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Viscount Bledisloe: My Lords, the noble and learned Lord used the phrase mens rea. Can he explain why it is thought that rape is the one crime for which we will abandon the test of mens rea? In all other serious crimes it is the accused's belief that is in question. If he has taken my property but has an honest belief that he was entitled to it, he has a defence whether that belief is reasonable or not. Why is that test to be abandoned in cases of rape? Above all, why is the onus to be put on the accused to prove that he honestly believed there was consent?

As the noble and learned Lord, Lord Morris, said, normally there are only two witnesses. The lady in question—we will assume it is a heterosexual rape—will say, "I did not consent. After we got back to my flat I said no", and the accused will say, "No, she did not. She may have jokingly said no but I thought it was quite all right". Probably both of them will have had a bit to drink. So why is rape suddenly to be singled out as the crime for which we abandon the normal test of mens rea?

Lord Falconer of Thoroton: My Lords, the Command Paper states:

We have a situation in relation to rape where the prosecution has to prove no honest belief in consent. There may well be cases where there has been no consent—the victim has been raped in any common parlance—but the prosecution fails to prove lack of honest belief and the defendant is acquitted. That is not a sensible situation for the law to reach.

Viscount Bledisloe: My Lords, in what other area of law have we ever abandoned a test because it is difficult to prove?

Baroness Jay of Paddington: My Lords, I was pleased to hear my noble and learned friend say in reply to an earlier question that the child protection agencies played an important role in many of these issues. I hope that he can confirm that many of these matters, particularly when they refer to vulnerable young people, are more appropriately and more sensibly dealt with in that way.

But when one comes to look at matters which are susceptible to the criminal justice system, we have heard several noble Lords refer to the problems of evidence in this area. Can my noble and learned friend

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develop a little on how some of these crimes—the new crime, for example, of "grooming" children over the Internet—can properly be investigated when we all know the difficulties of regulating and, indeed, enforcing anything to do with cyber space?

Lord Falconer of Thoroton: My Lords, I can confirm to my noble friend that some of these matters, even though they may constitute a crime, will be better dealt with by child protection agencies, particularly when we are dealing with acts committed between two people both under the age of 18.

As to "grooming", this issue has been looked at in the context of the Internet. In order for an offence to be committed there has to be a meeting. So matters must have moved beyond simply communication through the Internet.

It is worth making the point that the offence of grooming is not restricted to the Internet. It can also be committed in other ways—for example, by telephone or through correspondence to start with—but the critical element is that the meeting is the trigger. Even then, the purpose of the meeting and what went before must have been with the intention on the part of the adult to have a sexual relationship with a child.

Lord Ackner: My Lords, has the noble and learned Lord considered whether there should be sexual offences less than rape but involving sexual intercourse?

He has no doubt considered the reasons for the low conviction rate, but perhaps I may suggest to him that there are probably one or two to which he has not given regard. At the Bar, it was widely accepted that one of the reasons for the low conviction rate was the abysmally low fees that the CPS paid to the Bar. The former Attorney-General nods. That has been—I will not say put right—altered in that what the Lord Chancellor's Department agreed on the subject of graduated fees for the defence has been reduced, despite the agreement, in order that the reduction may be added to what is paid to the prosecution. So it may be that we will see a better balance between the two.

Secondly, the word "rape" strikes horror in the mind of everyone, and in a jury in particular. It knows that the starting rate of imprisonment is probably six years or thereabouts. It looks at the weeping family of the prisoner and it comes to the conclusion that not all that much harm was done—they were on reasonable terms, they flirted, they drank together—and for the man to go to prison for six years or thereabouts offends its sense of proportion, and accordingly the jury acquits. A lesser offence with a lesser tariff would make a big difference.

As has been pointed out by the former Attorney-General, these cases are usually a one-to-one contest. The onus of proof is beyond reasonable doubt—or, to use the phrase of Lord Goddard, which I always found put it up a bit, you have got to be satisfied so that you

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feel sure—and that is a very high onus. With a one-to-one situation, you cannot expect a high rate of conviction. Those matters should be borne in mind.

Lord Falconer of Thoroton: My Lords, as to the inequality of alms between prosecution and defence, that was an issue at the time when my noble and learned friend Lord Morris was the Attorney-General and I was the Solicitor General. My noble and learned friend took steps to ensure that the issue of equality was dealt with, and that has made a considerable difference to the nature of prosecutions by the CPS.

As to the noble and learned Lord's second point, the essence of his question was—this is putting it simplistically—"What about a charge equal to rape but of a lesser seriousness in relation to what might be described as 'date rape'?". That matter was considered before publication of the Command Paper, but the view we have taken is that rape is rape and cannot be divided into more and less serious offences. It can be equally as traumatic to be raped by someone you know and trust, who has chosen you as his victim, as it can be to be raped by a complete stranger. Always there will be difficulties in relation to these kinds of offences for the reason given by my noble and learned friend Lord Morris—that is, they frequently involve a one-to-one relationship. Having regard to the seriousness of the offence and the fact that there will always be that difficulty, we do not think that it is right to divide it into two in the way suggested by the noble and learned Lord.

Address in Reply to Her Majesty's Most Gracious Speech

5.11 p.m.

Debate resumed.

Lord Faulkner of Worcester: My Lords, it is a particular pleasure to follow the noble Lord, Lord Clement-Jones, as this gives me the opportunity to pay a personal tribute to him for his tenacity in introducing and subsequently taking through this House the Tobacco Advertising and Promotion Bill.

I want also to pay tribute to my noble friend Lord Hunt of Kings Heath, who supported the Bill at every stage and, crucially, succeeded in persuading his colleagues in another place to take over the Bill and turn it into a government Bill, which was finally enacted two weeks ago.

I must pay tribute also to the noble Earl, Lord Howe, who made no secret of his support for the Bill, despite some difficulties during our debates. He did not in any way obstruct its passage.

It was an important piece of legislation for two reasons. First, it will save the lives of 3,000 people each year, many of them young adults who would otherwise have been tempted to smoke and would have been killed as a direct consequence. Secondly, it was the first demonstrable piece of anti-smoking legislation to be passed by this Government since they came to power

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in 1997. It builds on the excellent Smoking Kills White Paper, published by the Department of Health in December 1998.

There has been a decline in smoking levels among adults, but these tend to be older people and people in the higher socio-economic groups. There has been almost no reduction in the under-24s, and none at all in females under 19. In 1998, 42 per cent of people between 20 and 24 smoked, and 26 per cent of 15 year-olds were regular smokers.

These are all Department of Health figures, published quite recently. They underline the need to do everything possible to discourage young people from starting smoking. That will mean taking on the tobacco industry—which knows that, as its product kills its older consumers, it must find youngsters to replace them and get them hooked through the addictive properties of nicotine. The companies must not be allowed to skirt around the legislation with "brand stretching"—using glamorous merchandising such as boots, clothing and adventure travel to sell tobacco.

The commercial placement of cigarettes in films, video games and other settings must be stopped. It is deplorable that the tobacco industry should be celebrating the conversion of Mr James Bond to cigar smoking in the new film and regard this as a very successful piece of product placement.

I hope that my noble friend will not think me churlish if I express my disappointment at the absence of further smoking and health related measures in the gracious Speech. Public opinion is moving steadily against tobacco smoking, especially in public places such as restaurants and pubs, on public transport, in the workplace and in front of children.

There is a growing awareness of the dangers of passive smoking, a point made by the noble Lord, Lord Clement-Jones, as well as a revulsion among non-smokers against inhaling other people's smoke and having their clothes impregnated with the stench of stale tobacco smoke.

This is the time when the Government should be building on their achievement in passing the Tobacco Advertising and Promotion Act. They should be coming forward with new measures which both reflect the public mood and lead opinion.

For if we can prevent 3,000 premature deaths each year by banning advertising and sponsorship—that is a very significant figure; it is as many as die on the roads each year, and far more than die from all illegal drugs put together—how many more lives could we save with fresh anti-smoking initiatives? The number that die each year from smoking tobacco is 120,000.

It seems to me that there are three strands of policy-making within the Government. First, there are those who recognise the dangers of smoking and passive smoking and are determined to do something about it. In this category I place my noble friend Lord Hunt of Kings Heath and his ministerial colleagues and officials in the Department of Health.

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The second strand consists of those in government who sympathise with the need to do more, but are required—perhaps through international obligations—to take measures which are against their instincts but which are none the less helpful to the tobacco industry.

Two examples of this are the maintenance of subsidies under the common agricultural policy for tobacco-growers in the EU, mostly in Italy and Greece, and the recent relaxation on the personal import of drink and tobacco from across the Channel.

One billion euros is spent on subsidising tobacco growing in the European Union, of which our share is some 80 million—80 million, my Lords! That is 25 million more than we spend on health education programmes trying to protect our own public from the harmful effects of tobacco.

In a Written Answer on 28th March 2001, my noble friend Lady Hayman, then a Minister of Agriculture, said:

    "The Government strongly disapproves of the common agricultural policy support scheme for tobacco which was introduced in 1970 . . . We believe that the Community should progressively disengage from support for tobacco production on grounds of health and cost".—[Official Report, 28/3/02; col. WA 41.]

But it continues.

The other example is the recent decision to raise—or indeed virtually abolish—the limit on the number of cheap cigarettes people can bring in from continental Europe, largely, it appears, in response to a tabloid newspaper campaign. In replying to the debate, will my noble friend explain why no effort was made to reinforce anti-smoking messages when the Treasury made the announcement that people could bring in up to 3,200 cigarettes per person?

I wonder whether my noble friend saw the letter in the Independent from Professor Stephen Spiro of University College, London. The professor wrote:

    "This relaxing of the rules is an encouragement to smoke more, and it also deprives the Government of a huge tax income that could have gone towards health . . . Surely this is another depressing negative step in our facing up to tobacco control. It is a very sad reflection that so little is being done to actively prevent cigarette consumption".

The third strand of policy-making in the Government in this area covers those who have successfully resisted the introduction of measures that would make a real difference to the health of the nation, and at the same time would make life more pleasant for the 80 per cent of the population who are non-smokers.

This means tackling the scourge of second-hand tobacco smoke. Passive smoking is a cause of fatal disease such as lung cancer and heart disease in non-smokers. In addition, it is a hazard to those with lung conditions, who are in effect being excluded from smoky environments at work or in public—a very obvious case of discrimination.

So many of us are just sick of the stinking atmosphere it creates. Normally, when one person's actions affect the well-being of another, society intervenes. That is not so with passive smoking, even though it can prove fatal.

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Tobacco companies and their apologists still try to argue that "the jury is out on passive smoking". That is not true. According to the Daily Telegraph on 7th November, a report by the British Medical Association's Board of Science and Education and the Tobacco Control Resource Centre concluded,

    "that there was no safe level of exposure to second-hand smoke and that millions of people were particularly vulnerable".

That is 8 million with lung disease, 2.1 million with angina, 1.3 million who have had a heart attack and 300,000 who have had a stroke. A total of 5.1 million people are receiving treatment for asthma, 1.5 million of whom are children. They are all at risk from passive smoking, as are 0.75 million pregnant women.

It is not as if the Government are unaware of what needs to be done. They have been consulting for almost four years on the approved code of practice on passive smoking at work prepared by the Health and Safety Commission. It is also possible to see how the problem is being tackled by other countries, many with tobacco-smoking traditions even more ingrained than ours. The Irish Republic has just announced that from next year it will outlaw smoking in all restaurants and pubs where food is served. Early this month, the Senate in Italy approved an anti-smoking measure that would forbid cigar and cigarette smoking in public places and require restaurants to confine smoking to special sections and to install ventilation systems.

By contrast, we continue to drag our feet here. The lack of action on an ACOP is unacceptable. Its absence is denying people a statutory right to work in a smoke-free environment. It is no secret that the Department of Health wishes to see it introduced without delay. Here again, I exempt my noble friend Lord Hunt from any criticism in this regard. It is the hospitality industry that seeks to block its introduction in pubs and restaurants thereby denying bar and waiting staff protection from customers' second-hand smoke. It continues to argue for its own voluntary public places charter. The editor of the The Good Pub Guide is in no doubt about the worth of that charter. In his introduction to the 2003 edition, Mr Alistair Aird draws attention to new signage that has gone up in pubs this year stating that smoking is allowed throughout the premises. I quote from his introduction:

    "These notices have been produced and promoted by an outfit which gets funding from the Tobacco Manufacturers Association. This flies directly in the face of the main purpose of the legislation to prohibit cigarette advertising, which is of course to stop the promotion itself".

Far from creating new rights and opportunities for non-smokers, the charter is encouraging the notion that smoking, and drinking and eating in pubs and restaurants are inseparably linked. Given that the new Licensing Bill, which comes before your Lordships next week for its Second Reading, will remove the restrictions on children from entering pubs, can my noble friend assure me that children will not be allowed to enter sections of licensed premises where they will be exposed to tobacco smoke? Will the Government look favourably on amendments to the Bill that would seek to achieve that?

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On cancer research, I declare my interest as a patron of the Roy Castle Lung Cancer Foundation. Will my noble friend comment on why lung cancer attracts only 3 per cent of research money even though it causes 22 per cent of all cancer deaths and accounts for 15 per cent of new cases a year? We know that stopping people from smoking, persuading them not to start and protecting non-smokers from the effects of passive smoking would have by far the greatest impact on lung cancer figures. But it is undeniable that if lung cancer is diagnosed early, survival rates are much better. The University of Iowa has conducted research that shows that people are 40 times more likely to survive if diagnosed early. Early diagnosis needs to be followed by early intervention. That means that we need more—many more—thoracic surgeons to bring us into line with European average standards for thoracic surgery. GPs need the confidence that, if they refer patients for lung cancer surgery, they will be operated on quickly. At present, there is much evidence that older patients do not get referred because their GPs are not confident that that will happen.

These issues are at the forefront of the Global Lung Cancer Awareness Month, which was launched by Macmillan Cancer Relief and the Roy Castle Lung Cancer Foundation on 5th November. I hope my noble friend will be able to give his unqualified support for this initiative and reassure me that the Government's commitment to reducing smoking and combating the influence of tobacco companies remains firm.

5.24 p.m.

Lord Fowler: My Lords, it is always a pleasure to follow the noble Lord. I will make a further point on smoking and tobacco later. In some ways, this debate marks the final demise of the old Department of Health and Social Security, which was created by Harold Wilson to get an overview over both sides. In this debate it is gently suggested that we should indicate which side we will be speaking on. When I was Secretary of State, it was frequently suggested that the DHSS should be split. When I was forever being battered by organisations such as the National Association of Health Authorities, whose director bears a striking resemblance to the Minister who will be making the winding-up speech on this debate, it was proposed as a way forward. When looking at cuttings featuring the Minister, I noticed that he had a rather interesting suggestion. When the department was divided, he said:

    "A more fundamental reform would have been to separate the NHS management board from the DHSS and run it as a separate agency which would allow the NHS to develop in an efficient way without too much central interference".

I am not sure that most of us recognise that as an entire description of the Government's health policy. Perhaps it is their secret agenda that they will come to.

I was told that, when the department was split, all the problems would melt away and that if health had a department of its own, it would be clear and uncontroversial sailing from then onwards. I am not

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sure that any Minister who has served in either the Conservative government or the Labour Government would recognise that as a description of what has happened. That is not to say that Ministers have not tried. I asked the House of Lords Library to find out how the number of press officers had changed since the department was split. In its efficient way, the Library told me that the Department of Health now employs 22 press officers and that the Department for Work and Pensions now employs 21 full-time press officers. Between them, they now employ 43 full-time press officers. The Library Clerk added:

    "In relation to the number of press officers employed by the Department for Health and Social Security in 1986, the Department of Health have told me that they are not able to provide the figure at short notice, as the relevant files are held in Lancashire".

A few days later, they wrote again to say that the department had been,

    "unable to find a record of the number of press officers employed by the Department for Health and Social Security in 1986. They are not aware of any other sources that may hold this information".

My department did not have 43 press officers. Even when I employed Edwina Currie, I did not need that number of press officers. I suggest that the number has doubled, if not more, in that time.

The truth is that however you organise a department, and these two departments, the issues covered remain among the most important in any government. I wish to touch briefly on three of them. The first is on what the noble Baroness who opened the debate referred to in the context of pensions. I would call it the pensions crisis, because I believe that it is just that. I have always believed, rather like her, that the basic pension provision should be in the hands of the government. The second tier, however, should be from personal provision. I make no complaint of the Government's policy on the basic state pension. Similarly, I make no complaint on pension credit. As the Government know, I support that, because they keep on quoting my words in support of their policy. I need no persuasion on that. I do, however, make complaint about the Government's policy to personal provision. Rather than encouraging personal provision, they have discouraged it over the past four or five years.

We did not all recognise the noble Baroness's reply on the 5 billion a year pension tax as a description of what has taken place in this country. The policy is likely to go down as a classic mistake, introduced on a false assumption that the stock market would continue to go up and up, when entirely the opposite took place.

I also condemn the Government's refusal to do anything about the annuity problem and compulsory annuities at 75. We now hear suggestions that tax reliefs are under threat and that there will be a Green Paper on the subject in due course. Doubtless there will be a debate on it, so I shall leave my full remarks until then. However, the Government will not be forgiven if they make the position even more difficult for those who are trying to make some provision for their

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retirement, in contrast, perhaps, with those in some of the public sector schemes. There is a serious danger of there being two nations in retirement in this country. We should avoid that.

