Health and SocialCommunity Health and Standards) Bill

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Mr. Streeter: Will the Minister give way?

Mr. Hutton: In a second. Operational capital is about only a quarter of the capital requirements of that NHS trusts. Those allocations have already been made, and the Government will certainly not be withdrawing them from NHS foundation trusts.

Mr. Streeter: The Minister has virtually answered my query in his last half sentence. Can he assure me that the Government do not intend to withdraw existing streams of capital to hospitals that will become foundation hospital trusts, either within the three-year allocation cycle or thereafter? Is the extra borrowing capacity provided for in the Bill intended to provide extra resources, or do the Government intend to save their own money, so to speak, in years to come?

Mr. Hutton: I can speak only about the three years for which allocations have been made. As regards wider access to public capital per se, however, there are some obvious areas for concern. Among those important services and systems that glue the NHS together, the need to upgrade the information technology infrastructure in the national health service is a priority.

The operation of private finance initiatives in relation to NHS foundation trusts is another big issue. The Government want to ensure that sponsors and funders are left in no worse a position as a result of the introduction of the new legislation and the establishment of NHS foundation trusts. The Government are proposing that, in future, all Department of Health-approved NHS foundation trust PFI schemes will be under novation to the Secretary of State. PFI consortia will be in a direct primary contractual relationship with the Secretary of State. The Secretary of State will, in turn, appoint the NHS foundation trust—either as his agent or subcontractor—to perform the obligations arising under the contract on his behalf. There will, therefore, be no substantive change.

The question arises more widely about access to public money; for instance, for initiatives that might arise under national service frameworks or the need to

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upgrade the information technology infrastructure of the NHS. In future, resources will be allocated mainly through the system by the new national tariff arrangements; that is true for NHS foundation trusts as well as those trusts that are not foundation trusts. If the Department requires NHS foundation trusts to procure a specific item—for example, in relation to a new initiative linked to implementation of a national service framework—the Department would have to fund it. Otherwise, the NHS foundation trust might not be in a position to participate.

The key point in relation to any central initiative such as this is that the relevant requirements should be set out in the terms of the authorisation, and I expect that they would be. If any public funds were made available for a central initiative such as information technology, NHS foundation trusts should have access to an equitable proportion of those funds. The Government intend that to be the case.

Mr. Lansley: The Minister has moved on to the relationship between the national tariff and the capital of NHS foundation trusts as distinct from non-foundation trusts. I thought that the Committee would deal with that matter later. My understanding is that the intention is to have a single national tariff. If, on the one hand, the tariff for NHS foundation trusts is designed to provide sufficient resources—not only to meet the costs of providing the service in revenue recurrent terms but to repay the capital costs of borrowing to support additional capacity—and, on the other hand, non-foundation trusts had not borrowed but had had their capacity provided by direct departmental capital grants, how does one equalise the national tariff? Will departmental capital grants to non-foundation trusts be capitalised on their balance sheets so that they have to repay the capital charge to the Department in the same way as foundation trusts would have to pay a private lender?

11.00 am

Mr. Hutton: When we discuss the public dividend capital in clause 13, we need to deal with how capital is financed and how repayments are structured, because there is an overlap. The hon. Gentleman and I have a fundamental disagreement; namely, should there be a national tariff? He would prefer price competition among NHS providers to a national tariff.

Mr. Lansley: We are debating the Bill as it is, not as it might be.

Mr. Hutton: There is nothing in the Bill about the national tariff. This clause is about financial flow arrangements. I should like it recorded in Hansard that the web site is a real peach. The hon. Gentleman should refer to it if he would like more information about financial flows.

Mr. Burns: Is it more accurate than the No. 10 web site?

Mr. Hutton: It is a good web site. It took me a while to access it, but it is well worth the effort, especially if one has trouble sleeping.

