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Lord Hunt of Kings Heath: This is indeed happy, familiar territory and I hope that I shall be able to convince the Committee, as I am not sure I did last time we debated the matter, that there is a perfectly reasonable explanation as to why the particular words the noble Lord, Lord Roberts, mentioned should be in the Bill.

What subsections (3) to (6) of Clause 8 to the Bill do is simply to mirror, for primary care trusts, existing powers to make payments to health authorities. Essentially the Secretary of State is here taking power to determine how much to allot each primary care trust based on their performance. He may consider a whole range of factors and we believe it is right that he has the flexibility to determine if and on what basis those payments should be made.

The Secretary of State may want to increase the allocation to a primary care trust for a number of reasons—either as a reward for good performance against challenging targets, or perhaps to assist those PCTs that have under-achieved against certain targets and, therefore, need extra assistance. For example, the Secretary of State might want to reward PCTs to meet challenging waiting-list targets, as in the former performance schemes in operation in 2000-01. Primary care trusts might also take part in pilot schemes, in conjunction with the Modernisation Agency, or others, to develop new ways of delivering healthcare. It would be wrong to tie our hands and remove the ability and flexibility to respond to opportunities to improve local services for people

In 2001-02 all NHS organisations have received their fair share of the new performance fund, regardless of star ratings. High-performing, three-star organisations have, however, the freedom to spend the fund as they want. Organisations with unsatisfactory levels of performance have received their funding with

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strings attached. The Modernisation Agency signs off their plans and oversees the implementation and spending of the fund. That will also be the case in 2002-03.

Amendments Nos. 69 and 70 would take away the flexibility of the Secretary of State to consider whether performance payments were warranted in the light of other information. I believe that these amendments rather contradict Amendments Nos. 71 and 72, which seek to make payments dependent on reports by the Commission for Health Improvement. Amendments Nos. 71 and 72 would take away the flexibility of the Secretary of State to take into account such factors as CHI reports.

The Secretary of State should specify the precise measures used to assess performance. Indeed, I do not believe that there is any doubt in that respect. However, for important reasons, he might not be able to do so before the start of the financial year in question. Planning guidance published in autumn 2001 will affect the financial performance for the year 2002-03, which, in turn, will influence the performance ratings that are due to be published in July 2003. It would simply not be possible to commit ourselves to the precise measures and thresholds to be used 18 months in advance of the star ratings being published.

I know that the noble Baroness, Lady Noakes, and the noble Lord, Lord Roberts, said that this was like moving the goal posts. However, perhaps I may give the Committee an example of how this provision would apply. The recently published mortality indicator for all deaths within 30 days following an operation now includes subsequent deaths in hospital and at home. This is clearly a better indicator than using only the deaths-in-hospital statistic which was previously used. Many patients are discharged from hospital and die elsewhere. If, however, we tied ourselves to the old measure purely because hospitals knew about it 18 months ago when the planning and priorities guidance was issued, that would mean using an inferior indicator of hospital performance.

In terms of the integrity of the process, perhaps it would be helpful if I inform noble Lords that in 2002 CHI will publish the performance ratings, and in 2003 will take full responsibility for the process. It will still be for the Secretary of State to determine the priorities for the NHS, but CHI will have an active role in overall assessment. As CHI is an independent inspectorate, this seems to be an appropriate division of responsibilities as opposed to the Department of Health, which is accountable through Ministers to Parliament for the management and performance of the NHS.

Indeed, the department may well act on the recommendations of CHI, as was the case last September when the star ratings of two NHS trusts were downgraded to zero stars because of adverse CHI reports. However, I believe that it would be wrong to put CHI in the driving seat when determining if and how to make specific payments based on performance. Surely that is a proper function of the Secretary of State.

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As I have said, the Secretary of State may want to increase the allocation to a primary care trust for a number of reasons, either as a reward for good performance against challenging targets or, as I have said, to assist those primary care trusts which have under-achieved against certain targets and need extra assistance.

Amendment No. 82 concerns Clause 9, which deals with the funding of local health boards in Wales. The National Assembly is currently considering a new framework to promote continuous improvement in health and health services in Wales. That is based on a "balanced score card" approach. The Welsh approach will be to look at the situation in the round—the resources and pressures locally as well as the current performance—and will have a future orientation. It will not simply give good or bad marks but will look at capacity, processes and results and provide a strong steer to every health organisation to sustain good performance and make improvements over time where needed.

If performance were to be measured solely on numerical indicators, it would be straightforward to specify the exact methodology for measuring performance. Although numerical indicators will play a key role in performance assessment, they cannot illustrate every aspect of performance. To give an example, one element of taking a balanced view of overall performance would be to assess whether the healthcare system is in touch with patients, its staff and partners both in terms of expectations and satisfaction. For such an area, performance will be more appropriately assessed against statements and standards. To set out exactly how performance will be measured in advance might be counter-productive and restrict the autonomy of the Assembly to take into account all the information available in reaching that judgment. The approach being taken by the National Assembly is innovative and will need to be fine tuned to best accommodate nuances in assessing performance. I hope that noble Lords will accept that a straitjacket would not be helpful in the early stages of performance funding.

I hope that my example illustrates why it is important that the amendment should not be accepted and that some flexibility must be allowed in order to arrive at a balanced view of local health board performance.

10.45 p.m.

Baroness Noakes: I thank the Minister for that extremely comprehensive reply. He made a bid for flexibility. One man's flexibility is another man's lack of certainty. If we look at the arrangements for performance payments through the other end of the telescope, the primary care trust end, we might find that the view from there is that the Secretary of State does not want to give certainty to primary care trusts about how the performance regime will operate for them. He wants to retain as many controls over it as

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possible, including using indicators that were not even relevant when the PCT set out its plan for what it was to achieve and went ahead.

These are complex matters and the hour is late. I shall read the Minister's comments in Hansard with interest. Meanwhile, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 70 to 73 not moved.]

Baroness Noakes moved Amendment No. 74:

    Page 10, leave out line 42.

The noble Baroness said: In moving Amendment No. 74 I shall speak also to Amendment No. 75. With Amendment No. 74 we return again to the theme of the powers of the Secretary of State over primary care trusts. The amendment deletes paragraph (a) of subsection (8) of Section 97C of the 1977 Act as inserted by Clause 8 of the Bill.

Paragraph (a) allows the Secretary of State to give directions to a PCT with respect to moneys paid to it as allocations or as additional allocations for performance. The Secretary of State cannot have it both ways. He cannot say that on the one hand he is committed to decentralisation, to devolving decision-making to the front line and to freedoms and autonomy for PCTs while at the same time retaining massive powers to intervene in their affairs.

Paragraph (a) would give the Secretary of State carte blanche to tell PCTs what to do. This is not about strategic direction at a high level. There is no limitation on this power. It potentially attaches to every last penny paid to a PCT. The Minister may say that the Secretary of State needs these powers for when things go badly wrong and that he would not use them all the time. However, we are all well aware that statutory powers of direction, even though rarely used formally, are used often and significantly by way of background threat and inducement to achieve things. I believe that the power is grossly disproportionate and wholly out of keeping with the Government's stated intention to decentralise.

Amendment No. 75 is rather different. It inserts the word "reasonable" into subsection (9) of new Section 97C so that when the Secretary of State sets conditions as to records and certificates they must be reasonable conditions. I am sure that the Secretary of State would only act reasonably and therefore that the noble Lord will find it easy to accept the amendment. I beg to move.

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