Commissioning: further issues - Health Committee Contents

Examination of Witnesses (Questions 433-528)

Q433 Chair: Thank you for joining us, Secretary of State, Dame Barbara and Sir Bruce.

Before we start, could I give advance notice that two of my colleagues have commitments before this session is likely to end? Both Grahame Morris and Sarah Wollaston will be leaving because they have prior commitments, and for no other reason. They wanted to make that clear at the beginning of the session.

You will be aware that this is a follow­on inquiry on work we did before Christmas, published at the beginning of the year, as to how commissioning in the Health Service is made more effective as an instrument for driving change, delivering good value, high quality health care. We published a series of recommendations in our report after Christmas and said we had some follow­up work we wanted to do. We are grateful to the Department for the support that you have given in that work.

One of the areas we didn't cover in that report, which we want to start with this afternoon, is the relationship between strengthening commissioning through the consortia and the arrangements for clinical engagement—the relationship between those institutions—and Monitor as the strengthened economic regulator. One of the questions we asked Monitor, when they were here, was the extent to which it was going to be possible for commissioners to determine for themselves that they want to commission integrated pathways of care without Monitor then, on the grounds of competition, opening the door to competition for individual elements of that pathway of care which might invalidate the attempts of the commissioners to commission an integrated pathway, for example, for diabetes patients.

I would like to begin, if I may, by asking you how you believe it is possible to reconcile the objectives of commissioners to commission integrated pathways with the commitment of Monitor to open the door, wherever possible, for competitors who may feel they have a better option for parts of a unified pathway.

Mr Lansley: Thank you very much. I am grateful to the Committee for inviting us along. We are very happy to work with the Select Committee as we develop commissioning in the National Health Service. You will know, in relation to your predecessor Committees, of the lack of focus and priority given to commissioning inside the National Health Service in the past. Therefore, all the focus and priority it is currently being given, not least by your Committee, is absolutely right.

We need to be clear that Monitor's role is to act as an economic regulator, remembering that we have the Care Quality Commission whose task it is to ensure we meet essential levels of quality and safety. Those two must be harnessed together on the provider side. Where commissioners are concerned, there is a read across into Monitor's role because if we were not to have the ability of an economic regulator to ensure that there were no anticompetitive practices operating against the public interest on the commissioning side, on the purchasing side, we would have a competition authority that did not have the full scope of responsibilities. In a sense, as you will know, in the Health and Social Care Bill, to that extent we do not give Monitor competition powers that do not already exist. We give Monitor concurrent competition powers to those that already exist but are exercised by the Office of Fair Trading. Indeed, in the National Health Service this is not a new concept, since the Co­operation & Competition Panel, to that extent, seek to replicate the same application of public procurement rules and competition responsibilities already.

From my point of view, as compared to the present, commissioners will have additional opportunities and options as to how they can secure the right structure of commissioning. For example, as we develop the tariff structure, we are already moving progressively towards payment by results which is focused on outcomes, not on procedures, and which enables commissioners of services to commission for a pathway of care. Within the current operating framework, we are working with the Cystic Fibrosis Trust to do that. I hope there will be rapid progress in enabling commissioners to do that.

To that extent, the role of Monitor is not to interfere with the way in which commissioners go about securing the services that they want for patients. If the commissioners wish to commission a service with a particular structure that might be set out in payment by results, or, indeed, notwithstanding how payment by results is structured, if they issue a specification they want their services to conform to, then, on the basis of any qualified provider being able to meet those services, Monitor would have no locus to interfere.

Q434 Chair: Can I push you on that point specifically because it is quite important? When Dr Bennett was here from Monitor, he was quite explicit in that he said Monitor had no role to review a decision by a commissioner on the shape of the integrated services that a commissioner wished to commission.

Mr Lansley: Exactly. Yes.

Q435 Chair: That couldn't be challenged on competition grounds. Is that it?

Mr Lansley: That is right. To put it in a nutshell, Monitor's role is only to intervene in circumstances where commissioners are behaving in a way which is both anticompetitive and acts against the public interest.

Q436 Chair: For example, if a private sector provider, or indeed a public sector provider, sought to challenge a specification that a commissioner was seeking to commission on competition grounds, they would simply be knocked back and told it was an issue for the Commissioning Board.

Mr Lansley: I think this is a matter for the commissioners.

Chair: Thank you.

Q437 Dr Wollaston: It is reassuring to hear you say that it is not extending either EU or domestic competition law. But am I right in thinking that, up to now, clinical services have been relatively exempt and this is just applied to procurement of non­clinical services, and that there is a crucial difference, that Monitor could have the power to impose fines of up to 10% of turnover commensurate with the Office of Fair Trading? Do you think, as we have heard from Monitor, that they would be responding to complaints? Therefore, if they are constantly responding to complaints, are we going to be opening up a Pandora's box of a different type of bureaucracy—shifting one type of bureaucracy for a legal bureaucracy of challenge?

Mr Lansley: I see no reason why the latter should be the case since exactly the same powers currently apply. It is just that they apply in the shape of the Office of Fair Trading and the way in which the Co­operation & Competition Panel apply their rules. Public procurement rules apply to health care services. The European Commission, when they do so, categorise them Part A and Part B and different extent of rules apply. If my recollection is right, health care, generally, is Part B services. Essentially, the providers of health care services have public procurement rules applied to them. Commissioners of health care services already have EU public procurement rules applied to them.

Q438 Dr Wollaston: Can I clarify, because I am not clear from your answer? Currently, are the competition panels able to impose fines of up to 10%?

Mr Lansley: On providers?

Dr Wollaston: Yes.

Mr Lansley: No, because that is a power enjoyed by the Office of Fair Trading, not by them.

Q439 Dr Wollaston: Will that now apply to Monitor? Will we see commissioners potentially facing fines?

Mr Lansley: No. The point is as I have described previously. The Bill does not extend the scope of either public procurement rules or competition law.

Dr Wollaston: Right. They won't face fines.

Mr Lansley: It simply creates a sector regulatory function. Monitor exercises, concurrently, the functions of the Office of Fair Trading.

Q440 Dr Wollaston: Can I clarify, so I am clear about this? It means that consortia will not face fines of up to 10% of turnover.

Mr Lansley: No.

Dr Wollaston: Thank you.

Q441 Chair: It follows, doesn't it, from what was said previously, that the commissioning decisions of consortia are not subject to challenge on competition policy grounds? They couldn't be subject to a fine because they are not open to challenge. Is that correct?

Dr Wollaston: But isn't that decision open to legal challenge? I know the Department has taken legal advice on this and I am wondering whether you would be able to publish that legal advice as to whether or not, if somebody did challenge that—

Dame Barbara Hakin: One important thing to remember, of course—whether it is the Office of Fair Trading or the economic regulator—is this. It is not that you cannot do something which is anticompetitive. It is not that you are forced to tender everything. It is not that you must. It is that, in situations where you have been seen not to offer competition to relevant organisations, you must have reasonable justification for it. Even if it was the Office of Fair Trading, just because a commissioner chooses not to tender a service, if they can demonstrate their reasons why that tendering process was not appropriate, that is perfectly acceptable. I am sure we could go away and come back with the kind of legal—

Dr Wollaston: It would be useful to have that legal opinion.

Dame Barbara Hakin: To understand better, yes.

Mr Lansley: It is quite important to reiterate that we are not changing the scope, the extent of the application of competition law, or indeed EU public procurement rules through the legislation.

Q442 Grahame Morris: Could I follow on that one? It really runs to the heart of many of the public concerns about the Bill, that it will pave the way for privatisation of the service. Your contention, Secretary of State, is that there is no extension of the competition rules. But, on this side of the Committee, we are concerned that the architecture of the—

Chair: This Committee does not have sides.

Grahame Morris: From this seat on the Committee, I am concerned that the structure—the architecture—of the Health Service is changed in such a way, particularly in relation to commissioning with the loss of the primary care trusts and the establishment of GP consortia, that it will then allow the application of EU competition laws and, indeed, the issues that were raised by my colleague about potentially private sector providers using legal redress with GP commissioners with the threat of a 10% fine of their turnover. My understanding, from clause 60 of the Bill, is that it is implicit in the Bill.

Dame Barbara Hakin: While the powers of the regulator mirror the powers of the Office of Fair Trading, we have to accept we have competition law and have to abide by that. Currently, if a company or an organisation appeals that an action has been anticompetitive, that can be investigated. If it is deemed to be anticompetitive without good reasoning behind it, there are ramifications. The same will apply with the regulator. But it is very much on the basis of an appeal and of an organisation proving that they could have provided as good as or a better service for patients and the commissioning organisation not being able to defend that they had not considered that when they set the contracts. If they have good reasons for not going out to competition, that is perfectly acceptable.

Mr Lansley: Can I make two points, quickly? First, as I understand it, essentially the sanction would not be a fine on the commissioners in this particular instance but, if they were to pursue a contract in a manner that was anticompetitive and against the public interest, to declare the contract void. But, as Barbara says, we will send you a note about all that.

The other thing I would say is it further illustrates the benefits that will be associated in future with going down the route of an any qualified provider approach. To that extent, of course, one is clear about the specification that one is looking for, one is clear about the quality one is looking for—if necessary, the structure of the service and its integration—and one will have established, by that route, a national or local tariff that is the basis upon which one is inviting providers to put themselves forward. Almost by definition, if you go down that route, as opposed to trying to do it on a competitive tender basis, it would not be open to a competitive challenge or a challenge using public procurement rules. Strictly, they are the public procurement rules we are talking about and not the competition law as such.

Q443 Grahame Morris: Secretary of State, can I follow this point to its natural conclusion, because I think it is a very important one for people to understand, and for me to understand in particular, in relation to the changed structure? Isn't it the case that, in the current structure, the primary care trusts are state enterprises, whereas the GP commissioning consortia are independent contractors? You mentioned exemption under Part B. Lawyers are arguing about it now and, if there is a point of debate, isn't there a risk that we could be involved in litigation as a consequence of these structural changes?

Mr Lansley: No. I come back to the point. You say "changed structure" but we are not extending the scope of public procurement rules and we are not extending the scope of competition law. GP commissioning consortia will be statutory bodies exercising a public function, publicly funded and for a social purpose. To that extent, there is no reason, as compared to the current interpretation in relation to primary care trusts, why they should be regarded any differently in terms of public procurement or competition laws.

Dame Barbara Hakin: All this is simply designed to protect the public interest. If the public interest is not protected, then Monitor, the economic regulator, can intervene on the individual contract, as the Secretary of State says.

This Committee has raised some concerns about the conflict of interests in GP consortia on a couple of occasions. This is one of those safeguards. Consortia are statutory NHS bodies. GP practices are independent contractors, but the consortia will be an NHS body very similar in constitution to a PCT—not in the way it operates but in its overall constitution. If the consortia was acting in an anticompetitive way and favouring the people on the consortia, then this is designed exactly to protect those things which this Committee has asked us about on a couple of occasions.

Mr Lansley: The intervention powers are specifically in relation to what is effectively an abuse.

Q444 Grahame Morris: But the issue about EU competition laws could be quite simply resolved if you published the legal advice that the Department has.

Mr Lansley: We have been very clear, both here and in the Public Bill Committee, about the simple fact that the Bill does not change the extent or application of competition law. It is not required.

Grahame Morris: It changes the architecture of the Service.

Q445 Valerie Vaz: Secretary of State, that might be correct but, to clarify, have you taken legal advice on the compatibility of the Bill and EU competition law? It is just a simple question.

Mr Lansley: You will forgive me for saying that those who have been responsible for the production of legislation will realise that all legislation is drafted and progressed on the basis of legal advice. Of course it is.

Q446 Valerie Vaz: What does that advice say?

Mr Lansley: That's not the point. The point is—

Valerie Vaz: No. What does the advice say?

Mr Lansley: Minsters, here and in Committee, have set out very clearly to the Public Bill Committee—and I am telling you now—what the legal position is.

Q447 Valerie Vaz: Which is?

