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Baroness Noakes: I raised the matter of the £120 million. Can the Minister clarify whether that £120 million that is included in the additional expenditure limit for 2001-02 relates to deficits that are carried forward; for example, £120 million borrowed from next year?

Lord Hunt of Kings Heath: I may have to write to the noble Baroness as I do not have the information about the specific figure that she has raised.

Baroness Noakes: I look forward to receiving that. This is an important area.

The questions raised by the noble Lord, Lord Clement-Jones, are extremely important. The Minister has suggested that it is in some way easy to parcel up a deficit and to attribute it to a primary care trust. I put it to him that there is no logical way of allocating a deficit that exists in one health authority between, say, three or four primary care trusts. Do the primary care trusts share equally in the deficit? Are some allocated larger amounts than others? If a health authority has a deficit at the end of the year, there is no logical way to allocate it to any one particular activity and to say which activity has borne the deficit. The noble Lord, Lord Clement-Jones, has raised some extremely important questions on that.

I ask the Minister to consider the matter again. He may like to write to us before Report stage about how that provision will work in practice as we have concerns about it. The noble Lord said that this will be a record year for resources, but I put it to him that the signs emerging from the NHS are that next year is already looking extremely tight. I understand that the early cut of the planning framework—nowadays called "SWAFF"—is showing almost as many tensions as there were this time last year. That round was regarded as an extremely difficult and bloody round of financial planning. That may not be a good basis on which to go forward into next year.

10.30 p.m.

Lord Hunt of Kings Heath: This is the time of year for noises and squeals from the health service, because this is the time of year when the health service is trying to reach agreement on the SWAFF round. I suspect that, whatever amount of resource one might give to the health service, there will always be squeals at this time of year. I think that the noble Baroness herself will remember the process all too clearly.

Baroness Noakes: I do remember the process. I was merely remarking that people in the NHS are not saying, "Oh, what a lot of money we've got!" Until we see the end of that process, I think that we might have to take with a pinch of salt the Minister's assertion that there will be so much money sloshing round next year that a few deficits will not make much difference.

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Basically, however, the Minister has confirmed to us that PCTs will have to pick up the sins of their forebears. I know that that will be a considerable disappointment to PCTs, who will find it difficult to know how to start their life with a deficit, even if they do not know how that deficit is to be calculated.

Lord Hunt of Kings Heath: Surely this is no different from any other restructuring in the health service when successor bodies take on the assets and liabilities of their predecessors. This is a normal process of structural change in the health service. Moreover, it seems to me that it would be wrong to wipe the slate clean. If we were to do that, surely we would be rewarding areas that have benefited from spending in excess of what we regard as their fair share. It would also send out the wrong signals to primary care trusts about the need to exercise financial discipline in the future. Surely this is the only sensible way in which to go forward.

Baroness Noakes: There are two ways forward. The first is to say that we shall give these new organisations a clean slate to begin with, and the second is to attribute a history from the previous organisation. Each is logical, and each has advantages and disadvantages which have been considered in previous reorganisations. There are two ways to proceed, and some PCTs will be disappointed at the Government's line.

We would like to think again about the issue. We should be grateful if the Minister will provide the additional information that he has undertaken to provide. Meanwhile, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 67 and 68 not moved.]

Baroness Noakes moved Amendment No. 69:

    Page 10, line 7, leave out "may" and insert "must"

The noble Baroness said: In moving this amendment, with leave, I shall also speak to Amendments Nos. 70, 71, 72 and 82. This group of amendments generally concerns payments to primary care trusts under the powers in Section 97C of the 1977 Act as inserted by Clause 8 of this Bill, while Amendment No. 82 deals with the corresponding amendment for Wales to Clause 9.

The effect of Amendment No. 69, which replaces "may" with "must" in subsection (3) of Section 97C, is to convert the Secretary of State's option as to whether he makes an extra payment to a PCT if it has satisfied its objectives or performed well against criteria. If the PCT has fulfilled its side of the bargain and satisfied its objectives and so on, why should the Secretary of State have the option to renege on his side of the bargain?

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Amendment No. 70 deletes the words "if it appears to him" from subsection (3). The effect of that is to turn the question of whether a PCT has or has not satisfied its objectives or performed well against criteria from a subjective test to an objective one.

Amendment No. 72 inserts a new subsection after subsection (3) which provides that the Commission for Health Improvement will supply the answer as to whether or not a PCT has passed the performance tests. The Commission for Health Improvement is fairly independent and so can provide the required objectivity.

The sum of those three amendments is to turn a subjective set of tests into objective ones. We on these Benches are far from convinced that the micro-management of PCT budgets via additional payments for achieving the Secretary of State's latest set of requirements is the right route. These provisions are a part of the Secretary of State's determination—as we have discussed before—to hang on to as much power as possible over the PCTs despite his decentralisation rhetoric. In our view, if these powers are to exist and to be held at the centre, they should be operated as rigorously and objectively as possible.

Lastly, Amendment No. 71 leaves out the words,

    "(whether or not the method of measuring its performance against those criteria was also notified to it)".

Amendment No. 82 does the same for Wales. This removes a particularly nasty element of the performance payment regime contained in Section 97C. It is not new to your Lordships' House and we debated it in the context of the Health and Social Care Act 2001. The words allow the Secretary of State to move the goalposts or, even worse, erect goalposts after the game has been played.

PCTs can be rewarded for performing well against criteria notified to them as criteria relevant to the satisfactory performance of their functions. Under the terms of Clause 8 it is not necessary to tell PCTs how their performance will be measured. In management terms that is complete nonsense. There is a massive library of literature on rewarding performance, and I do not believe that there is one respectable page of it which would recommend setting measurement rules separately, let alone not notifying measurement rules. But, of course, the Secretary of State may not be interested in sound management practices because we know what he wants to do is to retain as many levers as possible over his NHS. It is not decentralisation. It is old-fashioned command and control.

These amendments are modest changes, designed to give PCTs more of a chance to manage their affairs within the Secretary of State's framework, without the arbitrariness of the powers as drafted. I beg to move.

Lord Roberts of Conwy: I am particularly interested in Amendment No. 82, which is very similar to Amendment No. 71 relating to England. I am not sure whether these two gratuitous lines that we seek to eliminate do not indicate a somewhat slipshod approach towards financial allocations.

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I am bound to say that subsection (3) as a whole reads very oddly in this clause. It says in effect that the Assembly may add to the initial amount allocated to the local health board if (a) the board satisfies notified objectives and (b),

    "it performed well against any criteria notified to it as criteria relevant to the satisfactory performance of its function".

Then, as an afterthought, come the two gratuitous lines that the amendment seeks to delete.

My question is how on earth can a local health board perform well if it does not know the criteria against which its performance is to be measured?

I note under subsection (6) that the Assembly may also take away money from boards in the event of failure, wholly or in part, to meet any conditions imposed. What if the money has already been spent in trying to meet the conditions?

The arbitrary subtraction of moneys could in these circumstances have a seriously detrimental effect on the board's services. These arrangements are hardly reassuring so far as the local health boards are concerned, therefore, and seem to confirm our view that this clause gives the Assembly absolute discretion and very considerable latitude in financial matters.

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