My second point concerns health generally. I support the concept of devolving power and the step forward on foundation hospitals. I suspect that had we done that in government, the Labour Party would have attacked us outright, but we should not complain about that. I also suspect that right now the Government would prefer the support of former Labour Health Secretaries rather than former Conservative Health Secretaries on that policy.

The health debate should not just be about hospitals, as it so often is. It should also be about primary care and community care. I shall give one example. The Minister who will wind up the debate was responsible for an important paper on Pharmacy in the Future. I immediately declare an interest as chairman of Numark, which is the biggest organisation of community pharmacists in the United Kingdom. It has always seemed to me that pharmacists could play a much greater role in healthcare. They are an enormous resource of professionally qualified men and women who are capable of relieving pressure on general practitioners and of playing a much greater role advising the public on the treatment and prevention of ill health. As the Minister knows, there are important decisions ahead, with the OFT report. Above all, how should all this be organised? The nightmare would be if we went the way of the United States, with pharmacies too often relegated to the backs of supermarkets. Coming to the noble Lord's point, already we have the spectacle of a pharmacy in one part of a supermarket and the company's cigarette kiosk on the other side of the checkout. Make them ill at one end and try to alleviate at the other does not seem an entirely sound health policy. In conducting and informing policy, I hope that the Government will take their decisions above all on health grounds.

My third and most fundamental point concerns a crucial aspect of health policy that risks becoming neglected in this country: the policy on HIV/AIDS, which was referred to in an intervention by one of the Bishops. Internationally, the scale of the tragedy is clear and terrible. At the start of the 1980s, the World Health Organisation predicted that by 2000, 40 million people would be infected. The WHO was criticised and attacked for exaggerating the problem. In fact, by 2000, 56 million people were infected, of whom, it is estimated, 20 million have died. Some 13 million children have lost one or both parents. Eight thousand people a day are dying from AIDS. The vast majority of people with HIV live in the developing world. AIDS is reversing years of development gain and bringing untold misery from Africa to India, from China to eastern Europe and central Asia. We should underline that the predictions are that the problem will continue to increase, not decrease.

I shall seek to return to the international challenge on another occasion. The response from the West has not matched the challenge. Of course our figures in the

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United Kingdom—thank God—are not on the African or Asian scale, but we might remember that there have already been 15,000 HIV deaths. It is estimated that there are currently 30,000 to 35,000 people living with HIV. New reports of HIV infection last year approached 5,000. That is the highest ever annual total and represents the fourth year in succession that there has been an increase. Worst of all, the evidence is that young people are ignoring safer sex messages or have no understanding of the risks that they are taking. Anyone who wants further proof of that should look at the figures for sexually transmitted diseases generally. Attendance at the special clinics has doubled over the decade. We now have more than 1 million people attending per year. That has put the clinics—much admired around the world, but under-financed—under enormous pressure so that the whole policy of open access and self-referral is under challenge, putting at risk much of the policy in this area.

To be blunt, there is not much for our comfort here. We face a deteriorating position that demands action from the Government. Self-evidently, this is not remotely a party issue, but I must say in all seriousness to Ministers that I know of no one working in this area who believes that the response in the past few years has been adequate to the scale of the problems. What is needed? At a dinner of the Terrence Higgins Trust last week I asked that question to a professor who is working closely in the area. His response was clear: educate the young. That must be right. We need to remember that there is still no cure and no vaccine for HIV/AIDS. We hope for a vaccine, but none of us knows how long it may take. Public education is our chief prevention weapon and our only vaccine.

I am more than occasionally lectured that my 1986 campaign was too shocking, together with various other criticisms. I regret that the press officers at the Department of Health—perhaps to excuse their own inactivity—now quietly brief against it. The figures show clearly that that campaign and the needles exchange policy that we introduced had a clear impact on reducing the infection rate and improved knowledge and understanding. There is no doubt about that.

I am not arguing that the campaign that we carried out in 1986 is appropriate for 2002, but some campaign that has real impact is urgently needed if we are to reverse the present position. We also need a new effort with schools at the same time. The 2002 Ofsted report says that schools have cut the time spent on HIV and sex education. The Schools Health Education Unit has concluded that four out of 10 teenage boys have not heard of a disease called AIDS or HIV, yet it is one of the biggest killers that the world has ever seen.

The responsibility for that must lie with the Government. They have the ability to put out straightforward messages that spell out the dangers and say what can be done to avoid them. One of the real tragedies of HIV/AIDS is that it can be prevented. We are not doing enough to prevent it today. That puts

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us in a very weak moral position when we come to advise other countries. As we enter the third decade of HIV/AIDS, this is no time to relax our efforts.

5.39 p.m.

Lord Oakeshott of Seagrove Bay: My Lords, I declare my professional interest, noted in the register, as an investment manager of pension funds for the past 26 years. I shall concentrate today on the plight of occupational pension schemes, on which half our working population still depend. In a sobering debate in this House in May, I joined the noble Lords, Lord Fowler and Lord Higgins and others in warning of the financial crisis facing pension funds in this country. I think it is fair to say that in essence, the reply from the noble Baroness, Lady Hollis, was, "Crisis? What crisis?". We shall see. If she wants the quote, I have it here.

I cannot recall a time in my working life when people were so fearful—and, frankly, cynical—about the future of their pension schemes. The Maxwell scandal, shocking though it was and clearly though it showed the scope for outright fraud, was rightly seen as a one-off, which did not threaten the long-term compact between employers, pensioners, older and younger workers on which our final salary pension schemes depend. By contrast, the Equitable Life tragedy corrodes confidence in the pension promises week after week and month after month.

In the worst pension crisis before Maxwell, the runaway inflation and stock market collapse of the mid-1970s, most employers behaved responsibly: they held their nerve and showed their commitment to their workforce by raising, not cutting, their pension fund contributions, even when their own profits were going through the wringer. Courtaulds was a notable example. When I joined as its pension fund manager in 1981 the fund was worth twice as much as the company, but we kept faith with the scheme members. We invested more in real, long-term assets when markets were depressed and yields were high. Our pensioners and the company both reaped the benefit when equity markets recovered, as they always have done in Britain on a 10-year view, or sooner. Pension fund investment is a long-term business. The worst mistake you can make is to go liquid, or close your fund when markets are cheap and shares offer their best long-term value.

Many employers' reactions to the problem of the past few years have been quite different. A devastating report from the Association of Consulting Actuaries only last week showed that over half of all occupational pension schemes had now closed to new members. Many well-known companies are even breaking faith with existing employees by stopping them contributing now to get their promised proportion of final salary when they retire. There are, of course, honourable exceptions; for example, Northern Foods, which is increasing its contribution rate by 2 per cent of salary to protect its final salary scheme. But many mean and short-sighted employers are only too happy to start a race to the bottom in pension provision. The John Lewis Partnership has

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complained that its competitors in retailing are eagerly closing their pension schemes. Therefore, what we have now is a modern version of Gresham's Law: bad pension provision is driving out the good.

The latest figures from the Government Actuary's Department show that the average employer's contribution is 11.1 per cent of employees' salaries in defined benefit— that is, the traditional final salary schemes—against only 5.1 per cent in defined contribution, or money purchase schemes. Almost always these days, closure of a final salary scheme and its replacement by a money purchase scheme means a unilateral pay cut by employers. Employees, their trade unions, or other representatives, and the TUC, are quite right in my view to protest vigorously, and, in the last resort if employers refuse to consult, to strike against that pay cut. Alan Pickering sums it up succinctly at the start of his report: employers must keep to their side of the bargain with employees and meet their pension promises.

But far too many employers do not do so. The whole fabric of occupational pension schemes in this country is being torn up before our eyes. Solvent as well as struggling companies are able to close their schemes with impunity and break a moral, if not a legal contract with many of their longest-serving employees. Whatever the attractions in principle of moving towards more portable, money purchase pension arrangements for younger and more mobile employees, they do not justify welshing on existing scheme members. Ministers may wring their hands, but what are they actually going to do to protect those pension rights?

In response to an earlier intervention today from the noble Lord, Lord Fowler, the noble Baroness, Lady Hollis, claimed that by abolishing pension dividend tax credits the Chancellor of the Exchequer "corrected" an "anomaly" and that that is why our economy is healthy today. Does the noble Baroness really believe that our pension funds are healthy at present? Let us look carefully at that claim.

The Government's raid on pension funds is a key part of the pension problem. In his July 1997 Budget speech the Chancellor justified it by saying that,

    "many funds are in substantial surplus and at present many companies are enjoying pension holidays".

As the noble Lord, Lord Fowler, pointed out, how fast the world has changed! Markets are cyclical. Pension funds and insurance companies have always built up surpluses in the good times to see them through the bad. If Gordon Brown takes your pension overcoat away because the sun is shining in July, it is no surprise when you shiver in January.

Geoffrey Robinson, the honourable Member for North West Coventry, and Paymaster General at the time of that Budget, gave the real reason for the pension fund tax in his memoirs:

    "The calculations we commissioned from Andersen's suggested abolishing tax credits would benefit the Exchequer to the extent of approximately 5 billion per annum on an ongoing basis. We needed the money. It had to come from somewhere . . . This, we

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    all realised, was a politically explosive issue. We anticipated a huge hullabaloo from all quarters. But if the target was going to be met, the tax credits had to go".

They got away with their raid because the markets were strong in 1997-98, but I can assure the Government that they will face the hullabaloo now.

Myners, Pickering, Sandler—we have had review after review after review in short order—all tell much the same story. Myners says:

    "There is a lack of confidence in and knowledge of the pensions system".

Pickering comments:

    "The negative public perception of the financial services industry is not just a commercial problem for providers, distributors and advisers, but also a key impediment to meeting the Government's aim of raising levels of retirement saving".

And Sandler observes:

    "The current taxation regime for long-term savings has increased consumer confusion, exacerbating the problem of consumer weakness. The significant majority of consumers find savings products confusing and have little confidence in their ability to discriminate between products and providers".

Most significant of all, Sandler's report concludes by raising the question of the need for compulsory saving for retirement, as in Australia. He says that this,

    "has an obvious and strong appeal in that it deals directly with the problem of insufficient saving, rather than trying to tackle it at second hand. If the savings level is to be raised, it may be necessary to confront difficult issues such as this one. Compulsion is an important question which deserves serious and wide ranging debate".

We on these Benches agree with him. We shall set out our proposals fully in our response to the forthcoming pensions Green Paper.

If noble Lords remember their 1066 and All That, which I have been re-reading recently, they will recall that the authors invented "The Review of Reviews of Reviews". They must have seen the Government's pensions policy coming. What we need in the forthcoming Green Paper is not another review; we need to see urgent action on five key problems. The first is Gordon Brown's crippling pension fund dividend tax. The second is the rising tide of pension fund closures; and the third is the lack of protection for contributors—not pensions in payment, but contributors—when pension schemes wind up. The latter is a particular example of the current ASW problem, as featured on last Sunday night's "Panorama" programme in which that point was clearly made.

Fourthly, we need action on the ridiculous rule forcing 75 year-olds to buy annuities; and, finally, there is the 27 billion long-term savings gap, as estimated by the Association of British Insurers. If that is not a pension fund in crisis, could the Government please tell us what one would look like? It is far too serious for any more government dither, drift and delay.

5.47 p.m.

Lord McColl of Dulwich: My Lords, despite the fact that more and more money has been pumped into the NHS, morale seems to be at a very low ebb indeed. But

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what exactly has contributed to this state of affairs? Perhaps I may give your Lordships an example. A consultant-surgeon arranged to remove a benign tumour from a patient's neck as a day case. He arranged the operation six months in advance, because there was no hurry. It would mean that the operation would be completed during the winter. However, 24 hours before the operation was due to take place an administrator approached the surgeon and said, "You can't do the operation because the patient is outside the catchment area of the hospital".

Therefore, to avoid inconveniencing the patient and wasting valuable theatre time, the surgeon, in desperation, offered to pay for the operation. The administrator said that it would cost 3,500, whereupon the surgeon pointed out that he could have the operation carried out in the private sector for 600. The administrator explained that the patient would have to stay in the hospital for three days because that is what was laid down in his book. After a rather heated discussion during which the surgeon pointed out that the administrator knew nothing about surgery, they eventually agreed that the operation could go ahead on a day-case basis and the surgeon gave the administrator a cheque for 600 made payable to the hospital.

The operation went ahead and was successful. However, being a Scot, the surgeon telephoned his bank a month afterwards to see whether the cheque had been cashed. On discovering that it had not been, he cancelled it; and nothing more was heard about the matter. Noble Lords need not be surprised at that, such is the financial control in the NHS.

Heart surgeons are pretty demoralised these days. They are very unhappy about the bureaucracy which demands that they should not have a mortality of more than, say, 5 per cent. Consider the example of a heart surgeon who has done 90 operations and has lost one patient, giving him a mortality rate of approximately 1 per cent. Suppose he is then presented with 10 patients, all of whom need a heart operation and will die without one. Such are the risks with these 10 patients, however, that half of them will die even with surgery. The surgeon realises that if he takes on the 10 patients and five die, his mortality rate will increase to 6 per cent. So he declines to operate on the 10, maintaining his mortality rate at 1 per cent. But is it really 1 per cent? As 10 patients have died as a result of not having treatment, one might argue that his rate is 11 per cent. The bureaucracy, however, does not take that into account.

That is the way in which the ethos of medicine is being radically changed. The surgeon has to think first and foremost not of his patient, but of himself and his family. If his mortality rate goes beyond a certain point, he may be suspended and lose his job. That is truly bad for patients and truly bad for morale. It is one of the things that is truly undermining the NHS.

The BMA says that consultants want to provide the best possible care for their patients and do not want to be driven by targets which distort the delivery of care for those in greatest need. It is in the patient's interests that the consultants retain their professional

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autonomy and clinical independence, which is why the majority of consultants rejected the proposed new contract. The Secretary of State has been reported as saying that he does not want to renegotiate this contract and that no more resources are available. However, he misunderstands the position. Money has not been the primary issue leading consultants to reject the contract in England and Wales. Indeed, some of the problems identified could be resolved quite easily without additional resources.

In the psychiatric sphere, it has been laid down that children must be seen within a very short time. The administrators are fearful that if this is not accomplished, they may lose their jobs. So they become like demons attacking the clinicians to comply with the targets, often reducing the clinicians to despair. What actually happens is that the children are seen within the target time, but, as there is not time to treat them, they are put on a waiting list to be treated later. So the actual treatment is delayed even longer. That really is a farce. One of the cris de coeurs that I hear not only from surgeons but from clinicians of all kinds is that they wish that the administrators would stop telling them what they cannot do and start encouraging them to do what they can do.

Morale among junior staff is also very low. Consider the example of a young surgeon training to be a maxillo-facial surgeon. First he has to qualify in dentistry; then he has to qualify in medicine; then he does junior jobs and higher diplomas; and then, finally, 22 years later, he is fully trained. He then picks up the newspaper and reads that there is going to be a sub-consultant grade. So, at the last minute, this chap has the prospect of waiting another 10 years before he becomes a consultant. The idea of introducing a sub-consultant grade is certainly another factor demoralising the profession.

Quite understandably, the BMA is firmly opposed to such a move, fearing that the quality of care available to patients will suffer if the gold standard of UK consultant training is abandoned. There is do doubt that morale is low. Adding to the problem, of course, is the fact that the number of people applying to do medicine is beginning to decrease. Just this morning, on the "Today" programme, the President of the Royal College of Pathologists said that morale among pathologists is very low and that, unsurprisingly, there are now more than 1,000 vacancies in the pathology service.

The diagnosis is quite clear that something is radically wrong, and it might be wise of us to look at other organisations from which we can learn, despite the difficulties that that presents. I have spent several months in each of the past six or seven years working on a hospital ship, visiting the poorest countries in Africa. That floating hospital is one of the happiest hospitals I have worked in. In fact, it is the only hospital where I can operate from early morning to late night all week long without anyone trying to stop me or saying that they are off duty or anything like that. One Easter holiday, we operated all day on Good Friday, Easter Saturday and Easter Monday, although we did have the Sunday off.

There are difficulties in making comparisons between different organisations, but when one encounters an organisation where morale is so high

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and productivity is so good, surely it is worth looking at. The astonishing aspect of that charity, and what appeals to me as a Scot, is that no one on the ship is paid. All of us, including the captain, even have to pay for our food and keep. As it is a ship, of course it has to be under tight control and there have to be regulations; but there is no oppressive bureaucracy. The nurses, doctors, cooks, engineers, teachers and children are from 30 different nations, and they all work and live together in very good harmony.

No organisation is perfect, and, as a surgeon, I recognise that some surgeons are occasionally described as aggressive psychopaths. The solution which I have found is to have my wife, who is a doctor, assist me; having one's wife on the other side of the table provides a certain controlling influence. Although we have done this work for years, the nurses sometimes think that I am being a bit fresh with my lady assistant. When I explain that she is my wife, they say, "That's what they all say". Nevertheless, it is worth considering the example of that type of organisation. It is not controlled by a distant bureaucracy but is allowed to govern itself, and it does so with great enthusiasm.

It was encouraging to hear in the Queen's Speech that the Government are going to introduce foundation hospitals. I look forward to hearing how those will differ from the trust hospitals and—going further back—from the old teaching hospitals, which, in the 1940s, 1950s and 1960s, certainly ran their own affairs. Morale in teaching hospitals was very high and everyone was delighted to work in them.