Mr Lansley: That the Bill does not—

Valerie Vaz: Is it compatible or not?

Mr Lansley: The Bill does not change the extent or application of either public procurement rules or EU and domestic competition legislation. It is simply—

Valerie Vaz: Is it compatible with EU competition law?

Mr Lansley: That is not a meaningful question. Since EU competition law has direct effect, it cannot not be because EU competition law simply applies.

Valerie Vaz: I just asked the question. I don't expect you to put me down. I am asking a simple question. Is it compatible with EU competition law, and could you publish the legal advice?

Mr Lansley: It's a meaningless question.

Valerie Vaz: It is not a difficult question.

Mr Lansley: EU competition law applies now and the issue of the extent to which it applies is a question you would have to ask the EU competition authorities. The point is that, literally, our legislation cannot affect the extent of EU competition law. It can't do it.

Valerie Vaz: Could you publish the legal advice?

Mr Lansley: It can't do it because the EU itself determines the extent of EU competition law.

Valerie Vaz: Then could you publish the legal advice?

Mr Lansley: There is no need to do so because I have just explained it.

Q448 Valerie Vaz: Why? Do I have to make an FOI request?

Mr Lansley: No. There is no need to because, actually, that is it. That is it.

Q449 Valerie Vaz: Is it not in the public interest to publish the advice?

Mr Lansley: You are making a—

Chair: It is not a dialogue.

Q450 Andrew George: Can I come back to this very point but not from the same angle? You keep saying that the Bill doesn't extend the scope of the public procurement or competition law in any way. Of course, under the present arrangement that applies to non­clinical services—the purchase of toilet rolls or other services which come in to the NHS. Those public procurement rules clearly apply—the purchase of buildings and other services—but they do not currently apply to the purchase of clinical services. Is that not right? What you are doing with this Bill, this so­called reform, is extending it to clinical services, whereas, at present, those procurement rules apply—

Mr Lansley: I am very happy, and I say it—we will send you a note, by all means—that my understanding is we do not change the extent or application of public procurement rules or private procurement rules—

Q451 Andrew George: No, but that's not your role, is it?

Mr Lansley: No, and we are not intending to and we are not doing it. My understanding, at the moment, is that it is possible for public procurement rules to be applied to the procurement of clinical services. For example, if a primary care trust, at the moment, were to set out a competitive tender document which included clinical services as part of the tendering process but then, in the process of that, were to engage in an anticompetitive and abusive process, public procurement rules would apply to that.

Q452 Andrew George: Yes, but if the commissioning of those clinical services were a commissioning process and not a product of tendering those services, then those rules would not apply. In other words, if the present arrangement were to continue, the scope for legal challenge under competition law would not apply.

Mr Lansley: Andrew, you will forgive me, but when you say "a commissioning process as distinct from", competitive tendering is part of the commissioning process. Commissioning is about understanding the needs of an area and seeking to translate the needs of that area into the process of contracting for services in order to meet those needs. The contracted process may be conducted through an open competition or a tender, or it might be on an any qualified provider basis. The point I have made to the Committee is that our expectation—not least by the extension of tariff into a wider range of services—is that we will help to support, thereby, less use of the competition process and more use of an Any Willing Provider process. That reduces the risk of breach of public procurement rules because a competitive tender engages in some anticompetitive process, but I don't think it changes any of these rules at all.

Q453 Andrew George: But it may in relation to the bundling together of services. Any responsible commissioner of services in any area would recognise that you need to integrate those services, which would be an entirely responsible thing for them to do in their own area. Under competition law, as I understand it, any provider of any service could challenge the decision for a commissioner to bundle together services in a manner which would ensure their integration where that alternative provider of services would say, "This means that we are unable to deliver our provision of"—for example—"hip operations for fit people in this area. You have designed that service—bundled it together—in order to constructively avoid us providing services in your area."

Mr Lansley: It is helpful to ask the question in that way because it illustrates precisely the point I hope we have made already but will happily make again. If the commissioner sees it as being in the interests of the patients they look after to invite providers to provide a service in a particular way or to design a service in a particular way, bundling services together or securing services on a care pathway basis, that is their decision. I don't think there is any basis upon which a provider can go to anybody, be it the Commissioning Board, the consortia or anybody else, and say, "You're not allowed to do that." They are allowed to do that.

Dame Barbara Hakin: The issue is that the economic regulator has the public's interest at heart. It is not there simply to create competition for competition's sake. If, under the circumstances, the commissioner had not offered that service, or part of that service for competition when it would reasonably have been in the public's interests to do so because there were alternative providers who could have provided services that might have been better for patients or better value for taxpayers' money and would not have had another significant impact, at that point the commissioner has acted in an anticompetitive way. Again, it is about being clear. It isn't just about not tendering or not going out to competition. What the economic regulator is doing is seeking, in the public interest, to ensure that commissioners don't avoid going out to competition when it would have been in the public interest to do so.

Q454 Andrew George: If a commissioner decided to ensure that we have an integrated service in order to, for example, bolster an accident and emergency service—and therefore one ends up with a structure looking rather similar to a district general hospital—that decision in itself could not be in any way challenged. That decision to bundle would not be interpreted as anticompetitive and, therefore, open to any legal challenge.

Dame Barbara Hakin: I would not want to put myself in the position of deciding, in a specific instance, what either the regulator or the Office of Fair Trading would see as reasonable or not. What I am saying is that they would take the range of circumstances into account as to why the commissioner had not competed that service before making any decision about whether the behaviour had been anticompetitive or not.

Q455 Andrew George: It is fundamental though, isn't it? Integration of services—and we all know and understand why a district general hospital looks like it does, in order to have the capacity to be able to deal with the range of circumstances and unknown events which might come through its front door—is going to happen across the country as a whole. We need to be very clear that the bundling together—the integration—of those services and the commissioning of those services is something which can be planned for, commissioned for, tendered for and provided without any risk that it is going to be undermined by the salami-slicing of the services which are provided through that hospital.

Mr Lansley: What we and commissioners will want to see is that they are commissioning the services they need to meet their population. The process we have discussed, of commissioning, is about ensuring you have the services that are available. The Bill, compared to the present, substantially takes us forward in that respect. First, it is much better for us not to have a process of hidden cross­subsidisation. There will be a transparency about the services that are being commissioned, the quality that is being looked for and the price that is being paid—generally, often, through a tariff process. But it is very clear that there will be circumstances where, in order for the essential services and designated services to be maintained, there needs also to be a transparent process of paying more than might be paid to another provider under the same circumstances in a different place. That needs to be transparent as well. But it doesn't mean, from the commissioner's point of view, that somebody can simply say, "We are going to provide this service and that service" and the district general hospital will no longer be viable. In order to sustain designated services, there is a transparent process of designation which can lead directly to a process of payment that meets the additional costs of providing those designated services.

Dame Barbara Hakin: This is not my policy area but, obviously, I am very interested in it from the commissioning point of view. I am enormously reassured from what I understand of the policy, which I hope is quite extensive—and I am sure the Secretary of State understands it even better—that, with a note, we could allay a lot of the Committee's fears because some of the fears are unfounded.

Chair: If I may, it would be helpful to the Committee to have a note from the Department which sets out, as clearly as you are able, the extent to which the pattern of services which is going to be commissioned in any locality is within the discretion of the commissioner and a clear description of the circumstances in which that might be challenged, in particular by Monitor but by anyone outside the commissioning chain, on competition policy grounds.

Andrew George: It would also be very helpful to have some clarity, perhaps with some examples, of precisely the kind of services which you, the Secretary of State, see as potentially being designated. That seems to be crucial in all of this. The reference to "a range of services will be designated and therefore effectively protected" is an important issue which also needs to be clarified.

Q456 Chair: It is important, clearly. We are having a discussion about moving on to the framework of commissioning, but what is important is the authority of the commissioners to make their run to deliver the service that they seek to commission on behalf of their population.

Mr Lansley: Yes. I will gladly do as you ask and, as Andrew asks, will gladly illustrate that. I would, however, emphasise that the process of designation is something which we are not intending to dictate. It is something which should be derived from decisions being made on the part of commissioners about where they regard it as important to assure themselves about the continuity of services. It could be that in different places—let us say in Cornwall—there may be a much wider scope of designation than in other places, precisely because of the sort of physical geographical circumstances you know well. I will gladly do that.

To reiterate the purposes, we are very clear and the commissioners are very clear that the intention is to secure, for the commissioners, the opportunity to design the services that they need in the best interests of their patients, to do so to secure the public interest and that, in so far as they do so in a way that is not abusive and not contrary to the public interest, there is not a process by which they can be interfered with by Monitor on grounds of competition law. It might, in that sense, be quite a short note.

Q457 Chair: I understand that. It seemed to me that a considered statement, albeit short, might be quite helpful.

Q458 Nadine Dorries: To follow on from Andrew's point about district hospitals and patients walking through the door—the unknowns—one of the problems is that we all know non­elective care in hospital—the emergencies, the A&Es—has always been paid for by the siphoning off from the elective. There is an area of concern as to how that will be funded in future, what areas will be covered and whether the NHS Commissioning Board will be involved in that. It is important to communicate clearly, both to the public and to hospitals—particularly district general hospitals—how they are going to cope. We can all see this brave new world of GP practices and the amount of capital expenditure projects that are going to happen. There are going to be practices merging together, probably even a revival of cottage hospitals, and GPs extending their skills and the services that they offer, which will take away services from district general hospitals. That leaves them worried on two points. They are up for becoming Any Willing Providers and taking on the challenge, but they are also concerned about the A&Es, the non­electives and the unknowns and how they are going to be paid for if some of their elective stuff is going to end up being taken out of the district general hospital.

What reassuring words would you give to the chief executives and chairmen of district general hospitals who are facing that problem and that concern at the moment?

Mr Lansley: Yes. We have had these sorts of conversations. Bruce and I will have had these sorts of conversations with many of the hospital chief executives and, indeed, some of the senior clinicians. Essentially, from their point of view, what always gives them greater reassurance is that, in designing these services in the future, they are going to have a much stronger clinical relationship with their commissioners. It is not just a managerial discussion about cost and volume. It is quality based. Many of the specialists take immense reassurance from the fact that the competition is on quality and not on price. To that extent, therefore, the opportunities they have to use the specialisations they have in the secondary sector to design better pathways of care extending into the primary sector is terribly important. That does mean, in terms of the response, particularly on the part of district general hospitals in their areas, is one of shifting from seeing themselves as being hospital trusts to seeing themselves as being health care trusts. In order to respond to these kinds of changes, they need to do that. Clearly, the whole process of quality, innovation, productivity and prevention, the QIPP programme, and the need to secure efficiency savings in order to make the resources of the NHS meet rising demand, itself, is helping to drive a process of delivering care more appropriately in the right place at the right time, often with more accessible, community­based options. We know that the best way to design those services is with primary care and secondary care working together, and not shift the resources into primary care and let primary care do it and simply cut the budget at the hospital. All of that begins to change the business model in district general hospitals.

Q459 Nadine Dorries: You are saying it might be a desire on behalf of the primary care and the new GP consortium to do that, to take on those services and to bring them into primary care.

Mr Lansley: I will tell you a really interesting example of that, and it might be sensible to bring it in here, rather than be theoretical. All over the country we have new commissioning consortia coming together. One of the principal exciting opportunities is for them to think about how they redesign urgent care in their area. When they do that, they start to talk to the providers of emergency care in hospitals and realise that that relationship is a terrifically important one. The hospitals do not want to be in a position, as things currently stand, where the structure of the tariff often means that the primary care trust sets up a whole string of walk­in centres and urgent­care centres and front of hospital services. In fact I can remember being in one—and it must have been in Redhill—where the PCT set up a process by which they triage the patients at the front end and they take those patients. The way the tariff has been structured has meant that disproportionate amounts of income have been taken away from an emergency department that is left with all the complex and difficult operations and procedures to do.

Nadine Dorries: Exactly.

