I beg to move amendment 84, in clause 20, page 23, line 14, leave out from ‘when’ to end of line 15 and insert ‘the Board is notified in writing by the Secretary of State that the amount is allotted to it for that year.’.

With this it will be convenient to discuss the following: Government amendments 85 to 94, 107, 124, 137, 141, 142 and 147.

This group of technical amendments makes changes to the NHS commissioning board’s financial powers and duties as set out in clause 20. They also include a number of related amendments, which are consequential to those changes—in particular to the financial responsibilities of clinical commissioning groups, as set out in clause 23.

The amendments are necessary for two reasons: first, better to reflect the fact that resource allocations are the primary means by which budgets are set in the NHS and for applying financial controls; and secondly, to clarify the NHS commissioning board’s responsibility for the overall spend by NHS commissioners.

Broadly, clause 20 sets out how the Secretary of State would fund the NHS commissioning board to perform its functions, including providing funds to clinical commissioning groups. It also provides powers for the Secretary of State to impose certain limits on the board’s  expenditure and use of resources, which will reflect those that the Treasury applies to the Department of Health. Those would apply within the context of our commitment to protect the NHS budget and to increase spending on the health service by £12.5 billion over the current spending review period.

As we discussed under clause 19, this system of setting limits on the use of resources, as well as a cash limit on expenditure, reflects the system for controlling Government resources under the Government Resource and Accounts Act 2000. Under that system, resource allocations are the primary means by which budgets are set in the NHS and in respect of applying financial controls. Cash allotments and related limits on cash expenditure are calculated by reference to those resource allocations and the organisation’s spending plans against those allocations.

Will the Minister explain the funding formulae that will be used, particularly in relation to the weighting for health inequalities, and the pace of change that will be used in reaching that target?

Will the hon. Lady leave that with me for the moment while I deal with the main funding requirements for the NHS and the commissioning board? I will return to her at some point.

The Secretary of State will still be required, under section 223B, to allocate sufficient funds to the NHS commissioning board to enable it to perform its functions. Because the level of the allocation depends on the spending plans that the board will set out in its business plan in response to the mandate, it will not itself be set out in the mandate. Amendment 84 states that the board will instead be notified in writing of the amount. The Secretary of State will then have a duty to pay sums to the board up to that amount, and will only be able to make changes to the board’s allotment either with its agreement or, in the event that the board did not agree to the change, in exceptional circumstances.

As I will explain, the amendments would provide for powers for the Secretary of State to set limits in relation to expenditure on administrative matters that are in terms of use of resources rather than cash expenditure and are therefore covered under new section 223DB. Amendments 85 and 86 remove references to the limits on administrative spend in subsections (4) and (7) of 223B.

The group of amendments is also intended to clarify the NHS commissioning board’s responsibility for the overall spend by NHS commissioners. In future, funds will be allocated by the Secretary of State to the NHS commissioning board, which will be responsible for allocating funds and setting spending limits for individual clinical commissioning groups. That differs from current arrangements, under which both SHAs and PCTs receive funding directly from the Secretary of State, who has wide powers of direction as to how the funds are used.

Amendments 89 to 93 would mean that the expenditure limit set for the board by the Secretary of State under proposed new section 223D would apply to total expenditure by NHS commissioners, including clinical commissioning groups. The board will be responsible  for exercising its functions in relation to clinical commissioning groups to ensure that expenditure remains within that limit.

Amendment 94 would introduce new sections 223DA and 223DB, replacing the current duties on the use of resources. Amendment 88 would remove a single overall resource allocation; instead there would be two resource limits, one in relation to revenue and another for capital. As with the expenditure limit under proposed new section 223D, those limits will apply to the total use of resources by both the commissioning board and clinical commissioning groups. The Secretary of State will continue to have powers to specify which resources, and which uses of resources, may or may not be taken into account for the purpose of those limits. That will provide clarity about what would score in each case.

Proposed new section 223DB provides powers for the Secretary of State to set additional controls on the use of resources. Rather than a cash limit on administrative expenditure by the board, as under current arrangements, the amendments would allow the Secretary of State to set a limit on the total use of resources for administrative matters by all NHS commissioners and a limit on the board’s own use of resources for those purposes. It is still our intention to create, for the first time, a fixed definition of the costs that will be covered by the limits on administrative expenditure in regulations. Because there will be limits on spending for administrative purposes, any underspend will be available to invest in patient care.

The amendments also allow the Secretary of State to set additional limits on total capital or revenue resource use that is attributable to particular matters. That is to comply with the technical limits imposed by the Treasury in matters such as the depreciation of capital assets. Amendments 141 and 142 amend clause 23 to mirror those changes in respect of the financial duties that clinical commissioning groups will be under. The board will be able to set capital and revenue resource limits for each clinical commissioning group, and there will be a duty to stay within those limits.