It is essential that something radical is done to restore morale. The Government need to have urgent talks with the professions to get the NHS back on an even keel and to create conditions in which the workforce are happy and content. The imposition of the consultant contract on the profession is seen as an infringement of liberty and an attempt to dragoon doctors into being state employees. There was enormous goodwill when the NHS was started; altruism was there, and a very important component it was. It is essential that we try to take the petty party politics out of the NHS and focus principally on the needs of the patients. In order to do that, we have to have a happy workforce who are treated reasonably and are not subjected to suffocating bureaucracy.

5.59 p.m.

Lord McCarthy: My Lords, the Government are having a bad time in this debate. I apologise for continuing in the same vein. I want to talk about PFIs and PPPs. I also apologise for the fact that this is the third time in 12 months that I have tried to do so in this House. My explanation is that I have asked a series of questions to which I have not received answers either from the noble Baroness, Lady Hollis, or from the noble Lord, Lord McIntosh. But tonight the noble Lord, Lord Hunt, is to reply to the debate and I am more optimistic.

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I should also say that I shall not be ideological. As I have said before, it is the other fellow who is ideological. One insults him or her for being ideological. I am not ideological; I am reasonable. Neither shall I be pragmatic, although frequently the Government say that we should be pragmatic. I am always worried about the word "pragmatic". I have warned the Government about it before, so I looked it up. The OED says that to be pragmatic is to be officious, interfering, opinionated and doctrinaire; so let us hear no more about being pragmatic.

I want what I say to be, as the IPPR report on PFIs said, "evidence based". That is the issue. To hell with ideology and to hell with pragmatism. What is the evidence that PFIs or PPPs have done what we expected them to do?

First, it is self-evident—if someone wants to contradict me I shall be pleased—that the Government do not seek to justify anything that was done in the bad days of Tory privatisation. No one wants to justify what the Government are doing by reference to the contracting out of laundry services, catering services, cleaning services and certainly no one wants to justify railway privatisation. We do not want to justify any of that. We did not at the time and we said it was terrible. So, according to new Labour, there is no history of the privatisation of public services succeeding. On the contrary. What was done before 1997 did not succeed and we said it was a bad idea.

Secondly—if anyone from the Government wants to defend it they can—we do not wish to defend PFIs or PPPs by reference to those early scandals: for example, what happened in the Public Health Laboratory Service, or the National Insurance Contributions Agency or the Housing Benefit outsourcing activity or the computerisation of the Passport Service. No one wants to justify those examples. They were all disasters.

So what can we justify? What has happened? What have we developed since the Government came into office that is different from what the Government said was the previous disastrous legacy of privatisation in the public sector? Here we have to go back to a statement made in 1994 by the present Chancellor of the Exchequer, the Deputy Prime Minister and the Leader of the House of Commons. In that statement the Labour Party gave three reasons why we had to change our previous policies, change our previous attitudes and embrace a measure of privatisation in public services. At the time they were good reasons.

The first reason was that various studies had been carried out. The study of the national institute was crucial in this respect. In the early 1990s it produced a magnificent report to show that the past rate of investment in the public sector, particularly in the 1980s but also in the late 1970s had not been sufficient to cover the rate of depreciation. In other words, net asset values in the public sector were declining and there had been no effective expansion at all. So something had to be done. Secondly, it said that among the public there was a rising level of demand and a rising possibility of treatment in the health

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service because of innovation and technological advance. There were also rising demands in education and in the area of crime prevention; therefore there had to be a significant increase in the rate of public investment. Finally the report said—it is important in terms of what happened subsequently—that there were still restrictions on what could be done by public provision in terms of the money available. There were still problems about the PSBR, the Growth and Stability pact, and so on. Therefore it said that there were real limits to what could be expected as a result of the borrowing requirements in the public sector.

Something had to be done to deal with those problems. As I understand it, the solution, as it was developed at that time—if I have it wrong I hope that the Government will tell me—was that private money should be injected to provide increased services across the board in the public sector. I am trying hard to be fair to the Government: no one ever said that that would be a net addition of funds. They were concerned about the hump costs, given that the initial injection of capital at the beginning would be very substantial. But if we could persuade the private sector to develop consortiums and give us something like 50 per cent of the hump costs to be repaid by rents and by the charges for actual services which the consortium would provide, that would solve the problem. New Labour said all that before it took office and that was what it tried to do when it came into office.

Of course, there were a number of problems. I suggest that the first problem—I shall be happy to be corrected—is that it was inherently implausible and counter-intuitive. One had to raise the money in a much more expensive way, the debt had to be serviced, a profit had to be provided and, at the end of the day, it somehow had to be cheaper. That proposal was inherently counter-intuitive.

However, the Government provided two explanations, one positive and one negative. The positive one was that there would be "innovation"—the magic of innovation. I have never seen that word defined; perhaps the Government will define it tonight. Innovation would come from the private sector; what it would do no one could know, but it would transform the situation. Innovation would make matters cheaper, more efficient, more effective, quicker, less likely to fall down on delivery and so on. "Innovation" was the buzz word. No figures were provided but there was to be considerable innovation.

The negative explanation was that there would be what was called at the time a "public sector comparator". Before becoming involved in privatisation, or in contracting out, or in a PFI or whatever, one would ask the sponsoring department to find out the cost if the work was done in a traditional way. So there would be a public sector comparator. Unless it was shown that the private sector initiative or partnership or PFI was cheaper and gave better value—that phrase was used—than the public sector comparator, it would not go forward. So there was a positive test and a negative test. I believe that that was the theory.

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What is the evidence that that has happened? What is the evidence that innovation has risen like a flower and solved the situation? What is the evidence that all the public sector comparators were tested carefully and that all projects had public sector comparators and they all passed the test? What is the evidence?

There have been a lot of publications and surveys. This has been a period during which various semi-official and unofficial research organisations have developed their positions. There have been the Institute for Public Policy Research report, various parliamentary committee reports and the Herculean work of the National Audit Office. How the NAO performs as it does with the number of staff it has I do not know. Various other perhaps more prejudiced or one-sided reports have been published. Most interesting has been the recent survey of the Association of Chartered Certified Accountants, which is the most representative body of chartered accountants and has a special interest in accountants in the public sector who have been responsible for PFIs.

The IPPR said that we had obtained value for money from a few PFIs. It could not say that about most PFIs. Looking back, the most important thing about the IPPR report was its admission that it could not make a judgment at that stage on whether the system as a whole worked—whether, overall, it produced more benefits than disbenefits. The IPPR then tiptoed out of the room.

I turn to the parliamentary committees, the Select Committees on health, education and transport and, above all, the Public Accounts Committee. On the whole they attacked individual PFIs. They were critical of what was going on. The Select Committee on Transport considered the London Underground, the National Air Traffic Services, and so on. They warned—especially the Public Accounts Committee— about the erosion of the test of the public sector alternative. The Public Accounts Committee said that there was a danger that the Government's enthusiasm to sell PFI would create a "Buy now, pay later", situation. As far as I know, that was the first mention of a danger that the PFI would become "the only game in town".

The National Audit Office produced three or four reports. In all of them, so far as I know—I have asked Ministers questions but I do not get answers—it was equally reluctant to provide overall verdicts on the PFI as it proceeded. It is true that in one report it conducted a survey of the sponsoring departments. The report stated that 81 per cent were satisfied that they had received value for money; only 4 per cent said that they received poor value for money.

I am not trying to undermine the report; it is by far the best the Government have. The point is that it relates to the sponsoring departments. It is unlikely that they would say much else, because they would then be in a rather difficult position. It is hard to avoid calling it the Mandy Rice-Davies defence: "They would say that, wouldn't they?" It is difficult to reconcile with a statement that I recently came across

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made by Jeremy Colman, a senior official of the National Audit Office. In the Financial Times of 5th June 2002, he stated:

    "Public sector comparators suffer from a spurious precision . . . Value for money exercises",


    "pseudo-scientific mumbo jumbo where financial modelling takes over from thinking . . . it becomes so complicated that no one, not even experts, really understands what is going on . . . people have to prove value for money to get a PFI deal, but because that is wrongly seen to be demonstrated only by the public sector comparator, it becomes everything".

Here is the pay-off:

    "If the answer comes out wrong, you don't get your project. So the answer doesn't come out wrong very often".

I do not know the Government's answer to that. All I am saying at the moment is that we do not have much evidence.

The most recent report of the National Audit Office begins to dig up what in another context one might call scandals. For example, when PFIs work and considerable sums of money are available for what is called the refinancing of a PFI, the tendency has been for the consortium not to tell the Government. Only under a few contracts negotiated in the early stages were consortia under any obligation whatever to tell the Government. When that was uncovered in the report, there was a rush into the dovecotes.

I stress that it was possible for the agencies to re-negotiate, so that at least now new contracts are negotiated on a 50:50 basis. But that is a kind of scandal. How did we get to a state in which we entered negotiations in which there was nothing in the contract to say that if it was paid off—if it came in under cost—there would be no splitting of the money with the public sector and that the private sector consortium could take away all the cream?

I turn to a final study: the survey of chartered accountants. They were asked whether they thought that PFIs in which they had been directly involved were generally resulting in value for money; 57 per cent said no. That is a sharp contrast with the response from sponsoring ministries. Chartered accountants were also asked whether they thought that the public sector comparator was operated objectively—58 per cent said no. Only 4 per cent of those accountants who had been directly involved in the operation of the PFI said that they "strongly believed" that it had been a good thing.

The most gentle and reasonable conclusion to draw from all this evidence is that the jury is still out on the PFI. We are spending untold millions on that way of adding to our social services, but we do not know whether it is working. At the next election, the Government and the Labour Party will be asked to explain what they have done. If the electorate believe—and they almost certainly will, because it is the way with electorates—that not all of it has worked, or not worked enough, or not worked in their local hospital, or on the railways, we will need an explanation.

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The explanation must be that we have done our best, that we have tried to find a way through and that, where the PFI turned out not to be 100 per cent effective, we corrected and sought to improve it as we went along. We must have transparency—the jargon word of the day. We must be able to prove that the best has been done. But we do not have the evidence or the institution to provide the evidence. No one is really trying to find out whether we are getting value for money. That must be done; and it must be done now.

6.19 p.m.

Baroness Carnegy of Lour: My Lords, the noble Lord made a fascinating speech. I look forward greatly to reading it because it is about something which I am trying hard to understand and which I certainly do not understand yet. I shall take a different line from that taken by any speaker thus far. I do not know whether my noble friends on the Front Bench will approve of what I say—doubtless they will tell me afterwards.

It seems to me that modern techniques of focus groups and spin enable a government to respond to public opinion at any given moment. They enable them to legislate copiously and, at the same time, to stay popular. What focus groups do not do is to help to identify the deep-down causes of national problems, let alone give a government courage to take a lead and tackle those problems at their roots.

So, after five-and-a-half years in power and no shortage of legislative change, this Government are still popular and spending unprecedented amounts with some notable successes—one of them being to bring down dramatically unemployment, as the noble Baroness, Lady Hollis, described when she spoke earlier. Yet we find them presiding over a country deeply worried about crime—especially youth crime and drugs—about vandalism, about disruption and violence in schools, about too many miserable environments for inner-city living, and about a health service stretched to its limits.

In the face of that, we have a Queen's Speech which proposes legislation to rearrange how the courts deal with crime, legislation about co-operating internationally in catching criminals and drug dealers, legislation to tackle anti-social behaviour and truancy, to protect the environment and to bring the public closer to planning, and yet more reorganisation of the National Health Service. And today we have heard about a new set of targets and benefit shifts.

No doubt many of the proposed changes will prove positive. We shall see when we come to scrutinise the relevant Bills. But this Queen's Speech deals largely with the symptoms of our nation's problems, not with the problems themselves and their deep-down root causes.

I remind the House of what is certainly one main root cause: the fact that, despite countless ameliorating measures, far too many young people and, indeed, younger adults continue to succumb to behaving problematically. The reasons, we know well, are the insecure setting of many young lives, the lack of support and discipline, and guidance and loving

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encouragement. Above all, there is the lack of opportunity to learn at home the give and take of everyday relationships that a stable family provides. That poverty of experience too often reflects downwards to the next generation.

Noble Lords know all that, of course. The detail is fresh in our minds—it was much discussed during the passage of the Adoption and Children Bill. There is more divorce and fewer marriages—nearly one-third of marriages are remarriages. Of children with step-parents, 25 per cent are unhappy enough to run away from home. Cohabiting is a rapidly increasing way of family life. We know that. But of unmarried partners having a child, within five years more than 50 per cent split up, many to new partnerships. Twenty-five per cent of all children now live in a family with a single parent, with 15 per cent of those children developing a mental disorder. Thirty-five per cent of children are brought up in relative poverty, seeing on television and among friends lifestyles to which they cannot possibly aspire. And, of course, far too many are brought up in care.

Yet, for all the pressures of modern living, it does not have to be like that. The United Kingdom has more divorces than any other country in Europe with 2.7 divorces per thousand people—the European average being 1.8. We have the most one-parent families—twice as many as in Germany and France. We have by far the biggest teenage birth rate—again, twice as many as in Germany, two-thirds more than in France and five times as many as in the Netherlands.

What can be done? It seems to me that the clock probably cannot be turned back. But, in moving it on, surely a priority must be somehow to return to more stable homes in which children can grow up. Surely the time has come to give couples who are parents—married or unmarried—incentives to commit themselves more strongly and longer term to one another and to their children. More should be done to reduce the tensions, particularly for lone parents, between parenting and work and to make it easier for those who want to stop work for a while and be at home.

It was of course a Conservative government who introduced independent taxation for married couples—the fulfilment of a longstanding aspiration of women and appreciated by very many. But it has resulted in a financial disincentive to marry. Family rates of tax are nearly as high as those for single persons, whereas in Europe parents' tax is at a much lower rate.

Most European countries—Sweden excepted—in some way support marriage through tax. In France, it is mandatory; in most other countries, married couples can choose. In Germany, they can combine their tax allowances; in France and Belgium, joint assessment includes children's income. And in most countries reliefs and payments are linked either with marriage or with proven documented long-term cohabitation.

I personally hope that this Government, with the strength of their parliamentary majority, will have the courage to go beyond focus groups' perceptions and

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find a way to do two things: first, to formalise more strongly the long-term commitment of parents with children by way of marriage for those who see it simply as a ceremony and by way of non-marriage; and, secondly, to provide incentives for that stronger commitment, particularly using the tax and benefit system.

Of course, that would be only a beginning. But it would, in my view, be a move in the right direction. It is important to realise that most people want to do their very best for their children. Most people want, for the sake of the children, to stick together. They need, when the pressures come—as pressures do, and they can be very heavy—for it to be a more normal, usual way, and they need it to be a way that is recognised by financial encouragement.

If that could happen across this United Kingdom of ours, then perhaps much crime and school disruption, much vandalism, bad community relationships and the bad health that overburdens the health service could be avoided. It seems to me that the sooner the Government look beyond the symptoms and get to the heart of the matter, the better.

6.29 p.m.

Earl Baldwin of Bewdley: My Lords, before I address my main health theme this afternoon, I should like to anticipate the noble Lord, Lord Colwyn, alongside whom I have argued the case for complementary medicine for a good many years. He and I are both officers—the noble Lord for much longer than I—of what is now called the All-Party Parliamentary Group for Integrated and Complementary Healthcare. I am aware of what he proposes to say about the regulation of herbal medicines and vitamin and mineral supplements, and I think that it will save time if I simply associate myself strongly in advance with what he is going to say on this, but possibly not on other medical subjects that he may raise.

In parenthesis, listening with interest to the noble Baroness, Lady Carnegy, who has just spoken, I wonder whether she is aware of the extremely interesting study published in the British Journal of Psychiatry, in which vitamin and mineral pills were given to young offenders—the noble Lord is aware of that—resulting in a reduction of some 35 per cent in reoffending. This is one of a long line of studies, largely in America, which are achieving increasing validation. It is a very powerful study indeed. It is an interesting add-on, if you like, to other means of dealing with some of the problems in society which is certainly worth considering in the health context.

I want to say a few words about a controversial health topic where legislation has always been in the air. This is the topic of water fluoridation, long advocated by dentists as a means of preventing dental decay. The noble Lord the Minister has been spared my interventions for over a year now, but because of certain recent events I must raise the matter again.

First, some history. The practice of putting fluoride in the water supplies began some 50 years ago in America. Since then this country and a handful of

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others have followed in varying degrees (some 10 per cent of this country is currently fluoridated artificially). But there have always been scientific doubts, whatever dentists or governments may claim, and three years ago, after much questioning of the evidence, this Government agreed to my request, supported by Sir Iain Chalmers from the UK Cochrane Centre, to set up a full-scale scientific review of the evidence from around the world. This was conducted to the highest international standards by the NHS Centre for Reviews and Dissemination at the University of York, and I spent nearly a year on the advisory panel which helped to shape its final report. I must emphasise that this review was, and remains, by virtue of its thoroughness, transparency and systematic approach, the only reliable source of scientific information on the effects of fluoridation.

What it showed was what some of us had suspected: that there was no sound evidence for any of the claims traditionally made for fluoridation. It is the aftermath to the publication of this report that has disturbed me and some of my scientific colleagues from the York review.

It is fair to say that government and the dental and medical professions have had some difficulty, because of their previous beliefs and assertions, in coming to terms with a changed situation; and in the face of much misrepresentation Professor Sheldon from York issued an open letter nearly two years ago to make clear that the effects of fluoridation were still uncertain, and in particular that,

    "The review did not show water fluoridation to be safe".

Quite reasonably the Government referred York's findings to the Medical Research Council for advice on how the research agenda should be taken forward in an area of such surprising uncertainty. And here once again, the trouble started.