Mr Lansley: On the contrary, what we should be looking for is something that is a more integrated process and a tariff that is more responsive in that sense as well—a tariff that is more reflective of the complexity and cost of what is being done. Most hospital chief executives, when you have that conversation with them, realise that, with testing as it is, to be in a situation which is not simply block contracts that are progressively being whittled away by primary care trusts and where they are expected to cross­subsidise and cope, is not the right way to go. What they would much rather have is a transparent process by which there is an independent voice—and this is Monitor—whose job it is to ensure that the tariff accurately reflects the cost of the services they provide without that kind of hidden cross­subsidisation.

Q460 Nadine Dorries: To finish, you can guarantee there will be no district general hospital in the future who will be struggling financially because of the number of unknowns and emergencies—the non­electives—that have walked in through the door, because of the way the tariffs have been set. They will be able to manage and cope with those in the future.

Valerie Vaz: Secretary of State for the future, in perpetuity.

Mr Lansley: Thank you very much. That is very kind of you, Valerie. You helpfully illustrate that I cannot make that kind of guarantee.

We have many hospitals that are in exactly that position and have been in that position, sometimes, for years. We have hospitals at the moment in that position and I have inherited many of those problems in many of those places. The best way to avoid those things happening is for there to be what is essentially a clinically­led design of services that extends, in this particular instance, into urgent care in the community, does so effectively and does not just throw the problem back into the lap of the district general hospital—who are effectively the provider of last resort—on the back of a block contract that then does not give them proper compensation for what they do.

Chair: That is a good key in to Sarah who wants to move the conversation on to reconfiguration.

Q461 Dr Wollaston: Can I clarify one point before we move on? I was very interested, Dame Barbara, that you said Monitor was not going to be about competition for competition's sake. That goes to the root of many people's concerns about the role of Monitor and the issue that, although the intention is benign, maybe years down the line Monitor could interpret its powers differently. Looking at the possibility of the NHS becoming more like a regulated industry along the lines of Monitor following a position like Ofwat and Ofgem, certainly if you asked anyone in the south-west whether they feel Ofwat protects consumers' interests, you would get a very interesting reply. I am interested to know where you think in the Bill there are protections to prevent Monitor becoming more powerful with time and interpreting its powers in a way that does introduce competition for competition's sake.

Dame Barbara Hakin: Throughout the Bill it is clear that the policy intent is the public interest. The policy intent is to ensure that patients get the best choice and the best range of services possible. Monitor, the economic regulator's role is to ensure, if anticompetitive behaviour is brought to its attention, that it reacts to that in trying to determine whether that anticompetitive behaviour was founded on the public interest or, alternatively, whether it was an abuse of the system, at which point it would act. Throughout the Bill, the clarity is there, that the role of the economic regulator in health is to protect the public's interest in health and ensure that our patients get the broadest range of options and the best services, depending on which organisation can provide those services.

Q462 Dr Wollaston: You are satisfied that the fact it is there to broaden choice does not mean it is going to see its remit differently, and how you interpret the public interest is open to interpretation.

Mr Lansley: Monitor is there to promote the interests of people who use the NHS and use health care services. It should be promoting competition where appropriate because competition has that potential benefit, but, equally, through regulation, where that is appropriate, too, because we are talking of a social market, not a free market. We are talking about regulated prices, not price competition. Monitor has a specific duty to co­operate. It does not simply act on its own. It co­operates with CQC in the licensing process and has a duty to co­operate with the NHS Commissioning Board. For example, the regulated pricing structure is a co­production between the Commissioning Board and Monitor.

Monitor also has statutory duties to maintain the safety of people who use health care services, to secure continuous improvement in quality of health care services as well as continuing improvement in efficiency. We shouldn't discount the fact that it has to secure improvement in efficiency. Just as there are people who are worried about the impact of price competition, there are people who have said to me, "Hang on a minute. If you don't have price competition, how do you get that continuing process of delivering greater efficiency from providers so that we use money more effectively?" Answer: we depend upon Monitor, through its process of regulation of prices and knowledge of the providers of health care services, to help to drive that too. So we have safety, quality and efficiency.

Q463 Dr Wollaston: It is going to have quite draconian powers, isn't it? It is going to be able to change the operation of the pension scheme and possibly move away from national terms and conditions of service. It has all sorts of powers, including preventing commissioners from favouring incumbent providers, possibly leading to hospitals having to share their premises to provide a level playing field. These are the potential areas that they could have powers in, presumably. Is that correct?

Mr Lansley: I am not sure that the legislation says they should do those things, as I recall, and I am not sure where you are quoting from. It is not the legislation.

Q464 Dr Wollaston: No. It is about how we are going to have fair playing­field distortions ironed out. Where do you see Monitor fitting in?

Mr Lansley: I think it is rather important to have a level playing field in this respect because, in the past, we have had a situation where the NHS has, under the last Government, advantaged private providers relative to NHS providers. NHS foundation trusts were closed out of an independent sector treatment centre competition. ISTCs were given, on average, 11% more than would have been the equivalent payment through the tariff. The independent sector treatment centres were given, in total, £250 million for operations that they never provided.

Dr Wollaston: I accept that.

Mr Lansley: We are making it clear, through the legislation, that Monitor would not have the power to advantage private providers in the way that has happened under the previous administration.

Q465 Dr Wollaston: But do you see us maybe moving in the other direction, for example, obliging hospitals who hold assets—incumbent providers—to share their premises to level the playing field, or do you not see that happening in the future potentially?

Mr Lansley: I am not sure that I know under what circumstances that would be appropriate, but I will gladly think about that.

Chair: We are going to get a note from the Department on the legal constraints on commissioning which, from the point of view of an inquiry on commissioning, is the context. Grahame, did you want to come in on this? Otherwise I want to move on.

Grahame Morris: On Monitor, yes, I would.

Chair: Can we have one more round on Monitor and then move on?

Q466 Grahame Morris: My question is in relation, Secretary of State, to the role and the costs of Monitor. On 8th February, I received a written answer about the costs of the new economic regulator which were estimated to be between £50 million and £70 million per year. As recently as last week, that estimate was revised and figures that were given to the Health and Social Care Bill Committee now indicate that that figure has been doubled to £140 million. Does this square with the Government's commitment to abolishing bureaucracy? Would it be fair to say that what you are doing is removing clinical bureaucracy, with the SHAs and PCTs, but you are replacing it with a competition­based and economic bureaucracy?

Mr Lansley: It is fair to say that, as compared to the past, we are intending to reduce the overall costs of administration in those parts of the NHS which are responsible for commissioning and regulation. Strictly speaking, I don't have the power, and I am not intending to impact on the administration costs in hospitals directly because, like foundation trusts, they are their own management organisations.

As to the NHS management costs, we start with a total of £5.1 billion, of which £3.9 billion are in primary care trusts and strategic health authorities, £600 million are in arm's length bodies and £500 million overall in the Department of Health. We are intending to reduce those management costs in total by a third in real terms.

Grahame Morris: In relation to the sections we are dealing with here in Monitor—

Mr Lansley: What you describe in Monitor is consistent with that because, of course, the estimate in Monitor is comprised within that total.

Q467 Grahame Morris: With respect, the costs of Monitor at the moment are £21 million per year. That is £100 million over the lifetime of a Parliament. Contrast that with the new role Monitor is given on both the provider and commissioner side—an expanded role as economic regulator—and the costs over the lifetime of a Parliament are going to be £500 million. A Member of this Committee said, "Are we liberating the NHS from top­down political control only to shackle it to an unelected economic regulator?" Is that a fair assessment?

Mr Lansley: I will gladly send a note. We have been assiduously seeking, through the impact assessment on the Bill, to set out the best estimates of what these running costs look like. As far as Monitor is concerned, I understand they fall within the range £50 million to £70 million. They are, of necessity, more than the current costs of Monitor, and entirely because Monitor has a completely extended role in relation to where we are at the moment. It comprises not only the responsibility for all foundation trusts—and we are intending all NHS trusts should be foundation trusts—but it will have a broader set of responsibilities that are currently being exercised through the Co­operation & Competition Panel, through a number of strategic health authorities and in the Department of Health. As you would expect, the costs of an organisation under circumstances where its functions are substantially increased are also relatively increased.

Q468 Grahame Morris: You have given various assurances that competition on price will not happen, and Members of the Committee have raised issues about what might happen in the future given the powers that are on the statute book, or will be shortly, when the Health and Social Care Bill passes its final stages. Why spend £500 million on an economic regulator—and the figures were revised last week—if we are not going to have price competition?

Mr Lansley: Where did £500 million come from? I thought I said £50 million to £70 million.

Grahame Morris: Up to £140 million a year, over the lifetime of a Parliament, is £500 million, isn't it?

Mr Lansley: If you aggregate years together.

Grahame Morris: Yes.

Mr Lansley: I see.

Grahame Morris: As opposed to £100 million—

Mr Lansley: I think you would have to aggregate about eight years together in order to arrive at the—

Grahame Morris: Not if you use the "up" figure of £140 million a year—

Mr Lansley: Your example is interesting because, at the moment, that process of attributing prices to the payment­by­results system is conducted inside the Department of Health. Of course, in so far as that is being done inside Monitor, there is a transfer of administrative cost into Monitor to make that happen. It is perfectly reasonable to ask the question, but it is unreasonable to expect that the cost of Monitor can be at the level it is now when there is such a significant extension of its relative role.

Chair: It would be helpful to the Committee to have a brief note of the anticipated cost of Monitor currently and the Departmental cost of the regulatory role that is going to be assumed by Monitor currently and then looking at what they might be in the future. That might answer that point.

I am conscious that Sarah needs to go. She wants to talk about reconfiguration.

Q469 Dr Wollaston: Thank you, Chair. We know that about 20% of the Nicholson challenge is due to come from service changing—shifting services nearer to the community—and reconfiguration is immensely challenging. I was looking at the King's Fund report on Lessons from South East London. They made it clear that these service reconfigurations can't come about with market forces, are unlikely to do so with commissioning consortia and that, currently, it is strategic health authorities that have been able to drive those reconfigurations. I wondered where you feel, under the legislation, we are going to be able to drive those reconfigurations from because we will not have strategic health authorities.

Dame Barbara Hakin: It is important that the reconfigurations are largely driven on the basis of quality. We are moving into a situation where commissioners are much more focused on quality and describe very clear quality standards that they expect for their patients. That is likely to lead to some providers needing to reassess how they deliver services because it is evident, as you will well know, that the volume of service you provide, quite frequently, has an impact on the quality outcomes. Therefore, it is really important that we get the specialist expertise and the infrastructure to make sure patients with less common conditions are kept absolutely safe.

However, in order to look across a broader geography and a lot of areas where services will change, it will be essential that consortia work together to make sure they can take the overview of the services they want to commission and then work with a range of providers across that geography to help providers understand the best reconfiguration and the best configuration to give the quality services. The NHS Commissioning Board will have a responsibility to ensure that happens.

Again, there is an assumption that these organisations will all act in isolation and will not be capable of coming together to work together. Over the history of the NHS, most of the time, we have seen organisations come together to identify the shape of services for patients across a larger geography than one organisation. Looking back over time, I remember the original health authorities doing exactly that. Chief executives of PCTs and SHAs in a lot of areas—the PCTs in my patch—would work together to commission ambulance services, et cetera.

Dr Wollaston: Sure.

Dame Barbara Hakin: The Board will have a responsibility to ensure that consortia do the same. Again, the early indications from consortia, as I go round and speak to quite a lot of them, is that they are very aware of this. They are very keen to make sure that they have an infrastructure that allows several of them to work together.

Q470 Dr Wollaston: Perhaps, Secretary of State, you can clarify whether you have decided what the intermediate layer of the NHS is going to be. Is it going to be the NHS Commissioning Board that carries out service reconfiguration or will there be a regional presence, and have you clarified what that will be?

Mr Lansley: No. It is not the job of the NHS Commissioning Board to carry out reconfiguration because, clearly—

Dr Wollaston: No, but somebody needs to.