The national tariff is not designed to give an unfair advantage to one set of NHS trusts over another. The intention is to fix a standard price for similar

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procedures. That is what the healthcare resources group definitions set is all about. When a tariff is set, there should be no unfair competition based on reducing NHS quality of care. We have been there and done that, and it is a really bad place to go. My hon. Friend the Member for Cardiff, Central has some concerns about this, but we want to encourage efficiency and productivity. A national tariff can do that, because if an NHS trust or an NHS foundation trust can provide a service at a lower cost than the national tariff price, it can keep the difference between the national tariff price and the service price under which it can operate. There is clearly an imperative on, and an incentive for, NHS foundation trusts to operate at an optimum level and to use the proceeds and the benefits of that productivity to reinvest their savings and efficiency in the provision of NHS health-care services.

Dr. Harris: On a point of order, Mr. Atkinson. I share some of the concerns of the hon. Member for South Cambridgeshire, in that amendment No. 247 asks some of the questions that the Minister is answering. I do not wish to interrupt his flow, but I wish to seek advice from you about how to deal with the matters in amendment No. 247, because the Minister may repeat something he has already said. Although not too much time has been invested in this debate, I should be grateful if you guided members on how to structure debates on the next clause, given the Minister's extensive explanation, which, by his own admission, covers many of the issues in clauses 12 and 13.

The Chairman: These groups of amendments flow into one another, because they deal with financial matters. I said that I would be tolerant of a wider debate on clause 11, but that I would ask the Committee to keep to the subject when discussing clauses 12 and 13. When we come to amendment No. 247, the hon. Gentleman will be able to ask his chosen questions, but I shall insist that the debate is narrowly focused on that amendment.

Mr. Hutton: I am grateful to you, Mr. Atkinson. If I strayed too widely, it was inadvertent, because I have not dealt with the hon. Gentleman's amendment No. 247. There is another argument that applies to that amendment, which I have not knowingly made yet.

Mr. Jones: Having set a tariff, would a foundation trust that is more efficient than others in a particular set of operations—my right hon. Friend the Minister has explained that such a foundation trust would be able to keep the excess proceeds—be able to do more operations because it could do them more efficiently? If not, what incentive would there be for commissioning bodies to go to the most efficient provider, since the tariff is going to be the same regardless of which provider they choose?

Mr. Hutton: I agree that, by common consent, there is a weakness and a fault in the current method of commissioning care in the NHS. Most commissioning is based on block contracts that are not activity-based. In the current system, there is no incentive to do more, because people do not get paid to do more. That is

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ridiculous, and I am sure that many hon. Members will be surprised to learn that as a result, the available capacity in the NHS is not being fully utilised.

It is important for the health of any organisation—be it in the private or public sectors—that its financial arrangements encourage the utmost efficiency and productivity and provide incentives for other organisations to reach the same level. With the best will in the world, the existing financial flows within the NHS do not do that. In future, there will be a direct incentive for providers—NHS foundation trusts and non-NHS foundation trusts—to do more, because they will be paid for the work that they do, which will be at the national tariff rate, and will retain the surplus proceeds, if there are any. We will encourage the fullest possible utilisation of NHS capital assets.

My hon. Friend the Member for Cardiff, Central wants a system in place within the NHS where money flows in a way that encourages innovation, efficiency and productivity; that is what we are proposing. We can achieve it without replicating the deficiencies and defects of the internal market of the Conservative party, which was structured fundamentally on a system of competition based on those who could provide the lowest cost to the NHS. That type of market, based on price competition alone, is bad for the NHS; it does not place the right emphasis on quality, and we must achieve that. That is partly why we have included the Commission for Healthcare Audit and Inspection and the National Institute for Clinical Excellence in the Bill; not to mention clause 40, the new approach to setting national standards, the stronger and tougher inspection regime for, for example, non-NHS foundation trusts, and the annual CHAI inspections of quality and performance.

All these things are important. However, I say to all my hon. Friends that efforts to improve NHS efficiency will not be at the expense of the values and ethos of the public service itself. Those of us on the centre-left of British politics must learn a lesson from the past; if we leave it to the Conservative party to control the language of choice, diversity, plurality, efficiency and productivity, we have sold out the centre-left case in Britain. Those are not Tory words; they should be Labour words.

 
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