The MRC was given a remit, before recommending appropriate research and priorities, to advise on the current scientific evidence. But this had already been done by York, with exceptional thoroughness and skill and at no small cost. Some of us from the York review wondered what was going on. When I wrote to the Minister at the time, he assured me that the MRC was only going to "fill in the gaps" of the York review. The MRC reported this September, and it is clear that things were not as the noble Lord had said.

This is not the time or place for a scientific argument. I should simply like to put one or two points to the noble Lord and seek an assurance from him. We have a situation here where one scientific body has gone over much of the same evidence as its more high-powered predecessor, and produced some different conclusions with significantly different implications for public health policy. Whom do we believe? Whom will the Government believe? The areas of difference include: the overall effectiveness of fluoridation in preventing tooth decay—where the MRC actually misquoted York's findings; its ability to reduce inequalities in dental health across social groups; various aspects of fluoride's safety; and the quality of

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research now needed. Supported by the two leading scientists from the York review I have detailed the major discrepancies in letters to the Medical Research Council and the Chief Medical Officer. The latter has assured me that there is,

    "no intention to use the [MRC] report to detract from the York review's findings",

which I take to be an answer consonant with good science. I should be grateful if the noble Lord would confirm this assurance on behalf of his department.

There were some soundly-based and welcome recommendations in the MRC's report, and if I omit the positive things it is only to save time in a busy debate. But there has been rather a sense of "The Empire Strikes Back" in the aftermath to York. I had thought that at last after 50 years we could proceed from a truly authoritative and unbiased verdict on the state of the evidence. But it is astonishing how little it has been taken on board, and how dentists and even doctors can pay lip service to the need for further research, while pressing for new fluoridation schemes, and not see the inconsistency between these two positions.

And this is to say nothing about the non-scientific issues which York flagged but the MRC omitted—the questions of the ethics of giving a medicinal product to millions via their tap-water, and of putting a toxic substance into the wider environment without any real knowledge of its likely effects. I know of at least one European country which has rejected fluoridation for this latter reason alone. I should be interested to know what means the department has in mind for addressing these broader issues, recognising that, as York recorded in a website fact-sheet, the scientific evidence forms only a small section of the total fluoridation debate.

Finally, I should be grateful if the noble Lord could let me know how his department's thinking has developed—if it has—since he last wrote to me about procedures for local consultation, including any future possible legislation, should any communities be unwise enough to want to extend fluoridation in the present state of the evidence. I appreciate that I have asked him a number of questions with very little warning, and if he would prefer to write to me that would be perfectly acceptable.

6.36 p.m.

Baroness Greengross: My Lords, I wish to concentrate my remarks on one Bill, the Community Care (Delayed Discharges etc.) Bill, but will speak briefly on others in passing. I should like to touch on a couple of issues that were not mentioned in the gracious Speech.

First, I wish to discuss mental incapacity. It is now more than seven years since the Law Commission report, more than five years since the Green Paper, Who Decides? and three years since the White Paper, Making Decisions. When can we expect legislation on this important issue and a long overdue reform of the law relating to the most vulnerable people in our communities? Many others in both Houses and

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outside are agreed on that. Although it is the responsibility of the Lord Chancellor's Department, it is also most relevant to the Department of Health so I hope that the noble Lord on the Front Bench can enlighten me.

As I said in May when we debated reforms to the Public Guardianship Office—affecting those with mental incapacity—this Parliament often seems to give greater priority to foxes than human beings. It has again with this legislative programme. That is a sad reflection in my view. I was, however, encouraged to learn that a mental health Bill may be introduced even though Her Majesty the Queen did not specifically mention it. Although there is much to debate about the merits of that particular draft Bill, I am not against its key aim to reform our mental health legislation or even its proposal that some mentally unstable people may have to be compulsorily detained. One wonders, to speed things up a little, whether those two issues which, while quite distinct from one another, are nevertheless related in that they both relate to the condition of the human mind, could not be included as two parts of one Bill. That could be rather like the expected company law reform Bill, another omission from the gracious Speech, which would have covered a range of disparate but connected issues on corporate governance, although I hasten to add that I know that that particular Bill is not within the remit of the Ministers on the Front Bench tonight.

A second issue I wish to raise is that of pensions and savings. It is a hugely important issue and I look forward to the Green Paper but with some reservations. I welcome the assurance from the Minister that much is going on but I worry as the business of pensions and benefits seems to become ever more complicated with each passing year while we read that people are saving less and less for their ever longer lives. No doubt we shall see more pensions legislation in the next Session but I feel that after almost six years we should by now have had our fill of pensions reforms, both state and private sector, yet it seems without resolving the problems or, as I said before, simplifying matters.

There is a full agenda to consider, which includes the following five issues, on which I hope the Green Paper may touch. The first issue, which I have previously raised in this House, involves acknowledging the policy impact across society of our rising longevity. I declare an interest as a former head of Age Concern and chair of the International Longevity Centre-UK. I remain unconvinced that all government departments or business have fully woken up to the policy implications, a point made by the US think-tank, the US Center for Strategic and International Studies, and reported in the Financial Times last Friday.

The second issue is that of enabling older people to stay in the workforce, not just giving them warm words. We do not have much time before 2006, when legislation should have been put in place to ensure that that happens.

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The third issue is that of tackling related ageist attitudes and assumptions by employers in particular but also in the media and the general public, especially in relation to health and social care, where they must be eliminated. I know that the Government are committed to that. Careful and instant action is needed.

The fourth issue is that of simplifying pensions and savings so that more people understand them, for example by acting on some of the recommendations of the Sandler and Pickering reviews, as was mentioned by the noble Lord, Lord Oakeshott. The final issue is that of informing women aged under 52 of the implications of the impending rise in the age for the state pension in just seven years' time.

I turn to the Community Care (Delayed Discharges Etc.) Bill. It has already been introduced in another place but it will be many months before we consider it. In advance of our Second Reading debate on it, I shall set out some of my concerns in the hope that the Minister can reassure me. I have long wanted to see a breakdown of the barriers between acute healthcare services provided by our community's hospitals and non-acute and community care, which is largely provided by social services and other parts of the NHS. They should have, and they deserve, equal status. That is why I welcomed the Statement by the Secretary of State for Health in July in which he referred to the importance that he attaches to community care. I welcome the Government's commitment to spend 1 billion more on that by 2006.

I have not yet formed an opinion on the Bill or decided whether it will work and achieve what it sets out to do. Along with the noble Lord, Lord Clement-Jones, and the noble Earl, Lord Howe, I, too, am worried about the new perverse incentives that it may create. I am also worried about the new bureaucratic arguments that it may foster and that it will do little for those whom we all want to help: the older people needing care and their families, who need support.

We all saw the unintended consequences of community care policies in the 1990s. Many more people entered residential care, which was often not even in their own community, rather than being cared for in their home. I recognise that the approach is a well-intentioned attempt by the Minister to deal with a severe problem that needs addressing; that is, unnecessarily long stays in hospital by older people. I appreciate that extra money is being given in return for reforms. We all know that hospital is not the right place for such people unless they are critically ill or need acute care. The Bill appears to be as much about improving the performance of social services through a system of fines for poor standards, as about improving services for older people.

We know that the vast majority of older people want to—and can and should—return from hospital to their own home, not to a care home. Many delayed discharges are caused by getting the home care package in place—that involves the fitting of handrails, providing someone to help with the shopping and so on—rather than by a shortage of

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care-home beds, although that is a particular problem in London and the South East. The NHS cannot wash its hands of responsibility for such matters. If appropriate aftercare is not in place, the older person, as we know, is just as likely to be readmitted to hospital. It is no surprise to learn that some areas with no delayed discharge cases also have among the highest rates of emergency re-admission.

I therefore believe that hospital discharge must be a shared responsibility. The Health and Social Care Act, which was introduced during the previous Session, encouraged joint working and pooled budgets. Might this Bill build a new kind of "Berlin Wall", setting one against the other?

It crossed my mind that the Bill could even be turned on its head. Could we argue that the NHS should pay more of the costs associated with developing appropriate home-care packages so that older people can be discharged when they are ready to leave hospital? After all, we know that the NHS is not formally cash limited but that social services departments are.

I am, however, worried about the opposition of the Local Government Association—I declare an interest as one of its vice-presidents—and about the fact that many other organisations, such as the BMA, the RCN and the NHS Confederation, appear to be unconvinced. Age Concern said,

    "it is a short-sighted measure that puts the system before older people".

I very much hope that it is wrong.

My judgment is that social care for older people and their families is already too complicated. Will this Bill really simplify the process? I remain to be convinced, although I am sympathetic to the Government's overall aim.

6.46 p.m.

Lord Turnberg: My Lords, I shall restrict my remarks to two specific proposals in the gracious Speech, the first of which is the set of proposals designed to enhance care in the community for patients discharged from hospital. Any proposals in that regard are welcome. The ideas about jointly developed discharge plans and an enhancement of services in the community are valuable initiatives. The impact on the hospital service could be significant if they work as intended. That impact would be on the length of stay in accident and emergency departments; on reducing patient waits in hospital, with all the attendant dangers that that brings; and, in turn, on waiting lists to get into hospital. Nowadays, it appears that it is almost as difficult to get out of hospital as it is to get in.

The size of the current problems, which those efforts are intended to resolve, should not be underestimated. Patients are now commonly in an acute medical or surgical ward for six to 12 weeks. That is the norm in many hospitals. Social services are very over-stretched and it is often difficult to get hold of a social worker, for example, to deal with a patient. If the relevant

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social worker is away on holiday, it is almost impossible to find another to take on the case. There are nowhere near enough places in the community to house patients needing to be discharged. The deficit that the new Bill seeks to remedy is large and will need considerable investment. I am afraid that that cannot be achieved overnight.

Investment in the relevant services can work and has been demonstrated in those geriatric and psychiatric services in which there are dedicated social workers and in which joint discharge plans operate. However, those are rare in the acute medical and surgical fields. That is where we should focus our efforts.

We also need to focus on community facilities for the young and middle aged. For example, it is almost impossible now to place a young stroke victim. My noble friend may cover those details when we discuss the Bill, but the purpose of raising them tonight is to point to the size of the problem that the Government are trying to tackle through these very welcome proposals.

The second proposal in the Queen's Speech is one which, I am afraid, I am somewhat less convinced will improve patient care; that is, the idea of foundation hospitals. I can easily be persuaded that encouraging those hospitals that can show that they give a good service is worthwhile. I should, however, be uncomfortable if the form that that encouragement took led to resources being diverted from less well-performing hospitals to the good ones. That would be an unfortunate result for an egalitarian Government such as this. I wonder whether the Minister is slightly uncomfortable with the considerable support being given by Opposition Benches both here and in another place to the concept of foundation hospitals. I remember that under a previous administration not all was rosy in the NHS garden. I seem to remember hearing for the first time that, "Morale has never been lower" during those heady days.

The desire to free hospitals from stifling central control is admirable. If hospitals are to be released from the myriad of targets and executive directives that is much to the good. I expect that foundation hospitals will have fewer targets and directions, but perhaps my noble friend can say a word or two about whether the less fortunate majority of hospitals will see a reduction in this burden too.

The problems that exist in hospital services lie less in hospitals performing well and much more in those performing badly. If we are serious about tackling these problems, surely we should focus efforts on raising standards in hospitals at the bottom of the scale.

If the NHS was simply a business, we would probably close down or sell off the poorly performing bits of the business. But that is not an acceptable solution when we are talking about a service for patients. It is the patients who suffer if we do not support and improve failing hospitals. Punishing institutions for failure is not an option. In medicine we treat patients who are sick and we put much of our effort there.

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So, we should certainly encourage the best, but we should avoid any actions that would worsen the plight of the others—for example, by allowing the well off to poach scarce staff by unfair pay deals. So my question to my noble friend is whether particular attention can be given in the proposed Bill to improving the standards of hospitals which are not providing acceptable standards of care for our patients.

The Government have undoubtedly shown their admirably clear intention to improve the health service. It seems only reasonable in that light that they put their efforts where the problems are most severe.

Before I leave the hospital service I should like to put in a plea for another concept; that of the university hospital. The idea here is—as I am sure noble Lords know—that hospitals closely associated with medical schools should be jointly managed by university and trust as a combined approach. Too often these two organisations do not co-ordinate their efforts well enough. Occasionally, they are in conflict. Certainly, it is a problem for academic clinical staff who have to serve two masters.

There would be enormous advantages to both the university side—the clinical academics—and the NHS side from much more closely co-ordinated work. That is not a new concept, but it has been frustrated over the years by rules and regulations that are too often unnecessary and, I am afraid, the two government departments—health and education—not working as closely together as they should.

I wonder whether my noble friend the Minister will offer some encouragement to the new inter-departmental committee which he has so invaluably helped to set up, to take up again the university hospital idea. Who knows, it might even be as good at encouraging trusts as the foundation hospital concept—or even better.

Finally, I want to put a tentative toe in the rather murky waters of the unfortunate consultant contract fracas. I realise that consultants are not exactly flavour of the month with the Secretary of State for Health, nor indeed for that matter with many politicians. But I wanted to offer one or two reasons why the consultants might have wished to turn down what on the face of it seems to be an amazingly generous offer of 15 per cent on top of their current salaries. It was certainly nothing to do with an attempt to squeeze even more money out of the Government, and everything to do with the strings that were attached. There must be something significant to turn down such a seemingly generous offer.

Basically, they were unwilling to accept that hospital managers could, as they saw it, demand that they work nights and weekend shifts without any room for negotiation. They perceived that the way that some managers would exert control over the way they worked was too oppressive—especially, when they were already more often than not on call at night and coming in at the weekends, as professionals do and should. They knew that on average they already worked 56 hours a week for the NHS. That is the average across all specialities according to a MORI

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study. They also knew that they did not get their consultant posts until they were about 36 or 38 years old and after spending 10 to 14 years as a so-called junior doctor, working day and night in the NHS.

They were upset to be thought of as resisting change and reform when they know that the great majority of innovation in clinical care of patients has been introduced, not by governments nor by managers, but by the doctors. It is not surprising then that the majority of grass-root consultants rejected the contract, not the BMA. Although of course some doctors behave badly at times, it is unreasonable to believe that the majority do so. That would fly in the face of most patients' experience.

I am sorry to have gone on about this matter, but this is a profession that I believe is dedicated to the NHS and we rely on its members to deliver the reforms that we will be discussing. There must be a better way of encouraging them.

6.56 p.m.

Lord Colwyn: My Lords, I am delighted to follow the noble Lord, Lord Turnberg. For many years I sat on the council of the Medical Protection Society and he was the president. His experience is much revered in the MPS and has been much appreciated on this side of the House today.

In the gracious Speech, the Government announced an intention to modernise the delivery of healthcare by devolving power and resources given to frontline healthcare staff, building on the Government's commitment to decentralise public services.

In August, David Lammy, the Parliamentary Under-Secretary of State, Department of Health, when he introduced the report NHS Dentistry: Options for Change, said:

    "The Government is determined to bring dentistry back into the mainstream of the NHS and looks forward to working with the profession to make 'Options for Change' a reality".

I declare my interest as a dentist when I say that the proposed legislation potentially has enormous implications for NHS dental services. I understand that the Bill will place a duty on primary care trusts to provide primary care dentistry to meet the "reasonable" needs of the population. For the first time an NHS body will be obliged to provide dental services, thus bringing dentistry into line with medical services in both primary and secondary care.

Although the report represents a clear view of future strategy and does finally indicate a direction for change, it is not a blueprint for change. The document was largely put together by dentists and now the ideas in it will be tested by dentists in the NHS Modernisation Agency and its modernising dentistry programme that will test out different ideas in different parts of England.

Despite well publicised announcements about better funding—up to 35 million to modernise NHS dental practices and equipment, 4 million for the dental care development fund to help dentists expand their practices and treat more patients, and 18 million to reward dentists who are committed to the NHS—this

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is not an ongoing arrangement. There seems to me to be very little funding available until the reforms have been shown to work.

Mr Lammy announced that over the three-year period from 2000 to 2003 more than 125 million would be made available to the NHS to improve local services in addition to the scheme introduced in April 1999 to encourage dentists to increase their NHS commitment. So far as I am aware, that money relates only to spending in the salaried services and excludes general dental practitioners who provide treatment for the vast majority of patients within the NHS. The modernising dentistry programme has been allocated only 1 million to set up and run the field sites.

Trying to modernise within existing resources simply will not work. Despite the long-standing NHS dental service provision, there are still areas of social deprivation where oral health is poor. In many of those areas, there is little or no service available, and uptake is poor. Attendance for treatment often occurs only when the patient suffers pain. Forty per cent of practices are not taking on new NHS patients. The present GDS fee scale is described in the policy document as iniquitous, driving,

    "high levels of productivity via an outmoded approach".

For many years, dental magazines have had articles offering advice on how to get out of the NHS and how to go private. To encourage practitioners to remain in the NHS, there should be a basic practice allowance, addressing local factors such as property and wage costs, as well as allowing primary care trusts to build up provision in areas that had lacked a dental service and to address the problem of areas with high overheads. Regular payments could be made for regular attenders. For patients who need little treatment but need regular screening and preventive gum treatment, dentists could be paid on some form of regular basis, such as capitation. For new patients or those with an irregular attendance pattern and those who needed advanced treatments, it would be necessary to retain some form of simplified item of service fee scale.

The recent report by the Audit Commission, which is too complex to cover this afternoon, is broadly supported by the British Dental Association. It has advocated many of the findings for years. The BDA and the General Dental Practitioners Association campaigned for an emphasis on prevention and for a review of patient charges. I still hear Ministers saying that the NHS is free at the point of delivery; that is simply not true for NHS dentistry. A high percentage of the treatment cost is borne by the patients, unless they have an exemption.