The board will also be able to set additional limits on capital or revenue resource use, including revenue resource use associated with administrative matters where the Secretary of State imposes such limits on the board. Amendments 107, 124, 137 and 147 make consequential changes to reflect the new clause numbering.

The hon. Member for Oldham East and Saddleworth asked whether allocations to clinical commissioning groups will continue to be weighted for deprivation. It is for the commissioning board to decide the most efficient way to allocate resources to clinical commissioning groups. Under proposed new section 13F to clause 19, however, the board will be under a duty to reduce inequalities in access to services and patient outcomes, as well as to deliver any requirement in the mandate from the Secretary of State. It must, therefore, have regard to the prospective burden of disease and disability when determining allocations. Where there is evidence that people from a more deprived background have a greater need for health care services, we would expect  allocations to be weighted towards more deprived areas. For those reasons, I urge the Committee to accept the amendments.

This is a complicated set of amendments and I will explain what I believe they really seek to achieve. The amendments give the board or, as I will now call it, NHS England more freedom to spend its money how it wants, but they give consortia, or clinical commissioning groups, less freedom to spend the money how they want. They also take away the Secretary of State’s ability to specify for the board and individual consortia how much they may spend on admin costs. That is my understanding of the amendments.

Amendment 85 deletes the current clause in the Bill that gives the Secretary of State the power to tell the board and consortia how much they may spend on administrative costs. Instead, it gives an overall limit, which gives the board the power to shift money around, including resources for admin costs.

A pattern is emerging. The commissioning board, or NHS England, will end up being a super-quango that can spend as much money as it wants on admin costs with far greater power over clinical commissioning groups. I think that GPs and others who were enthusiastic about the Government’s plans will see, step by step in the post-pause Bill, their power and influence taken away by the board in ever more centralised control.

Whatever the Minister says in his description of the financial changes, they are not technical amendments; they are amendments that will shape and drive how the NHS is run, giving NHS England greater control, commissioning groups less control and, overall, taxpayers less control over how admin costs are spent.

Sitting suspended for Divisions in the House.

On resuming—

I call Liz Kendall to continue addressing the Committee on Government amendment 84.

Thank you, Mr McCrea, but I had finished the point I was making before the Committee was suspended.

I can be extremely brief. The hon. Lady raised two issues. One of them was the funding of the administrative costs of the commissioning board and the CCGs. We have always made it plain that a global figure will be allocated by the commissioning board, for its own use and for the CCGs. That has not changed. We have also made it clear that the figure we have in mind for the CCGs for their administrative costs will be somewhere between £25 and £35 per patient, and we are looking at the experience of the current pathfinders to determine the exact amount. There will be an incentive for the groups to get cost-effective administration because they can use money saved from that in patient care.

The Minister is saying, then, that any surpluses that derive from saving on administrative costs can be retained by the consortia—the groups—and invested in clinical or patient care. Does the money have to be invested in that way, or could the consortia choose to spend the retained surplus in other ways?

First, I would not use the word “surplus”—I would do it the other way around. If in a given year there is money that a group does not spend on administration because it has been particularly efficient and lean, that money can be reinvested in patient care.

Will the Minister give way?

No. I think that I answered the hon. Gentleman’s question clearly—

No, you did not.

The hon. Gentleman can look at the record tomorrow.

The hon. Lady also mentioned that she interpreted this group of amendments as meaning more freedom for the board and less for the CCGs, but I am afraid that I do not share that analysis of the situation. We have always said that the board will be responsible for accounting for NHS resources, and the chief executive will be the accounting officer. The amendments do not give the board any more substantial powers to set spending limits than those that were in the clause previously agreed by the Committee. There are additional powers to set technical limits on matters such as the depreciation of assets, but only when such limits are imposed on the Department by the Treasury and fed through to the board and the CCGs.

It is a great pleasure to serve under your chairmanship, Dr McCrea, albeit late in the day. I want to make two brief points, on which I hope the Minister will at some point be able to provide clarification. One relates to his statement that there will now be a global sum of money. Does that change the previous position, in which a distinction was made in the Bill between the moneys that would be made available to the CCGs and to the board? Is it now one global pot of money, which, as my hon. Friend the Member for Leicester West has said, gives the board greater leeway?

My second question relates to the point that I raised a moment ago. The Minister did not precisely repeat what he said. He said that the money could be available to reinvest in patient care, or would be available to reinvest in patient care, neither of which answered my question. Could the money be invested in something else, such as the salaries of the people on the commissioning board, or the purchase of a new fleet of cars?

I made it quite clear, and I really do not want to drag this out. If the CCGs were particularly efficient and had some money left over from their administration budget, they would be able to use it on investing in patient care. They could not spend the money on increasing their salaries, having a bonus or buying a fleet of cars.

