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House of Lords

Thursday, 15 September 2011.

11 am

Prayers-read by the Lord Bishop of Hereford.

Police Federation

Question

11.06 am

Asked By Lord Morris of Manchester

To ask Her Majesty's Government what consultations they have had with the Police Federation about current issues of importance to its members.

Lord Morris of Manchester: My Lords, I beg leave to ask the Question standing in my name on the Order Paper. In doing so, I declare an interest a former parliamentary adviser of long-standing to the Police Federation.

The Minister of State, Home Office (Baroness Browning): There is a programme of regular ministerial meetings with the Police Federation at which it can raise matters of importance to its members. Recently, on 11 August, my colleague the Parliamentary Under-Secretary of State for Crime and Security met the Police Federation leadership on the Home Secretary's behalf.

Lord Morris of Manchester: My Lords, I am grateful to the Minister for her reply, but is she aware that the Police Federation was at no time consulted on what the effects would be of cuts in spending on front-line services-which of course its members provide-and that the Chief Inspector of Constabulary warned that cuts in the policing budget could not be achieved without damaging them? Is the Minister further aware that in the past year the number of police officers has been depleted by over 4,000 and that, in the words of their own journal, "morale in the service is at an all-time low"? Yet the Home Secretary gave police officers the pledge,

"I will always back you ... and fight for you".

My Lords, was performance ever more remote from promise?

Baroness Browning: The Home Secretary has consistently been clear that she has the utmost respect and admiration for the bravery and dedication of the men and women of our police forces, but that does not mean unquestioning agreement at all times. The Home Secretary has a responsibility to the taxpayer to tackle the deficit and improve the service to the public. The police cannot be exempt from their share of cuts but, as I have already informed the House, there are regular meetings at which members of the federation can raise any issue they like with Ministers. I understand that, apart from the regular series of meetings that are held,

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additional meetings are held at certain times, such as the one with my honourable friend Mr Brokenshire following the riots.

Lord Rosser: My Lords, we are all grateful for the commitment shown by members of the Police Federation across the country, not least for sometimes working 20 hours a day to assist in tackling the riots and in bringing those involved to justice. However, that all costs money in extra policing at a time when police budgets are being squeezed. Bearing in mind that the Home Secretary has recently said that applications from police forces for a special grant to cover the additional costs will only be "considered", could the Minister say whether the Prime Minister's Statement in the other place on 11 August that:

"The Treasury is standing ready to assist police forces. Clearly, the bill for the Metropolitan police force for the past few days will be large and, if they continue to deploy in those numbers, it will get larger and the Treasury will stand behind that",-[Official Report, Commons, 11/8/11; col. 1065.]

still represents government policy in the light of the Home Secretary's statement?

Baroness Browning: My Lords, we have yet to receive from any police force its Bill in respect of the riots. We have had some indication in one or two forces-for example, I think that some evidence given to the Home Affairs Select Committee earlier in the week would have indicated the nature of the bill-but we cannot at this stage give an open assurance that every bill as presented will be paid. As we understand it, some of these bills are likely to contain quite significant sums relating to opportunity costs. I think that the House will understand that, when I stand at the Dispatch Box and say that we will honour every bill as presented, we will honour our pledge but that we will want to examine those bills very carefully.

Lord Richard: The Minister failed to answer the Question asked by my noble friend Lord Morris, so perhaps I could pose it again. Is it true that the Police Federation was not consulted about the effect on frontline policing of the proposed cuts?

Baroness Browning: My Lords, the nature of those proposals are such that, in order to give a definitive answer to the noble Lord, I will have to write to him. I will want to take careful advice as to what opportunities were given for discussion or written consultation. The noble Lord is shaking his head. I think that he would prefer a definitive answer in writing than for me to wing something at the Dispatch Box.

Baroness Hamwee: The topic of pensions for the police must obviously be on the mind of the Police Federation as well as on all our minds. Does the Minister have any news on tackling that issue? But thinking about retirement on a more personal basis and satisfaction for people who want to extend their working lives, is there anything that she can say about the retirement age of police officers and about making use of their experience and the investment

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that has been made in them for the good of the forces and of society, not losing them at a relatively early age?

Baroness Browning: I can tell my noble friend that public service pension schemes are consulting formally on the proposal, for example, to increase employee contribution rates. The consultation for the police pension scheme is happening within the Police Negotiating Board. The Home Secretary wrote to the Police Negotiating Board on 29 July and has asked for views on its proposal by the end of September.

Lord Brooke of Alverthorpe: In the light of the response that the noble Baroness gave to my noble friend Lord Richard, will she copy the letter that she is sending to him to the rest of the House? That is precisely what the Question is about.

Baroness Browning: When I reply to the noble Lord, Lord Richard, I would be very happy to place a copy in the Library of the House.

Lord Hughes of Woodside: Will the Minister, for whom I have the highest regard, have a word with her private office and her advisers? The questions posed by my noble friends Lord Morris and Lord Richard clearly should have been anticipated. She has been badly advised and put in a difficult position. She should sort her private office out.

Baroness Browning: I hesitate to criticise my civil servants. It is not something that I would wish to do. In terms of the issues around police federations, the substance of the Question was not specifically about that consultation. It was about how much contact Ministers had had with the Police Federation, which I answered in terms. As I have explained, I am very happy to write to the noble Lord because I do not know off the top of my head what opportunities or attempts there were for any consultation specifically on that issue. But I will inform the House in writing and it will be a substantive reply.

Lord Grocott: I would ask the Minister to give a reminder to her colleagues, who can sometimes be careless with statistics when they talk about the proportion of police officers who are on the beat at any given time and complain about it being a low figure. The simple arithmetic, which I know she is aware of, shows that on a three-shift system, the maximum number of people available to be on the beat, even with no holidays, sickness or days off, would be 33.3 per cent of the available force. Very misleading statistics are being given out when Ministers complain about what they describe as being the low proportion of officers on the beat. I am sure they understand that in a 24-hour system of cover, that is bound to be the case.

Baroness Browning: My Lords, we understand the shift patterns, but other reasons can affect the number of police officers on the front line at any given point. As I have said many times in this House, we leave

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matters regarding individual policing and independent decision-making on force deployment to chief constables, and rightly so. None the less, we are aware that we are asking the police to take some tough decisions, and chief officers are responding well to that. In turn, they have to make difficult decisions about back office, middle office and front-line police officers. We also rely on Her Majesty's Inspectorate of Constabulary which, in several reports including its most recent one, has indicated some trends which I think will be helpful to chief officers and to inform the rest of us.

Public Disorder: Eviction from Social Housing

Question

11.16 am

Asked By Lord Dubs

To ask Her Majesty's Government what discussions they have had with local authorities about the eviction from social housing of families with members involved in rioting or looting.

The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Baroness Hanham): My Lords, during and since the riots, a number of discussions have taken place between Ministers and local authorities, and eviction was one of many issues discussed. The Department for Communities and Local Government is currently consulting on proposals to extend the existing discretionary ground for possession for anti-social behaviour to include tenants or family members who have been convicted of the sort of criminality witnessed during the recent riots, wherever that criminality took place.

Lord Dubs: My Lords, is the Minister aware that many people will find it shocking that innocent members of a family could be evicted because one member has committed a criminal offence? Are we to stand by and watch families and innocent children being turned out on the streets?

Baroness Hanham: My Lords, I think there would be a general view among the public that those who abuse social tenancies by whatever they do should not expect to continue to enjoy the privilege of those tenancies. It is already the case that those who are subject to anti-social behaviour orders and commit crimes within their locality are subject to eviction. The consultation on this will be a discussion of whether to extend the current powers. The noble Lord asked about the circumstances of families and children. The people who do this will be intentionally homeless, but local authorities will have the same responsibilities as they have currently.

Baroness Hussein-Ece: Is my noble friend aware that only 8 per cent of people in England are council tenants? Does she think it is fair or just that council tenants accused-some have just been accused and not even convicted-of riot-related offences should be

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selectively punished? Is she also aware that if and when these families are evicted, they will have to live somewhere? Councils will have a duty to house them, which may cost more public money?

Baroness Hanham: My Lords, I think there is probably a difference between people who are paying for their own accommodation and those who are being cared for or given accommodation by local authorities at a subsidised rent. As I said in my previous answer, this is not a matter that can be dealt with at the moment because the law would have to be changed to enable people convicted of anti-social behaviour or a crime committed not within their local area to be evicted. We have seen some spectacularly dreadful sights in our country recently and it is only right that we should be able to consider whether there are other ways of dealing with this. That is what is being done.

Lord Kinnock: My Lords, we are having difficulty getting answers from Ministers to the very specific Questions set out on the Order Paper, whether about consultations with the biggest of the trade unions in the British police service or on the question of families. As a compassionate woman herself, will the Minister tell us whether she believes that there should be a change in the law that would enable the families of people involved in and convicted of rioting offences to be evicted from their homes-yes or no?