I am reluctant to mention fluoridation again for fear of restimulating the noble Earl, Lord Baldwin of Bewdley, whose views I respect but cannot agree with. If the Government cannot make it available to more than 10 per cent of the country, as is the case at the moment, should not more emphasis be given to fluoridated salt or milk? It is time that the argument was resolved. I hope that the Minister will tell the House that the plans for fluoridation are progressing.

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The impact of primary care trusts on dentistry is an important area for the field sites to consider. In July 2001, the Minister, in response to my plea for a dental presence on the professional executive committee of all primary care trusts, said that he would look carefully at how dentists and dentistry were represented on PCT boards, so that we could be assured that advice on dentistry, including dental public health, could be secured. If Options for Change is to succeed, we must go further. Managed clinical networks are now established in the NHS throughout the UK. That should include dentistry, and the field sites will provide an opportunity to test them out. I am attracted by the BDA proposal for managed dental networks, as a part of individual PCTs. Dental networks could provide a formal network to enable PCT-wide dental care providers to provide a joined-up service for patients, easing their movement through the system and providing improved access to NHS dental services, an improvement in the oral health of the community and a reduction in oral health inequalities.

I turn to some of the problems with European legislation relating to herbal products and food supplements. My interest has already been declared for me by the noble Earl, Lord Baldwin of Bewdley. In October, at a meeting between the Medicines Control Agency and representatives of the herbal forum, the noble Lord, Lord Hunt of Kings Heath, responded to the concern about potential over-regulation and highlighted the public health issues that had arisen in the past through the lack of a systemic approach to the safety and quality of herbal medicines. In July, the Minister asked concerned representatives of the herbal sector to send to the MCA specific concerns about the proposed European directive. The agency has been examining the 1,000 or so products submitted. That request came in response to fears that many currently legal products would fall outside the directive's proposed definition of traditional use and would become illegal.

The Minister sought to allay fears about that and called for a dialogue between the MCA and the herbal sector to continue on all the issues that had been raised in response to the directive. He said that the proposed directive could give sufficient flexibility to provide a regulatory home for herbal nutrient combinations. The scope of the current herbal directive is restricted to herbals alone, thereby making many safe and popular products that combine herbals and food nutrients ineligible and excluding many important combination products used in traditional Chinese and Ayurvedic medicine.

Article 16 of the directive requires,

    "an assessment of the possible extension of the traditional use registration to other categories of medicinal products",

at a date as yet unspecified. Even if an early date were agreed, such products might, effectively, be outside the EU regulatory system for several years. I hope that the Minister will support an amendment to Article 16 that will allow for the introduction of national rules. I know that he will have been made aware of the specific amendment that has been suggested.

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Many of the companies in the UK's specialist health product industry are small. The economic impact of the directive will be heavy. The costs incurred in meeting the criteria for plant, machinery and personnel will be high, and the MCA is required to charge fees for product registrations. To continue to be able to supply consumers with the products that they seek, many companies will need to register a considerable number of products. The fees for registration must be kept low, and the development of a national positive list, made up of products with a long tradition of safe use in the UK, should require only minimum regulatory assessment. One example is the MCA consultation on a proposal to prohibit the sale of kava-kava. A final decision is awaited. I ask the Minister not to impose disproportionate and unnecessary restrictions on a herbal product in respect of which there is no evidence of a risk to consumer health. Such an action would have serious implications for manufacturers, retailers and consumers.

The food supplements directive has two annexes that list the vitamins and minerals and sources of both that may be used in the manufacture of food supplements. The directive allows for a derogation period for the continued use of vitamins and minerals that are not listed of up to seven years, provided that safety dossiers for their inclusion are submitted to the Scientific Committee for Food within three years from the date of the implementation of the directive. That is an expensive and lengthy process, appropriate for new substances but quite inappropriate for the many missing ingredients with a long history of use that are already accepted as safe by UK regulators. I urge the Minister to encourage argument in Brussels for a system whereby the SCF can accept minimum data requirements for safety dossiers for products with a history of safe use.

Finally, turning to a different subject and declaring my interest as co-chairman of the All-Party Jazz Appreciation Group, I urge the Government to re-examine the Licensing Bill in relation to public entertainment. I am not allowed to speak twice, so I have to mention it this afternoon. Successive governments and Ministers have agreed that current licensing for musicians performing in public is seriously flawed. It seems that the current Bill will change the "two in a bar" rule to "none in a bar". That would be a disaster for thousands of British musicians, particularly young musicians, who have few venues in which to perform.

It cannot be right that broadcast entertainment that can attract significant crowds and cause noise nuisance is exempt, while one unamplified performer will be illegal, unless licensed. I hope that the Government will amend the Bill to pull it back from the regulatory musical abyss that it is in at present.

7.8 p.m.

Baroness Finlay of Llandaff: My Lords, following the gracious Speech, the Government's plans to modernise the delivery of healthcare were reiterated by

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the Secretary of State for Health in the other place. He said that the Government stood where they had always stood—for an NHS that,

    "provides patients with care that is free, based on the scale of their needs, not the size of their wallet".—[Official Report, Commons, 14/11/02; col. 165.]

The NHS Plan also states that care,

    "will remain free at the point of delivery—whoever provides it".

Is there a subtle difference in the wording? Is some system of charging or reimbursement in the offing? I do not know, but the debate would detract from important plans—some welcome and some less welcome. As a practising clinician, I found it difficult to restrict my remarks to four areas.

The creation of the Commission for Healthcare Audit and Inspection—CHAI—should really be called "CHI Mark II". Of course, there must be standards. The drive for quality of care must not be lost to the pressures of financial tracking and accreditation audits which are easier to deal with and, therefore, can hijack the agenda.

All the evidence from organisations around the globe is that quality is pushed up by the approach that CHI has taken and not through punitive measures. To be effective the new CHAI must be completely independent. Widening its remit to include the complaints procedure and the Mental Health Commission is welcome. It should also include the recommendations in the joint report of chief inspectors of the agencies responsible for child abuse and child protection and its recommendations on staff, resources and joint working between agencies if offences against children are to fall.

Foundation trusts are interesting. They remove the hand of Whitehall from the day-to-day running of the service and, as such, are to be welcomed. In Committee on the National Health Service Reform and Health Care Professions Bill the noble Baroness, Lady Cumberlege, moved an amendment to create a National Health Service agency for England. I moved a similar amendment to create a National Health Service agency for Wales—I do not believe that I see the Minister laughing at that. However, the idea was to remove the direct management of the NHS from the clutches of Whitehall and politicians. Foundation hospitals may be in the spirit, but the Spaniards have cautioned against them in the BMA News recently.

Those hospitals given the freedom and independence to manage their affairs will be an elite. The three star trusts have "played the game" to reach targets set by Government—targets which are criteria of management and not monitors of quality of care. Meeting targets can be subject to wide fluctuations year on year, can distort other aspects of care provided and do not necessarily represent the best hospitals clinically. However, there seems to be a link between good care and good management. There is a danger that such hospitals will milk away nurses, radiographers, physiotherapists and others in short supply from neighbouring NHS trusts, just as NHS Direct appears to have taken many nurses from the bedside arena.

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Seven is a magic number, and foundation hospitals have five to seven-year contracts. The longer contract provides security, but it should include flexibility to allow patients to go elsewhere if they wish and for changes in service provision. Primary care trusts are new and coming to grips with their roles and responsibilities. Perhaps details of the commissioning process would be a better marker of stability of the hospital than stars.

The criteria for foundation status should be based on a good outlook and sound partnerships, with a hospital committed to meet the needs of the whole population it serves, including emergencies and those with high risk and high need. The noble Lord, Lord Turnberg, has outlined university hospitals which may answer some of the issues in the Follett report. A commitment to research, education and training is absolutely essential for the future NHS to develop scientifically with evidence-based care, meeting its manpower needs and fit for purpose.

If foundation hospitals fail will they lose their status? If they sell off NHS assets without consulting others, will planning for the future needs of the population become impossible? If they destabilise local services by draining resources, how will the widening gap in care provision be countered? As a foundation hospital is, I understand, a contracting authority for the purposes of Regulation 3(1)(u) of the Public Works Contracts Regulations 1991, will it be subject to EU contracting directives?

New ways of working must be evaluated by randomised trial. Results at two years will be revealing. Until the evidence base is there, I am pleased that we shall not have foundation hospitals in Wales and also that we shall be keeping community health councils.

The European courts pose another looming challenge to the NHS. The European Working Time Directive and the SIMAP judgment mean that to avoid sanctions the 48 hour week will need to be in place by August 2004. The latest Royal College of Physicians' census shows that, on average, consultants work 61 hours per week, as compared with 58 hours in 2000. Many would like to reduce their hours but say that they are unlikely to do so because of an adverse effect on patient care and on their colleagues.

Staff numbers do not add up. There are not enough trained specialists and doctors in higher training. The complex diagnostic skills required mean that the care of the very ill can be delegated only up to seniors. It cannot be delegated safely to those less skilled. Mortality is greater in hospitals where medical cover is low. Tonight, each junior doctor will, on average, look after 67 in-patients overnight. One cardiac arrest and one critically ill patient simultaneously can make high quality care almost impossible to achieve. Many hospitals do not have the numbers of staff now and consultant expansion has fallen from 6.1 per cent per annum between 1993 and 2000 to only 3.2 per cent in the past year.

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Continuity of patient care is becoming impossible, but the recent confidential inquiry into peri-operative death targets shift working as a major risk factor as continuity is lost. No hand-over can substitute for the same doctor looking after the same patient across the course of their acute illness.

Much was publicised about the consultants' rejection of the new contract. Consultants know that there is a monumental shortfall in trained specialists, making the contract unworkable. My colleagues feel distrust of a system of failed initiatives where the managers are under enormous political pressure to deliver against targets. Those targets meet the needs of some at the expense of others. The divisive and now infamous "slide 9" from the Department of Health only reinforced that, splitting doctors from management especially where management is weak. The proposed code of conduct for NHS managers is long overdue.

William Jeffcoate in the Lancet states that doctors in the UK:

    "embark on a medical career because they wanted to help people who are sick—not because they are motivated by money. Their primary duty is to the patient and they must not allow this to be deflected by the need to meet other non-clinical objectives. They would have no problem if they trusted that those targets would always be compatible with the needs of their patients. Sadly, UK doctors do not have this confidence".

It has been that concern with the individual and the duty to patients that has driven the universal outcry against part of the previously proposed mental health Bill. The Government are to be congratulated for omitting it from the Queen's Speech. That signals surely a radical rethink. Everyone wants change. The Mental Health Act of 1983, based on the 1959 Act, is out of date. It does not reflect modern therapeutic practice, the voice of users and carers, advocacy and the move to community care. Any new Act must be ethically fair, practically workable and effective.

The previously proposed Bill was none of those. It was based on a concept of public risk rather than on the proper treatment of people with mental illness who had temporarily lost the capacity to make judgments for themselves. My noble friend Lady Greengross has already addressed that comprehensively. Public order was confused with health. In recent years compulsory treatment has increased despite no change in legislation because psychiatrists practise defensively in fear of litigation and blame. It is said:

    "better an overcrowded ward than being the subject of an enquiry".

Wards are already overcrowded. Poor environments and staff shortages make them poor therapeutically. Community teams are staggering under the weight of numbers. Do not forget that one in four of the population will suffer treatable mental illness in their lifetime.

The proposed Bill would not have decreased risk, it would have increased it. The number of crimes committed by those with serious mental illness have fallen as a percentage of all homicides during the past 10 years. A child is much more likely to be murdered by parents with a catastrophic event in their lives than

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by a stranger with mental illness. By stigmatising mental illness, those affected would present later in an illness, if at all. Acute services would be further overwhelmed and unable adequately to assess and care for those in need. Psychiatric internment on suspicion would have broken the service.

Lastly, but very importantly, the diagnostic criteria for dangerous severe personality disorder do not exist. It is not featured in any textbook of psychiatry; it is not a treatable condition. Dangerous severe personality disorder is a civil issue needing criminal justice and a Home Office Bill. Mental health is a health issue and a new mental health Act is indeed needed.

The Government must continue to listen to those doing the job. Just as I did in the previous Session of Parliament, I make a plea for seven years without massive reorganisational change that is not evaluated by hard evidence.

7.20 p.m.

Baroness Noakes: My Lords, the NHS has been wounded by five-and-a-half years of interference by this Government. One of the few positive things that can be said about their stewardship is that they put some more money in and they plan to put some more in. But few, including those in the NHS, expect that the extra money will solve the problems.

I shall focus today on efficiency in the NHS. It is a somewhat dry subject and I fear that it involves figures and statistics. However, it shows the harm that has been done to the NHS. Noble Lords may remember the Chancellor of the Exchequer introducing public service agreements when he announced his 1998 comprehensive spending review. The PSAs were supposed to be contracts between the Treasury and the spending departments for the departments to deliver specific things in return for the money that was being put into public services.

The Prime Minister told us,

    "By publishing clear and measurable targets, we are making it possible for everyone to judge whether we meet them".

The Government's White Paper which published the targets in December 1998 stated that PSAs were,

    "commitments by the responsible Minister to those who were affected by public services".

It was supposed to herald a brave new world in ministerial and government accountability.

The department's public service agreement included the NHS achieving efficiency and other value-for-money gains for 3 per cent per annum. It was a clear commitment, not hedged by any qualification, and it said how it would measure it. So how has the department done against that target? In its annual report of 2001, it assessed its progress as,

    "slippage—final figure not available".

So it knew it was not on target to achieve the 3 per cent each year but it hid behind the fact that there were no final figures.

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Let me turn to this year's annual report. This is confusing. First, the department said that the measure was now,

    "overall delivery of PSA targets".

There was nothing at all about measuring efficiency gains. But even more surprisingly, under "Progress" it reported that the target was "Achieved". And in justification it said:

    "The best measure of health authority efficiency is the extent to which other targets have been met".

I am a simple accountant. I do not understand a target which says that it requires 3 per cent annual efficiency gains and which was not on track in 2001 but is suddenly achieved on a totally different measure in 2002.

Let me translate those weasel words into plain English. They mean, "Last year we thought we were going to miss the efficiency target but we didn't want to own up to it. Now we know that we have missed the target so we are going to pretend that it does not exist and that other targets are the ones that matter". Why the Treasury has let the Department of Health get away with sliding out of responsibility is a mystery.

What has happened to the accountability that the Prime Minister promised us? When Ministers fail to deliver on their commitments, should they not take responsibility? I hope to explain what has really happened to efficiency. I think that what should happen to the responsible Minister will be clear enough—and I should say that I am not pointing my finger at the noble Lord the Minister opposite. There is another person in another place who should take responsibility.

Let me first take noble Lords through what the department's annual report says about efficiency. At page 71 the report gives a hospital and community health services cost weighted activity index. That has been given for many years and it is a standard way of comparing the activity of the NHS and the resource inputs. The report explains,

    "A faster increase in activity than in expenditure, after allowing for changes in input costs, constitutes an efficiency gain".

That is just what we were looking for in the PSA target.

The index is reported a bit in arrears, so when this year's departmental report was published the latest figures given were for 1999–2000. Noble Lords might think that a departmental report which gives such out-of-date analysis has something to hide and I shall turn to the more recent figures in a while.

However, the report gave analyses for the 10 years ending 1999–2000. It shows an increase in efficiency of 3 per cent. That is not 3 per cent per annum, like the PSA target set in 1998; it is 3 per cent over the whole 10 years. And so the question is: what was happening in that 10-year period?

The first seven years were under my party. How much of the 3 per cent did we account for? The answer is: nearly 11 per cent. Noble Lords will quickly see that this means that for the last three years, for which this Government are accountable, the NHS went

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backwards in efficiency by some 8 per cent. So the majority of the efficiency gains that we bequeathed to the Government have been squandered.

The story goes on. In 2000–01, the resources available to the NHS increased by nearly 8 per cent in real terms. What happened to activity? Finished consultant episodes, including day cases, went up by less than 1 per cent. One does not have to be a genius to work out that efficiency took another spectacular dive in 2000–01.

What about 2001–02? Spending was set to increase by nearly 9 per cent in real terms. We do not have final figures for activity, but in May this year we were given an estimate which showed that the increase in activity was estimated to be between 0.25 per cent and 1 per cent. So we have another year of major economic loss in the NHS.

The story is always the same. Under this Government, far from meeting a target of 3 per cent efficiency gains each year, the NHS has been going backwards at at least that rate. We know why that has happened. The Government have pursued an agenda of relentless restructuring. GP fundholders were abolished and replaced by primary care groups. Then primary care trusts, once claimed to be voluntary, were imposed. Health authorities were compulsorily merged and then replaced by so-called strategic health authorities, which have no strategic function whatever. NHS trusts were placed in a tight grip of central control, although a privileged few may now be allowed to escape as foundation hospitals. What has all that achieved?—organisational turbulence, plummeting morale and restructuring costs, and for no gain whatever.

The Government claim to have abolished the internal market, but all they did was to institutionalise rigidity in the funding system. Belatedly, they are now reinstating some of the flexibilities in their new financial flows initiative. What has all that achieved? Patient choice went out of the window, together with patient responsiveness.

The Government have used a lot of fancy words to describe what they are imposing on the NHS: "co-operation", "partnership", "network", "modernisation" and so forth. The fanciest set of words is "performance management". What has this achieved?—the kind of performance that has people waiting in A&E departments far longer than they were in 1996, and still more than 1 million people on the waiting lists.

