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Baroness Barker: I thank the Minister for that response. It was helpful to tease out from him the strength and force of some of those other requirements on the two bodies. I would simply say that, particularly in relation to Amendment No. 346, we sought to probe the extent to which the type of reports produced by the Audit Commission would be made available. There is a fair degree of disquiet on these Benches about the extent to which the existing Audit Commission functions will relate to the new bodies. I question whether solely the audit function to which the Minister referred will be sufficient to provide the full strategic information that will be needed.

None the less, the Minister has been helpful in his reply. On that basis, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Noakes moved Amendment No. 232:

"(5) The CHAI may borrow money other than as mentioned in this paragraph up to a limit of its annual expenditure for the previous year as shown in its annual accounts less any amounts outstanding in respect of loans advanced under this paragraph."

The noble Baroness said: In moving Amendment No. 232 I shall speak also to the amendments grouped with it. We now come to a group of amendments dealing with the financial side of both CHAI and CSCI. The need for financial independence lies at the heart of the amendments and I shall build on the comments made earlier by my noble friend Lord Howe about the importance of independence.

I shall speak to Amendment No. 232 shortly, but it may help noble Lords if I begin with Amendment 317, which would give CHAI a basic financial duty, inserted as a new clause before Clause 61. It is not a revolutionary provision; it simply requires CHAI to break even on its income and expenditure account. No reference is made to CHAI's financial duty in the Bill and I hope the Minister will agree that it is important to be clear about the way that CHAI will operate financially.

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The specification of a financial duty is important because Amendment No. 319, which applies to Clause 61, concerns the fees that CHAI may charge. The amendment states that the regulations made on fees by the Secretary of State must ensure that CHAI can meet its financial duty. Amendment No. 320 would achieve the same end in respect of regulations made by the Assembly under Clause 62.

Amendment No. 232 concerns another aspect of financial independence. It would give CHAI the ability to borrow money other than from the Treasury. This would ensure that if CHAI needed to invest in property or information systems and so forth, it would not be frustrated in that by the Treasury's power of veto. Borrowing money commercially should be a route made available to CHAI in order to keep its independence. I imagine that it would not often want to borrow at the higher rates that would almost inevitably pertain in the private sector, but if the Treasury is intransigent—perish the thought—then the option would be available.

Amendments Nos. 253, 357 and 358 are mirror images for CSCI of the amendments I have just spoken to, thus ensuring that it, too, would be financially independent. Charging by CSCI is a particularly sensitive issue for local authorities, which are not currently charged by the Social Services Inspectorate. May I put a direct question to the Minister: what do the Government intend in relation to charging local authorities? Is it intended that local authorities should bear the additional costs by way of CSCI fees? The Local Government Association considers this to be an important issue and I hope that the Minister will be able to respond.

If the Government are unable to accept these amendments, which are crucial to the financial independence of CHAI and CSCI, will the Minister say in what ways the financial independence of those bodies will be secured? We see nothing in the Bill to give us comfort on this. The noble Baroness, Lady Howarth, referred earlier to the damaging impact when cuts in resources can be imposed on bodies suddenly and almost without notice. That is potentially a very real issue.

I turn now to one further amendment in the grouping, Amendment No. 318. This is a probing amendment designed to explore how fees will be set, and in particular seeks to ensure that English NHS bodies bear none of the costs attributable to any functions of CHAI in relation to Welsh bodies. Cross subsidy is rarely attractive but it is particularly unattractive if it means that there are hidden reallocations of resources between the two countries. I beg to move.

Baroness Barker: I rise briefly to speak to Amendment No. 321. It is a small amendment, but none the less relevant. It seeks to give CHAI the power to charge for its reports. Noble Lords who have worked long and hard in this field will know that such reports are always fairly bulky and expensive to

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produce; a considerable cost can be incurred. It seems only reasonable that CHAI should have the power to make a charge.

4.30 p.m.

Lord Warner: I shall speak first to the non-government amendments in this grouping. As the noble Baroness, Lady Noakes, has explained, Amendments Nos. 232 and 253 seek to allow CHAI and CSCI to borrow money from the private sector. I assume that underpinning this proposal is the argument that such a power would reduce the dependence of CHAI and CSCI on government funding, thereby guaranteeing the commissions greater freedom of action. However, I should remind the Committee that allowing CHAI and CSCI to borrow from the private sector would go against Cabinet Office and Treasury rules for borrowing by non-departmental public bodies as well as precedent. Neither the Audit Commission nor Ofsted may borrow from the private sector, and no one suggests that those bodies are not independent.

I hope that the amendments will be rejected, and to that end I shall set out further arguments. First, any money obtained through loans from the private sector is likely to be charged at higher rates than money borrowed from government. Thus there exists a very strong "value for money" justification for not allowing CHAI or CSCI to borrow from sources outside of government.

Secondly, public bodies such as CHAI and CSCI will be providing a valuable public service and therefore cannot be allowed to run the risk of amassing excessive debts through private sector borrowing. Indeed, I felt a little queasy when the noble Baroness mentioned some of the things that the bodies might do. Such borrowing could present a real danger to the effective performance of their key functions. Equally, to allow bodies that are neither democratically elected nor responsible to shareholders to borrow from the private sector would be irresponsible, given that it would not be possible to hold them to account for their actions. Through allowing them to borrow only from government, as the Bill currently provides and in accordance with normal precedent for bodies of this kind, the risk of excessive debt is effectively nullified.