Baroness Hanham: My Lords, I cannot possibly pre-empt consultation.

Noble Lords:Oh!

Baroness Hanham: Noble Lords may not like my answers, but I shall give my answers. It is not up to me to decide this matter at present. There is a consultation on whether the law around anti-social behaviour and criminality in social housing, and when people can be evicted, can or should be extended in the circumstances that we have seen in this country. I do not understand how much clearer I can be. That is the third time I have said it.

Lord Hamilton of Epsom: My Lords, surely we are talking here about parental responsibility. I do not think that anybody in this House can feel that parents should not be responsible for their children, particularly when they are involved in riots.

Baroness Hanham: My Lords, clearly, the answer to that is yes. It is also clear that a number of the parents of those who were involved in the riots did not know where their children were at the time.

Baroness O'Loan: My Lords, if a member of a family has allegedly committed some rioting offence and the remaining members of that family are completely uninvolved in their activities, and if they are evicted from their home and thereby lose what may be the only security they have, is it not possible that other members of the family may be driven into worse conditions and ultimately into crime?

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Baroness Hanham: My Lords, there are always outcomes when people behave badly. There is also a responsibility within families. We have seen awful riots. People were made homeless as a result of them. There is a responsibility within families to know what their members are doing on the basis that what they do may have an impact on their family.

Arab Partnership Initiative

Question

11.22 am

Asked By Baroness Nicholson of Winterbourne

To ask Her Majesty's Government what they hope to achieve through the Arab Partnership Initiative in the wake of the Arab Spring.

The Minister of State, Foreign and Commonwealth Office (Lord Howell of Guildford): My Lords, the Arab Partnership supports the building blocks of democratic societies-that is, effective institutions, political pluralism, free media and economic fairness-across the Middle East and north Africa. Working with a wide range of regional partners, including Governments, Parliaments, the judiciary and the media, we are supporting long-term economic and political reform. As the Arab spring has demonstrated, this is the only route to a more stable and prosperous Middle East/north Africa region. Supporting this goal reflects not only the United Kingdom's values but also our direct national interests.

Baroness Nicholson of Winterbourne: I thank the Minister for that comprehensive reply. I congratulate him and his colleagues on the British Government's robust response to and support for the Arab spring. Will the Arab Partnership Initiative incorporate some support for the public good in Iraq, where democracy is now well established with, for example, its Government's attempts to provide health services, education, energy and a free market? Can the Arab Partnership move ahead on those fronts in all the Arab spring countries?

Lord Howell of Guildford: Yes, it most certainly can. There are Arab Partnership funds for Iraq but they are on quite a modest scale because-as I know my noble friend is well aware-Iraq is potentially a rich country with gigantic resources of oil, phosphates and so on. Money is not the main problem; the problem lies in technical and administrative support. The Arab Partnership is involved, for example, in the development of broadcasting and accountable institutions and upholding human rights. We are working with the Government of Iraq across the whole field of energy, education and health. There is active engagement in ensuring that this potentially brilliant country comes back to the full comity of nations.

Lord Lea of Crondall: My Lords, British Arabs are not unaware of the meaning of the Arab spring, yet there are none of them in this House to give us the benefit of their advice. That is despite the fact that

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there are 200,000 or 300,000 British Arabs-the census will give the exact figure in due course. Does the Minister agree with me that rectification of this anomaly-it is rather an invidious position-is long overdue, not only on its own merits but in terms of the perception of Britain in the Arab world?

Lord Howell of Guildford: That is not actually a matter for me. However, it gives me the opportunity to say that your Lordships' House is already much more representative of this various and variegated nation of ours than people often give us credit for, and it could certainly become more so. I agree with the noble Lord that it is a valid point.

Lord Hylton: My Lords, my question concerns Tunisia. Will the funds that have already been agreed be released immediately so as to reduce unemployment and give hope to young Tunisians? Will the Government also encourage the resumption of normal tourism right away?

Lord Howell of Guildford: I agree with the noble Lord that the tourism aspect is very important not only in this case but obviously for Egypt and neighbouring countries. It is a vast part of their economies. On the noble Lord's specific question, the Arab Partnership is supporting democratic transition in Tunisia, providing technical assistance and political and economic reform-although, obviously, the Tunisians are taking the lead in all those things. We have an Arab Partnership programme worth about £1 million which is deliberately covering a whole range of assistance and support. That includes the matters to which the noble Lord referred.

Baroness Falkner of Margravine: My Lords, I congratulate my noble friend on the Government's extension of the scheme to up to £110 million. As the scheme was meant to be multilateral, what other countries have contributed generously to it, particularly those in the rich Arab world which have a special obligation to help their brothers?

Lord Howell of Guildford: A number of countries have contributed but the partnership funds are mostly administered through the so-called G8 Deauville partnership and the European Neighbourhood Policy. The countries co-operating in this include Kuwait, Qatar, Saudi Arabia, Turkey and the United Arab Emirates. So there is a good support cadre working alongside us and our colleagues in promoting these aims.

Lord Triesman: My Lords, the programme is certainly to be welcomed and we share the Minister's ambition that it should help strengthen the rule of law, democratic practice, institution building and the development of think tanks. We welcome all of that. However, can the Minister tell the House what specific targets the Government are setting and how they will measure the outcomes that will result from the expenditure of these significant sums? I suspect that the House would

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regard this programme as sufficiently important to wish to see a timely-not necessarily frequent, but periodic-report on progress on those specifics.

Lord Howell of Guildford: We will certainly try. It is not all that easy to pin down and specify the outcomes as time goes by. I know that the noble Lord will be the first to appreciate that these developments, particularly in the field of democracy, are owned by the countries themselves. We are not in a position to score specific targets and to tell them to get to this point or that point. That is not at all the language in which we conduct our affairs. Our respect is for these countries and for their efforts to struggle forward to better and more settled democratic structures. It will not be easy for any of them, but we will give our support and try to score the outcomes and results that we want.

Lord Dykes: Does the Minister accept that the Palestinians also deserve their Arab spring after 43 years? Will he and the Government work very hard to persuade the United States Government not to exercise a veto-well over the 30th since 1967-stopping Israel behaving according to international law?

Lord Howell of Guildford: As we discussed in this House earlier in the week, it would be desirable to avoid any confrontation and any vetoing. It would also be desirable for as many nations of the world as possible to carry forward their recognition of Palestine, and to move to nationhood and establish some negotiation with Israel which will point them in that direction.

Lord Avebury: Is it consistent with the objectives that the Minister outlined in his first Answer to my noble friend for the Government to invite Bahrain to the arms fair, which is currently being held in London, when the Bahraini security forces are gunning down peaceful demonstrators on the streets of their country?

Lord Howell of Guildford: On the general principle of arms sales, I am sure that my noble friend would not disagree with the proposition that nations should have the right to defend themselves and that our industry and aid for that should be carefully calibrated to do so. We control the export of arms and export licences very carefully indeed. There is no evidence that our weapons or supplies have been used in Bahrain for riot control. In fact, we withdrew 18 licences for exports just to make sure that that would be so. So I do not think that there is any inconsistency. We work with Bahrain for a more positive result and an end to the violence there, which has been deplorable.

Armed Forces: Accommodation

Question

11.30 am

Asked By Lord Lee of Trafford

To ask Her Majesty's Government what are the implications for defence service accommodation of ending the £1.5 billion programme to upgrade decaying barracks and married quarters.

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Lord Wallace of Saltaire: My Lords, there are no plans to end the upgrade programme for service accommodation. However, from 2013, defence budget projections foresee a three-year pause in the upgrade of some 800 service family accommodation properties-SFA, in defence jargon-and some single living accommodation bed spaces, or SLA, each year. A further 3,000 upgraded bed spaces will be developed by 2014 and routine maintenance will continue to be fully funded. This decision reflects the substantial financial challenges we inherited from the MoD budget and our determination to protect front-line operations.

Lord Lee of Trafford: Is my noble friend not embarrassed that while the Government pledge support for the military covenant, of which a key element is housing, and while the Deputy Prime Minister yesterday pledged fast-tracking for 40 major infrastructure projects to help the construction industry, the MoD makes its unique contribution to joined-up government by going in totally the opposite direction and deferring essential maintenance expenditure? Apart from the obvious disadvantage to service personnel and their families, have we not learnt by now that deferring this sort of expenditure always costs a lot more in the long term?

Lord Wallace of Saltaire: My Lords, I am glad that the noble Lord has read the excellent speech that the Deputy Prime Minister gave yesterday morning, which I commend to the House. I am sure that many others will want to read it. We are continuing to work within the MoD budget to see whether we can generate additional funds for purposes such as these. We are being deliberately cautious in making forward projections, in contrast to the overoptimistic, even reckless, forward projections of the previous Administration in defence budgeting.