The Government have made many promises about money being directed to specific activities—50 million for palliative care, 100 million for IT, 300 million for counter services and so on—but most of it did not get there. What has this achieved?—another string of broken promises and loss of trust.

The Government have created many quangos—I last counted about 20, plus several hundred patient forums—some of which have inspection or audit roles. Most of them impose burdens on the NHS, and we are

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promised more quangos in the next health Bill. What have they achieved?—a lot of jobs for cronies and a lot of interference for the NHS.

Before the 1997 election the Labour Party bragged that there were 24 hours to save the NHS. Saved for what?—saved to be subjected to the most wasteful period of experimentation in its history. The Government have no idea how to get the NHS to work well. Their only idea is to throw money at the NHS in the desperate hope that some will stick and hold it together. Unless the Government learn from their mistakes—and do so quickly—we shall see further periods where money will be wasted. The money will disappear into a black hole created by the Government's own ineffective and misguided policies.

Like most noble Lords, I value the NHS and want it to be great. Under this Government the NHS is in a downward spiral, and that is a matter for the most profound fear and regret.

7.32 p.m.

Baroness Pitkeathley: My Lords, the House will not be surprised to hear that, unlike the noble Baroness, Lady Noakes, I feel optimistic about the health service. I am delighted that the Government remain committed to modernising the delivery of healthcare based on those founding principles of the NHS which are so dear to many of us, especially those who, like me, owe their lives to the NHS.

The Health and Social Care Bill will shortly be before us and we shall, as ever, have many long and significant debates about the proposals contained in it. Feelings run high in the House, and quite rightly, about the principles of devolving power and resources to front-line staff, about giving greater freedom to certain institutions while increasing their accountability, and about proposals for regulation and inspection. I very much look forward to these debates but, in the interests of brevity, I shall refer only to foundation hospitals and local authority support for older people awaiting discharge.

The Government have, in my view and in the view of many of those who work in the NHS, made huge strides towards making it much more patient centred than it has ever been hitherto. Your Lordships may perhaps remember that this was the most important lesson I learnt from my own prolonged stay in the Middlesex hospital last year—that at all levels of staff, medical, nursing and ancillary, there is nowadays a great deal more emphasis on communicating with the patients, asking their opinions and engaging their commitment than was the case when I was previously a patient some years ago.

I am convinced, therefore, that the Government's commitment to the principle of patient first, to which lip service has long been paid, is now much closer to being a reality. If foundation hospitals are to be a further extension of giving patients more power in decisions about their own treatment, I support the idea.

Some criticism has been voiced of the idea in case the proposals lead to a two-tier system. We have to understand that, in some senses, we already have a

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two-tiered—or, perhaps more accurately, a several-tiered—system when it comes to hospitals. Everyone knows that in, for example, a London teaching hospital you are more likely to have access to a wider range of skills, experience and treatment than in an ill-equipped hospital in a community setting which finds it difficult to attract the right staff.

I am greatly in favour of the proposal for the stakeholder councils which will govern these new style hospitals as I feel this will surely be another important step along the road to placing decisions about the health needs of a community in the hands of the community itself, ensuring greater accountability and much better evaluation of the outcomes for patients. It is, I believe, too easy to consider output when it comes to evaluating health services when what really matters is what the actual outcome is from the patient's point of view.

The New Opportunities Fund, the largest of the lottery distributors, which I chair, has put in place the most extensive evaluation process for its healthy living centre programme which covers issues such as the overall health improvement of a community. I am sure that stakeholder councils will wish to do the same. Indeed, through the Department of Health, we shall be more than willing to share our experience, if that will be helpful.

I imagine that the department will be especially interested to see how the encouragement of taking exercise, in no matter what form, education about lifestyle choices and knowledge about healthy eating is developing through this programme, and how our fruit in schools programme and our major programme in physical exercise for schools and community are affecting the health of communities. I hope that the foundation hospitals will be pioneers and innovators in addressing some of these issues.

My reservations—and no doubt we shall have many opportunities to debate this—centre around the dangers of further aggravating geographical disparities in the provision of hospital care and the danger of too much specialisation, leaving a community without adequate cover across the full range of its services and needs.

Another problem with the proposal is that it may encourage us in the danger of slipping back into thinking that the health needs of the community are served by its hospitals when the vast majority of healthcare is provided by primary care and community services. We have, I believe, made excellent progress in getting that idea across to both the health service and the public at large, and I would not want this focus on hospitals to impede that progress.

I turn now to the proposal for charging local authorities for delayed discharges. I am sure that there are some merits in the proposal, and it will surely concentrate the minds of some local authorities, but we have to understand that there is absolutely no substitute for adequate discharge planning. I seem to have been banging on about this all my working life—indeed, I wrote my first book about it in 1977—and sometimes I despair of it ever getting any better.

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Your Lordships will not be surprised to know that I am particularly concerned about the effect of these proposals on patients' families, their carers. It is absolutely essential to ensure that these most vital of all providers of any kind of care in the community are not put under more pressure to take home people who are not ready for discharge just to free up a hospital bed.

While I am talking about carers, and as I see that my noble friend is in her place, I must take the opportunity to acknowledge the improvements in carers' benefits which have taken place in recent years—for example, access to the state second pension and the huge increase in the earnings disregard. This is largely thanks to the efforts of my noble friend Lady Hollis.

My concern about the delayed discharge proposals is that in some cases they might exacerbate bad and poor practice rather than improve it. The fear is that carers will not be involved, consulted or properly assessed before the person they are about to care for is discharged from hospital. Research by Carers UK found that between 1998 and 2001 the number of carers who did not have their concerns taken into account rose from 36 per cent in 1998 to 45 per cent in 2001. The proportion of people being cared for who had to be readmitted—this is a very important figure—within two months because they had been discharged too early rose from 19 per cent in 1999 to 43 per cent in 2001—we should take careful note of that figure—and 43 per cent of carers were not given sufficient help on the patient returning home. Comments showed that even if support was promised, it did not seem to be delivered. Carers often had to make numerous telephone calls to secure the support that they had been promised, and in several circumstances the support did not materialise at all.

I hope that the Minister will be able to assure me that, if these proposals go ahead, safeguards will be written in to protect carers from undue pressure to take someone home. For example, a duty could be placed on the trust and local authority to ensure that carers are consulted and offered an assessment.

I suggest that the Government could update and reissue the statutory guidance on hospital discharge. They have already pledged to update the hospital discharge workbook. It would be good to have further information about when this will be published.

I look forward to debating these and other important issues as the Bills reach this House, and to working together in this House, as we do so successfully, to ensure that all the proposed changes bring about what we all seek most—real benefits for patients and their families.

7.40 p.m.

Lord Chan: My Lords, I welcome the Government's priority in the gracious Speech to continue to modernise the delivery of healthcare based on access that is free according to need rather than the ability to pay. Better access to the National Health Service is dependent on good information for potential users, comprehensive facilities that are open during hours

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when patients can conveniently use them appropriately, and adequate numbers of trained staff with an understanding of the local population they serve. Such healthcare services are still not generally available throughout England, particularly to people living in deprivation in our cities. I shall focus on primary care trusts, foundation trusts and the strengthening of the inspection of NHS trusts.

I declare an interest as a non-executive director and vice-chairman of a primary care trust on Merseyside serving 220,000 residents, one in four of whom live in five electoral wards that are among the 20 most socially deprived in England. They are: Bidston, Birkenhead, Leasowe, Seacombe and Tranmere on the Wirral peninsula south of the River Mersey.

A number of changes took place at the beginning of the current financial year to shift the balance of power from health authorities to primary care trusts (PCTs). I welcome this legislation, which has devolved power and resources to front-line staff. But the expected outcomes of this excellent and innovative policy have been hampered because many PCTs have inherited debts accumulated by their predecessor district health authorities which were abolished in April this year. These debts impede the ability of PCTs to address the public health needs of their residents, particularly those living in postcode areas of deprivation. These include: help to improve their diet from birth by increasing breast feeding; fresh fruit for children; encouragement to adults, particularly young women, to stop smoking; and a reduction in teenage pregnancies. The burden on PCTs is further increased because, by statute, it is illegal for them to carry over debts into the next financial year.

As a result of this rule, priority has been given to consultation with neighbouring PCTs and acute hospital trusts on how to handle the debt rather than in essential partnership with local authorities and other agencies on initiatives that can make a significant difference to the health and well-being of disadvantaged people living in deprivation. The aim of our PCT is to change these areas now marked in red on the map into areas of better health colour-coded green.

The Birkenhead and Wallasey PCT has recently proposed a three-year plan of debt repayment to our strategic health authority. This plan involves spreading the PCT's debt to our acute hospital because hospitals are permitted to carry over deficits into the next year.

But our acute NHS trust is a three-star hospital that is likely to lose a star if its annual accounts show debt. The hospital trust has aspirations to apply for foundation hospital trust status which will be thwarted because it has to help our PCT to solve this legacy of debts incurred before the PCT came into existence. In spite of these problems, my PCT has reduced waiting times for patients to see a GP to 48 hours in 37 of our 40 GP surgeries since April. So great advances can take place in a very short time.

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I therefore look forward to the Minister's reply on how financial burdens may be reduced in order that modernisation of services may take place sooner rather than later to make a difference to our residents living in deprived districts.

In this regard, I await information on the funding formula for people living in deprivation. I welcome the Government's promise to give PCTs three-year budgets so that we can plan improvements in the way we work for the benefit of our needy population. Time is of the essence because all our deprived districts in Wirral have most of our children when compared with better-off districts.

If we do not intervene soon, particularly in the first five years of a child's life, we shall have condemned our children to an unhealthy adulthood and to lives of unfulfilled potential. We cannot afford to allow this to happen in a Britain with an increasing proportion of older people who are living longer.

If PCTs were not distracted by negotiating their debts, they could pilot greater patient choice for the treatment of chronic conditions. For example, the pain of arthritis and other degenerative disorders can be successfully controlled by complementary therapies such as acupuncture. This could also reduce the budget for pain-killing drugs and save patients being exposed to complications from long-term drug therapy. In this connection, I declare an interest as the independent chairman of the Acupuncture Regulatory Working Group currently in discussions to produce a report to be submitted to Ministers.

The Government's proposal to give greater freedom to successful hospitals while increasing their accountability to local communities is another area that is likely to hamper improvements in healthcare services in areas of deprivation.

Successful hospitals are those with three-star status because they have fulfilled targets set by the Department of Health on waiting times and the treatment of sick patients. Primary care trusts are held accountable if acute hospitals do not achieve their targets.

In our acute hospital trust in Wirral, future patient needs will require more beds and new wards will need to be built if we do not change the way in which we work. Our PCT is proposing that we innovate so as to improve care in the community and by following up patients discharged from hospital in primary care rather than increasing bed capacity in our hospitals.

The attraction of foundation hospital status may run counter to the modernisation that we propose, because hospitals will find it more attractive to increase their capacity. This is a worry that PCT boards would like Ministers to address.

Finally, I welcome the proposal to introduce an independent health inspectorate. The undoubted success of the Commission for Health Improvement (CHI) is something of which the Government can be justly proud.

The new independent health inspectorate, which will combine the best practices of CHI in its clinical governance review of hospital trusts with the functions

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of the Audit Commission, is to be welcomed. I hope that this development will lead to a stronger inspectorate that can offer help to all NHS trusts to implement best practice, including those for equal opportunities in the employment of a diverse workforce as well as equal access to all, including ethnic minority groups and the disabled.

The inspectorate will ensure that all NHS trusts provide appropriate care to all who use their services. I look forward to the inspectorate's influence to improve the provision of trained interpreters for all patients who are not fluent in English in GP clinics and in hospitals. By auditing the ethnic mix of patients in diabetes clinics, for example, staff should provide better care for ethnic minority groups who are at a higher risk of developing this disease and all its serious complications, such as renal failure and an increased need for kidney dialysis and kidney transplants. All this treatment is very expensive, and it is projected that it will cost the NHS billions of pounds. I hope that the inspectorate will not only improve standards of NHS healthcare but prevent many patients from developing serious complications that would severely increase the cost of healthcare.

7.50 p.m.

Lord Blackwell: My Lords, it is a privilege to follow the noble Lord, Lord Chan. Like him, I shall focus my initial remarks on the Government's programme for health, but I will add a few comments on pensions. Like some of my colleagues on these Benches, I welcome the Government's belated conversion to the notion of independent fund-holding hospitals. Like others, I detect stronger support for it on these Benches than on the Government's own Back Benches.

Against the forensic analysis of statistics set out by my noble friend Lady Noakes, my criticism is that the Government have not gone far enough and do not intend to go quickly enough in pressing forward in this new direction. However, I welcome the recognition that I think I detect from the Government, at last, that running a health service of 1.5 million people as a nationalised state monopoly simply does not work. The noble Baroness, Lady Pitkeathley, talked about the founding principles of the NHS. In 1945, Nye Bevan said that the objectives of the health service were to provide the medical profession with the best and most modern apparatus in medicine, enabling them freely to use it to the benefit of the people of this country. He said:

    "Every doctor must be free to use that apparatus without interference from secular organisations".

The trouble with running the NHS as a nationalised industry, as it has been run for the past 40 years, is that, like every other nationalised industry, it promotes a culture of managing upwards to meet the targets and directives set from above rather than responding at local level to people's needs. The plethora of central initiatives and central controls acts as a block on local initiatives. If we are ever to get efficiency and better patient care in the NHS, just as we learned that we could not run telephone systems or steel industries as

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a nationalised industry, we must return to the pre-1948 structure of the health service based on local independent voluntary and charitable organisations. Fortunately, the Government have already started to do that. These organisations would be run by professionals for the benefit of patients in the way that Nye Bevan set out in his vision.

We will need to see the legislation to understand whether the Minister's promise of fully independent hospitals is lived up to in practice. I have my suspicions, but I am hopeful. We will wish to ensure, so far as we can, that the legislation provides for that. Since the Government are now on to a good thing, I encourage them to set out a timetable to go much further—a timetable to enable more hospitals to benefit from the status of being fully independent voluntary and charitable trusts.

That, of itself, is only part of the answer. Reform of the supply side alone is not enough, when we continue to have a state monopoly of healthcare purchasing—a monopsony, in effect. So long as there is a single purchaser of healthcare, purchasing will still be used to enforce centralised targets, priorities and initiatives. The truth is that supply rationed by bureaucracy always disadvantages the weakest members of the community. Whether it is a Soviet state trying to supply housing or the borough of Hackney trying to provide social services, it is the weakest who always fall victim to state bureaucracy. That happens because it is those who are most articulate and most capable of finding their way through the system who can get treatment out of a rationed bureaucracy. The least articulate and the least able have the least power. The Minister is shaking her head, but there is a raft of relevant statistics, which I will quote to her on another occasion. The NHS Executive itself has published a report to show that someone in social class 5 is far more likely to wait for more than three months for treatment in the NHS than someone in social class 1. It is a huge advantage to be articulate and able to work one's way around state bureaucracy.

PCTs may help. For some of the reasons set out by the noble Lord, Lord Chan, I suspect that they will not provide the whole answer. The only way to provide the level of effectiveness that the NHS needs, alongside freeing up the supply side, is to create real customer power, or patient power. I am not talking about dismantling the NHS and replacing it with private insurance; I am simply talking about recreating the NHS in the image that Nye Bevan envisaged. This would be done by allowing patients to take their part of the NHS budget—an NHS credit, if you like—and apply it in a way that would give them power and choice over the kind of healthcare they receive. Rather than have an NHS monopsony, patients could use their NHS credit in one of various independent healthcare management organisations that would then contract with the hospitals and primary-care agencies, competing to provide the best healthcare possible.

Until we grasp that nettle and remove all vestiges of centralised state monopoly out of the health service, we will unfortunately continue with such inefficiencies as those my noble friend regaled us with. I recognise

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that such a change cannot be brought about overnight. But now that the Government have started on this path of reform, I encourage them to think about going the whole hog and addressing the idea as part of their plans.

Beyond what I said about health, my one criticism of the Government is that the biggest social welfare issue that this country faces is dealt with wholly inadequately in any of the Government's plans so far. I recognise that a Green Paper is promised soon, but I detected a note of complacency in how the Minister addressed the issue in her opening remarks.

We have an ageing population. More and more of the population will become dependent on retirement funds. In 15, 20 or 30 years' time, the funding required for that will not exist; we are grossly underfunded. The Government's own estimates of the liabilities to pay for the future basic state pension add up to more than 1,000 billion, which should be declared on their balance sheet. To that we must add the extra cost to taxpayers of paying the second state pension that we heard about. It has good aims, but it will result in additional cost to taxpayers. I fear that even with the state second pension, there will not be enough coming out of the state purse to meet the expectations of many people when they retire.

Let us be clear. We are talking primarily about people in the lower half of the income distribution who will face these problems, because they do not have enough savings. As my noble friend Lord Fowler said earlier, we are in danger of creating two nations, because those in the lower half of the income distribution often do not have their own savings to supplement what they can expect from the state. There are a number of reasons for that. First, in many cases they cannot afford to put much aside. Secondly, as the Minister has recognised, for many of them, at least recently, it may not have been economically sensible to put money aside. If they got best advice from a financial adviser they would be told that it was not sensible for them to save, because any funds that they accumulated would be knocked off their minimum income guarantee and they would be worse off. I note the Minister's reassuring words about the impact of the state pension credit. I recognise that that may help to ameliorate the problem. However, I doubt that it will be enough to make it truly worthwhile for people who do not have very much to save enough to make a difference.

