Report (5th Day)

Part of Health and Social Care Bill – in the House of Lords at 9:45 pm on 6th March 2012.

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Photo of Earl Howe Earl Howe The Parliamentary Under-Secretary of State for Health 9:45 pm, 6th March 2012

I will be happy to meet the noble Lord to talk about that.

I was talking about the example of the Netherlands and Germany and was about to make the point that bodies of that kind can create a transparent and stable environment for pricing outside the influence of politics so that providers have confidence to invest and regulators can develop strong technical skills in setting prices at efficient levels. The Bill proposes that independent statutory bodies-Monitor and the NHS Commissioning Board-would collaborate to regulate prices. This will give commissioners a key role in price setting, whereas the opposition amendments would prevent this and would return control to Whitehall.

Monitor would publish national tariff prices based on a methodology subject to consultation where providers and commissioners could trigger an independent adjudication to ensure transparency and fairness. I am clear that we must have, as I said earlier, a process for adjudicating on Monitor's methodology. Otherwise Monitor could just go ahead with its proposals, even if there were a whole lot of people affected by the proposals who objected and the only way that they could see those objections through to a conclusion would be through judicial review. The government amendments in this group ensure that the appropriate providers could trigger independent adjudication.

I am also clear that the Competition Commission should undertake this role. As I said earlier, it would be free from political intervention in making these judgments and is well respected as an organisation across the economy for the role it performs. The opposition amendments would prevent any of these benefits being realised. A key priority for improving the system is to expand its coverage so that more and more services are brought within scope. The previous Government failed to do this in line with their own published timetables, for example, regarding mental health services. The Bill would place duties on Monitor and the NHS Commissioning Board to secure the standardisation of service specifications to support the foundation of a comprehensive tariff system. This will make reconfiguration of services and integration across administrative boundaries easier.

To put matters beyond doubt, the national tariff would be a fixed price, with any competition based on quality and choice, not price. We listened to representations made to us about this, and we amended the Bill to make clear that the tariff would not be based on a maximum price. Of course I understand the points made very ably, if I may say so, by the noble Lord, Lord Davies, and the noble Baroness, Lady Murphy. We all want to see best value for money for taxpayers in the way that services are provided, but our judgment was that, for reasons that I will elaborate on, that is not the right way to go. Where services were not covered under the national tariff, there would be rules to govern those prices locally. Prices and rules within the national tariff would be legally binding and independently enforceable by Monitor to eradicate any abuses. Tariff prices could not be varied for different providers according to their ownership status. That would prevent future Governments paying inflated high prices to private providers.

I shall elaborate a little on what I said in answer to the noble Lord, Lord Davies. The purpose of the tariff is to ensure that providers are reimbursed fairly for the services they provide and to allow competition to be based on quality and not price, as I mentioned. When a maximum price was suggested, the fear was that there would be a drive to the bottom on prices, thus jeopardising the quality of care. The evidence from the UK and internationally suggests that quality-based competition with fixed prices can be very beneficial in producing higher quality care-that evidence is reported by the Office of Health Economics-whereas evidence from the USA sounds a note of caution that the wrong kind of competition based on price can lead to a race to the bottom on quality. Our judgment was that we should stick with our position that the tariff will not be a maximum price.

Finally, the Bill addresses the problem of cherry picking, which I am afraid was a problem that the previous Government did not grip. It places a duty on Monitor and the NHS Commissioning Board when setting prices to consider the range of services provided by different providers and the differing needs of the patients treated. As the Royal College of Psychiatrists noted:

"We are particularly glad to note the Government's moves to prevent the cherry-picking of services and hope that the safeguards are a success".

The Opposition's amendments would actually delete these important provisions from the Bill, thus not addressing the concerns expressed by clinicians up and down the country.

To conclude, the status quo is not an option. The Bill strengthens the current system and meets the concerns raised by clinicians and others. I ask noble Lords not to press their amendments which would fail to address the current fundamental problems and would deny patients and taxpayers the benefits of an independent, fair and transparent system. Finally, I hope the House will accept the minor and technical amendments in my name in this group when I come to move them.