Lord Rosser: My Lords, when the Secretary of State for Defence made announcements in July and September on the welcome procurement of 14 Chinook helicopters, he did not give details of how they were being financed. Maybe we are now beginning to find out, as it now emerges that the housing improvement programme for military personnel, which was put in place by the previous Government, is being halted for three years. When did the Secretary of State publicly announce these specific cuts in the housing improvement programme, and through which channels? Also, what other cuts directly affecting the welfare of Armed Forces personnel are being made that have not been or will not be announced with quite the same vigour as, for example, the Chinook helicopter programme?

Lord Wallace of Saltaire: I should pay tribute to the previous Administration for their efforts to improve service accommodation. The current situation is that 96 per cent of service accommodation has now been upgraded. We are talking about some 2,000 service family houses and about the projection that, in two years' time, there will be a pause in further upgrades. I am told by officials that the majority of the 2,000 houses that have not yet been upgraded will either have been disposed of or will have been upgraded by 2013.

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Lord Craig of Radley: My Lords, does the Minister recall this quotation:

"Poor accommodation is an issue which is creating difficulties in retaining personnel in the armed forces"?

That was Dr Liam Fox as shadow Defence Secretary in 2007. Has the Defence Secretary changed his mind?

Lord Wallace of Saltaire: I assure the House that the Defence Secretary has not changed his mind, and I repeat: we should pay tribute to the previous Administration's considerable efforts in recent years to upgrade service accommodation, which are continuing. A further 900 houses have already been upgraded since this Administration took office. We are very conscious of the importance of this programme. Perhaps I should also mention that alongside it, a substantial programme is to be undertaken in the next five years of service accommodation adjustment to accommodate troops who will be returning from Germany. That is not part of this pause.

Lord Palmer of Childs Hill: My Lords, as the Minister will be aware, at every stage of the Armed Forces Bill I have raised the dire state of houses for service personnel. I asked whether the Government could look at the use of housing associations in garrison towns to improve housing earlier than he has indicated. Will he confirm that they will urgently look at this in the light of recent revelations?

Lord Wallace of Saltaire: As I have indicated, the MoD recognises the importance of this to service welfare and is doing everything it can to ensure that the programme continues.

Lord Barnett: The Minister referred to what the Deputy Prime Minister said about increased expenditure, capital matters and infrastructure. Did the Deputy Prime Minister have the agreement of the Chancellor?

Lord Wallace of Saltaire: The DPM, as others do, speaks for the coalition Government as a whole.

Lord Dannatt: My Lords, does the Minister agree that, whereas one can count what constitutes as savings in the reduction in the housing expenditure programme, you cannot calculate in the same way the cost of the impact on morale? Is he able to tell the House, either now or later, what steps are being taken by the Ministry of Defence to engage with the service families associations to inform them about the changes to the upgrade of their accommodation, bearing in mind that many of the occupants of those houses will probably now be undergoing their second or third tour of duty in Afghanistan?

Lord Wallace of Saltaire: My Lords, I have asked that question of officials and I am assured that the service welfare charities and other bodies have been fully consulted on this.

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Lord Touhig: My Lords, the defence estate represents 1 per cent of the land mass of Britain and is worth over £15 billion. Have the Government looked at disposing of some defence estate assets, a policy that I pursued when I was a Defence Minister? There is a lot of money there that could be used to improve the quality of accommodation for our service men and women.

Lord Wallace of Saltaire: I assure the noble Lord that the Government have looked at that, although I suspect that we will not follow the example of the Icelandic Government in considering selling large chunks of the defence estate to Chinese investors.

Business of the House

Timing of Debates

11.37 am

Moved by Lord Strathclyde

That the debate on the Motion in the name of Baroness Wheeler set down for today shall be limited to two hours and that in the name of Lord Myners to three hours.

Motion agreed.

Armed Forces Bill

Order of Consideration Motion

11.37 am

Moved by Lord Wallace of Saltaire:

That the amendments for the Report stage be marshalled and considered in the following order:

Clauses 1 to 14, Schedule 1, Clauses 15 to 26, Schedule 2, Clauses 27 to 29, Schedule 3, Clause 30, Schedules 4 and 5, Clauses 31 to 34.

Motion agreed.

Welfare Reform Bill

Order of Consideration Motion

11.37 am

Moved by Lord Freud

That it be an instruction to the Grand Committee to which the Welfare Reform Bill has been committed that it considers the Bill in the following order:

Clauses 1 to 31, Schedule 1 , Clause 32, Schedule 2, Clauses 33 and 34, Schedule 3, Clause 35, Schedule 4, Clause 36, Schedule 5, Clause 37, Schedule 6, Clauses 38 to 48, Schedule 7, Clauses 49 to 69, Schedule 8, Clauses 70 to 88, Schedule 9, Clauses 89 and 90, Schedule 10, Clauses 91 to 99, Schedule 11, Clause 100, Schedule 12, Clauses 101 to 136, Schedule 13, Clause 137, Schedule 14, Clauses 138 to 141.

Lord Foulkes of Cumnock: My Lords, in the debate on this yesterday, the government Chief Whip said:

"I hope that it is noticed that I am stressing Grand Committee, not the Moses Room ... I fully recognise that a number of noble Lords who use wheelchairs and have other mobility restrictions would find the Moses Room difficult, and I therefore discarded that as an option".-[Official Report, 14/9/11; col. 753.]

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She went on to describe the options that were being considered by the Director of Facilities. I know that a number of Members, particularly on the Cross Benches, supported the Government on the basis of that assurance. Just before I came into the Chamber, I was told that this information was wrong and in fact the Moses Room is going to have to be used. On the basis that the House made its decision on misinformation, I hope that this matter can now be reconsidered. I hope that the noble Lord the Leader of the House will give an assurance to the House that since we made that decision on the basis of totally incorrect information, it is now right for the House to consider the matter again.

Baroness Anelay of St Johns: My Lords, I am disappointed that the noble Lord, Lord Foulkes, did not seek to alert me to the information that he had, nor has he given any information to justify what he has just said. No doubt whoever said this to him did so in good faith, but they are wrong. The basis upon which the House made its decision yesterday stands.

Lord Bassam of Brighton: My Lords, I apologise for this intervention, which is, I confess, rather opportunistic. However, I have been given a copy of our forward business. I hate to say this but it lists Grand Committee on the Welfare Reform Bill as being held in the Moses Room. I assume and hope that this is a typographical hangover from an earlier iteration of the forward business. However, the House deserves to know, on the record, that we will not be using the Moses Room for Grand Committee on the Welfare Reform Bill. That seemed to be a clear undertaking that was given to the House yesterday.

Baroness Anelay of St Johns: My Lords, I am grateful to the noble Lord, Lord Bassam, for pointing out what is clearly a typographical error. If that is the source of information to which the noble Lord, Lord Foulkes, referred, it is a pity that he did not make that clear. He may have other sources of information. The assurance that I gave stands. I am not accustomed to having the veracity of my statements challenged, which is clearly what is happening. This is opportunistic. May we please proceed to the business in hand?

Lord Foulkes of Cumnock: To be absolutely clear, I am not going to say who it was, but there is no more reliable person in this Chamber than the person who told me.

Motion agreed.

NHS Future Forum

Debate

11.41 am

Moved By Baroness Wheeler

To call attention to the extent of the implementation of the recommendations of the NHS Future Forum in the Health and Social Care Bill; and to move for papers.

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Baroness Wheeler: My Lords, this is an important debate. It is the first opportunity for the House to discuss the NHS following the First Reading of the Health and Social Care Bill last week. It takes place in the context of the continuing debate, controversy and deep unease over key aspects of the Bill, its incoherence and complexity even in this, its fourth iteration.

When the Future Forum report was published in June, hope sprang eternal among the many critics of the original Bill-patient groups, specialist groups for patients with long-term conditions, medical and other staff, trade unions, carers and Members across both Houses-that the report and the Government's response to its core recommendations signified a major change of approach and strategy. My noble friend Lord Darzi was among those who recognised this change in the language and approach of the Future Forum and the Government's response, welcoming the stated main thrust that the quality of service and care should remain the organising principle of the NHS.

We on these Benches welcomed the Future Forum report in the context that it had not covered all aspects of the Bill. We pay tribute to the work that the forum undertook in the eight weeks that it had to consult, deliberate and produce its report. My noble friend Lady Thornton, in response to the Minister's Statement on the forum on 14 June, recognised that the Government's proposed changes in response to the forum were indeed significant. Crucially, however, she urged Members across the House not to suspend their critical faculties but to wait for the publication of the revised Bill to ensure that the rhetoric was matched by the reality. We now have the reality before us. Three months on from the Future Forum report, fundamental questions remain about the post-pause Bill. Even after the Committee stage and Third Reading in the House of Commons, we are still no clearer about why this massive upheaval is needed. What is the Government's future vision for the NHS? Who will be responsible and accountable for making decisions that will benefit patients and improve the NHS?

