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House of Lords

Thursday, 16th October 2003.

The House met at eleven of the clock: The CHAIRMAN OF COMMITTEES on the Woolsack.

Prayers—Read by the Lord Bishop of Southwark.

Health and Social Care (Community Health and Standards) Bill

The Parliamentary Under-Secretary of State, Department of Health (Lord Warner): My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.

Moved, That the House do now again resolve itself into Committee.—(Lord Warner.)

On Question, Motion agreed to.

House in Committee accordingly.


Clause 18 [General powers]:

Earl Howe moved Amendment No. 182:

    Page 8, line 26, at end insert—

"( ) An NHS foundation trust shall have the power to pay remuneration and allowances to any person without reference to future national agreements on pay negotiated by the NHS."

The noble Earl said: In moving Amendment No. 15, I am conscious that I am bringing us on to some controversial territory. The question it asks is simple: to what extent should foundation trusts be free to set their own pay and conditions for the staff they employ?

I am, by instinct and conviction, against the idea of trying to impose artificial prescriptions from the centre on an organisation of the size and diversity of the NHS. As far as I can judge from their pronouncements, government Ministers have embraced that view, too, in broad terms, although perhaps not universally. Therefore, direction from the centre, especially when the Bill before us purports to set the NHS free, should be looked upon critically and the assumptions underpinning it should be tested rigorously before it is retained as a feature of the new NHS.

Yet the idea that foundation trusts should not be bound by national pay agreements is one that was described by the Minister in another place as "preposterous", "absurd", "ridiculous", and to be treated with "complete derision". Colourful phrases such as those make me think straightaway that we are dealing here with more of a shibboleth than anything else because those words do not constitute a decent argument.

We already live in a competitive market for healthcare staff. The private sector, including agencies, compete with the NHS not just on the basis of pay rates, but also in terms of working conditions. Those who seek to cap the ability of foundation trusts to set their own pay rates point to the danger of

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predatory behaviour by those trusts which would disadvantage the rest of the health economy in the locality. I do not buy those arguments and I will explain why.

We all know that local labour markets in the South of England are different from those in the North. Recruitment and retention of healthcare staff in the South is hampered by the profusion of alternative jobs in other sectors, many less skilled and many better paid. Housing costs in the South are much higher than they are in the North. These disparities have been recognised by the Government in Agenda for Change. They were recognised by the Chancellor in the last Budget debate. There is no argument that local labour markets demand different responses and different rates of pay if we are to deal with the realities of life.

Agenda for Change contains much that is welcome relating to pay flexibilities. Potentially, there is flexibility amounting to 30 per cent in pay rates, which doubtless managers in foundation trusts would be free to use if they judged it to be necessary. Nevertheless, 30 per cent is an artificial cap and a cap which is not necessarily appropriate to the realities of the market, any more than previous formulas were. Under Agenda for Change, it is still necessary for the Government or the regulator to say to a hospital manager that he may not, for any reason at all, stray outside the prescribed formula, no matter how good a case he can present. That is unjustifiable.

I maintain that, in practice, there will be little to incentivise managers to stray outside the bounds of nationally negotiated pay agreements. Predatory behaviour by foundation trusts against other NHS bodies will be curbed by two principal restraints: the national tariff and the duty to co-operate under Clause 29 of the Bill. The national tariff will, in practice, limit what trusts are able to pay their staff. There can be no question of an unbridled bonanza of pay rises in foundation trusts.

However, in the event that the local health economy looks like being destabilised by pay differentials, the regulator has power to act. But I do not believe that that will happen. The private sector is already free to attract staff away from the NHS, and it frequently succeeds. But it does so not by offering higher hourly pay rates but rather by holding out the promise of a better working environment, more user-friendly hours and better staffing ratios. Anyone who is afraid of predatory behaviour by foundation trusts needs look only at that precedent, which tells us that pay freedoms are not simply about the hourly rate of pay.

I do not expect to receive many warm words from the Minister in response to the amendment. However, I hope that I will receive an answer that is not dismissive. If he disagrees with the extension of freedoms to foundation trusts, with respect, he needs to tell the Committee why. I beg to move.

Lord Clement-Jones: I suspect this is one of those areas of the Bill where noble Lords on these Benches part company with the noble Earl, Lord Howe, in his

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search for even greater flexibility than the Minister has proposed. That has been the watchword of most of his responses in the course of the Bill.

The Minister dealt with the issue on the third day of Committee, when he said:

    "As the noble Lord acknowledged, first, NHS foundation trusts will implement the new Agenda for Change pay system. The Secretary of State will not support applications from NHS trusts without a clear commitment to implement Agenda for Change. Under the new pay system, NHS foundation trusts will be specifically represented in forums for national collective bargaining on staff terms and conditions of service".—[Official Report, 13/10/03; col. 628.]

I welcome that statement.

However, we are concerned not only about the past and the present but also about the future. One of the key concerns of many of those who have reservations about foundation trusts is their potential impact, and their ability to offer better terms and conditions, on the local health economy in their areas.

That is one key issue that has not yet been fully addressed in terms of the future. I believe that the amendment of the noble Earl, Lord Howe, nicely teases that out and I hope that, in a sense, mine does, too, in terms of what the Minister and his colleagues propose for the future. As I read it, the Bill is silent on that subject. It is a question of whether or not foundation hospitals take part in future bargaining and negotiations. I believe that, as yet, that question remains unresolved.

From the way that the Minister responded on the subject of the regulator and his powers—he said that it was not the job of the regulator to consider that side of things—it is not clear whether the regulator will have the power to insist that foundation hospitals join, in a coherent manner, the national pay bargaining negotiations or whether he will be comfortable if each foundation hospital conducts its own negotiations, paying well outside the flexibility of Agenda for Change in future. What will make Agenda for Change last for the future? The answer to that is not clear at all. I believe that a number of unresolved questions of great importance derive from both amendments.

Baroness Finlay of Llandaff: I declared my views by adding my name to Amendment No. 185. In these two amendments, which appear to go in opposite directions, we are being asked to look into the future and speculate as to what might happen. We have already expressed concern about destabilisation of local health economies and about staff moving from one trust to another.

A duty of co-operation is set out on the face of the Bill, but I do not know how far one will have to be non-co-operative—that is, how many staff will have to move from one trust to another—to demonstrate that one really is poaching staff and destabilising the local health economy in staffing areas. We are already well aware of staffing problems in some parts of the UK. It would be incredibly easy for a foundation trust, freed of any rigours in relation to pay negotiations, to drive up the price per hour or people's salaries and drain local trusts of staff.

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Agenda for Change is being introduced and it has been welcomed by the professions. I believe that even that will be difficult to regulate, if I may use that word, although it will not come directly under the terms of the regulator. Job descriptions can be subtly rewritten and a little more responsibility added so that, within a foundation trust, staff may do almost the same job but have a few more responsibilities and thereby move to a higher pay bracket.

Terms and conditions certainly need to be improved, but I have to disagree with the noble Earl, Lord Howe. When staff move, they do so for pay increases on an hourly rate. It is true that they also move for better conditions. I am aware of trusts which have very good staff relationships but, sadly, they will lose staff to another organisation where the hourly rate of pay is higher. There is a huge need for staff to have creche facilities and similar support organisations within the trusts in which they work. I do not see anything in the Bill to stop trusts doing that. However, I shall be gravely concerned if they are allowed to determine their own rates per hour. Therefore, I firmly support Amendment No. 185.

11.15 a.m.

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