Mr Lansley: —the first responsibility lies in the hands of the providers themselves to respond to the shape of services that are being commissioned. The prime impetus comes from commissioners being clear, through their Joint Strategic Needs Assessment, of what services they do need. That is a combination of commissioners and local authorities coming together. If you remember, what we have been clear about, since the election, is the process of applying four tests to try and bring into the current system an appreciation of how the system should work in the future. There needs to be a public voice, through HealthWatch, and that public voice should be taken into account now; there needs to be a democratic voice, through Health and Well-being Boards, and we are trying to make sure that that voice is being heard now; there needs to be a patient voice, again through choice—and, clearly, some of these changes will be the result of the disclosed choices of patients—of where they want to be treated and by whom, and there is the voice of general practice­led commissioning consortia. All these things come together.

Clearly, that doesn't mean there are not circumstances where the consequences of a service designed to meet commissioners' changes doesn't give rise to a need for review. We set out in the legislation that there are processes by which, where there are major service changes, there is scope for those to be referred to the NHS Commissioning Board or, ultimately, to the Secretary of State—with major reconfigurations where the local authority, as a whole, cannot accept what is being proposed. I would say, as Barbara says, we can see this happening now. South London Healthcare is a very interesting case in point because these things were not happening. They weren't being brought together. Now, for example, through the Bexley, Greenwich and Bromley Clinical Cabinet, we have general practice commissioning consortia coming together directly in order to look at some of the consequential issues, particularly for Queen Mary's, Sidcup, and saying "We can offer our view." Technically speaking, they are due to let me know, next Thursday, what their view is about how accessible, safe services can be provided and should be provided on the Queen Mary's campus.

Q471 Dr Wollaston: You see that all coming from commissioning consortia and not needing—

Mr Lansley: In the first instance it has to be led by clinical leaders, and not least because at the heart of this is safety and quality. There does need to be a clinical impetus behind getting safety and quality right.

Q472 Dr Wollaston: You think they will have the levers to be able to carry out those functions.

Mr Lansley: As Barbara says, if they don't have what they regard as the levers themselves—and you do ask a very fair point—we are intending that the NHS Commissioning Board, instead of having, as it were, rigid tiers of management in 152 primary care trusts and 10 strategic health authorities with all the costs associated with that, should have a significant role and it will need to discharge that role in ways that enable it to aggregate together some of its responsibilities for supporting commissioning consortia and indeed, if necessary, for performance monitoring and oversight.

Q473 Chair: Can I push Dame Barbara about that because she said the Commissioning Board "will have a responsibility to make certain these things happen"? I am not sure I quote you precisely, but that is what I heard you to say. What is the quality of information that is going to come to the Commissioning Board? Who, in the Commissioning Board, is going to provide the assurance that these things are happening? Who, in the Commissioning Board, is going to be taking action if the information coming to it gives rise to concern that opportunities which should be taken for service reconfiguration are not being taken?

Dame Barbara Hakin: First, I would reiterate the Secretary of State's point that a lot of the reconfiguration, or the change in service, needs to be driven by providers on the basis of commissioner plans and quality specifications. The legislation is quite clear that the NHS Commissioning Board, first and foremost, authorises consortia. It has a role to support and develop consortia to make sure that they are fit for purpose, capable and competent and it has a responsibility to assure that consortia are delivering on all their duties. As yet, the precise shape and way the NHS Commissioning Board functions has not been decided. But Sir David Nicholson has been very clear that he sees an enormous strength which we will have through one organisation having a consistent operating model in the way that it supports and develops all the consortia who are the frontline organisations.

In order to be assured that consortia were discharging all their duties, the Board would have to be sure that they were able to come together, because there are certain duties as a consortia, as a PCT and, frankly, as an SHA Chief Executive that you couldn't discharge without colleagues. All NHS organisations have a duty to work in partnership. The Board will be there to ensure that, where appropriate, the consortia do work in partnership where consistent commissioning plans across a wider, broader geography of one consortia are important. At the moment, I couldn't give any details on exactly what shape that will be because there is still discussion. Obviously, Sir David is Chief Executive designate but the rest of the Board is not yet in place. He has made it very clear that he recognised a large part of the Board's work will be out in the field rather than being done centrally in one office.

Mr Lansley: Can I make a point, at the risk of intruding? It seems to me that there is a tendency—and I think it is overstated—to believe that the productivity requirements in the NHS, in contrast to the last decade, are going to be delivered, principally, through structural reconfiguration of hospital services. This is simply not true. Indeed, when one looks at the overall structure of the QIPP programme, there are considerable expectations in terms of productivity gained in hospitals, but principally by the application of productive care principles and of doing things more efficiently inside hospitals that do not fundamentally change the structure of those hospitals—merely the productivity with which they are delivered.

Yes, there is a need to improve the quality of care and the accessibility of care for people with long term conditions, and that represents about 10% of the overall QIPP programme. That will reduce the demand for emergency admissions to hospital and so on. Again, I do not think that, in itself, is going to lead to major requirements in terms of reconfiguration of sites of hospitals. It will be more of an incremental process of responding to changes in demand.

Chair: Interesting. We could have a long dialogue on that.

Mr Lansley: I have one more point, if I may. Of course, if you ever did get to the point where there was major structural reconfiguration—we have been in situations in the past, which you will be familiar with, where there have been questions about hospital reconfiguration—the NHS Commissioning Board may, in any case, be a participant in those discussions because they, themselves, will be commissioning services. They will be commissioning specialist services that are currently embraced within the national and regional specialised commissioning processes. So they are very likely to be a participant in the process.

Chair: We could spend a long of time on that, I suspect.

Q474 Andrew George: On the issue of the reconfiguration and configuration of services, I get the sense that there is a fog somewhere between the NHS Commissioning Board and the consortia in terms of making decisions about the shape of local or regional services, particularly acute services. I will give the example of coronary care, stroke or obstetrics. In Cornwall, we have a pathfinder with a population of 28,000. If you think that that is an appropriate, integrated way in which it is possible to make a decision about the shape of services, it would be interesting to know how that might happen and how simply GPs, which is one sectoral interest, might be making that decision. Local authorities have a role, of course, but where does clinical governance come into the shaping of those services? What will lie between those commissioning consortia and the NHS Commissioning Board? You still haven't really addressed that. There is a lot of uncertainty.

Dame Barbara Hakin: I want to reiterate that the Board is not just a board. The Board is an organisation with a very significant range of responsibilities, both in supporting, developing and overseeing consortia and in its own commissioning. What we are trying to create is a commissioning architecture which works across all geographies, whether it is very local or national. It doesn't matter what the system looks like, people have always had to work together. PCTs have worked together and PCTs have worked with SHAs in terms of their commissioning. It will be exactly the same with the Board and the consortia. There will be some services the Board is commissioning which you will need to take into account, in terms of the commissioning plans, with what the consortia are commissioning because the two together create the whole plan for that population.

What is not envisaged here is a remote and distant board that has nothing to do with commissioning locally. This is about a serious partnership between commissioners—whether it is the Board and the consortia. I am sure Bruce will add to this, but again we have been very clear that consortia, in discharging their duties, must make sure they involve all clinical professionals where it is appropriate. Again, a consortia of 28,000 are never, in isolation, going to be able to have a major impact on the shape of services that go beyond very local community services. In order to commission those services, they will have to work in partnership with those around them and perhaps use commissioning support in order to do some of those roles. But different models will work. Bigger organisations use localities to get the clinical input. Smaller organisations work in a federated way to make sure they can commission services of the appropriate geography.

Q475 Andrew George: It is "suck it and see", really.

Mr Lansley: No.

Dame Barbara Hakin: No.

Mr Lansley: I don't think so. It runs in contrast to an NHS which has sought and failed over the years, through successive reorganisations, to try and establish that there is some magical number of intermediate organisations that meet every need. Of course, that isn't true. Stroke care, for example, in some cases can be commissioned entirely on a quality service basis. You don't need to redesign the structure of stroke care across a whole area. You might do at the point at which you have to introduce a new service for strokes, like thrombolysis for stroke. But for the commissioning of stroke care it is perfectly possible do it at a local level on the basis of the quality that you are looking for and with whichever provider can meet the quality that you are looking for. That is absolutely fine. Cardiac care, I think, will be interesting. There is a point about designing in relation to the professional inputs that leads you to different conclusions in relation to different services. Even where cardiac services are concerned, which obviously is Bruce's principal area of professional expertise, cardiac care will be commissioned at different levels depending upon the service you are talking about.

Sir Bruce Keogh: It depends what you mean, in many senses, by "reconfiguration" because it means different things to different people. To some people it means the way real estate is configured and to others it means simply the way a service is delivered. With the National Commissioning Board, the major reconfigurations generally relate to specialist complicated services. Those are the big, more tricky, reconfigurations. The National Commissioning Board will be responsible for commissioning about 20% of activity and it will be around those major complex areas where they are either expensive or the risk to patients is the highest.

In terms of other types of reconfiguration, which is the way that services are delivered, they are more appropriately devolved down to local consortia, or to a local level. The key issue in all of this is that the decisions are not going to be made in isolation by people working in primary care. We are absolutely clear that what we are talking about here is not GP commissioning. It is clinical commissioning. We will expect there to be intimate involvement of the people who deliver the specialist services in discussions about the nature of their delivery. There is a spectrum of reconfiguration and the key to that spectrum is the discourse between those who provide the service and those who are commissioning it.

Q476 David Tredinnick: I want to talk about the Armageddon factor. What happens if a consortium has a catastrophic failure and something goes seriously wrong—a Mid Staffordshire Trust situation? Where does the responsibility lie there? Do you grab it, as Secretary of State, and pick it off the wall? What happens?

Mr Lansley: No. The responsibility, under those circumstances, lies with the NHS Commissioning Board. It is the Board's responsibility to identify that prospect of failure and to intervene early, not to wait around for a failure to occur. We have had too many instances of waiting around for failures to occur. In fact, in the NHS, we have had too many instances of failures occurring and people not—

Q477 Valerie Vaz: What would trigger any—

Mr Lansley: We are in discussion, through the NHS Commissioning Board, with the pathfinder consortia about structuring what those sorts of triggers and intervention points look like. The answer to the question is that it is the Commissioning Board's responsibility and, of course, if there were a failure, to step in. It has powers, if necessary, literally, to take over responsibility, or indeed to ask another consortium to do so.

Q478 David Tredinnick: Are you going to have spotters out there—scouts? Are you going to have a department that is looking down, checking each individual organisation to make sure, ticking off points, provided they get 70% success? Where does it click in? Is it a percentage success rate?

Mr Lansley: Form follows function and we are starting with the perfectly reasonable proposition that we are talking about a National Health Service and the National Health Service Commissioning Board has a substantial set of responsibilities at a national level. Indeed, some of the responsibilities that are currently distributed to primary care trusts could, should and will be discharged by the National Commissioning Board in a way that I hope will deliver greater consistency and economies in the future. At the same time, there has to be a series of processes by which the Commissioning Board doesn't just sit at the centre. It has to have a process by which it monitors performance, is capable of intervening and, frankly, is also capable of supporting. We are now designing what those support mechanisms look like because, where commissioning is concerned, there are a range of different population characteristics which, in themselves, are optimum in relation to commissioning for different purposes.

Q479 David Tredinnick: This is my last question. You have an audit function, then, at the Board. You are auditing what is going on through the whole range of consortia.

Mr Lansley: Yes. Clearly, the Commissioning Outcomes Framework, in itself, creates a whole structure of accountability on the part of the commissioning organisations for the results they are achieving. Also, the Commissioning Board has a direct responsibility, through monitoring its own contract with the commissioning consortia and, by extension, its contracts with GP practices, to ensure that the money is being spent in a proper and effective way.

Q480 Chair: Before I bring in Grahame, there was one important phrase you used there "its contracts with commissioning consortia". That is how you envisage the Commissioning Board operating, is it, on an agreed contractual basis which defines what the Commissioning Board is looking for?