At the heart of the continuing problems are two issues that are fundamental to the ethos of an NHS that is free at point of need and provides a national public service. First, there is the importance of the Secretary of State having a continuing duty to ensure that we have a comprehensive NHS. Secondly, we must address the real concerns over Part 3 of the Bill, which places competition at the heart of the NHS and sets up an economic regulator that still has substantial powers to promote competition in the NHS. The Future Forum was clear on these issues and the recommendations are welcome and straightforward. However, the amendments to the Bill do not reflect that or translate the Future Forum's intentions into legislation.

The Commons deliberations have failed to resolve the issue of the Secretary of State's duty and role in relation to the NHS. Indeed, as the noble Baroness, Lady Williams, said in her recent Observer article, "confusion thickens". My honourable friends in the other place, supported by authoritative legal opinion, have underlined that if the Bill becomes law then the duty to provide a National Health Service would be

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diluted and lost. The Government argue strongly for greater freedom for clinical commissioners from political interference. However, as the noble Baroness, Lady Williams, has said,

"to throw out accountability in order to tackle petty interference is to undermine democracy itself".

The health professionals remain deeply concerned, as seen in the letter in last week's Times from the BMA, the royal colleges of nursing, GPs, midwives and psychiatrists, and the governing bodies for the physiotherapists and occupational therapists. They warn that the new Bill will destabilise the NHS and requires further significant amendments. They say:

"Though the language may have changed, the Government remains committed to opening up the NHS further to market forces as a priority".

The Patients Association sums up the ever increasing complexity of the Bill and the NHS structure when it says:

"It is unclear how the original commitment from the Government to streamline the NHS and remove bureaucracy will be met by current changes-one layer of bureaucracy being replaced by another".

How does a Bill which adds more layers and bodies-increasing the number of statutory bodies from 163 to 521-substantially increases costs and fails to provide a clear rationale why it is all necessary succeed in improving quality of care and promoting integration?

At one of the many excellent seminars that noble Lords have had on the Bill at its various stages, we were promised by the Under-Secretary at the Department of Health an organigram of the proposed new NHS. That was perhaps a rash promise in view of the sheer number of organisations it has to include, but its production would at least help us to try to understand how the reforms will work as a whole and how they stand some chance of improving the quality of patient care. We know that there is a very real risk that the increased complexity added to the NHS structure will slow down or prevent decision-making, either through more bodies becoming involved in decisions or where it is not clear which organisation is ultimately in charge. How do these reforms support effective and speedy decision-making?

After the forum report publication, David Cameron said, "We have listened, we have learned and we are improving our plans for the NHS". Nick Clegg was beside himself with joy when he declared a great victory for his party, with 11 out of 13 demands for change laid down by the Liberal Democrat conference being achieved. However, the reality is that the scorecard result is far more modest, as a number of prominent Liberal Democrats have recognised. The Future Forum made important recommendations which have not been dealt with by government amendments to the Bill, and which the Government have consistently blocked Labour, and a few Lib Dems, from amending.

In passing, as a former chair of the Labour Party conference committee in charge of the conference's agenda programme, I have been following with interest the attempts to block debates and votes on the NHS at next week's Lib Dem conference. For what it is worth, in my experience, keeping issues off the agenda usually results in the people affected going straight to the

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media and getting even more coverage than they would have had anyway, so I shall watch developments with interest and be very thankful that I am not the one defending that position on the conference platform.

In respect of the Future Forum report, I place on record for the avoidance of doubt that, of course, we recognise that the Government have acted positively on a number of its recommendations, including the change to clinically led commissioning and clarity on the wider input from health professionals. They have also clarified some of the accountability issues of clinical commissioning groups and have recognised that the timetable for reform could not be achieved. However, many concerns and issues remain in these areas and we will pursue them as we deal with the Bill clause by clause in the coming weeks.

I return to the second major area of concern: competition and the role of Monitor. The forum raised strong concerns about promoting competition as an end in itself. Recognising the problems with the original Bill, the report recommended that it should be changed to make it very clear that Monitor's primary duty is not to promote competition but to ensure the best care for patients. Specifically, it recommended that Monitor's powers should,

"promote choice, collaboration and integration".

This is still missing from the Bill. The Government have also ignored the spirit of the Future Forum recommendations that sought a greater balance between competition, and co-operation, collaboration or integration. Compare and contrast the 90-odd clauses of the Bill on the regulatory regime for competition with the woolly references to organisations having to,

"act in an integrated way",

with no definition of integration.

The Bill remains as lopsided as ever and, for a Health and Social Care Bill, there is actually precious little about social care. However, that is a whole debate in itself.

The Future Forum further recommended that the Bill be changed to clarify that Monitor be a sector regulator for health, not an economic regulator. While the duty to "promote competition" has been removed, it has been replaced with a new duty of "preventing anti-competitive behaviour". This flipping of the language does not substantially affect how Monitor carries out its duties, its cost and its reach across the whole NHS.

Moreover, although the Bill moves away from referring to economic regulation, Monitor is still to be given sweeping pro-competition powers, including concurrent powers with the Office of Fair Trading under the Competition Act 1998 and the Enterprise Act 2002. These powers, alongside the power to license every provider to the NHS, have not been changed by the amendments. Monitor therefore remains an economic regulator in all but name. How will the Government address these concerns and issues? How will the issue of the role of the Secretary of State and the role of Monitor be resolved so that the service does not face constant legal challenges in the future about who is ultimately responsible and accountable for decisions, or about how commissioning has been undertaken and contracts awarded?

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There are other issues. On transparency, the Future Forum recommended that all providers of NHS-funded services should hold their board meetings in public. The Government rejected this recommendation in their response to the Future Forum. This means that decisions about NHS services will be made in private, and could be marked "commercial in confidence". The Government have similarly failed to bring greater transparency to clinical commissioning groups and foundation trusts by allowing substantial loopholes and leeway. There is a get-out clause for CCGs that want to avoid meeting in public. The wording of the Bill states,

"except where the consortium considers that it would not be in the public interest to permit members of the public to attend a meeting or part of a meeting".

Foundation trusts can exclude members of the public from a meeting for special reasons with no explanation about what these are. This leaves this clause open to abuse.

There is also the important issue of the private patient cap and cherry picking by private providers. Professor Field, the Future Forum chair, admitted that the issue of the private patient income cap was not looked at by the forum and stated that,

"the feeling was that the private patient cap should actually stay".

The Government have tabled no amendments to the clause abolishing the private patient cap. The implications of the abolition of the cap and increasing financial constraints that the service is operating under are already beginning to be seen. The Government's amendments on cherry picking in the Bill only require that a provider be transparent in how it chooses its patients, and do not deal with preventing providers from picking the easiest and most profitable patients. All in all there is a very mixed and confused picture of implementation and translation into the Bill of the forum's recommendations.

Finally, I come back to the Future Forum itself, as we now learn that its work is to continue with listening exercise mark 2-this time on education and training, integrated services, public health and information. Can the Minister give us more details of this? How does he envisage that this work will be fed into the Bill and what impact it will have on its parliamentary passage? Are we to have further amendments to, for example, the integration and information clauses? How long do the Government envisage the role of Future Forum continuing? Is it to be a permanent listening body-another body to be placed on the much awaited organigram? If so, when will the normal rules of public appointments and declaration start to apply to its membership? Are we to have further "pauses"?

Noble Lords will recognise that I set great store by getting the promised organigram. I am really looking forward to receiving it. When it comes, I will be asking myself three key questions. First, is this the structure to take the NHS forward into the future and provide the integrated care pathways that people with long-term conditions must have? Secondly, how will this help the NHS to deal with the Nicholson challenge of £20 billion savings over five years? Thirdly, will it now be easier for patients to find their way through the system and be clear who has responsibility for making decisions about their care? I think I already know the answers.

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11.55 am

Lord Ribeiro: My Lords, I thank the noble Baroness, Lady Wheeler, for introducing the debate. The Future Forum addressed four core themes, many of which she has covered: choice and competition, patient involvement and public accountability, clinical advice and leadership, and education and training. The latter, as she correctly described, is still work in process under Julie Moore, who led the forum's work on education and training. The Government have accepted that deaneries will oversee the training of junior doctors and dentists, and that that will be under the umbrella of Health Education England. That should give some reassurance to the profession, but it remains unclear who should be responsible for quality assurance of training. I do not believe that a "one size fits all" approach works, particularly with respect to the craft specialties. In this, I include surgery-here I must declare an interest as a past president of the Royal College of Surgeons. Prior to the introduction of the postgraduate medical education and training board, known as PMETB, currently responsible for quality assurance, colleges had the responsibility for accrediting training. I believe that the craft colleges are ideally placed to undertake the quality assurance of training, ensuring professional clinical input under the auspices of Health Education England.