A further problem is the cost of compliance. For the insurance and pension companies it has not been economic to try to sell products to the lower income group. Although stakeholder schemes were aimed at the poorest part of the income distribution, they have failed to achieve what was intended because it is not economic to distribute products on a small scale to small savers.

If we do not tackle all those problems, I fear that we shall have a ballooning legacy of costs for the next generation that is not addressed by any of the Government's proposals. I do not suggest that I can offer solutions to all those problems tonight, but I have

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two brief suggestions that the Government might like to pick up in their Green Paper, if it is not too late. My first suggestion, which has been made in other quarters, is the notion of a top-up for people on low incomes who make pension contributions. For every 1 that they put away, the state could put an additional 1 in their pension bucket. That would seize the imagination and would enable people to see that they were getting a real accumulation of money that they would not get if they did not save for themselves. Secondly, allied to that proposal, we should allow people to move that part of the state pension fund that is attributed to them into their personal pension pot. To do that, the Government would simply crystallise the liability that they currently have for that state pension, issue debt to the individual to be put into their pension pot and, over time, allow the individual to invest that in other assets where they might get a higher return. Over and above that, it would be a real incentive to the individual to see that they had a bucket of money to which they were adding rather than starting from scratch.

Those are two ideas to put into the Green Paper considerations. Something bold and imaginative will be needed to avoid facing a real pension crisis for future generations.

8.2 p.m.

Lord Hodgson of Astley Abbotts: My Lords, I follow my noble friend Lord Blackwell in discussing the strategic challenges that lie ahead in providing a framework for savings and pensions over the next 25 to 50 years. I begin by declaring an interest. I am a trustee of two final salary pension schemes and the chairman of the trustees of one of them. These final salary schemes are now closed to new entrants. Before I fall into the category of welshers described by the noble Lord, Lord Oakeshott, let me make it clear that we intend to fulfil all the obligations to those who are still contributing and those who are in pension.

Why have we had to close the schemes? Three reasons spring to mind. The first is the continuing sharply rising cost of administration. The second is the financial exposure to our parent company—our employer—through the provisions of FRS 17, as we live in a time of extreme stock market volatility. One of our funds lost 15 per cent of its value in the last quarter. It is a perfectly sensibly administered fund. It is in a tracker fund. It is not anything very dramatic. However, the exposure for the employer has become very great. Thirdly, I am concerned as a trustee that we might begin to make promises to people that we would subsequently find that we could not fulfil.

The pension scheme relates to a manufacturing business. It is a very good pension scheme. However, amid the fusillade and torrent of statistics given by the Minister at the start of the debate, one thing cannot be concealed: the Government have been extraordinarily careless with the manufacturing base of this country. We are now facing a contribution rate of 35 per cent in the scheme—for every 1 that we pay, we have to put

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35p into the pension scheme. That cannot now be afforded given the Government's policies towards the manufacturing sector.

I see at first hand the difficulties and perhaps the crisis facing the pensions industry. Some of those reasons, such as increased longevity, are clearly not of the Government's making. While it is a matter for private delight that people are living longer, there is a public cost, not least in pension funding. However, the Government have contributed significantly to the worsening of the crisis, in some ways by sins of commission and in others by sins of omission.

The greatest of all the sins of commission, as mentioned by my noble friend Lord Fowler and the noble Lord, Lord Oakeshott, was the raid on the pension funds by the changes in ACT. To change the basic terms under which people save for their pension mid-way through a savings plan is an outrageous breach of public trust. If a similar action had been undertaken in the private sector, there would rightly have been a widespread outcry.

As has been pointed out, the change has drained 5 billion a year out of pension funds. The Prime Minister defended it at the time by saying that a buoyant stock market had given better returns than expected. That was then. If you had put your money into the FTSE 250 share index on 1st January 2000, it would now be down 42 per cent. In the light of that, does the Prime Minister now intend that the Government return the money? I think not.

The second problem is the increasing burden of regulation. It has fallen on companies and has been particularly damaging to smaller companies running final salary schemes. However, it has also fallen on trustees, who feel increasingly exposed. There is an interesting article in today's Financial Times headed, "On the board, a good man is hard to find". It is written by a lady, so I imagine that it also means that a good woman is hard to find. It is about the dangers for outside directors and trustees. It says:

    "Nowadays, outside directors sense that they are more likely to become a casualty of a future scandal than to prevent that scandal".

The article also points out:

    "By far the strongest deterrent to board service is the very general 'name in the newspaper' factor".

Then there is the rising tide of form-filling and bureaucracy. No doubt much of it is worthy in intent, but of how much practical significance I know not. Some noble Lords may have heard the interesting interview recently broadcast on Radio 4 with the Abbot of Downside, who is retiring as headmaster of that distinguished school. In the programme, he referred to the emergence of what he called the "geek" culture—that is to say, tick the boxes, fill in the right forms, and you will have covered your backside and you will be okay.

The Government have also added their own list of complexities with the steady expansion of means-tested benefits, about which we have heard much this evening. Those of us who had the pleasure of taking part in the proceedings on the State Pension Credit Act

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saw this in spades—a worthy enough objective in danger of being lost in a fog of regulation. When reform could have been introduced to improve the situation, the Government have too often fluffed the opportunity. The planned reform of annuity provision in a way that would enable people to plan for their own needs, as opposed to being forced to take actions that may well not be in their best interests purely on the basis of an arbitrary date or age, seems to be an opportunity sadly missed.

But perhaps most damaging to public confidence has been the Government's attempt to deny any responsibility for the position in which we now find ourselves. Everyone else has been blamed: the City has been blamed for being short-termist; the employers have been blamed for being hard headed, and welshers; the pensions industry has been blamed for being rapacious; and, when that does not work, the previous Conservative government have been blamed for the inheritance. The combination of all those factors has led to a comprehensive undermining of people's confidence in the value of long-term saving. The result is a savings ratio that has fallen steadily and halved since this Government took office from 9.1 per cent to 5.4 per cent.

The Government should now be guided by three important principles that should form the basis of what will appear in the Green Paper. First, they need to allow flexibility; secondly, they need to give clarity a strong framework; and, thirdly, they need to be honest, above all, about what can or cannot be achieved. As regards flexibility, the Government need to trust people to use their savings in a way that suits them, provided that enough remains in their personal savings pot to enable them to stay above welfare levels. The latter does not mean just reforming the annuities legislation; it means enabling people to use their other savings flexibly. I have in mind ISAs—withdrawing and replacing the ISA because people have different needs: they need to spend but they also need opportunities to save.

Secondly, there is the need for clarity. The huge range of complex means-tested benefits needs to be reduced by focusing on the basic state pension. The cost of administering these means-tested benefits is huge and, because of the complexity involved, they too often fail to reach people who most need them. Moreover, in the interests of clarity, the Government should consider permitting individuals to deduct fees for professional financial advice from their tax payable. Without this change, people will inevitably continue to choose to have their charges deducted from their premiums. This will mean that we shall continue to have product bias.

Of course, none of that will happen. The noble Baroness opened the debate arguing cogently and persuasively, as is always the case. But she knows, and we know, that the real obstacle to pension and savings reform does not lie in her department; it lies in the Treasury. The Treasury may weep tears over the declining savings ratio, but they are crocodile tears. Its

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concern, its age-old obsession, is about tax leakage. That is why the Treasury will oppose any such changes.

Thirdly, the Government must come clean and be honest. They must stop trying to make people think that if only 30 out of 80 years of life are spent working—that is to say between the ages of 25 and 55—pensions can be provided on exactly the same basis that applied when people worked for 40 or 45 years out of 70 years of life. They need to stop trying to make people believe that certainty can be achieved. Funding over 50-plus years in today's volatile world is inherently uncertain. An actuary friend of mine compared his job of forecasting retirement pensions to trying to lower a ping-pong ball on the end of a fishing line into a bucket 25 yards away in a force nine gale.

If the Government are clear, flexible, and honest, people will be encouraged to make the additional savings necessary to give them a comfortable old age. But on the record to date, one cannot be optimistic.

8.10 p.m.

Baroness Barker: My Lords, I begin by making my customary declaration of interest in that I work for Age Concern. The debate on the gracious Speech is perhaps one of the most interesting points in the parliamentary calendar. I very much welcome the changes that we have made this year as regards the way in which we have improved the structure of the debates compared to previous years. That struck me particularly when listening to the wonderful speech made by the noble Lord, Lord Fowler, with his apposite and moving comments about AIDS. On whatever day the draft plan for Africa was being discussed, I suspect that the subject of AIDS would have been mentioned. That highlights some of the remaining structural problems with these debates. As the noble Lord so rightly said, we can no longer turn our backs on problems in Africa.

The gracious Speech provides an opportunity to stand back and consider the extent to which joined-up government has become a reality. It is also a moment when those of us who provide effective opposition are challenged to do so outwith the restrictions that apply to debates on specific legislation. This year's debate on the Loyal Address has given those of us on these Benches a welcome opportunity to set out our own approach to the funding, the delivery and, crucially, the governance—a word which has not been heard today—of health and social care.

For the past 20 years, this Government and their predecessor have grappled with a key issue: how to fund old age. Both governments have sought to address the issue against a background of real reductions in state pensions. In her opening remarks, the noble Baroness, Lady Hollis, set out the plethora of initiatives which this Government have introduced, but she neatly side-stepped the issue of the real level of the basic state pension. She mentioned one of the key themes which I should like to talk about today, complexity, but she avoided a central concern—the

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crisis in private and company pensions, which was expertly explained by my noble friend Lord Oakeshott of Seagrove Bay.

Governments have tried in various ways, both negative and positive, to increase private provision for retirement income. For some, it has taken many years for the message to get through that any state pension they might receive will not sustain the standard of living that they envisaged. Currently, those who have been prudent and saved, often in company or private pension schemes, are looking at the closure of final salary schemes and starting to lose faith. For the past decade, for many investment in property has been a far more attractive option, offering a higher rate of return and certainty about the control of assets. However, with the property market surging at a seemingly unsustainable rate in some parts of the country, one wonders how long it will be before those who invested in property as a security for retirement also find themselves staring at an extremely bleak future.

This Government and their predecessor—as the noble Earl, Lord Howe, and the noble Baroness, Lady Noakes, might concede—have returned time and time again to one fundamental issue: how to cope with increasing demand for health and care services; with demand for new and effective but costly treatments; and with greater demands from an increasingly older population who are living longer. The National Health Service and Community Care Act 1990 was a first attempt to align health spending with what was then called community care spending. At that stage, however, a fundamental decision was taken which created an in-built flaw in health and social care planning which has persisted ever since: the decision to concentrate resources on acute conditions and high dependency. Only this year, that policy was reinforced in the fair access to care services guidance in which commissioners were told to allocate people to four eligibility bands—critical, substantial, moderate and low needs.

The guidance explicitly states:

    "Councils should prioritise needs that have immediate and longer term critical consequences for independence ahead of needs with substantial consequences".

It is doubtful whether any authority in the land seriously envisages making any provision whatever for low-level needs. Yet there is evidence—cited, among other places, in the National Service Framework for Older People—that low-level interventions which enable older people to manage their own lives independently pay massive dividends in the avoidance of acute care and in continued mental health.

Such thinking on the subject of managing demand was the starting point for a policy paper on the public services which the Liberal Democrats developed and adopted earlier this year. We saw our task as policymakers as the need to develop systems which enable the development of services that meet needs effectively, appropriately and—above all—sustainably. We realised that the best way of reaching effective solutions would be to enable users,

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practitioners and those in the local community who know the real problems and issues to develop frameworks and solutions that work.

We also realised that this approach, if it was to work, would have to be based on various important requirements, the first of which is agreement on basic minimum service standards, discussed and negotiated from the bottom up, not the top down. Secondly, adequate resources, coupled with local tax-varying powers, need to be in place nationally. Thirdly, democratic local control and accountability of decision-making must be coupled with an effective flow of information and evidence. It is on that basis that we on these Benches judge the two main health and social care measures in the gracious Speech, on foundation hospitals and delayed discharge. I have to say that, on that basis, we have found some very big holes in both pieces of legislation.

The proposal for foundation hospitals was trailed as long ago as last May. From the outset it has been clear that they are destined to be entities built on contradictions. They are to be selected from hospitals that have gained three stars by meeting centralised targets. Whether or not they have succeeded in meeting local health needs, or have simply met arbitrary targets for waiting list management, they are to be handed over to public benefit organisations. As I listened to the noble Baroness reel off the official line on waiting times, I could not help but note that the time that it takes to get on to some waiting lists—for example, for minor surgical procedures or for outpatient services such as audiology—did not get a mention and yet the preventive value of such services is commonly agreed to be high.

As my noble friend Lord Clement-Jones said, foundation hospitals will provide services that are commissioned largely by PCTs and the funding of PCTs is determined by their ability to meet targets which are set in Whitehall. In view of that, the notion of local accountability begins to seem unreal.

The noble Lord, Lord Turnberg, made an eloquent speech. I took to heart his point about health inequalities and the question that people in the NHS have about how a system as currently set up for those hospitals that already perform well can possibly work to reduce health inequalities. As the governance of those hospitals will be turned over to communities, I believe that in areas where there are more articulate people with time, energy and resources to become involved in the running of the hospitals, that is bound to lead to some of the problems mentioned by the noble Lord, Lord Turnberg.

One aspect of this sudden and somewhat unconvincing rush to decentralise is the proposals on delayed discharge. The Government's proposal is part of just one of a series of initiatives that first arose in the Wanless report. Noble Lords may remember the Wanless report, which was commissioned by the Treasury and which was produced earlier this year. Referring to a point made by the noble Lord, Lord Hodgson of Astley Abbotts, it is interesting to note

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that many reports often lie about for a long time before they are given a response, but this one was picked up within 24 hours.

I say it is only part of the response because the Wanless report advocated three points, only one of which the Government have chosen to implement. First, Mr Wanless stressed that it is impossible to make accurate predictions about future healthcare demands without a thorough analysis of future need and patterns of provision of social care. He advocated that there should be a strategic view, a recommendation on which there has been silence. Will the Minister say whether future social care reforms will be based upon such a strategic view, or are we to expect a series of piecemeal measures?

The Secretary of State in another place in his speech to the National Social Services Conference on 16th October stated that the strategic commissioning group chaired by Jacqui Smith will produce a report on how local and community groups can take a bigger part in the delivery of services. That is not the same as an analysis of need, but it is an important element of working out the future of the whole health and social care economy, so I ask the Minister to update us on the progress made on that.

Secondly, there is the matter of the disappearing measure from the Wanless report. It advocated a system of fines to local authorities, but it did so in conjunction with a system of fines for hospitals where re-admissions were deemed to be the result of inappropriate discharge. The Government must have seen some merit in that proposal because it is included in Chapter 8 of Delivering the NHS Plan. However, more accurately, over the course of the summer that proposal disappeared. I simply ask the Minister: why? My honourable friend in another place Mr Paul Burstow has produced evidence of re-admission rates growing at an alarming pace—up 18 per cent in the past two years. Moreover, voluntary organisations, such as my own, are beginning to detect patterns where re-admission rates climb in the same areas where discharge rates have increased. Common sense suggests that there must be a correlation.

Unlike the noble Baroness, Lady Greengross, I have many reservations about the forthcoming Bill, but the aspect that should cause the greatest concern is that nowhere does it mention informed consent. Under the Bill, patients will be discharged apparently without ever having had the opportunity to agree whether they should be, or to exercise any choice at all. For those of us who work in the field, that is worrying—not just for those older people but, as the noble Baroness, Lady Pitkeathley, said, for their carers, many of whom are extremely elderly and unable to care for people with complex health needs.

Furthermore, the Bill makes no mention of mental incapacity. There appears to be no mechanism to establish what is in the best interests of the most frail older people—those who cannot express their own will. That seems totally to contradict standard 2 of the National Service Framework for Older People, which requires that older people receive the care that meets their needs as individuals.

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Many noble Lords have mentioned bed-blocking and the lack of care homes as a causal factor. It is indeed. However, as we consider the Bill—I must tell the noble Baroness, Lady Greengross, that I expect that it will be here sooner rather than later—we shall hear an acronym that we all know and love: "sit reps", situation reports on hospital discharge. They are the common currency of social services and acute hospitals, the locally collected statistics that give the reasons behind delay of discharge.

No noble Lords have mentioned, and nor have the Government made much of the fact, that a substantial proportion of delayed discharges—up to 25 per cent, and in some areas a great deal higher—are caused by delays and inefficiencies within the NHS: failure to communicate within departments; failure to have discharge procedures in place; or failure to agree a process between acute and other wards. The Bill is not aimed at the right targets or in the right way.

Finally, I turn to accountability. One reads reports that the legislation came from Sweden; but it has been plucked from a different health and social care context. In Sweden, both health and social care are largely monopolies; in this country, social care most certainly is not. It is difficult to envisage at either a strategic level or for individuals where accountability for what may happen to people will lie and where complaints and advocacy are properly to be sited.

In view of all that, I have been desperately searching for an analogy. I have come to think that this is a community care congestion charge. Rather like Mr Livingstone's proposal, of which the Minister will no doubt be well aware, this provision is premature. Rather than being based on a whole system of care, it is an attempt to address one particular bottleneck. That may deal with the symptom but not with the cause.

The noble Lord, Lord Chan, in an excellent speech, highlighted one area of concern: the ability of primary care trusts to deliver the current system. In view of what he and other noble Lords had to say, there is a strong case, not necessarily for delaying the Bill for a long time, but for saying that the Government's hopes of having the system up and running by April 2003 are somewhat premature.