Dame Barbara Hakin: The Commissioning Outcomes Framework is not a contract as we understand the contracts between commissioners and providers. The NHS Commissioning Board will have a Commissioning Outcomes Framework, and it is that which makes clear, alongside staying within the financial allocations, its expectations of consortia. But running alongside "These are the expectations", the Board will put in place a range of tools, supports and guidance to mean that consortia do not have to reinvent things however many times there are of them.

Mr Lansley: These are, of course, statutory bodies in a statutory relationship.

Q481 Grahame Morris: In relation to the point that has just been made about reconfiguration of GP commissioners, and indeed the failure rate, I have been making quite extensive inquiries. I have written and I have tabled Parliamentary questions to try to discover what the Department's or Ministers' estimates are of the anticipated failure rate among GP consortia, and indeed local health services. I am not sure if you are aware of a piece of research that was carried out by the Nuffield Foundation. They did a very large study in North America of 3,000 commissioning groups. They went back, some 15 or 20 years later, and there were only 300 left. 90% had failed over that period. It wasn't because of any lack of goodwill or clinical expertise. The failure was because of a lack of management input and financial oversight. I would be very interested to know what your figures are—what the Department's estimates are.

Finally, the impact assessment that is published with the Bill seems to assume that there is some potential for failure built into the Bill, otherwise it wouldn't create much of a market.

Mr Lansley: Let me say three things. I am familiar with the Nuffield Trust's paper in relation to America. It is instructive in the sense that we knew the impetus for general practice in clinical commissioning is because we want clinical leadership in the design of services for patients. If we thought that the purpose of GP commissioning was in order to have better financial managers, that would be rather absurd, would it not?

Q482 Grahame Morris: Wasn't the lesson—

Mr Lansley: In America—let me answer the question—yes, there were failures and those failures of physician­led commissioning were largely to do with their inability to operate in an insurance marketplace. We are not looking at comparable situations, since our organisations have to manage finances but they don't have to engage in risk management in the way that the physician­led commissioners did in America.

The second point is we are intending—but our recognition has always been that we are intending—for the consortia to establish themselves in a way that has strong financial support alongside them. That is why we are establishing the PCT clusters. The clusters, over the course of a two­year transition process, will ensure they do have precisely that kind of strong financial framework, including the establishment of that strong financial and other management expertise accessible to the consortia when they take over their legal responsibilities. Is there a risk of failure? Of course there is a risk of failure.

Grahame Morris: Failure is a risk.

Mr Lansley: Strictly speaking, we are in a learning process with the pathfinder consortia now. They are engaging directly with commissioning. There will be substantial delegation of responsibility for commissioning to them in the course of this next year and then, of course, shadow running in the year after, which will allow us to make more valid estimates. The Bill contemplates that, in order to respond to that, there is not only the power of intervention on the part of the Commissioning Board but, if necessary, a contingency fund in order to manage any consequences that flow from that because patients will always be looked after.

Q483 Grahame Morris: In relation to that point and the reason for failure of the cases that were looked at in the Nuffield Trust study, a particular case, in fact, the West Cumbrian practice­based commissioning, has been held up as a model, as an example. My understanding is that it is currently £11 million in deficit and the strategic health authority has effectively bailed it out. That organisation will no longer exist under the new structure, the new architecture. What will happen in these circumstances? Is this going to be a pattern of failure?

Mr Lansley: I am perfectly happy to send you a note. I have been to Cumbria and discussed it. It is perfectly clear to me that the general practice commissioning groups that came together, but out of practice­based commissioning—

Grahame Morris: There is no argument about their clinical expertise. It is their management expertise.

Mr Lansley: —demonstrated, in Cumbria, their willingness to get to grips with what were longstanding financial problems in the health economy in Cumbria. They are substantially improving the financial and service prospects in Cumbria as a result of that, not least by literally facing up to their problems which, in the past, were simply being ignored and were accelerating.

Grahame Morris: It is a huge deficit.

Q484 Chair: If we are going to go round every health economy with issues, we are going to be here all night.

Can I refer to some evidence Sir David Nicholson gave us when he came here to talk about the authorisation regime, how these risks that we have been discussing are going to be managed and the way in which the Commissioning Board is going to satisfy itself that these risks can be properly managed before a commissioning consortium is authorised in the arrangements in the new Bill? When Sir David was here, he made it clear he left open the possibility that in some parts of the country there wouldn't be a consortium ready to be authorised by 1 April 2013. He also introduced the thought that, in some parts of the country, there may be partial authorisation. Could you tell us how that might work and, importantly, who would be the commissioning authority in an area where there was either non­authorisation or partial authorisation on 2 April 2013?

Dame Barbara Hakin: I am happy to answer that. I would say—as I am sure Sir David would if he was here—that we do not have all the answers yet. This is something we are working through with the pathfinders in the Department of Health and as we build the basis for the Commissioning Board. The first and most important principle is that the Commissioning Board wants to see successful consortia. The success of the NHS absolutely depends on the success of the consortia, and one of the Commissioning Board's primary roles will be to support consortia to be as good as they possibly can be.

Alluding to the reference to deficits, while good management is absolutely key and critical to all NHS organisations—and we hope, through this model, to increase the economies of scale and protect the specialist expertise in terms of good management—there is no doubt that NHS resource is spent by clinicians of all kinds. In order to address deficits such as the ones we see in Cumbria, we need to see a change in clinical practice so that that clinical practice eliminates waste and delivers high quality for patients. That is what we will be supporting the consortia to do.

It will be in our interest to give the consortia the best possible start in life. Therefore, an authorisation process which looks at all the important aspects and helps them to demonstrate that they are good across the range of the things they need to do will be key, but that will then have to be followed up by an ongoing assurance process because organisations change. We all know that. We have a lot of work to do on the detail of the elements of the authorisation process, but we are all clear that it is really important we look at six areas during authorisation. One is that these organisations are clinically focused and are really going to make a difference from the clinical point of view. Otherwise, what would be the point in having them? That is not just about general practice clinicians being engaged. It is about them demonstrating that secondary care clinicians, nurses and allied health professionals are all engaged in this process.

The second important area is that these have to be organisations that are responsible to their patients and their communities. As part of the authorisation we would want to understand that they have the right systems and processes in place to do that, not only from their own point of view but working closely with the local authority and local HealthWatch. In fact, as a step along the journey, we have announced, in the last few days, that in this year's GP contract practices will have an increased focus on patient participation groups, which we hope can help to feed that.

The third area key for authorisation will be that the organisations have a plan and can demonstrate how they are going to improve quality for patients within their allocated resource. We would need to know that they have a comprehensive capacity and capability to discharge all their functions, which are significant. As I have said here before, we are trying to create a system which gives the consortia a choice of commissioning their back office commissioning functions from organisations which are highly expert and therefore getting the economies of scale. In terms of looking at that overall capacity and capability, which is about both discharging commissioning functions but also doing the full range of corporate governance, statutory functions, safeguarding—all of those things—some of those elements might be bought in from outside the consortia itself, or shared across consortia.

The next area we would want to be clear about is that, to commission effectively, consortia need to collaborate. They need to have those arrangements in place. I go back to my earlier conversation about having to collaborate with neighbouring consortia but also with the local authority because a lot of commissioning is joint with the local authority.

Finally, they need to have the leadership capacity and capability. Again, they have to have an accountable officer and they have to have a chief finance officer. I am sure none of us here underestimates that successful organisations have very high calibre leadership.

Those are the domains, the areas we would want to see. We want consortia to be able to demonstrate to us that they have thought about these and they have thought about how they can discharge all these duties. I am sure we will try, during the course of the authorisation, not to create a bureaucracy so that they spend all their time worrying about authorisation. We will try to make sure that the documents that they are already having to produce, such as their constitution and their commissioning plans, meet the needs. Again, as Sir David mentioned last time he was here, so much of this depends on partnerships and relationships that it is our assumption that the authorisation will include the views of others locally and in neighbouring organisations.

It does seem unlikely, although we still have two years—given the enthusiasm and the number of pathfinders who are starting to look at this path already—that every single consortium would be absolutely competent in every area. I am sure that probably never happens to any organisation. They will always need support and development. But there is a range of options, as opposed to the full authorisation, which would be available. One would be that the consortia was authorised to commission some services and not others. Another would be that the consortium was authorised with support. It may well be that the Board would consider that, until it matured, some extra support in terms of management capacity needed to go into the organisation. There might be certain conditions around the authorisation. Where the consortium is not authorised to discharge all its duties, then the Board would have a choice of either commissioning those services itself or perhaps allowing a more mature consortium to commission those in the interim. Broadly, that is where we are on that process which, hopefully, puts us in the position whereby, as we move through 2012­2013 and into 2014, we simply have constantly improving consortia who all become able to be more autonomous and independent. Then, I am sure, the continuing assurance process will be one which includes earned autonomy.

Mr Lansley: I would add a point or two, if I may, to that. First, we are already in a process, not least through the PCT clusters, of identifying how the right kind of staffing support and management support can be available to the new commissioning consortia. As all of us know, your predecessors, the Select Committee before the election, published a report in March last year which made it perfectly clear. I think what they said was, "The 2009 World Class Commissioning assurance process confirmed that the quality of commissioning by PCTs was largely poor to mediocre." That disguised that there are some good managers and good teams in primary care trusts. Our expectation is that this process will identify those and not only ensure that they are retained in PCT clusters but also have the opportunity to join commissioning consortia in future.

The other thing I might say is this. Of course, we have known for years that primary care trusts were not meeting the quality standards and capabilities that we wanted, but there was no authorisation process. We do not start down this process from, "It all worked fine, so why are we messing with it?"

Chair: One of the more implausible public campaigns is the campaign for the preservation of the PCT, as they were in April 2010.

Mr Lansley: Yes. That is exactly the right point. This process of authorisation, not least because of its transparency and rigour, is going to be something that gives people, including people who depend on the National Health Service, and the local authorities, who have an integral part in all this, a degree of reassurance about the nature of the capabilities that are managing their commissioning process that we have not had in the past. All that happened with PCTs was the World Class Commissioning process was introduced and, in the two years it was introduced, the amount of management consultancy spend by primary care trusts and Strategic Health Authorities rose by 78%, from £176 million to £314 million. The response was just to hire more management consultants.

Chair: We have, helpfully listed by Dame Barbara, six domains—I think that was your term of art—that we would like to go through, or at least some of them, in the course of the time left to us.

Q485 Chris Skidmore: I am particularly interested in what Dame Barbara said about engaging secondary care commissioners and the process of that engagement. Why not simply include secondary care commissioners within the consortia to start with? Why do they need to be engaged on a separate level? Obviously, you are talking about commission­led commissioning.

Mr Lansley: I will ask Bruce to add to this because Bruce, in particular, has been engaging with the views, as it were, of the broader clinical community in all of this. From my point of view, it is general practice­led commissioning. Why general practice? For the very simple reason that that is a unique place in the structure of clinical responsibility in the National Health Service where there is not only a responsibility for the individual patient, for whom one is responsible, but an understanding of that patient in the context of their community and their needs over the longer term in a population health context. It is built around general practice, but it is not confined to general practitioners and it is not necessarily confined to general practice as such.

Sir Bruce Keogh: Different consortia will have different needs that they will need to engage with their secondary care colleagues about. They have to have the freedom to do that.

Chris Skidmore: But they won't be specifically included on the consortia. They won't have a voice within the consortia senate, for instance.

Mr Lansley: We are not intending to be prescriptive about how the consortia should structure themselves. We are intending to set, as Barbara has very well set out, "tests" for authorisation that are about capability, purpose and how one goes about delivering that task, not trying to set a series of prescriptions.

Q486 Chris Skidmore: If there was a population group with a particular chronic need where secondary care commissioners would need to be involved, they could join the local commissioning board of the consortia.

Sir Bruce Keogh: Indeed, and we would expect them to.

Q487 Chair: As full members of the consortium or as members of the executive of the board?

Mr Lansley: The practices will be members of the consortia. The way in which they go about their task is something we will be asking them, through the authorisation process, to demonstrate—how they fulfil these purposes. It is purposive rather than prescriptive.