Turning to clinical advice and leadership, the forum called for multiprofessional involvement and leadership at all levels of the system. The NHS commissioning board is a good place to start. I welcome the Government's statement that the NHSCB will establish close links with the royal colleges and other professional bodies to entrench partnership-working at the national level. The board will have a medical director and a chief nursing officer-rather reminiscent of the old days of matron, senior medical officer and administrator, who used to run hospitals before the 1974 reforms. The board needs to be independent and free of political interference.

The role of the Secretary of State has been clarified in the Bill. I know, after following the debates in the other House and the views expressed by the noble Baroness, Lady Wheeler, that there is still concern about the role, but I believe that it is clearly expressed in the newly amended Bill. The Secretary of State will have a mandate to provide clear direction to the board, and the board will then be accountable to the Secretary of State.

One of the biggest problems that any Secretary of State faces is the reconfiguration of services-in particular, hospital services. The King's Fund this month produced a report, Reconfiguring Hospital Services. The report highlights the urgent need for clinical reconfiguration of hospital services in some locations to improve the quality and safety of patient care. The ability of politicians to interfere with the process of reconfiguration is well known, and the sight of MPs of all political persuasions on the picket line outside hospitals threatened with closure is not uncommon. The evidence presented by Chris Ham of the King's Fund of the Ontario experience in Canada suggests that an independent body can make hard decisions. The health service's restructuring commission set up in Ontario in 1996 to restructure

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hospital services not only achieved its mandate but saved $1.1 billion in a total spend of $17 billion. This amount was then reinvested in other services.

The commission drove the establishment of clinical networks, a recommendation made by the Future Forum, and invested in home care and long-term care to facilitate hospital closures where required. Chris Ham also noted that the process used was not dissimilar to that used in this country to support the closure of mental and learning disability hospitals in the 1990s. The Government then transferred funding ahead of hospital closure to develop community services.

We must learn from these lessons. The Secretary of State should not be concerned with operational matters, but should be focused on strategy. Liberating the NHS implies liberating the service to rely more on professional clinical leaders. Armed with evidence, backed by research-another new responsibility for the Secretary of State-evidence-based practice can be used to reform the health service.

I believe that delay is not an option. The impact of specialisation, and in particular the European working time directive, of which we have heard much in this House over the past few years, will make it impossible to provide emergency surgical cover in all hospitals with accident and emergency departments in England. The development of trauma centres in London will create a new paradigm shift in acute care management. Reconfiguration of emergency services will be an inevitable consequence of this change, which will ultimately affect all hospitals in England. The Darzi principles, mentioned by the noble Baroness, Lady Wheeler, are important. They introduced quality outcomes based on the effectiveness and safety of the services delivered, and the quality of the patients' experience remains a fundamental principle on which, I believe, the Health and Social Care Bill can build.

12.02 pm

Baroness Jolly: My Lords, I thank the noble Baroness, Lady Wheeler, for securing this timely debate and for her thought-provoking speech and I thank the noble Lord, Lord Ribeiro, for his speech. I believe I speak for all my colleagues on these Benches when I say that we welcomed both the listening exercise, a process to which we contributed enthusiastically, and the report of the NHS Future Forum. We also welcome the Government's commitments to implementing the bulk of the Future Forum's recommendations. However, there are three broad areas-I think we shall revisit these three areas throughout the debate-on which I would appreciate further clarification from the Minister, in particular on accountability, local government involvement, health education and workforce planning.

First, it is important for the functioning of the NHS as a whole to get the Secretary of State's duties and powers absolutely right. We on these Benches have long advocated the devolution of power away from Whitehall wherever possible; and the Secretary of State should not be able to micromanage the health service. But there is a balance to be struck. The Health Secretary must remain ultimately accountable to the electorate, through Parliament, for the system as a

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whole; and, on the other side of the coin, he or she must have appropriate powers to intervene where the system has broken down.

Therefore, I am pleased that the Secretary of State will now have an express duty,

"to secure that services are provided in accordance with this Act",

rather than, as hitherto, merely to,

"act with a view to securing",

their provision. This wording ought to ensure that the Secretary of State will continue to be accountable to Parliament for what goes on in the NHS, while also recognising that day-to-day operational control rests with clinicians and managers.

I welcome, also, the clarification of the Secretary of State's powers of intervention in cases of substantial failure, and in particular the requirement that he or she be transparent in publishing the reasons for any such intervention. Set against these powers, the Secretary of State also has an express duty to promote the autonomy of other actors and players in the health service. This is a laudable duty, because it militates against political meddling. However, can my noble friend reassure me that this duty will not hamper the Secretary of State's power to intervene when necessary in cases of failure? If there is a chance that it might have that effect, will he consider appropriate amendments to ensure that the right balance is struck?

Secondly, I am delighted to see local government attracting a greater role in the health service under the Bill. Assuming that the provisions are properly fleshed out and implemented, there is another opportunity here to press the localism agenda that is common to both parties in the coalition. The new health and well-being boards represent an opportunity to put more power in the hands of elected local representatives and their communities and so bring health and social care together in a meaningful way, but even after the Government's amendments, the Bill leaves almost all the detail of this to regulations. Will this House have sight of the draft regulations before the end of Committee in your Lordships' House? Will the regulations, in particular, detail appropriate outcomes, incentives and levers so that health and well-being boards are able to ensure that the integration of health and social care services actually takes place in their communities? What will happen, for example, where a clinical commissioning group and its health and well-being board cannot agree on the contents of the joint strategic needs assessment or health and well-being strategy? What recourse will there be where a clinical commissioning group strays significantly outside the provisions of the relevant local assessment or strategy? The duties of consultation and co-operation set out by the Government's amendments are welcome, but I am concerned that they do not go far enough. There will be some situations where the health and well-being boards will need to have real teeth in order to get the job done.

Bringing public health back into the purview of local authorities is a hugely welcome development. I am glad to see that local authorities will be required under the Bill to appoint a director of public health, but can my friend reassure the House that directors of public health will be sufficiently senior and independent?

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They will need to have sufficient tools and resources at their disposal, financial and otherwise, to hold local authorities to account and make sure that they take their public health responsibilities seriously. In particular, will the department require each local authority to establish the post of DPH at an appropriate level of seniority, reporting directly to the chief executive? Can the public be confident that they will be adequately qualified? Will the Minister consider including this in the Bill, or at least setting it out in regulation or guidance?

Finally, education and training formed one of the four headline areas tackled by the Future Forum in its report, but is more or less absent from the Bill. While we welcome the retention of the functions of postgraduate deaneries within the NHS, the current system of medical education and training is overly complicated and was in need of reform well before the Bill appeared. However, given the impending demise of strategic health authorities, there is a danger that the existing system may disintegrate before anything can be set up to replace it. The Future Forum recommended, and the Government accepted, that Health Education England ought to be established as soon as possible with a clear mandate. I would be grateful if the Minister would update the House on progress so far on setting up the new system and the likely timetable for completing this work.

The Future Forum also recommended that education and training should be confirmed as a vital part of the core NHS, rather than established as a separate system. In the Government's response to the Future Forum report, we were promised,

"an explicit duty for the Secretary of State to maintain a system for professional education and training as part of the comprehensive health service".

This does not appear to have been implemented in the Bill as it stands. Will the Government bring forward an amendment in Committee to make good on this commitment?

We also understand that employer training networks-which, thanks to Future Forum, will now be known as local education and training boards, LETBs-are in the process of being set up. We welcome the move to bring healthcare providers more into the process of education and training. Will the Minister reassure the House that these organisations will be required to operate transparently and will be properly scrutinised by Health Education England?

As a result of the Government's response to the Future Forum report, we now know in broad terms what the arrangements will be at local provider and national level, but can the Minister tell the House how strategic regional workforce development, hitherto carried out by strategic health authorities, will be carried out under the new system?

This has been a timely debate that has given us all plenty to think about at our party conferences. I will take the opportunity to update the noble Baroness, Lady Wheeler, on what will happen at the Lib Dem conference next week. There will be a debate on Wednesday in prime time, immediately before the leader's speech. In addition to that, our Minister will hold an open surgery. There will also be a Q&A session in the conference centre. There is no secrecy here. In addition,

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all parliamentarians involved in health will be available at a plethora of fringe meetings. I am more than confident that our membership will take every opportunity to engage us in debate.

I return to this one. I am sure that the House will agree that the issues of accountability, integration and education are critical to the smooth running of the NHS. We look forward to working with the Minister on these issues when we finally go into Committee later this month.