On underspends, I have been consistent and the matter is quite straightforward. There will be an administrative budget for the administrative purposes of the national commissioning board. The board will distribute money when we have determined what the CCGs’ funding will be; it will be somewhere between £25 and £35 per patient, which will be distributed to the CCGs to spend.  That comes out of a global administrative budget, which seems to me quite straightforward. I cannot see any problem with that.

Amendment 84 agreed to.

Amendments made: 85, in clause 20, page 23, leave out lines 21 to 26.

Amendment 86, in clause 20, page 23, leave out lines 33 and 34.

Amendment 87, in clause 20, page 23, leave out lines 35 to 37.

Amendment 88, in clause 20, page 23, line 38, leave out from beginning to end of line 5 on page 24.

Amendment 89, in clause 20, page 24, leave out lines 6 to 15 and insert—

223D  Financial duties of the Board: expenditure

(1) The Board must ensure that total health expenditure in respect of each financial year does not exceed the aggregate of—

(a) the amount allotted to the Board for that year under section 223B,

(b) any sums received by the Board or commissioning consortia in that year under any provision of this Act (other than sums received by the Board under section 223B or by commissioning consortia under section 223H), and

(c) any sums received by the Board or commissioning consortia in that year otherwise than under this Act for the purpose of enabling it or them to defray such expenditure.

(1A) In this section, “total health expenditure”, in relation to a financial year, means—

(a) expenditure which is attributable to the performance by the Board of its functions in that year, other than sums paid by it under section 223H, and

(b) expenditure which is attributable to the performance by commissioning consortia of their functions in that year.’.

Amendment 90, in clause 20, page 24, line 17, after ‘the Board’, insert ‘or a commissioning consortium which is’.

Amendment 91, in clause 20, page 24, line 19, leave out ‘expenditure within subsection (1)’ and insert ‘part of total health expenditure’.

Amendment 92, in clause 20, page 24, line 21, leave out ‘under section 223B’ and insert ‘or a commissioning consortium under section 223B or (as the case may be) 223H’.

Amendment 93, in clause 20, page 24, line 23, leave out ‘the expenditure of the Board’ and insert ‘total health expenditure’.

Amendment 94, in clause 20, page 24, line 28, leave out from beginning to end of line 12 on page 25 and insert—

223DA  Financial duties of the Board: controls on total resource use

(1) In this Chapter—

“total capital resource use”, in relation to a financial year, means the use of capital resources in that year by the Board and commissioning consortia (taken together);

“total revenue resource use”, in relation to a financial year, means the use of revenue resources in that year by the Board and commissioning consortia (taken together).

(2) The Board must ensure that total capital resource use in a financial year does not exceed the amount specified by the Secretary of State.

(3) The Board must ensure that total revenue resource use in a financial year does not exceed the amount specified by the Secretary of State.

(6) The Secretary of State may give directions, in relation to a financial year, specifying descriptions of resources which must, or must not, be treated as capital resources or revenue resources for the purposes of this Chapter.

(7) The Secretary of State may give directions, in relation to a financial year, specifying uses of capital resources or revenue resources which must not be taken into account for the purposes of this Chapter.

(8) The Secretary of State may give directions, in relation to a financial year, specifying uses of capital resources or revenue resources which must be taken into account for the purposes of this section.

(9) The amount specified for the purposes of subsection (2) or (3) may be varied only if—

(a) the Board agrees to the change, or

(b) the Secretary of State considers that there are exceptional circumstances which make the variation necessary.

(10) Any reference in this Chapter to the use of capital resources or revenue resources is a reference to their expenditure, consumption or reduction in value.

223DB  Financial duties of the Board: additional controls on resource use

‘(1) The Secretary of State may direct the Board to ensure that total capital resource use in a financial year which is attributable to matters specified in the direction does not exceed an amount so specified.

(2) The Secretary of State may direct the Board to ensure that total revenue resource use in a financial year which is attributable to matters specified in the direction does not exceed an amount so specified.

(3) The Secretary of State may direct the Board to ensure —

(a) that total revenue resource use in a financial year which is attributable to such prescribed matters relating to administration as are specified in the direction does not exceed an amount so specified;

(b) that the Board’s use of revenue resources in a financial year which is attributable to such prescribed matters relating to administration as are specified in the direction does not exceed an amount so specified.

(4) The Secretary of State may give directions, in relation to a financial year, specifying uses of capital resources or revenue resources which must, or must not, be taken into account for the purposes of subsection (1) or (as the case may be) subsection (2) or (3).

(5) The Secretary of State may not give a direction under subsection (1) or (2) unless the direction is for the purpose of complying with a limit imposed by the Treasury.’.—(Mr Simon Burns.)

Clause 20, as amended, ordered to stand part of the Bill.