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Baroness Finlay of Llandaff: The noble Lord, Lord Peyton, has given me the courage to stand up to ask a question. I am a novice on legislation. I find some of this rather gobbledegook to follow. But I had understood from Clause 1 that the term "strategic health authorities" applies to England and that the term "health authorities" applies to Wales. Yet the wording within Clause 7 appears to relate to England and not to Wales. Therefore, I fail to understand why the heading of this clause includes "health authorities". Have I missed something and does the clause in some way apply to Wales as well as England.

Lord Hunt of Kings Heath: First, I thank Members of the Committee for comments that they have made

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about the amendment. Essentially, the subsection as currently drafted means that the Secretary of State could give performance-related payments to strategic health authorities for meeting certain objectives notified to them. It does not compel him to do so. The amendment proposed by the noble Baroness, Lady Noakes, would take away the power of the Secretary of State to make such performance-related payments to strategic health authorities.

The noble Baroness, Lady Noakes, asked why we needed this part of the Bill when we have stated that it is not our current intention to make performance-related payments to the new strategic health authorities out of the NHS performance fund. The intention is that we shall not make performance-related payments to strategic health authorities, but it may be that in the future, and as we see how the new arrangements develop, there may be an opportunity to make such payments.

Perhaps I may give an example. In relation to the way in which we judge and make payments in accordance with performance, while much performance relates to the work of an NHS organisation, working across boundaries and in partnership is also one of the ways in which one can ensure good quality performance. It may well be that strategic health authorities may be incentivised in future for partnership working by being given money to use to encourage partnership working between primary care trusts. We may wish to make payment to health authorities for that purpose. We have no current intent to do so, but we want to allow for that possibility in future.

Baroness Noakes: I thank the Minister for that reply. Perhaps I may tell my noble friend Lord Peyton how much I appreciate his kind comments. Those of us on the Front Bench always look to my noble friend for kind comments; this is the first time that I have received some from him, and I hope that it is the first occasion of many.

Turning to the Minister's explanation, what he said demonstrated that there is no need for the power to make performance payments. The Government have no current intention to make such payments and the examples that the Minister produced sounded somewhat thin. He said something about working in partnership and across boundaries. I could not see the substance of that. However, in the interests of moving on, I shall consider what the Minister said and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 7 agreed to.

Clause 8 [Funding of Primary Care Trusts]:

Baroness Noakes moved Amendment No. 63:

    Page 9, line 35, at end insert—

"( ) In determining the amount to be allotted for any year to a Primary Care Trust under subsection (1)(b), the Secretary of State shall consult with health professionals, local authorities and other interested parties as to the health needs of the population served by that Trust."

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The noble Baroness said: In moving Amendment No. 63, I shall by leave speak also to Amendments Nos. 68, 73 and 81, which are grouped with it. Amendments Nos. 63, 68, 73 deal with consultation and taking account of the health needs of the population in determining allocations to primary care trusts by amending new Section 97C of the 1977 Act, which is proposed in Clause 8. Amendment No. 81 deals with taking account of health needs in the amounts allocated to local health boards by the National Assembly for Wales.

Amendment No. 63 seeks to insert a new subsection into new section 97C. It would require the Secretary of State to consult health professionals, local authorities and other interested parties about the health needs of the population served by the PCT. Amendment No. 68 would insert a new subsection after subsection (2) of new Section 97C, which would require the Secretary of State to take health needs into account when determining the amounts allotted. Amendment No. 73 is a narrower amendment, and would attach the same requirement to have regard of the health needs of the population to the powers in subsection (6) of new Section 97C, which allows the Secretary of State to reduce allotments already made to PCTs in certain circumstances.

I am sure that the Minister will say that the amendments are redundant because the Secretary of State already takes into account the health needs of the population when assessing how moneys are to be allotted, but the health Acts do not require him to do so. More importantly, whether or not in practice the Secretary of State takes into account the population's health needs, there is no requirement on him to consult anyone. I am aware that in practice there is an advisory committee on resource allocation, but that is a central body and I am not aware of locally based debates on health needs feeding into that committee. In any event, the advisory committee does not advise on all aspects of the allocation methodology. In particular, it does not advise on the subjective pace of change and health inequality adjustments.

Amendment No. 63 is therefore designed to ensure that there is more openness in each allocation process so that there is greater public confidence in the process. Although the Department of Health releases copious notes on allocation methodologies after it has announced allocations, those methodologies are not the subject of public debate—certainly not in advance of the Secretary of State's allocation decisions. The department's figures per weighted head of population for health authorities, based on allocations for 2002-03, show that the highest spending authority spends 15 per cent more than the lowest. That is on a weighted basis, so why the differences? That space cries out for more public debate.

Amendment No. 73 is important because it qualifies the Secretary of State's power to claw back moneys allocated under subsection (3) of Section 97C on the basis that the PCT has failed to meet some conditions imposed. It might be good business management theory to impose penalties for failure to meet a condition, but the NHS is not a business. Penalties can

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have only one target: the patients. Less money means less patient care. If the Secretary of State wants to use business-world penalties—we are far from convinced that that is an appropriate mechanism—the amendment would require him to have regard to the health needs of the population. If the health of the population would be harmed by the withdrawal of funds, the amendment would make it difficult, if not impossible, for the Secretary of State to proceed.

9.45 p.m.

Lord Clement-Jones: This may be the opportunity to talk more generally about the funding of PCTs, which has raised concerns in several quarters. The way in which the allocation of funds is devolved to PCTs is of particular concern.

There is concern that PCTs could be saddled with the outstanding deficits of health authorities, as part of the devolution process, leaving PCTs without the resources to implement their devolved responsibilities and achieve the Government's targets. Arguably, there could be no additional resources and, therefore, little opportunity to improve the provision of healthcare over and above that provided by the authorities from which the PCTs have taken the responsibilities.

It is also unclear whether PCTs' funds will be protected from the revenue consequences of any major building projects. It is understood that discretionary capital will be allocated to the new strategic health authorities. If PCTs are not protected from the revenue consequences, there will be particular concerns in areas in which boundary changes following the establishment of strategic health authorities mean that PCTs may become retrospectively liable for the revenue consequences of a major building project.

Baroness Hanham: I endorse the fact that there is concern about the resources being given to PCTs and about the way in which they will be allocated. I speak from the point of view of the acute sector, although this probably affects the primary sector as well.

As has rightly been said, resources have been secured for 2002-03. They are not secured for 2003 onwards. There are only a few pilot primary care trusts in existence, and those that are coming into existence will not really be operational and taking a strategic view of how they will spend their resources for at least six months. There is a concern about the allocation of resources and how it will be carried out, particularly in 2003-04 when the ground will hardly be secure under the PCTs' feet.

Stability of funding is vital in the short term, if not in the long term, in the health service. The amendment is important as it begins to show a way of discussion and consultation about how services should be provided. My noble friend Lady Noakes would agree that that cannot happen in the short term, but it could happen in the longer term. However, I would be interested to know how the Minister sees 2003-04 progressing in the light of the fact that PCTs will

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probably not be able to make serious and informed decisions about funding and the continuation of or changes to services within that timescale.

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