Clause 55 - Monitor

Part of Health and Social Care(Re-Committed) Bill – in a Public Bill Committee at 9:30 am on 7 July 2011.

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Photo of Owen Smith Owen Smith Shadow Minister (Wales) 9:30, 7 July 2011

Again, I entirely agree. As my hon. Friend has clearly pointed out, this area is contested. It is not a settled, legal view that competition law has always applied to the NHS. In fact, a significant body of legal opinion says that that is not the case because of the nature of the services provided. The extent to which there is state provision, with few entrants into the market, affords the Government the ability to argue that it is not a real market and therefore should not be subject to competition law. That has been the basis on which the NHS has defended itself when it has been challenged previously.

That will change because competition will be written into the script. The language has changed a little, but the powers in respect of competition remain unchanged. The other thing that we heard from Mr Bennett is that the burden of proof requiring Monitor to demonstrate where it should apply competition has apparently been increased. I shall come back to that in a moment.

A further thing that has changed with Monitor is the application of a contradictory and far weaker duty to enable health care services, which we will come on to in the debate under clause 56. At the moment, I do not think that that is entirely reconcilable or, more importantly, that it is of equal weight. The desire to prevent anti-competitive behaviour, with specific powers attached, and to enable integration where it is in patients’ interests implies that integration is often not in patients’ interests. I presume that we are talking about vertical integration or cartel behaviour, as it would probably be called in other legislation. There is a big difference between powers specifically designed to prevent and the desire to enable without any powers.

First, what about the change in language? In essence, the duty to promote competition has been taken out and replaced with a duty to prevent anti-competitive behaviour. That is described elsewhere in the Bill as behaviour that would

“prevent, restrict or distort competition”.

When I read that I thought, “This sounds very familiar to me.” I have worked with the Office of Fair Trading in the past, in industry and business, on market studies—and, indeed, in the health care sector. I turned to the Competition Act 1998 to look for the words

“prevent, restrict or distort competition”.

I did not have to go very far; in fact, I got to part I, section 2. Section 1 is simply entitled “Enactments replaced.” The title of the first principal section has the words:

“preventing, restricting or distorting competition”.

I thought, “My gosh that’s very familiar. That’s precisely what the Government have described as anti-competitive behaviour.” Section 2 goes on to describe such behaviour as being to

“directly or indirectly fix purchase or selling prices or any other trading conditions”.

Well, the NHS currently does that; it fixes prices in the tariff and fixes trading conditions through contracts. That is standard practice in the NHS between hospitals and doctors. The description goes on:

“limit or control production, markets, technical development or investment”.

Well, the NHS clearly does that lots. It limits and controls how many doctors it will need and precisely which services it will offer. That will clearly be subject to challenge. The Act mentions something else:

“share markets or sources of supply”.

I suggest that it is absolutely vital in the NHS to share markets and sources of supply. Apparently, that will potentially be ruled out when competition law applies. The Act gives a further definition:

“apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage”.

That might, for example, involve someone working with a local GP consortium and deciding that they are going to give the business for their cataract operations to the local hospital, as they have always done. In future, of course, that will be a problem because in deciding to go to their local hospital, someone is disapplying the ability of other providers elsewhere in the country, which they have never treated with previously, to apply. The Act also states:

“make the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts.”

Again, that is a clear example of where the NHS does draw up contracts and does not get all the potential providers available in the country—the market, in other words—to tender and submit bids. It does not do that, and it would be hugely unwieldy if it did. The likely result would be that it might be undercut and have to “exit the market”, to use the language of the Bill.