Dame Barbara Hakin: It may be that not many PCTs have secondary care clinicians on their boards and governing authorities.

Q488 Chris Skidmore: It is very welcome that you have made these statements here today. Certainly the evidence we have received, overwhelmingly, has been out of a concern that it will be, although GP led, GP dominated and that secondary care commissioners won't have a voice. You explaining that today is certainly welcome.

Mr Lansley: Barbara will know better than I do, but I know about this from places I have been. I was in Dudley last week where they were describing to me the way they are going about the design of their care pathways, and they had nursing and speech and language therapists who were leading work streams. It is not doctors leading, either. It is a range of health professionals.

Q489 Chair: Bruce, do you want to develop the theme of the broader clinical engagement?

Sir Bruce Keogh: One of the things we are trying to do through this is to give considerable freedom to the consortia and to the GP commissioners to conduct business in a way that they feel is most appropriate for their patients. When we look at the kind of issues that they and providers are having to deal with at the moment, they are having to deal with emergency admissions, which puts a load on the providers, we have patients in hospital who would be better off being handled in the community and we have growing evidence that not only patients but sometimes care can be much better delivered in the community. For consortia to set about trying to deliver services without involving secondary care clinicians would be like trying to have a fight with one arm tied behind your back. It is simply not going to work.

We want to encourage them to use their imagination. There are many different models. You have heard one from the Secretary of State. But I can see no reason why a commissioning consortium can't commission a secondary care physician to lead on a particular type of pathway, like rheumatology or chronic obstructive airways disease. That is the sort of thing which will help to engage them and help the secondary care organisations feel they are making a significant contribution to the delivery of care in the services. If conducted properly, that has the potential to alleviate some of the burdens on secondary care that Nadine Dorries was alluding to earlier and also relieve some of the financial burdens.

Q490 Nadine Dorries: Could you describe how that would that look? How would that look, a secondary care clinician leading? Can you illustrate it slightly more? I don't think everybody quite understands what you mean by that. Can you illustrate how it would look—how it would work in practice?

Sir Bruce Keogh: Perhaps I can work down. One of the most successful things that has happened over the last decade, in terms of improving care, has been the development of clinical strategies in the NHS. The thing that makes them successful is that they focus on clinical outcomes, they focus on clinical leadership and they are led by a clear, declared leader. In this Committee you will have seen some of the national clinical directors. What is quite possible is to have a microcosm of that existing at a local level, either with one, two or more consortia, asking for leadership and receiving very specialist advice on how to develop pathways of care from those who are most familiar with them.

Q491 Nadine Dorries: Would it be an exchange of dialogue, of opinion, or would there be an official role on the consortium?

Sir Bruce Keogh: I wouldn't want to stipulate that it would be one or the other. It could be all of those things. But I can quite easily see that a commissioning consortium could commission a secondary care doctor to lead the development of a particular type of service for them at a service level agreement type of approach.

Q492 Nadine Dorries: It would be that you would buy for all your rheumatology patients to come to this hospital and be seen by these doctors. "This will be the type of care and the way we will treat rheumatology. Therefore, our agreement is this much for that service." Is that not right?

Sir Bruce Keogh: That is a bit too speculative as to the end result of how that might work. There are all sorts of ways that things could be delivered and, of course, the secondary care doctor who is leading on that would be expected to consult with all those who had an interest in rheumatology patients, ranging from the third sector right through to his colleagues. It doesn't necessarily mean that he stipulates that all patients are seen in one place.

Mr Lansley: We have a number of examples of how this might work, generally speaking. Cancer networks in some places have already developed from what was originally simply a network of providers of cancer services to organisations, effectively, that are now capable of being a commissioning structure. What they are looking at, in effect, is determining the care pathways for cancer patients. It is a meeting place of a range of disciplines and professions to make that happen.

We have another example in the West Midlands. The West Midlands federated mental health commissioning vehicle has GP leaders and people from local authorities, from user groups and from providers of mental health services coming together in that sort of network to define what the care pathways look like. In fact, that goes on, then, to be responsible for contracting. The commissioning consortia can give that kind of contracting organisation a responsibility.

Q493 Nadine Dorries: This is one of the problems with the Bill, Secretary of State. You know of those examples because of your role and your Department knows of those examples. But the question I am frequently asked by GPs is, "How does that work?" If I had a criticism of the Department in this Bill, my main criticism would be that you have not communicated very well these examples which you and your Department know about but GPs and their consortia don't always know about. I had a conversation this weekend with a group of GPs. They can't quite see the way through how some of it is going to work because it hasn't been communicated to them terribly well.

Mr Lansley: It is a fair point. From our point of view, in a sense, the debate about how it is supposed to work is happening before we had expected to have created the learning network that shared precisely how people were putting these things together. In a way, when we started out, in March 2011 we expected there to be a small number of pathfinder consortia who were beginning to shape this. In fact, we have 177.

Nadine Dorries: A victim of your own success.

Mr Lansley: There is a tendency to expect the Department of Health to produce a document that tells them how to do it. The answer is that we are creating much more of what we think of as a learning network, the purpose of which is that they shape how this works.

Q494 Chris Skidmore: How is that learning network progressing so far? Is it internet advice and various officials giving advice on the phone?

Dame Barbara Hakin: Yes. The pathfinder network has taken off. We have 177 pathfinders. There is a range of things that are going on, but the key one that holds it together is the pathfinder network and website, which is growing in terms of its technical ability and its content by the day. We are very early—

Q495 Chris Skidmore: Do you have any data for how many people have logged on or clicked on to it yet?

Dame Barbara Hakin: I haven't at the moment, but I would be happy to get you that.

Q496 Nadine Dorries: Is that just for GPs to use or is that for everybody to access, all health care workers? Who has access to that website?

Dame Barbara Hakin: Anybody could have access to the website. It is predominantly designed for pathfinders, but the pathfinders don't have to say, "Only our GPs can log on to the website." Some areas of the website are open to anyone because we want the consortia who are not already pathfinders to be able to use and access it. I won't pretend for one minute that that site is as we would want it to be. It is a relatively short space of time since the Bill was introduced and the enthusiasm and response is helping us create the website. Of course, to some extent, most learning comes from each other. It isn't about what we know in the Department. For us, the key is creating the linkages.

Sitting around the pathfinder, which I call the hard­wiring of the system, we have a clinical commissioning network. That is much more about bringing people together and facilitating discussions—again, website, e­mail and places for people to have conversations and debate issues. Then, sitting round that, there is a huge raft of things. Again, at the behest of the frontline we are trying to make one coherent whole—not that it is all the same but that people can navigate round the system. There are an awful lot of organisations, the BMA, The Royal College of General Practitioners, The National Association of Primary Care, NHS Alliance, all doing work and having networks to help people learn from one another. I see our main role as making sure that we use the technology to best effect to connect all these people. It is those people out there on the frontline who have the answers, not us.

Q497 Valerie Vaz: With the greatest respect, one of the GP pathfinders said he was working through the PCT, so the PCTs are still in control of these pathfinders. Is that not the case?

Dame Barbara Hakin: At the moment, the pathfinders—

Valerie Vaz: They are. He said that.

Dame Barbara Hakin: The best pathfinders act with delegated authority from the PCT.

Valerie Vaz: They are working with the PCTs.

Dame Barbara Hakin: Pathfinder does what it says on the tin. It is trying to help us find the path.

Valerie Vaz: So they are working with the PCTs.

Dame Barbara Hakin: Yes, absolutely.

Valerie Vaz: The set­up is exactly the same as it is now.

Dame Barbara Hakin: They are what, sorry?

Valerie Vaz: The set­up is exactly as it is now. The PCTs are in control with GP consortia and the pathfinders.

Dame Barbara Hakin: We are in a transition period. We have created clusters in order to try and help the consortia to develop and grow into what we need them to be as soon as possible, but we still have two years.

Q498 Valerie Vaz: I was pleased to hear that Professor Sir Bruce Keogh said there were some successes over the last 10 years. I am not into party politics. I just want a National Health Service that works. What concerns me is that a number of GPs, 89%, have said that they don't want the system you are currently putting through. I know you may smile, Secretary of State, but there are people out there who are concerned about the lack of accountability of public money. It is all very well that you say, "We are just thinking things through." That is what you said five minutes ago, "We are thinking things through." But you still don't know what the triggers are where the National Health Service Commissioning Board—

Mr Lansley: We are in a transition.

Valerie Vaz: No. Let me finish. —is going to step in and take over a GP consortia. You said you don't know. You are still thinking it through. But, at the bottom of it, do you not accept that you are actually playing—

Mr Lansley: What are the triggers now?

Valerie Vaz: Let me just finish. —with public money and playing with people's lives. This isn't just a stand­alone. This is actually people's lives we are talking about.

Mr Lansley: Do you know what? The people I'm relying upon are general practitioners who are already responsible for people's lives. I am relying upon clinicians across the NHS to add not only the responsibility they currently have for providing the care to people, and doing it more successfully year on year—

Valerie Vaz: And they do it very well.

Mr Lansley: —the improvement they deliver year on year, to empower them, through this process, to put alongside that the responsibility to be able to make decisions about how resources support them.

Valerie Vaz: And they are doing it very well and they don't want the responsibility of the money.

Chair: Can we have one at a time?

Mr Lansley: There is a relationship with managers. It is not a relationship where the PCT—

Valerie Vaz: He interrupted me.

Mr Lansley: —tells general practices and commissioners what to do. It is a process by which those who are responsible for the management of care of patients are increasingly, themselves, in a leadership role with management in support.

Q499 Valerie Vaz: But that is not the evidence we heard.

Mr Lansley: I actually think that's the right way round.

Valerie Vaz: With the greatest respect, that is not the evidence we heard. We heard about some good practice around the country. I would have expected, in this time of financial constraint, that you don't spend the £5.1 billion that Sir David Nicholson said is being spent on the reorganisation and that that goes into patient care.

Mr Lansley: It's not. I just said £5.1 billion—

Valerie Vaz: That's what you said. It was £5.1 billion. Have a look at the transcript.

Mr Lansley: £5.1 billion is the current cost of administration in PCTs, strategic health authorities and arm's length bodies in the Department. We are planning to reduce it by £1.7 billion in real terms. The cost in the impact assessment of the overall reorganisation has been estimated at £1.4 billion. Most of that would be costs that would be incurred anyway in order to reduce the total administration costs. It yields a saving of £1.7 billion in each year. 10% of the overall QIPP programme for delivery of efficiency savings is happening simply because we are delivering those reductions in administration costs. Under current circumstances, it is absolutely the right thing to take resources from the frontline—from the back office and get them into the frontline.

Q500 Valerie Vaz: "Frontline"—Freudian slip.

Mr Lansley: That is what we have done over the six months since May 2010. In the first six months for which data is currently available, there was a reduction of some 2,000 in the number of managers. I have the numbers—

Q501 Valerie Vaz: Do you think people are satisfied with—

Chair: Valerie, can we be patient—

Mr Lansley: If you want to have the actual numbers—

Valerie Vaz: I have been patient, Chair.

Mr Lansley: — we had a reduction in the number of managers of 2,103.

Valerie Vaz: I am talking about exchanging e­mails at the minute.

Mr Lansley: It is a 2,103 reduction in the number of managers and, for example, an increase of 2,484 in the number of doctors. I happen to think that what we are doing is all about empowering and supporting those who are already responsible for delivering care to patients.

Chair: Andrew George has been seeking to come in on the second of Dame Barbara's domains, which is local engagement.

Q502 Andrew George: I will begin with a broader question. How long do you think it will be before each GP practice will be subject to competitive tendering?

Dame Barbara Hakin: I don't really understand—

Andrew George: If everything else is up for grabs, as far as tendering of services, I want to understand what is different about GP services, in terms of all other health services, that they shouldn't be subject to a tendering process?

Dame Barbara Hakin: The current contract for general practice, the dominant contract, is the GMS contract. There are local PMS contracts. Where there is an absence and where, strategically, there is a need to attract other forms of general practice to an area because it is not possible to attract traditional general practice then, under those circumstances, there have been tendering processes.