12.11 pm

Baroness Pitkeathley: My Lords, like many noble Lords I have very personal feelings about any health Bill and have taken part in debates on many since I have been in your Lordships' House. Let us remember that the Bill that will shortly be considered by this House is the Health and Social Care Bill. I am grateful to my noble friend Lady Wheeler not only for securing this debate but for reminding us that at the moment there is precious little about social care in the Bill.

Social care has been one of the great commitments of my working life. The other has been about enabling disadvantaged individuals-clients, carers and patients-to speak up for themselves and to contribute to policy formation. How I judge proposals for change to health and social care services is therefore simple: will the new arrangements lead to services that are more organised around individuals and more integrated among all the providers of care, such as health services, carer services or voluntary and privately provided services? Therefore, I am delighted by the emphasis placed on integration and collaboration by the Future Forum report. I am not surprised, because calls for better integration always result from consultation with users, carers and the third sector, and the forum made excellent use of the networks of members from patient and user organisations.

I draw noble Lords' attention to page 20 of the Future Forum report, which reminds us that the provision of integrated services is rarely dependent on structural change. It states:

"The reality is that the provision of integrated services around the needs of patients occurs when the right values and behaviours are allowed to prevail and there is the will to do something different".

I will illustrate how we can do something different by telling noble Lords about Trevor. He is an Afro-Caribbean man in his 30s and a severely ill bipolar patient. He is treated by both health and social care services. He is an in-patient on many occasions. Staff try to get him to attend daycare when he is not in hospital so that his medication and behaviour can be monitored. Noble Lords will know that the average day care centre is not very suitable for a man like Trevor and he rarely attended, resulting in frequent breakdowns and hospital admissions. Last year staff decided to try a personal budget for Trevor. They worked with him to decide how it should be spent. He decided that he wanted karate lessons. For nine months he has been going to karate lessons almost every day in his local gym. He has become very good at karate, he is fit and stable and he has had no hospital admissions in that time. Moreover, when he is asked what benefit he has gained, Trevor says that he feels good and is a better father to his children.

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Now this took place in one of the commissioning consortia pathfinder areas, but it is rare. We have not yet dealt with the problems caused by the mismatch in timing in the development of personal healthcare budgets and social care budgets. I fear that there will not be as many examples of such innovative practice as we need to see going forward.

Harry Cayton, writing in 2006 about patients as entrepreneurs, said that we got very near to enabling patients to have some real autonomy with personal budgets, but we stepped back from the brink as we were afraid of losing control and of what they might do with it. He said that we must not be afraid in the future. I am sure that that is absolutely right, but I fear that we are still afraid.

We still have the problem that commissioners may be focusing on the wrong problems. If you talk to a group of GPs, you will find that they are very clued up about the diagnosis and treatment of cardiovascular disease and even about its prevention. That was entirely appropriate when we had the worst record in Europe on cardiovascular disease, but the problems that face us now are not like that. They are about chronic illness and long-term care, and we still have a long way to go before we are innovative in that area.

The new amendments place a duty on local commissioning groups to consult health and well-being boards and HealthWatch is to ensure the involvement of patients and the public in policy and commissioning decisions. I worry that the plans for local healthwatch bodies have the potential to create conflicts of interest, as they are accountable to local authorities, the very bodies that commission and provide the services that HealthWatch is to monitor. Moreover, the consortia, as the noble Baroness, Lady Jolly, has reminded us, are under no obligation to abide by the views of the health and well-being boards, so I think there are some real questions about how much influence those boards can have. I very much endorse her call for them to have sharper teeth.

In addition, although some progress has been made toward coterminosity-that awful word-between consortia and local authorities, the populations for which consortia will be responsible will in fact be based on the practice lists, not on geographical boundaries, so there may be the sort of problems that those of us who have been around a long time have seen many times before of health and social care professionals trying to work across geographical and administrative boundaries.

My principal worry about the patient and public involvement issue is that all my experience shows that structural change does not bring about integration and collaboration, either within a service or across services; it is people and proper communication about the assessments of need and the point of view of the patient that bring that about. That was the example that I gave about Trevor.

However well intentioned the changes-and I am sure that they are well intentioned-that have been made as a result of the Future Forum's work, have they really led to systems and structures that are in fact more complex and more difficult to find your way around, even for the professionals who work in them, let alone consumers when they are concerned and

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anxious? If you can ever find a flow chart about the new system-and they are pretty hard to find-they make your hair curl, as they look like one of those very elaborate electrical wiring diagrams. That is pretty difficult for any user, carer or patient to follow. I am concerned about the staff who are trying to administer such complex structures, anxious as they often are about their local position and jobs. They are anxious about the different paces at which different things are happening at local and national level, and I think that the complexity of the system will make that even worse.

I am also concerned about the mismatch that we now have in timing between a very major reorganisation of the NHS, in spite of promises that were once given about there being no such thing, and the very major reorganisation of the social care system as a result of the Dilnot commission, about which we still await government proposals. Will the NHS changes be set in stone by the time any decisions can be reached about social care?

I want to say a word about prevention. It is always a balancing act between quality and affordability. Services which prevent crises rather than intervene once crises have occurred are always vulnerable at times of financial restraint. How are commissioning boards going to see services that are not at present urgently needed but which are a good investment because they prevent crises developing? For example, I believe that some research about telecare shows that if you spend £1 now, it saves you £4 down the line. Will such investment be made?

I hope that the Minister will reiterate the Government's commitment to prevention in heath and social care and will assure the House of their commitment to ensuring that social care is given equal status and importance with healthcare and that the reconvened Future Forum will have a clear programme of work and a timetable with regard to the integration of services. The temptation to focus social care on those with high needs and no means is very great. One of the ways of countering this short-sighted view is to remind ourselves that social care must achieve the same status as healthcare in future. In other words, it is not the province of the poor and feckless. It is in all our interests, and especially in the interests of commissioners, to ensure that it is understandable, which means that the current proposals are far too complicated. It must also be free from fear about affordability and provide dignity, safety and peace of mind. I remain to be convinced that the Bill that will shortly be before us will bring that vision closer.

12.22 pm

Lord Rea: My Lords, I thank my noble friend Lady Wheeler for providing us with an overture, if you like, to our forthcoming debates on the Health and Social Care Bill and for her excellent speech. I apologise for missing part of it. There was an unexpected closure of the Jubilee line, which I am afraid is not uncommon.

Despite the listening exercise and the Future Forum report and a huge raft of government amendments for Report state in the other place-there were 700 amendments just for changing commissioning

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consortia into clinical commissioning groups-the Bill remains largely intact, not altering its unstated aim of opening up the NHS to a wider range of providers, including, not exclusively, the profit-making private sector.

There have been some improvements arising from the Future Forum report. I welcome the inclusion of hospital doctors, public health specialists, nurses and lay members in the clinical commissioning groups. Will the Minister confirm that they will have among their members or closely advising them an expert healthcare public health specialist, whether clinical or non-clinical? It is vital in helping them to plan.

I think there are too many loose ends in Schedule 2, which describes the membership and structure of the clinical commissioning groups. Too much has been left to regulations. Surely the composition of the groups should be stated in the Bill or in a schedule and some indication of the number of CCGs should be given. Are there going to be 100, 150 or 300? There should also be some indication of their catchment populations. As my noble friend Lady Pitkeathley has just said, it is going to be very difficult to arrange for coterminosity with CCGs being based on practice populations. Many feel that the population of 300,000 covered at present by the average PCT is too small for proper planning purposes, and some are already merging. Doubtless these issues will be covered in much more detail during the passage of the Bill.

A further change, which has been welcomed, is in the wording of the duties of Monitor. As the noble Baroness, Lady Jolly, has said, "duty to promote" competition has been converted to "prevent uncompetitive behaviour" in contracting. In practice, I think the changed wording may not be very different. Uncompetitive tendering or contracting surely means that before a contract is made with an NHS body, the independent and third sectors must be asked to make a bid. There are now a large number of British, European and American for-profit healthcare corporations ready and waiting to put in such bids. As we all know, many are already working inside the NHS. I do not think the change of wording is very meaningful. It enshrines in law what has been going on at an increasing rate since the Government of the noble Baroness, Lady Thatcher, first introduced compulsory tendering in the mid-1980s.

Private corporations have an advantage over third sector or in-house NHS bids because the complexity of public contract regulation and case law is now quite formidable and developing further. There are quite draconian remedies and penalties for breach of regulations. There is a real risk that there will be a deficit of suitable expertise within each commissioning group. They will probably have to bring this expertise in from outside, although I understand there are words in the Bill that seek to prevent this. Perhaps the Minister will comment on that. Like clinical commissioning groups, third sector or NHS bodies are also unlikely to have enough in-house expertise in procurement law and may not have the resources to bring it in from outside. Commercial organisations, on the other hand, need to have recourse to it in their everyday work in order to survive in the commercial world and large firms will have considerable in-house expertise. This gives them an advantage in making attractive proposals that are

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compliant with regulation, and of course they may also be loss leaders-the more likely the larger the firm.