I fear that the wheels are beginning to come off the Government's perpetual revolution in the NHS. NHS forecasts are beginning to have all the credibility of Soviet five-year plans for the wheat harvest. Taking these two single measures, I believe that the future for older people in this year is beginning to look very much starker than it was previously. These measures, in particular, will receive thorough and tough scrutiny as they move through this House.

8.30 p.m.

Lord Higgins: My Lords, to some extent I shall concentrate on work and pensions issues and, therefore, I begin by declaring an interest as chairman of an occupational pension scheme and an interest in Equitable Life.

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However, before I turn to those issues, I want to pick out one part of the gracious Speech which I do not believe has attracted enormous interest. It states:

    "Parliament will be invited to scrutinise legislation in draft on a number of measures, reflecting the importance that my Government places on pre-legislative scrutiny by Parliament".

I am most enthusiastic about pre-legislative scrutiny. In fact, it is 30 years since I was the first Minister to introduce in full a draft Bill which abolished purchase tax and SET and introduced value added tax. As a result of that pre-legislative scrutiny, I believe that the legislation has lasted the test of time, except for the fact that successive Chancellors have increased the rate from 10 per cent, which was nice and simple, to 17 per cent.

I am profoundly worried about the way that we now scrutinise legislation. From our experience in the previous Session on the Tax Credits Bill, which arrived in this House in an unworkable state due to the fact that the Minister in another place clearly did not give it sufficient scrutiny, and from the way that the Home Secretary's proposals on asylum were not discussed at all in the other place, other than when we happened to defeat the Government on a particular amendment, we know that the system is not working. The process of programming and modernisation in another place is placing a bigger and bigger burden on your Lordships' House. One cannot help but feel that somehow the proposal for more pre-legislative scrutiny is intended to make up for the fact that this House does not carry out legislative scrutiny in the way that it should.

In the course of the debate, many noble Lords have spoken on both health and pensions issues. With regard to the health issues, I have a strong impression that noble Lords are mostly warning of dangers. The noble Lord, Lord Faulkner of Worcester, warned about the danger of smoking. I strongly agree with that. My noble friend Lord Fowler dealt with the problems of the AIDS epidemic, and my noble friend Lord McColl spoke about falling morale in the health service. Going more widely, my noble friend Lady Carnegy of Lour warned about the problems of dysfunctional families and the breakdown of family structures. Therefore, we heard a whole series of warnings on which, no doubt, the Minister will wish to comment when responding to issues raised in the health service field.

However, I want to turn primarily to the issue of pensions. We are promised a Green Paper in the near future. Whether this is a question of the calm before the storm from a legislative point of view, given the welter of legislation with which the noble Baroness and I have dealt over the past five years, or whether it is simply the calm before a damp squib, we shall have to wait to see. But, at all events, I believe that it is worth referring to the previous Green Paper, Partnership in Pensions, published in December 1998. A crucial part of that paper set out the Government's expectation that total spending on pensions would change from 60 per cent from the state and 40 per cent from private sources to the reverse—that is, 40 per cent from the state and 60 per cent from private sources.

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From statements made by the noble Baroness the Minister on the Front Bench and outside, it would seem that she has been saying that the department is thinking about the matter again. She did not mention the issue in her opening remarks. But it is crucial because almost everything that the Government have done since the publication of that Green Paper has pushed the balance in the opposite direction. Crucially, it undermines provision in the private sector and, very largely, has failed so far as concerns provision in the public sector.

The noble Lord, Lord Oakeshott of Seagrove Bay, and my noble friends Lord Hodgson and Lord Blackwell all referred to the stealth tax on ACT. The total take now with regard to pension funds is around 25 billion and rising. That has meant that more and more companies have felt obliged to change final salary schemes to defined contribution schemes, transferring the risk from the company to the individual. A recent survey indicated that around half—rather more, in fact—the final salary schemes that existed at the time of the previous Green Paper have been closed to new entrants or future accruals. That is a fundamental change of the greatest importance.

As regards the stakeholder pension, the survey to which I have just referred suggests that fewer than 1 per cent of employees based in firms covered by the survey have joined stakeholder schemes and that 46 per cent of stakeholder schemes have no members at all. Again, the legislation on stakeholder pensions that we ploughed through has largely been a failure. Increasingly, outside experts are calling into doubt the state second pension and moving towards the views of the late Barbara Castle, whose contribution to our debates we miss very much. She was always in favour of raising the basic state pension and not going down the means tested route. The National Association of Pension Funds, the IPPR and the Pensions Policy Institute have all produced proposals that concentrate on the basic state pension rather than move towards the state second pension. Commentators such as Mr Timmins in the Financial Times have expressed similar doubts. The Minister has been cagey about the 40:60 split. However, it would be helpful to know whether that is still the Government's expectation or whether, as a result of their own actions, matters have moved in precisely the opposite direction.

I turn now to the point made by my noble friend Lord Hodgson in particular, but also by the noble Lord, Lord Oakeshott, and others. The reality is that pensions are in a state of crisis. That is what we are faced with at the present time both with regard to those who become pensioners now or those who will become pensioners in 20 or 30 years' time. My noble friend Lord Blackwell pointed out the enormous future liabilities that ought to appear on the Government's balance sheet but which they refuse to make explicit in their accounts.

This is not just a crisis in the pensions industry but a crisis in confidence. It is that which is deterring people from saving at a time when, quite clearly, it is vitally important that they should if they are ever to retire on a reasonable income. That brings me to a point made

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by the noble Lord, Lord Oakeshott. I agreed with virtually every word of his speech. He referred to Equitable Life. Only last weekend we heard that, as a result of the serious situation at Equitable Life, some people with pensions already in payment—perhaps having retired 20 years ago—will suddenly find that their pensions are cut by about 20 or 30 per cent. I cannot recall that ever happening previously, even when the Policyholders Protection Act 1997 was introduced. I hope that the Minister will tell us whether that is the case.

As regards this matter there has quite clearly been a complete failure on the part of the regulator and the Government. Originally, the matter was the responsibility of the DTI. Then a number of officials moved to the Treasury and the matter was for a considerable time the responsibility of the Treasury. It then became the responsibility of the Financial Services Authority acting as the agent of the Treasury and then, finally, the responsibility of the Financial Services Authority itself. However, the reality is that the failure of Equitable Life is equally a failure of the regulator, and the regulator was the Treasury. There should have been a proper inquiry. The Government set up the Penrose inquiry. No, I am wrong; the Treasury set up the Penrose inquiry and the Treasury determined what its terms of reference should be. The report will be made to the Treasury. We now find that the inquiry has been set up in a such a way that it is not likely to be possible to publish the report in full anyway. It is absurd to have the failures of the Treasury investigated in that way. However independent Lord Penrose may be, he is closely confined by the very organisation that he should be investigating.

As a result, the ombudsman felt that his inquiries should be put on hold. I have a qualification to make in this context. I had an exchange with the noble Lord, Lord McIntosh of Haringey, in the House on 31st October, when I made exactly the point that I have just raised. When he replied that the matter had not been put on hold, I asked him to check his facts. Very courteously and in his usual way, he has done so and he wrote to me. He is right that the inquiry now being carried out by the ombudsman has not been put on hold. However, that is only a tiny period of the overall period that has affected Equitable Life. The overall range of complaints that the ombudsman has been investigating has been put on hold; he is not going to produce an inquiry until such time as the Penrose report has been published, if it is ever published.

The ombudsman's views on this subject are very clear. He said—he has of course just retired and been replaced by a lady—in his annual report that:

    "The root cause of the problem, in my view, is the failure of the authorities to establish at the outset a single inquiry with terms of reference covering all aspects of the Equitable Life affair".

That is what should have been done, but it was not done; it should be done now. Lord Penrose must be given unlimited terms of reference to go into all aspects of the affair and he must produce a report that is genuinely independent and not circumscribed in the

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way that the Treasury, in its own interests, has managed to do so far. That meant that some people found that their pensions, which had been in payment for 20 years, had suddenly reduced. Many people are suffering serious loss and we do not know even now what the future of the company will be. Consequently, there has been widespread concern and a widespread crisis of confidence in financial institutions generally and in relation to the regulators. I believe that that was pointed out on "Panorama", although I did not see it the other night.

These are very important issues because we must do all that we can to ensure that the pensions industry functions on a viable basis. We must do all that we can to ensure that so far as possible company schemes remain of the "final salary" sort rather than of the "defined contributions" sort. As my noble friend Lord Hodgson clearly spelt out, the pressures on companies are growing. Not all the reasons for that are the fault of the Government; as my noble friend rightly pointed out, there is greater longevity and a number of other factors, including the decline in the stock market, make the situation very difficult. However, that, to a significant extent, is the problem.

Incidentally, I welcome the situation regarding FRS17. I pay tribute to the Minister, who I believe was probably incidental in persuading the Secretary of State—she has done so in relation to many issues—that the FSR17 issue will be delayed until such time as the international standard is agreed. However, to what extent that standard reflects some of the problems associated with FRS17 remains to be seen. That measure has been one of the factors contributing to the breakdown of the traditional pension system in this country, which the Government, when they came into office, asserted was the jewel in the crown of the British pension system.

In her opening remarks the Minister was not as analytical as she normally is. Her speech was little else than a long stream of statistics. She did not anticipate, understandably, the Green Paper, but she did not deal with the fundamental issues of the split between private and public and so on, to which I referred in my opening remarks. That stream of statistics must itself be suspect because the department and the Government generally have recently made a number of rather serious mistakes. The Financial Times reported the other day that the Ministry has agreed to clarify the figures.

We all know that both parties in government have not had an impeccable record in the SERPS saga. Having said that, one would have thought that at least the department would be trying to get its figures right, whereas it appears that its projections did not adequately allow for the problems of contracting out and so on.

It is also the case that, as my honourable friend Mr Willetts in another place has pointed out, the Government made a most appalling error in estimating the amount of money that was being invested each year in pension schemes. They were under the impression that the sum was 86.4 billion. It

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turned out that those figures were totally wrong. It was 43.7 billion. I leave noble Lords to deduct one figure from the other to see the magnitude of the error. That was reflected by a most extraordinarily complacent attitude by the Government on this whole issue. They were basing their ideas on statistics which were wrong. That is one of the reasons why the noble Baroness has been inclined to say that there is not a crisis as regards pension provision. I believe that that is the situation.

There are other problems regarding complexity that we have been over many times. Prudential recently produced a study stating that 1.2 billion in benefits are unclaimed. If one looks at the documentation which explains to people how to fill in the relevant forms, one can well understand why that is so. The Government said, "Oh, well the form is now much shorter". Yes, the form got shorter and the explanatory memorandum on how to fill it in got longer. This did not really work out as the Government proposed. Curiously enough, it has almost exactly the same number of pages overall.

The other aspect of the matter about which we have expressed grave concern—and on which the Government are continuing to plough in the wrong direction—is means testing. We are told that in 1997, when the Government came into office, 14 million people were in households where there were means-tested benefits. By next year the number is expected to be 25 million. In 1997, 38 per cent of pensioners were on means-tested benefits. By 2003 the figure is expected to be 57 per cent.

I am not generally speaking in favour of debate by statistics, even though the Minister decided that that was an appropriate way to approach this debate. But I am profoundly concerned about—my noble friend Lord Blackwell raised this point—what will happen in the future with minimum income guarantee being uprated in earnings, and with more and more people on means-tested benefits. The prospect for vast masses of people in our country in 20 or 30 years' time is grim indeed. We will see more and more people on means-tested benefits and a smaller and smaller number of people paying for them. At some stage—I probably will not be here in 30 years' time to see it—the people who are responsible for paying for means-tested benefits will not be able to finance them.

The prospect for pensions is desperately uncertain. I shall make one final point about Equitable Life. We must set up a proper inquiry, so that we can restore confidence in the savings industry, in the regulator and the prospects for the future. At the moment, the Government are going in the wrong direction. There ought to have been a system, from 1997 until now, to move the pensions industry in the direction in which it wished to move, which was towards a greater emphasis on private provision and a smaller emphasis on public.

8.50 p.m.

The Parliamentary Under-Secretary of State, Department of Health (Lord Hunt of Kings Heath): My Lords, in the debate on the Queen's Speech, we are often called upon to display considerable feats of

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ingenuity in pulling together the threads of what is always a wide-ranging debate. The point raised by the noble Lord, Lord Colwyn, about the licensing of musicians takes the debate even wider.

I enjoyed the reminiscences of the noble Lord, Lord Fowler, about the glory days of the old DHSS, although I thought that his reference to a comment that I made rather a long time ago was a bit below the belt. Later, I shall demonstrate—to my satisfaction, at least—that there is a coherent line between what I said then and what I say tonight. None the less, I agree with the implication of what he said: however we cut the cake in Whitehall, we must always work across departmental boundaries. There are strong links between ill health and the other problems that we face, such as unemployment, poor housing, poor educational achievement or, as the noble Baroness, Lady Carnegy of Lour, mentioned, the insecurity faced by so many young people. We will always have to work together throughout Whitehall to sort out such problems.

The issue for health, in the wider sense, is the irony that, although today we are healthier and more prosperous and live longer, the health gap between the most disadvantaged in our society and the rest is very wide. At birth, men in Manchester can expect to live nearly 10 years less than their counterparts in north Dorset; women in Manchester can expect to live nearly seven years less than women in west Somerset. That is why we must have a radical programme to tackle health inequalities. I say to the noble Lord, Lord Chan, that that is why we have made the reduction of such inequalities a key criterion for the allocation of NHS resources to different parts of the country. It is why we must do everything that we can to encourage healthier lifestyles, improve diet and physical activity and tackle drug and alcohol misuse.

I believe that we can see encouraging progress. There has been a reduction in teenage pregnancies among the under-16s and under-18s. On sexual health more generally, I agree with the noble Lord, Lord Fowler, that we cannot be complacent. I share his view that a focus on public health promotion is essential, and that is what we seek to have. I pay tribute to the noble Lord's leadership, in his time as Secretary of State, over the issue of AIDS.

It is not just a matter of sexual health. We must ensure that there is a healthy start to life, through action to reduce infant mortality. The Sure Start programme, targeted at disadvantaged children and their families, has much to offer. We must do more to help people to improve their diet. I am glad to report that, from this autumn, nearly 600,000 children will receive a free piece of fruit every day in school. Physical activity is equally important, and I pay tribute to my noble friend Lady Pitkeathley for the work of the New Opportunities Fund in sponsoring healthy living centres and for the new programme to encourage physical exercise. I do not believe that one can overestimate the importance of that. We shall do everything that we can to encourage the NHS to support schools in that important programme.

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Smoking is equally important. The smoking cessation services that we have launched are showing great signs of success. I thank my noble friend Lord Faulkner for his generosity in relation to the Tobacco Advertising and Promotion Act. I pay tribute to the noble Lord, Lord Clement-Jones, for his initiative in bringing it forward, and no doubt the noble Earl, Lord Howe, would want to thank the noble Lord, Lord Faulkner, for his kind remarks on that matter.

As far as the implementation of the Act is concerned, we have announced that the commencement date for most of the Act's provisions will be February 2003. We have power to make regulations allowing sponsorship agreements to continue in certain circumstances until 2006. We intend to make those regulations in the near future and are currently consulting on them.

As regards the approved code of practice on smoking in the workplace, the Government are giving careful consideration to the commission's proposals. As part of that process the Health and Safety Commission has been asked to consider further both the implications of the code of practice on the hospitality sector and the role the public places charter can play.

I agree with my noble friends concerning the common agricultural policy and we would certainly, as a country, like to see tobacco subsidies phased out. We are working closely with the European Commission. I assure my noble friend that we take up that issue as every opportunity arises.

Sticking with the public health arena, I would like to say to the noble Earl, Lord Baldwin, that I welcome him back to our debates on fluoridation. I want to confirm the assurance that he has been given by the Chief Medical Officer that we shall not use the Medical Research Council report to discredit the York report. I am happy to write to him on the further matters that he raised in our debate today. I consider dentistry an important component of public health. The noble Lord, Lord Colwyn, will know that we are working very hard with the BDA and the profession to find a way to get ourselves through the treadmill impact and have the right incentives to encourage dentists to work under the NHS dental contract. The noble Lord will know that I have a great deal of respect for the dentistry profession and I am as committed as the Government are to finding a way through.

The noble Lord, Lord Chan, emphasised the key role of primary care trusts in relation to public health and the important role that they have to play. I agree with that. That is why we were determined to place public health at the primary care trust level. I believe that the noble Lord has shown the potential of primary care trusts to take those public health programmes forward. Certainly, I believe that they have an important contribution to make to our overriding commitment to break the cycle in which previous generations have condemned children to a lifetime of ill health, merely because of where they lived or what their parents did for a living.

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That is why it has been so important to reduce unemployment, and to make good progress towards our target of reducing the number of children in low income households by a quarter by 2004, as the first step on the road to eradicating child poverty within a generation. I agree with the noble Baroness, Lady Barker, that the funding of old age is just as important in that context.

That brings me to the question of pensions. My noble friend Lady Hollis dealt with a number of the issues that have been raised. It is clear that the Green Paper will be of great importance. I hope that when it is published it will commend itself to the noble Lord, Lord Higgins. As a former member of an Equitable Life AVC scheme I have a particular interest in a number of the matters raised by noble Lords tonight.

I hope that the noble Lord, Lord Higgins, will forgive me for not being drawn on the questions he raised in relation to the Penrose inquiry. I believe that we need to wait for that inquiry to report and the timetable is very much a matter for Lord Penrose.

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