Q503 Andrew George: Is it potentially subject to any contestation, the fact that these things are straightforward contracts with providers at a local level, straight from the NHS Commissioning Board in future?

Dame Barbara Hakin: I am sorry?

Andrew George: Will it be a matter, under competition law, of potential contestation given that these are straight contracts and it will be, in future, from the NHS Commissioning Board directly to GP practices? Is there any concern there?

Mr Lansley: I do not think this is any different a process than that which would be currently undertaken by a primary care trust. It just happens to be done by the NHS Commissioning Board centrally.

Dame Barbara Hakin: Again, as back with the earlier conversation on competition, that process comes into being when one is creating new services, whereas the contracts that practices have for delivering primary medical care are life-long.

Mr Lansley: A lot of these are perfectly reasonable questions. In a way, it kind of illustrates how far what we are doing is evolutionary from where we are now. There are an awful lot of things people are asking questions about and saying, "How is that going to work?" Nobody has any idea how it works now. What, for example, are the triggers for intervention by the NHS executive—

Q504 Valerie Vaz: That is what is so worrying. Aren't you concerned that nobody has any idea about our Health Service?

Chair: Valerie, please.

Mr Lansley: This is what I am saying. What do you think are the triggers for intervention in a primary care trust now, because there are primary care trusts that fail? We have lived without any such transparency, and completely without it.

Q505 Andrew George: I will move the question on to the issue of accountability, GPs coming together in consortia and not meeting in public. It was proposed at my party conference that they should do and also that they should be configured of a wider range of representation, including locally­elected representatives, which was originally in the coalition programme. Secretary of State, are you likely to take any of that on board?

Mr Lansley: I will do exactly what I have described. We are going to continue through the process of the passage of the legislation, continuing to seek to ensure that we clarify and, if necessary, improve the way in which the Bill delivers the purposes that we set out at the outset. Often, people have lost sight, in the minutiae of the detail this, of the fact that this is all about delivering better outcomes for patients and the focus on quality and outcomes is absolutely at the heart of this. It is about empowering patients. We are very clear that we are going to do that. It is about empowering frontline professionals, and we are going to do that.

Q506 Andrew George: Is the issue of accountability and transparency and the proper conduct of these statutory decisions, which were ultimately made, in conflict with that objective?

Mr Lansley: No. We are intending that there should be, and in the course of our conversations this afternoon we have illustrated a number of respects in which there is far greater transparency in the design of the NHS for the future than has been the case in the past. There is also much greater scope for accountability. You won't want me to go on too long about this, but, for example, HealthWatch delivers a much greater formal accountability and structure for patients to exercise voice. The scrutiny processes of local authorities will be significantly empowered as compared to where they are now, because at the moment they cannot reach into private providers. The scrutiny processes, at the moment, don't even reach directly into general practice, do they?

Dame Barbara Hakin: No.

Mr Lansley: They will in future. Wherever the NHS pound goes, the scrutiny process will follow. As you rightly say, we have in the legislation what is now intended to create a role for democratic accountability through the Health and Well-being Boards that has simply not existed in the NHS since the early 1970s. As to the Health and Well-being Boards, alongside the pathfinder consortia we have now got, as I announced last week, 134 local authorities—90% of the country—have come forward and said they want to be early implementers because they recognise this process of direct engagement with the commissioning process, allied to their responsibilities for public health social care and beyond, has the potential to transform the quality of NHS and public health and social care services.

Q507 Andrew George: I can't see how that is going to happen. You say—and you repeat the mantra—"No decision about me without me" and you say it is all patient-centred and it is about patient outcomes, but the crucial decisions about commissioning of services don't have the patients or their elected representatives there on those commissioning boards. They are outside. There is no transparency. The meetings are not held in public. How can you possibly claim—

Mr Lansley: They will be transparent.

Andrew George: —that there is "No decision taken about me without me"? They are outside.

Mr Lansley: No. They will be transparent for two reasons. One, because all of those commissioning the structure of the commissioning plan must be the subject of discussion between the commissioning consortia, the local authority and the Health and Well-being Board. It is also transparent since the commissioning consortia will have, transparently, to make clear what service it is they are inviting providers to provide. Or, if they are doing so through an open competition, it will be an open competition and the contracts will be—as we as a coalition Government are doing, they are contracting and the public sector will be, except where there are specific compelling reasons for commercial confidentiality—out in the open.

Q508 Andrew George: There will be a tremendous amount of commercial confidentiality with regard to those. The ultimate decision, obviously, will be communicated.

Mr Lansley: Why would there be commercial confidentiality? Since there is a tariff—

Andrew George: A tendering process always involves commercial confidentiality. You cannot pretend that it does not.

Mr Lansley: But I made clear why I think we will see, in future, less by way of competitive tendering because, through the any qualified provider process one would establish a tariff basis and invite people, in effect, to offer to be a provider on the basis of the tariff and the quality specification. To that extent, it can be entirely transparent.

Q509 Andrew George: If a commissioning consortia came forward to you with a proposed governance arrangement that involved, as equal members of their commissioning board, clinicians from secondary care, nursing care, and elected community representatives, you wouldn't object to that?

Mr Lansley: I will repeat what I have said before. The authorisation process for consortia is purposive rather than prescriptive. Since we are not prescribing that they should do things, it is reasonable for us not to prescribe what they shouldn't do.

Q510 Chris Skidmore: Can I come in on that briefly and take a slightly different stance from Andrew? I am concerned if you have elective representatives from local authorities that you create a politicisation of the system. I was wondering if you have any concerns that Health and Well-being Boards might ever be at loggerheads with consortia and how that would be ironed out.

Mr Lansley: They may be. In the Coalition Agreement—and clearly it did differ—the intention originally was that we would have primary care trusts that tried to combine both things together, but it was perfectly obvious that once the commissioning responsibility is in the hands of the commissioning consortia and once the public health responsibility is in the hands of local authorities and there are good and compelling reasons for that, there was not a substantive role for primary care trusts. That was a pointless position to pursue. None the less, we were always clear, through the coalition process, that we were going to combine two things together: clinical leadership and democratic accountability. The place where that happens is in the Health and Well-being Board.

Q511 Chair: Secretary of State, it is slightly odd, isn't it, to have the commissioning authority in the hands of the consortium without an obligation to meet in public, whereas the trust board, which in the end is simply responding to a commission placed by a commissioner with public funds, does meet in public?

Mr Lansley: Which trust do you mean by the "trust board"?

Chair: Provider trusts.

Mr Lansley: It is all part of a central proposition, which is that we want the consortia to meet a whole range of specific purposes and themselves to come forward and set out how they intend to do that. Barbara, I think very helpfully, has further illustrated to you the shape of what those purposes look like, in addition to their specific statutory responsibilities. They will come forward and they will show us what those look like. We are literally resisting, in order to ensure that we do not simply recreate, in the context of this new statutory body, all the characteristics of primary care trusts. We are going to give them the opportunity to come and show how they can meet this set of criteria.

Dame Barbara Hakin: We should watch and wait to see what alternative arrangements they can come up with. The current arrangements are a number of non­executives in a meeting which, admittedly, is held in public but the public cannot intervene in that. The non­executives are there to ensure that the governance arrangements of the organisation are met. But a lot of patients, their carers and other stakeholders would like to see a situation where they are involved further and more comprehensively long before that final decision is made. Currently, lots of the decisions about payment, because of tariff, are not made as they used to be when we had block contracts. As I go round the country and talk to consortia, a number of them are coming up with really innovative ways of seriously starting to understand what it is their patients and communities want and are involving them in the whole process of designing the purpose of the consortia, the strategy and how it is going to meet patients' needs.

Q512 Nadine Dorries: Secretary of State, it was fortuitous for me to be at the RCN Headquarters in Cavendish Square speaking at the beginning of the month when the press release arrived from the Department of Health announcing that the Chief Nursing Officer will sit on the NHS Commissioning Board and that there will be a director of nursing in the Department of Health with a greater public health focus. However, it did seem to take a long time and many representations to get the Department of Health to get to that position. Given that nurses today triage, prescribe and are involved in many areas of clinical administration with patients, why can it not be that nurses are commissioners alongside GPs? Why can you not go the extra step and do that?

Mr Lansley: They can be. As I said when I was in Dudley last week, if I recall correctly—

Nadine Dorries: You said nurses and various others. I wanted to jump in on that point, actually. If you did, in Dudley, can you explain in what way they are doing that? Again, how does it look?

Mr Lansley: In that particular instance, and I recall the conversation, I said, "If you are designing care pathways, very often, it may be that nurses are in a very strong position." Funnily enough, I was at the Royal College of Nursing having a discussion with nurse leaders about a month ago.

Nadine Dorries: You were there the day before me.

Mr Lansley: The point they made was that nurses are very often in a very strong position to see the whole care pathway, whereas doctors are very often in a position of understanding rather better the particular issue of diagnosis or treatment rather than seeing all the components of care. That is a very fair point and I entirely understand it. I was relaying that to the Dudley consortium in this conversation and they said, "Yes, we completely agree about that. For example, the community psychiatric nurse is quite often likely to be the person best placed to see the whole structure of services provided to a mental health patient, which is why a community psychiatric nurse is leading the design of mental health services for our consortium."

Q513 Nadine Dorries: Is she actually sitting on the consortium board then?

Mr Lansley: They haven't yet come to us and told us. There is this talk about what "the board" looks like—

Nadine Dorries: But will they be able to?

Mr Lansley: These consortia will be giving them space prior to the authorisation to determine what that looks like. We are not setting out "There must be a board" or what the board consists of. Indeed, there are nurse­led practices, admittedly not many, across the country who, themselves, will be members of the consortia and nurses will lead them. That happens now.

Nadine Dorries: Thank you.

Q514 Chair: There is one set of issues we have not touched on, which is the "Who commissions the commissioners?" question, which Andrew touched on, which is the relationship between the consortium and its own primary care members, GP members. When Sir David was here, and I refer back to that session, he indicated he felt it was necessary to have an engagement by the Commissioning Board at sub­national level in order to be able to be an effective commissioner of primary care. If we develop that argument—and clearly primary care, by its nature, is a local service—there is a history, isn't there, in the Health Service of the problems caused by having separate commissioning networks for primary care and secondary care? That is how we got to where we did with FHSAs being merged into health authorities. Do you think the danger exists of that being recreated, in other words of a primary care net that is separate from the commissioning structure for secondary care? Is it not desirable, in fact, to have the primary commissioning decisions for primary care being made alongside the decisions for secondary care, in other words, in the consortia?

Mr Lansley: I am sure Barbara will want to add a little, but let me say why I don't think that is likely to be a serious problem. First, although we are intending that the NHS Commissioning Board—in fact, it is set in the legislation—will be responsible for the contracting process with individual GP practices, of course we are looking, increasingly, at the same time, that the NHS Commissioning Board will be expecting the commissioning consortia themselves to engage with the GP practices in how they deliver the quality and outcomes that they are looking for. To that extent, performance monitoring and management can be devolved from the NHS Commissioning Board. Indeed, in so far as the NHS Commissioning Board is making decisions about the way in which it contracts—the process, for example, that Barbara was describing about determining whether there is a gap in commissioning primary medical services, or numbers of practices—that is something that would not be determined by the NHS Commissioning Board in isolation. It would be done literally as a consequence of a discussion about primary medical services in the Health and Well­being Board in a particular local authority, so seeing how the Joint Strategic Needs Assessment will govern that. This parallels, in that sense, the way in which the NHS Commissioning Board will respond to the Strategic Needs Assessment on things like pharmaceutical services or dentistry.