I do not have time to go through every change following the Future Forum's report. Nick Clegg, for the Lib Dems, has said that 13 of their 15 requirements for the Future Forum have been secured. Closer scrutiny of these shows his assessment to be somewhat overoptimistic. One example concerns cherry picking by private providers. The Liberal Democrats had a requirement that new private providers should be allowed,

"only where there is no risk of cherry picking, which would destabilise or undermine the existing NHS service relied upon for emergencies and complex cases, and where the needs of equity, research and training are met".

In fact, private providers will be able to cherry pick by choosing to take on classes of patients with fewer complications, and will remove these patients from NHS hospitals which will thus lose the tariff payment that they would otherwise get. Unfortunately, there is no time to go through the other 12 Lib Dem requirements. Suffice to say that I am happy to supply any noble Lord with a list of these.

In conclusion, this has been a useful preliminary canter for our forthcoming debates. I hope that we will get further suggestions from the Future Forum regarding what has been discussed by a number of noble Lords; that is, research and training opportunities, and regulations and changes which will solidify the role of the Government in promoting these activities.

12.30 pm

Lord Warner: My Lords, I, too, welcome my noble friend's ability to secure this debate today because it gives us a chance to limber up for the marathon that now approaches in a few weeks' time. I also endorse her view and that expressed by my noble friend Lady Pitkeathley with their timely reminder that this is a health and social care Bill. I should declare my interest as a member of the Dilnot commission on the funding of social care. It is important that we do not shut the door on changes in social care in this Bill that would help the NHS to face some of its challenges for the future. I have in mind particularly some of the non-financial aspects raised in the Dilnot report, such as assessment and integrating better the assessment of people for adult social care and NHS continuing care. That is one of the great and difficult boundary issues in our modern world.

Let me be clear at the outset that I fully support the need for continuing reform of the NHS. I certainly do not view the proposed changes with the same level of horror as many of the Government's critics do. As a former Minister responsible for NHS reform, I remain a strong supporter of more patient choice and competition among a greater diversity of providers of NHS services, with an economic regulator holding the ring. We need to finish the job of separating the commissioning function from service provision. We need to give clinicians a larger role in commissioning services and to accelerate the transfer of more care and treatment to community settings across the health and adult social care divide.

However, as I have set out in a book about my own experience of trying to reform the NHS, the forces of opposition to reforming this icon are formidable. I

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notice the noble Lord, Lord Fowler, in his place. He has, I suspect, had a very similar experience. The Government launched this blockbuster of legislative change on an unsuspecting NHS. If you do that, it is hardly surprising, if you have such a poor narrative of why this change was necessary, if you get a rather considerable adverse response. Rebellion from the usual suspects-many of whom were my old sparring partners-was totally predictable.

The NHS is a provider-dominated service with a huge element of public monopoly provision. That is the reality of today's NHS. It is the reality of the NHS over a long period. If you attempt to change that, you must expect vociferous opposition. It should have come as no surprise that with such a poor narrative the Prime Minister felt the need to call time out and attempt to regroup. Today, we are having a peep at the regrouping, or at least at the bits we know about because the Future Forum is still at work. I hope that the Minister can lift the veil a bit more on this and explain to us what further homework the forum has been set and how long it has been allowed to complete it.

What are we to make of the changes that the forum has proposed so far? Do they improve the coherence of the reforms and the likelihood of their success? Do they improve the prospects of the NHS meeting the formidable financial, productivity and service reconfiguration challenges that it faces over the coming years? My good friend, Professor Paul Corrigan, has today produced a new pamphlet that identifies some of these problems, and I hope that all noble Lords will avail themselves of the chance to read it. Let me make it clear that I am not paid anything by Professor Corrigan for giving his work that small plug.

The proposed changes by the Future Forum seem to have pleased the leader of the Liberal Democrats, although, from my observations, many of his foot soldiers still seem to be pretty disgruntled. Although the coalition agreement advocated making Monitor an economic regulator, the reality seems to put the wind up a number of Liberal Democrats. I have not seen many NHS interest groups putting out a lot of celebratory flags as a result of the forum's report. The disgruntlement of the BMA and other public sector unions seems little abated. Perhaps more significantly the NHS Confederation, for which I have very high regard, hardly seems to be bowled over.

If I was still a Minister, I would also be a bit more anxious about the continuing concerns of more objective and analytical observers such as the King's Fund and the Nuffield Trust. They have drawn attention, rightly in my view, to the additional complexity and cumbersomeness that the forum's proposals have introduced. The original enthusiasm for GPs running more of the commissioning show seems to be evaporating as the hospital specialists fight back to retrieve more ground through the modification of consortia membership and the rather ghost-like senates that will lurk there. We certainly seem to have a lot of fingers in the needs assessment and service commissioning pie-the National Commissioning Board, a rump of SHA and PCT clusters posing as outposts of the board, clinical commissioning groups and health and well-being boards.

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The forum seems to have helped the Government further along a path of public confusion over who is really in charge of NHS commissioning and who is accountable when things go wrong. There is now plenty of scope for dodging accountability and laying off the blame for failure. This is particularly the case in the area of service reconfiguration which the NHS needs so badly. It is perhaps appropriate that we have just seen a Health Secretary finally take a decision on service changes in Chase Farm Hospital the best part of a decade after it should have been taken. Let me congratulate the Health Secretary on showing the courage to do this eventually.

In my view, the forum's proposals make worse the already unsatisfactory accountability for service needs assessment and the commissioning of services, and will make the much needed reconfiguration of services even more difficult. We have to concentrate more hospital specialist services on fewer sites and provide much more care and treatment in the community on an ambulatory basis if the NHS is to live within its means. This requires us to reduce expensive, unsustainable, low-quality and unnecessary acute hospital services and to transfer service resources to new service configurations with different providers from the public and, yes, the private and, yes, the not-for-profit sectors. We have to face up to moving away from the outdated business model of the all-purpose district general hospital of the 1960s.

Modifying reform in ways that make these changes more difficult to achieve is bad news for those of us who believe in a tax-funded NHS that is free at the point of clinical need, especially given the £20 billion of efficiency improvements that the NHS has to make over the next four years. These are issues to which some of us will want to return in a lot more detail during the passage of the Bill. I very much commend the remarks of the noble Lord, Lord Ribeiro, about some of these issues.

I conclude by saying a few words about integration and competition, which seem to have produced rather more heat than light in the recent public discourse. We are all in favour of integration, but we need to understand what we are talking about. From my point of view, I think that patients benefit from integration if it is related to the delivery of services to individual patients, but they may not benefit from the horizontal integration of service providers if it simply produces mergers that create far more monopoly provision and little improvement for patients.

It is also nonsense to suggest, as some have done, that competition inevitably means the fragmentation of service delivery and is inimical to integrated delivery. It is perfectly possible to have competition for the provision of integrated services; it just depends on the commissioner's service specification and the payment mechanisms. In the US, Kaiser Permanente and others have shown that the integration of patients' service delivery can flourish in a competitive healthcare market. Again, these are issues that we will need to come back to in the Bill.

Let me end by wishing the Minister well as he faces the Herculean task of taking the Bill through the House, but I cannot guarantee that it will be a totally pain-free experience.

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12.41 pm

Baroness Donaghy: My Lords, I also thank my noble friend Lady Wheeler for the opportunity to have this debate today. We have heard reference to the start of the political party conference season. The Future Forum exercise and the Government's response have been presented by some as a David and Goliath battle to secure major concessions on the reorganisation of the health service-plucky Nick facing up to the giant privatiser and winning while claiming that it is not about winning. But we have the wrong bedtime story here. It is not David and Goliath but more like Little Red Riding Hood. I appreciate that the noble Earl might appear to be an unlikely wolf, but let us not forget that even the wolf dressed up in a frilly nightcap and adopted a soft voice. There are more questions than answers here, and some of the original questions remain. Why is there to be a major upheaval of the health service when all the staff are working flat out to provide a good and comprehensive service? Why are more quangos to be created rather than fewer? What will be the real role of Monitor in its revised format? And why are we giving £80 billion to the NHS Commissioning Board, the daddy of all quangos?

Since the Future Forum listening exercise, and here I must commend the diligence of its members, a revised Bill has been presented which we will debate in this House in October. But the Bill gives rise to new questions. First, in revised Clause 1, the Secretary of State's powers and duties are closer to the current duty as set out in the NHS Act 2006, but as has been said, the phrase "to provide" has been deleted on the grounds that,

"having the premises and the staff necessary to offer health services directly does not reflect the reality of the situation in which commissioning and provision rest with the NHS bodies, not the Secretary of State".