The Government are committed to the commissions having access to the resources necessary for them to carry out their important functions. We are introducing new clauses which place duties on both commissions to manage their respective financial affairs so that their expenditure is covered by their income.

The amendment is neither necessary nor desirable, for several reasons. Both commissions are already placed under a duty to carry out their functions effectively, efficiently and economically under paragraph 2 of Schedules 6 and 7 respectively. Furthermore, both commissions must ensure that they manage their budgets effectively under paragraph 10(3) of these schedules. In doing so, they must send

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annual accounts to the Comptroller and Auditor General, who in turn must certify them and lay copies of his reports before Parliament.

Under Clauses 61, 62 and 84, the Secretary of State or the Assembly, as appropriate, may prescribe those functions for which CHAI and CSCI may charge fees. It may not be appropriate to allow them to charge fees for all their functions. For example, where they undertake a comparative study of a number of bodies in order to enable them to draw general conclusions as to the state of the health service or social services, it will probably not be appropriate to charge the bodies involved. We anticipate that it will be necessary for the bodies to retain an element of state funding for such studies.

Amendments Nos. 319, 320 and 358 seek to ensure that any such regulations made by the Secretary of State and also, in the case of CHAI, the Assembly, do not hamper either commission's ability to manage cost recovery to the extent that they would fail to meet their financial duties as set out under the proposed amendments.

Amendment No. 318 seeks to ensure that CHAI and CSCI do not charge fees which exceed the cost of the activity they are undertaking. While I am sympathetic to the amendment, I do not believe that it is necessary as, clearly, this is something that we would expect CHAI and CSCI to do as a matter of course. It has always been our expectation that any fees levied should be to cover operating costs rather than with a view to making a profit. It is not in CHAI's interest to overcharge healthcare providers.

Currently Clause 61(6) provides a power that will enable the Secretary of State to make regulations that would allow an independent person or panel to review an individual charge that CHAI has set. Where such a person or panel feels that CHAI has wrongly applied its own fee scales in a particular case and, as a result, has charged too much for a particular review or investigation, they will be able to substitute a lesser fee. Clearly the independent person or panel will be very unlikely to substitute a lower fee if the amount charged by CHAI or CSCI was not sufficient to meet its costs. So the amendments are not necessary.

Were CHAI or CSCI to set outlandish or unreasonable fee levels, it would be incumbent on the Government, like others, to make known their view that the fees set were not reasonable. If the bodies refused to set fees appropriately, the Government would have to take a view as to whether or not the chair of CHAI or CSCI was fit to carry out the duties of his office. Ultimately—this is something of a nuclear option—such behaviour could lead to the removal of the chair from office, although it would be very strange if such behaviour developed among incumbents of those offices.

The position is different for providers regulated under the Care Standards Act. At subsections (2) to (5) of the proposed new Section 113A in Clause 103(2), the Secretary of State has retained powers to set fees under Part 2 of the Act, if necessary.

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Amendment No. 321 would entitle any person who requests a copy of any material relevant to a review or investigation under Clauses 45 to 47, or a study under Clause 53, to have one on payment of such reasonable fee, if any, that CHAI considers appropriate. I should draw the Committee's attention to the fact that CHAI is not given review or investigation functions under Clauses 45 to 47 of the Bill.

The noble Baroness, Lady Noakes, drew attention to the issue of local authority and CSCI fees. The SSI is currently funded by a top slice of the local authority social services settlement. This money will be returned to local authorities when CSCI commences charging local authorities. We do not anticipate significant increased costs to local authorities.

I now turn to the government amendments. Amendment No. 317A, 319A and 357A are technical amendments, recommended by parliamentary counsel, to Clauses 61 and 62, which allow CHAI to charge fees to NHS bodies with respect to the exercise of its review functions in relation to services commissioned by those bodies from practitioners or providers. The Bill currently empowers CHAI to charge fees to individual practitioners or providers with respect to the exercise of CHAI's functions in relation to the services provided by those persons and could be interpreted as not allowing CHAI to charge the commissioning NHS bodies with respect to the exercise of those functions. These amendments therefore enable CHAI to charge the commissioning NHS or Welsh NHS bodies with respect to the exercise of such functions by CHAI. We believe that there may be circumstances where CHAI may wish to charge the practitioner or provider—for example, where CHAI has investigated some problem with the practitioner's or provider's practice—and we retain that option in the respective clauses.

Under Clause 84, fees are most appropriately charged to the local authority as the work that CSCI will be undertaking is in respect of all social services provided by a local authority, including those commissioned from other providers. However, parliamentary counsel has advised that, as in the case of Clause 61, there could be doubt as to whether Clause 84 allows CSCI to charge fees to the local authority with respect to the exercise of its functions in relation to services commissioned by the local authority from other persons.

Amendment No. 357A therefore clarifies that when CSCI is carrying out a review of the social services provision of a local authority it may be able to charge that authority for work that it undertakes in respect of services that a local authority can commission or provide by arrangements with other bodies and not just for the services provided by the authority itself.

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