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NHS: Finance

My Lords, I, too, thank the noble Lord, Lord Rea, for his very topical subject for debate. It is topical because noble Lords will be aware that in the past two weeks, Patricia Hewitt has appointed Sir Ian Carruthers, who was until recently the acting head of the NHS, as a troubleshooterto quell public rebellion against hospital closures in50 hotspots. It is extraordinary that at a time of unprecedented investment in the NHS, there is growing public disquiet about the extent of independent sector involvement in it. I say ““extraordinary”” because independent sector involvement in the NHS is not new. NHS GP, ophthalmic and pharmacy services have largely been provided by independent contractors since 1948. According to a report by the Healthcare Commission in 2004-05, more than 80 per cent of those who use mental health services in the independent sector are NHS patients, including those in low and medium secure settings. It is not new so why, then, this disquiet? The first reason is the fear that there will be a huge impact on other parts of the NHS in a way that is unplanned. The noble Baroness, Lady Murphy, came closest to putting her finger on the real question. There is a deep and growing disquiet at the lack of transparency about the terms on which private sector involvement is taking place in the NHS, leading to a situation in which it is impossible to judge in any objective fashion the true impact on activities and costs. ISTCs are expected to provide more than 500,000 elective procedures. Phase 2 of the ISTC provides £2.75 billion over five years for elective surgery and£1 billion for diagnostics. We do not know what the effect of that will be on the NHS. The Government’s response to the Health Select Committee’s report on ISTCs, Command 6930, is a fascinating document. In a very small, tight, condensed fashion it hits on all the key questions about what the programme is likely to do to the NHS. In response to fears raised by the committee about the capacity of phase 1 ISTCs being built in places where the capacity was not needed—a point touched on by the noble Lord, Lord Selsdon—the Government’s response was: "““Utilisation of ISTCs is high at 84 per cent and we are unable to benchmark this against NHS performance””." Why not? That is an absolutely crucial piece of management information which any enterprise would be expected to have. It is essential to work out whether something is providing value. The Health Select Committee also made the point that while ISTCs have increased choice at more locations—and they have provided earlier treatment—there is no information about clinical quality, so patients cannot exercise informed choice. The Healthcare Commission is reviewing the quality of care provided by ISTCs to patients and will publish its findings in March 2007. It will state whether there is evidence about the extent to which the quality of clinical care in ISTCs meets recognised professional and regulatory standards. Would it not have been wiser to have that information before going ahead with another phase of ISTC development? Would that not be a sensible way in which to ensure that patients received treatment that was not only timely but safe? I think that we are all in agreement that the ISTC programme is not at the moment a damaging thing to its NHS competitors, but there is no way of evaluating whether we are comparing like things. In the Health Select Committee report, in paragraph 103 on page 37, the committee addresses the issue of value for money and the NHS equivalent costs of the ISTC programme. The noble Baroness, Lady Turner, mentioned this figure and said that ISTC procedures were deemed to be 11.2 per cent more costly. They are—and they are considerably lower than the cost of spot-purchasing individual procedures privately. But the Government’s defence of the whole ISTC programme and buying in this extra capacity was that it was based on an analysis of projected need conducted by strategic health authorities. That begs two questions. First, how good was that analysis? As the noble Lord, Lord Selsdon, said, a great deal of money is put into NHS facilities, and there appears to be very little co-ordination between the provision of the service and the demand for it. The second question that arises from the Health Select Committee report is about the issue of the block contract arrangements. The noble Lord, Lord Rea, was right in saying that the ““take or pay”” nature of those contracts led to a distortion of provision. The Government have defended that form of contract, saying that they need to balance risk and cost for these new providers. That is extraordinarily generous of them. I should declare that in my working life I advise not-for-profit companies that seek to provide services to the NHS—principally, primary care services. We routinely, along with the lawyers who advise us, tell them to watch in all tender and contract negotiations for risk being loaded on to them as providers. That the NHS should choose in this instance to carry the risk itself is fairly unusual. How will that risk-loading on contracts be dealt with in the next phase of contracts? To what extent are the transactional costs for contracts in the private sector factored into the evaluation of the comparison with NHS equivalents? In the time left to me I shall concentrate on the potential contracting out of PCT commissioning. In June 2006 the Government advertised for firms to, in effect, take on the role of commissioning servicesin the NHS. It was a very strange decision. There had been no public debate about it. It was not a manifesto commitment. The advert was actually withdrawn. It is not possible to determine exactly what the Government’s intentions were, but their decision implied that they felt a lot of services run by PCTs, including commissioning, were inadequate and would be more effectively provided by the private sector, thereby putting it potentially in control of three-quarters of the NHS budget—that is, about£65 million. Our view on these Benches is that there are areas in the country where the quality of commissioning is poor. However, the case for bringing in the private sector to take over that commissioning function has not been made, because it is not clear on what basis the private sector would do that. One is left to assume that services would be commissioned principally on the basis of cost, not of quality. That leads us to suggest that there is no evidence that the development of private commissioning would be preferable to improving commissioning skills and capacity within the NHS; for example, by disseminating good practice. Much has been said already on the subject of PFI. I support the noble Lord, Lord Rea, in his question to the Minister about how the Government can justify the payment of £53 billion for private finance initiative hospitals that are worth only £8 billion. In September 2006, in a speech to the IPPR, Patricia Hewitt stated that there was no limit to the role of the independent sector in the NHS. We on these Benches would add to that the words, ““as providers competing on fair and equal terms, judged by the same quality standards and required to provide the same management information, and working with the same obligation to work in partnership with those parts of the NHS that will never be commercially attractive but will always be needed””. As in other public sector services such as education, what is happening is yet another round of rushed structural reforms in pursuit of very short-term gains. We believe that the NHS working with the independent sector has a bright future, provided that there is coherence in Government policy, and that what we are buying for the NHS is increased resources and not increased competition for the future, at a time, as the noble Lord, Lord Selsdon, has said, when services and demand will be different.