Health and SocialCommunity Health and Standards) Bill

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Dr. Harris: The Minister has given an interesting perspective on the way in which the Government want to use what I am happy to call the internal market—under the terms that he has used—and the split between commissioning and providing. However, if money is to follow not only price but efficiency and activity, the implication is that it might flow from places that are less efficient and active to those that are more so in a way that does not happen at the moment due to the block contract.

My concern is about those providers that are unable to increase their efficiency or capacity because of factors beyond their control, such as supply of labour or capacity in the social care sector. They will lose funding that they do not lose at present, because of the greater flows. That will make their situation even worse because they will be less able to compete in the labour market. They will be less able to buy extra capacity because they will have lost the funds that they

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had been accumulating in order to compete. That is our real problem with the beginnings of the operation of this flow.

Mr. Hutton: That is precisely why we are not doing it with a big bang approach. We are starting with about 15 healthcare resources groups this year. There will be a gradual move to a wider application of the national tariff. On a point of clarification, the national tariff will encompass some of those regional cost pressures and differences that the hon. Gentleman mentioned; for example, the higher cost of labour in the south and south-east.

Chris Grayling: The Minister talked about the ability of foundation trusts to retain excess funds and invest them in improving patient service. It is clearly not his intention that non-foundation trusts can also retain that money to invest in patient service. How will he avoid the national tariff, by definition, imposing unfair competition between those who have the power to retain money and invest it and those who must return it to the Treasury?

Mr. Hutton: That is why it will be a gradual process. It must be remembered that there will not be a full application of the national tariff system within our desired time frame for the establishment of NHS foundation trusts. We are alert to the issue that the hon. Gentleman mentioned, and there is a way through it.

I apologise, Mr. Atkinson; the discussion has been rather wider than I intended, but I hope that it has been useful. There is one important issue for the Committee. I know that it is not in the Bill, but the funding flows of the national health service and the arrangements that any Government make will determine to a large extent the issue that clause 11 addresses, which is one of borrowing and the ability to service debt.

As I said, the overwhelming amount of resources for NHS foundation trusts will come from their commissioning arrangements with PCTs. The basis on which those commissioning arrangements are structured will have a direct impact on the level of borrowing of an NHS foundation trust, so there is a connection.

I say to the hon. Member for Oxford, West and Abingdon and the Committee that it is difficult to go down that road; I accept that. We are going to change the inertia in a system that does not provide incentives and, perversely, rewards the least productive parts of the national health service. However, we are not imposing some penal provision on NHS foundation trusts in the way that the hon. Gentleman has described. We are working with trusts through the additional resources, the extra support that CHAI is providing and the hospital improvement programme, about which my right hon. Friend the Secretary of State made a further announcement only a few weeks ago, with additional resources going to support those who are not performing to the extent that they should.

We want to bring the entire NHS up to an effective level of performance. That is our focus; we are not leaving behind those who are currently struggling with some of the problems that the hon. Gentleman

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suggested. We seek to bring the NHS as a whole to a point at which it can benefit from the freedoms of the Bill and provide a better service to the public.

It is important that we do not run away from some of the difficult decisions that must be made. Let me be blunt; we should not have a system in which the least efficient and effective parts of the NHS are funded in the same way as the most efficient and effective. That is what we want to change, and we should change it. In addition, we should also make it clear to primary care trusts, as we have done, that they are free to commission from whatever provider is best in order to provide a service for their patients. That is also a very important point, because there is no better way to try to encourage stronger and better performance in the NHS than to make it clear to providers that there is no guarantee. We want to have a system that encourages good performance.

Mr. Jones: I want to emphasise the Minister's point. Not only does the current system treat inefficient areas the same as efficient areas, but, in order to make efficiency gains, there are short-term costs and difficult decisions to make. In a system such as ours that equalises payments, the difficulties of short-term costs are emphasised because there is no gain after they have been taken.

Mr. Hutton: Sometimes there is a need to invest to produce efficiency and more effective services. I accept that. I cannot deal with specifics if my hon. Friend has a particular case in mind. However, I can strongly make the case on the generality that the capital investment going into all parts of the NHS is rising significantly. In addition to our funding streams, there is the Treasury's invest-to-save budget scheme, which is designed to deal with some of the points that my hon. Friend and others have made. This has been a wide-ranging debate.

11.15 am

Dr. Harris: I accept that it is vital that commissioners have the freedom to choose from whom they commission services, and realise that they have and can use that freedom. That is how we will get a more responsive NHS. Does the Minister accept that equity is involved? For example, a commissioner may wish to commission services locally—even at a less efficient rate—to ensure that there is equitable access for those who are unable to travel to where there is a more efficient provider. Although it may not be his preference, does he accept that an alternative way of solving that problem is to allow commissioners to raise revenue locally in a democratically accountable way? He could put it to the people that they must pay a premium if they want local services that may not be as efficient as those elsewhere. If he does not do that and cuts back on the availability of central funds—which will dampen the market that he wants—how will he solve the problem of equity that concerns all of us on the centre-left?

Mr. Hutton: Welcome to the centre-left. We could debate this until the cows come home, Mr. Atkinson; as you represent Hexham, that subject is perhaps closer to your heart than it is to mine.

The Chairman: Sheep, actually.

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Mr. Hutton: Sheep, yes.

The hon. Gentleman is right to say that primary care trusts themselves should eventually have the freedom to take decisions at an operational level, because they are the commissioning bodies. We have emphasised to primary care trusts that they should be free to commission from those that provide the best service. Issues of equity and access will prey heavily on the minds of primary care trusts, and it is right that they should. The national tariff will operate as I have described; not as a barrier to access, but as a way to improve it. Together with the other reforms that we are introducing, the tariff will add into the system a direct incentive for local providers to do more.

A primary care trust may be faced with the difficulty, which is often faced in various parts of the country, that it cannot get a service that provides rapid access to deal with, for example, the problem of long waits because of local shortages. If that is the case, it is important that it is free to commission a service from other parts of the national health service, or from other providers, to ensure that local people get access to NHS-funded care more quickly. That is a separate issue from the one that the hon. Gentleman raised about somehow withdrawing support from local providers. It is not about that; it is about commissioning an additional service. However, it is also about allowing the local provider an opportunity to provide that additional service, since a direct financial incentive is available to them.

I have said previously to the hon. Gentleman that the difference between us is that he represents in this place a set of very deep and conservative attitudes about the national health service that places the interests of producers and providers above the needs and interests of the patients. That is not just my view; it is the view of many of his hon. Friends. I see what is written about him and his Front-Bench performances in ''Focus'' and other magazines, in which he is regularly attacked as being an old-style politician who is not prepared to embrace change. I know that he is trying to learn the language of reform and change, and I will provide some seminars and support for him if he wants to attend. However, he is gradually edging in our direction, which is welcome.

I hope that the right hon. Member for North-West Hampshire—who started this debate by asking about the sourcing of borrowing and capital for NHS foundation trusts—has had some answers. It seems a very long time ago since I started to respond to him, and I have no memory at all of what I said. I will look in Hansard to see whether I answered him. [Interruption.] I see that he wants to have another go at me, so I am happy to give way.

Sir George Young: I was not proposing to interrupt the Minister; I wished to come back after he had finished.

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