Can I take this opportunity to let you know something which, from my point of view, has been erroneously suggested. I know how it happened. There has been an assumption, which was made by some but not by us, that 80% of the commissioning budget of the NHS would be in the hands of GP­led commissioning consortia. Therefore, people said, if there is £100 billion in the NHS budget, that is £80 billion. It does not work like that. The total resources for the NHS are £100 billion and rising. The commissioning budget, at the moment—if you were to say it is the primary care trust budget—is £89 billion in 2011­12. Part of that is public health, and we have yet to determine how much, but part of that will become part of the responsibilities of Public Health England and the local authorities, so the comparable figure would be less than that. Of that total, about £10 billion is for commissioning specialised services—the sort of thing Bruce was talking about—the national and regional specialised services, prison health and high security psychiatric services and so on. The primary medical services, which you are just asking about, represent about £8 billion. Other family health services activity, dentistry, pharmacy and ophthalmic services, are something over £3 billion. When you put all those together, the amount of resources that would be in the responsibilities of GP­led commissioning consortia—their commissioning budget to look after their patients—is of the order of £60 billion rather than £80 billion.

Q515 Chair: But there is still a requirement for the commissioning of the primary care element of that to be properly integrated—

Mr Lansley: The primary medical services delivered by general practices on their own account, yes, absolutely.

Q516 Chair: Exactly, to be integrated into the delivery of an integrated health care system.

Mr Lansley: It is.

Q517 Chair: That was the focus of my question. It seems to me essential that that should be something where the decisive voice in a locality is with the people. There needs to be a single voice responsible for commissioning the delivery of an integrated service, both primary and secondary care, otherwise what we are doing is reintroducing, or reinforcing a division between primary and secondary care which has always been one of the fault lines of Health Service that people have tried to find their way over.

Dame Barbara Hakin: That is a really good question. Of all the things that concern me in thinking about, "How are we going to get this absolutely right?", this is one area that still requires attention and needs to be sorted out by working with the consortia. It is only fair to say that it would not have been proper for the consortia to have total free rein to commission services from themselves in primary care. Therefore, everybody is in agreement that the decision for the NHS Commissioning Board to have oversight of that is absolutely key. On the other hand, what you say is absolutely right, that the difference, the kind of provision of primary care services, is almost the start of the commissioning journey. The way that primary care is delivered and how well it is delivered has a huge impact on secondary care services and the range and type that you need to commissioning from secondary care. We are back to exploring and understanding the relationship between the Board and the consortia, not having a situation where we have got the Board over here commissioning primary care in isolation and the consortia commissioning secondary care, but a commissioning architecture that works together. Inevitably, where it is confident that consortia are able to, the Board will delegate significant areas of this commissioning to the consortia. You will notice that, in the Bill, the consortia have a duty to improve the quality of primary care which locks them into that relationship.

We are all absolutely aware—and nobody more than the consortia, who feel they want to take on this responsibility and that they can make a big difference through peer pressure and some of their activities—that this has to be an intimate partnership, otherwise the fault lines that you describe appear. At the moment we will need to work through how that happens and I suspect, in the final analysis, some of it will almost need to be done on a case­by­case basis, depending on the maturity of the consortia and the ability of the consortia to discharge some of these functions on behalf of the Board.

Q518 Chair: I will bring David and Valerie in, but it would be fair to say, wouldn't it, that these problems are easier to address if the statutory public authority nature of the consortium is reinforced through the governance structures?

Dame Barbara Hakin: You are absolutely right. Once there is confidence in the governance arrangements of the consortia, it is much easier to delegate authority for these issues. However, there are other areas outside primary medical care that the boards will be commissioning, such as dental care and optometry. The same applies.

Q519 Chair: Primary care includes, surely, pharmacy—

Dame Barbara Hakin: Absolutely, all the areas.

Chair: Yes, otherwise the fault line is simply moved somewhere else.

Q520 David Tredinnick: I want to add to what the Chairman was saying. Thinking about the county I represent, Leicestershire, my understanding is that the consortia are talking directly to primary care. Therefore, there is an informal process which has already been created that is very beneficial. I absolutely agree that there should be a formal structure, but you have already got an informal one. Certainly, my understanding of the county—and the Chairman is well qualified to comment on what I am saying as he represents the same is county—is that that is happening. My question is: is it happening elsewhere in the country? Are you getting a better tuning of primary care services already because of better lines of communication?

Dame Barbara Hakin: Primary care continues to improve everywhere. PCTs across the country have made huge inroads. Your constituencies in Leicestershire were part of my patch of the East Midlands Strategic Health Authority, so thank you. I think lots of good things went on in terms of improving the quality of primary care. But there is still variability. We have to accept that if you look at the variability in primary care it is probably greater than almost any other aspect of the Health Service. One of the benefits of one NHS Commissioning Board will be a consistent approach to the commissioning of primary care which, hopefully, reduces the variability and starts to address some of the inequalities. There is no greater mark of inequalities than availability of high quality primary care. In terms of inequalities in health care, that has a huge impact. Addressing that will be key.

Q521 David Tredinnick: In the county, as you have volunteered that you were representing the East Midlands, is it not a fact that we are getting a better line of communication through this new arrangement informally before we get to the formal structures?

Dame Barbara Hakin: Lots of things are improving the quality and consistency of primary care.

David Tredinnick: I am bowling you such a soft ball and I am hoping you are going to hit it.

Dame Barbara Hakin: There is no area in the country that could look across all its primary care and say that there were not areas where there was room for improvement, although I do think what they have done in your neck of woods is really excellent.

Chair: It will look good in the Leicester Mercury.

Q522 Valerie Vaz: I have three very quick stand­alone questions. Integrated health partners have said they want to enter into partnerships with GPs on a profit­sharing basis. Do you agree with that? Do you think that is likely to happen?

Mr Lansley: I saw press reports—I have to say only press reports—that appeared to indicate they were doing this on the erroneous belief that they and/or the consortia were in a position to profit by making savings within their commissioning budget. That is simply not true. In so far as a commissioning consortia wanted to have commissioning support from a private­sector organisation, and if they wanted, for example, to use their management allowance for that purpose, or share their quality premium—and we have designed the quality premium to make it clear that if they deliver higher quality services there is a remuneration to the consortium for that purpose—with a private sector-commissioning support organisation that is up to them. None of that money comes out of the money that is available to support services for patients. The only structure of incentives there is to deliver the highest possible quality and outcomes from within the resources that are available.

Q523 Valerie Vaz: You are comfortable with that, that GPs can?

Mr Lansley: By a roundabout way, I am saying that what I have read in the newspapers—

Valerie Vaz: Is it yes or no?

Mr Lansley: —suggests they are proceeding on a business model that is not accurate. It does not work like that. If they want to produce a different business model that corresponds to the simple fact that saving money on their commissioning budget does not yield any profit to the commissioning consortia, then they have to go away and think again.

Q524 Valerie Vaz: Is the training of doctors a national issue or is it a local one?

Mr Lansley: We published a consultation just before Christmas on the future structure of education and training.

Valerie Vaz: Is it going to be with the National Health Service Commissioning Board?

Mr Lansley: We are in the process of receiving those responses to the consultation and we will respond to the consultation in due course.

Chair: That is an early bid for another inquiry, if I may say so.

Q525 Valerie Vaz: On the Ipsos MORI poll, which apparently hasn't been published by the Department, that was out in the autumn of last year, is it possible to put that on the website instead of the 2007 one?

Mr Lansley: You mean—

Valerie Vaz: The levels of satisfaction with the Health Service.

Chair: This is a Sunday newspaper story that apparently you have suppressed a piece of good news.

Mr Lansley: You mean I didn't publish it in circumstances—

Valerie Vaz: We don't always believe what is in the papers, do we?

Mr Lansley: —where my predecessors didn't publish it either? It is that sort of allegation.

Valerie Vaz: There was an election in May, wasn't there?

Mr Lansley: As I understand it, it is a piece of work which has been done on a regular basis for Ministers. As it was not published by my predecessors, it is not my intention to publish it.

Valerie Vaz: It was only out in autumn 2010, I understand, but I do not know.

Mr Lansley: Did you say "out"?

Valerie Vaz: I don't know. That is the question I am asking. I don't know what goes on in the Department. That is why you are here and that is why we are asking you the questions.

Mr Lansley: It is part of the process of development of policy advice to Ministers. It was not published by my predecessors when it was done in previous years, 2009 and 2008, and it is not my current intention to publish it. If you want to know what Ipsos MORI have done, I point you to work they did for the Nuffield Trust and which was published just a week or so ago.

Valerie Vaz: Thank you.

Chair: Does any Member of the Committee wish to have a concluding shot, otherwise I think we have probably gone quarter of an hour beyond. There is one concluding shot from a coalition supporter.

Q526 Andrew George: As I sit on the coalition benches, it is quite true. In relation to both sides of the coalition, you know that both the Liberal Democrat conference and the BMA have had a number of comments to make about the Health Bill as well as, of course, our colleague Sarah Wollaston, who is not in her place this afternoon. She was reported in the Daily Mail today, I notice, as saying "Someone needs to get a grip ... It all risks going belly­up" and is saying that the Bill is doomed as far as the NHS is concerned. How are you reacting to those broad­brush comments and resolutions coming from—even if you don't respect them—the Liberal Democrats and the BMA, in terms of the resolutions which they have brought forward? Is it a question of ploughing on?

Mr Lansley: I can fairly say that I respect the Liberal Democrats at least as much as I respect the BMA.

Andrew George: What about Sarah Wollaston?

Mr Lansley: Sarah, too. I said yes last week. We had an opportunity in the debate initiated by the Labour Party. To make it clear, there was no proposal and no policy coming from the Labour benches. If people have concerns, I said absolutely straightforwardly, if there are legitimate concerns, we will certainly look, discuss, listen, and if we can clarify we will do so. We have already done so. People made it very clear to us they were very concerned about the issue of price competition. We had a discussion about that here in the Committee. I made it clear that it was competition on quality when I went to the Public Bill Committee. A Labour Member said to me, "Is it competition on price or is it competition on quality?" I said it is competition on quality. That was fine. But people still looked at the legislation and said, "It doesn't actually say that," so we amended the Bill to make it absolutely clear that, at the point at which a patient is exercising choice, or being referred, it will be on the basis of quality alone and there will not be differentiation between providers on the basis of price at that point. We have already made clear, through amendments to the Bill, that precisely the thing that worried the BMA, and may have worried some of your colleagues, is that there could be discrimination, that Monitor could use its powers to favour private providers for the purposes of promoting competition. We have ruled that out. We didn't think it would happen and we were not intending it to happen. Through the legislation, we will make it absolutely clear that where there are concerns we will respond to them. We have done that through the legislation, making it clear that there is no scope for discrimination between providers on the basis of ownership.

Q527 Chris Skidmore: There are no further Government amendments to the Bill.

Mr Lansley: No. We are amending the Bill many times and for many reasons, many of which are technical and for reasons of drafting, but we have already amended the Bill—

Chair: The Parliamentary process is still open to you to propose amendments to the Bill.

Mr Lansley: Absolutely it is, yes.

Q528 Andrew George: In terms of GPs, you say that GPs are enthusiastic about it. In the recent Pulse magazine, as you are well aware, even among a survey of pathfinder GPs, who must be, obviously, amongst the most enthusiastic, it says that they found 45% of them do not support the principle of GP commissioning and half expressed no confidence in you. You earlier said that they are in a unique place. If they are in that unique place, they will have a unique perspective. You are putting a lot of expectation on them and they are not terribly impressed at the moment.

Mr Lansley: The BMA last week, among many things, said they do support the principle of general practice­led commissioning. Indeed, in the past they have made it very clear that, alongside many other organisations, the principles and purposes we are pursuing are very widely supported. The same is true, and we can see it, in the way in which general practices across the country have come together to show how they will take this responsibility and use it. I do not say this on the basis of self­selecting surveys. I do this simply on the basis of going round the country, as I and my colleagues are doing all the time, and meeting consortia and the pathfinder consortia who are taking on these responsibilities. It is erroneous to suggest they are doing it because they think it is required of them. Nobody is requiring it of them at this stage. The BMA said to them, "You don't have to do this," but they came forward and volunteered to do it.

Chair: On that note, we should thank all three of you for coming. Thank you very much. You have given us plenty of food for thought.

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Prepared 5 April 2011