I think we all accept that no matter how hard they might try to distance themselves, the political reality is that Governments will always be held responsible for the state of the health service. So why should we worry about semantics, and indeed, is it about semantics? The Government's response to the Future Forum exercise stated that the Bill would,

"make explicit that the Secretary of State remains fully accountable for the NHS".

That sounds fine, but where is the responsibility for social care, a question also asked by my noble friend Lady Pitkeathley? What will be the definition of the NHS further down the line if providers are private companies? I am not a lawyer and I have no idea what the legal implications of this change mean, but I am a graduate in English language and literature. I know what "to provide" means and I am concerned that the significance of this omission will grow and grow as the years go by.

My concern is heightened because the responsibility for defining what constitutes the health service is being transferred from the Secretary of State to clinical commissioning groups. While the Secretary of State is still responsible under the new system for the promotion of the health service and ensuring that it is free of charge, clinical commissioning groups will determine what services actually constitute the health service.

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Just when I tell myself that I am worrying unnecessarily, I am then reminded that in the summer, the Health Secretary instructed primary care trusts to identify three services to be put out to contract. I am supposed to be reassured that the new private providers will not be allowed to cherry-pick, but the Bill only requires transparency in how patients are chosen. It says nothing about the easiest and most profitable types of treatment to provide, which could still destabilise the National Health Service.

I turn to the role of Monitor. The language is definitely softer: its primary duty is no longer to "promote" competition, but to prevent "anti-competitive practices", a point already raised by my noble friend Lord Rea in his contribution. The Minister in the other place has claimed that this is a fundamental change and that Monitor's main duty would be to protect and promote the interests of people who use healthcare services not by promoting competition, but by promoting the economic, efficient and effective provision of healthcare services. Again, I would love to ask a seminar of English language undergraduates to write a critique of the difference between promoting competition and preventing anti-competitive practices; drinks on the Terrace for the best essay. The Bill gives Monitor powers to fine hospitals up to 10 per cent of their turnover for anti-competitive behaviour and a new duty to promote integration. What exactly will that mean in practice? Could we see a situation where a hospital which is struggling financially is forced into the arms of a foundation trust in the name of integration? Who will pick up the overdraft? Beware the big bad wolf.

Finally, we come to the issue of what happens if Monitor declares a commissioner's arrangements for the provision of health services to be ineffective, perhaps where it has failed to comply with procurement regulations. Indeed, what will happen if a service runs out of money? The Government have not yet presented their revised plans for a failure regime. The Minister's explanation was that they would not rush their proposals for such a regime as it is a complex issue and they want to "get it right". That is the second time this week that I have come across the "get it right" reason for having no information on a vitally important topic. The first time concerned regulations on the way in which the self-employed would be treated under the Welfare Reform Bill. At some stage we really need an organigram, also called for by my noble friend Lady Wheeler, setting out what the new structure will look like, who is in charge and how social care fits into it all. Without it, I hope that Little Red Riding Hood will stay on her guard.

12.48 pm

Lord Sawyer: My Lords, I also thank my noble friend Lady Wheeler for initiating this debate. It is very clear that the passage of the Health and Social Care Bill has been troubled and that deep-seated concerns have been expressed by stakeholders across the health sector over the past few months. The Government have made some changes to their NHS reform proposals following the legislative pause and listening exercise, overseen by the NHS Future Forum. What was put forward by the forum was seen by many as a workable set of recommendations, and in fact 16 were made in

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all. However, the Government's efforts to take forward revisions to the Bill based on those recommendations have led to further serious questions from all sides. In some areas the recommended changes have not gone far enough or have been missed altogether, and even where there have been improvements, there are serious worries that they have been made at the cost of introducing new complexity and bureaucracy into the National Health Service. An already multifarious piece of legislation is sadly becoming even more complicated.

The Government have made some effort to listen to and address some of the concerns that have been expressed about the Bill to date. Despite some improvements over the summer and despite there being some positive aspects to the reforms, it is apparent that real, deep-seated problems remain.

An unbelievably wide range of voices in the health sector, such as the NHS Confederation, the King's Fund, patient bodies as well as trade unions including the British Medical Association and Unison, have expressed concern about the unacceptably high risk posed to the health service in England as a result of the Bill. That is why those organisations are calling for the Bill to be withdrawn, or at least to be substantially amended, before matters proceed.

I agree with my noble friend Lord Rea that the Bill continues to place inappropriate and misguided reliance on market forces to shape services, which is lamentable. It is very clear that the general direction of policy travel, such as widening patient choice to any qualified provider across a much larger range of services, has the potential to destabilise local health economies. That is also implicit in the Bill, which embeds a more central role for choice without full consideration of the consequences and creates ambiguity about how the trade-offs between increasing patient choice and ensuring fair access, integrated care and improved efficiency should all be managed.

In addition, insufficient thought has been applied to the unintended knock-on effects and long-term consequences of proposals in the Bill, including for medical education and training, public health and the patient-doctor relationship. Excessive complexity and bureaucracy are associated with the changes made to the Bill to counter the lack of proper checks and balances in the original proposals. Furthermore, much detail is still lacking, being left to subsequent regulations and guidance.

The focus on the changes flowing from the reforms is already creating a noticeable distraction from efforts to ensure and improve the quality of patient care today. Anybody who works in the health service, as I do from time to time, must be distraught at the time-consuming issues that employees have to tolerate and the uncertainty that arises from the proposed legislation. This is at a time when the NHS is expected to find an unprecedented £20 billion in efficiency savings over four years. What is happening is quite remarkable.

There are still many areas that need to be addressed. The Bill seeks to ensure that the Secretary of State retains overall responsibility,

"to secure that services are provided",

while giving operational independence for the delivery of healthcare to numerous bodies, most notably the

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NHS Commissioning Board and clinical commissioning groups. This has been the subject of much debate and will no doubt continue to be so, but most outside organisations believe that insufficient assurance has yet to be given that the Secretary of State will have ultimate responsibility for the provision of a comprehensive health service while allowing other bodies such as the commissioning board day-to-day operational independence. There are still big questions to be answered in that area.

The Bill establishes a new system of economic regulation of health and social care. However, there should not be a reliance on market-based policies that risk further fragmentation and destabilisation of the National Health Service. Increasing patient choice should not be a higher priority than tackling fair access and health inequalities, meeting need, promoting integrated care and optimising resources. Those are the things that should be properly reflected, underlined and given priority in any legislation.

The proposals relating to public health still require further changes. Public Health England should be established as a special health authority of the National Health Service and all specialist public health staff should be employed on national NHS terms and conditions of service. It is also important for directors of public health to be made accountable jointly to the chief executive of the local authority which they serve and to Public Health England.

It has already been said by other noble Lords that an effective education and training system is fundamental to preparing a suitably trained workforce for the future. To achieve this, oversight of education and training must occur simultaneously at both national and regional levels. The structural reforms proposed by the Bill must not undermine this. The Government say that they will bring forward amendments to safeguard education and training. I look forward to seeing the detail of those proposals.

There must be a robust and transparent process which has the full confidence of the NHS when it comes to how failing trusts are dealt with, in order to protect the interests of patients and the public. The Government have reversed proposals to use private sector insolvency processes to manage NHS provider "failure" and introduced amendments in the other place outlining new proposals. However, it is important to ensure that these proposals are sufficiently robust to do the job. Questions about this will need to be asked when the Bill reaches this House.

Despite the numerous changes made to the Bill and movements in policy following recommendations from the Future Forum, more work needs to be done to ensure that the Bill does not pose significant risks to the future of the National Health Service. If the forum makes further recommendations, they should be listened to and acted upon.

12.56 pm

Baroness Thornton: My Lords, I am very pleased that my noble friend Lady Wheeler has put this Motion before the House today. The timing is perfect: we are within a few weeks of the long awaited Second Reading

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of the Health and Social Care Bill; and we are within a few days of the party conferences, at at least two of which, my own and that of the Liberal Democrats, the threats to and future of the NHS will be near the top of the agenda for our members. What happens at the Conservative Party conference is probably as much of a mystery to the Minister as to the rest of us. However, we do know from announcements made by the Prime Minister from one of his holidays this summer that he thinks that it is "job done" as a result of the work of the Future Forum, and that the Government's proposals now have widespread support from staff and patients. I could not help but wonder at what point the Prime Minister made this announcement and what particular beverage he might have been enjoying at the time.

However, as I said in your Lordships' House when the Future Forum was established, as well as when it reported, it is a political fix by the Prime Minister and his Liberal Democrat deputy. One of them had realised that his Secretary of State was not a safe pair of hands and had succeeded in uniting the whole medical profession-patients and patient groups-against his proposals; the other had just had a disastrous set of election results, lost a referendum and received a good kicking from his members at the Liberal Democrat spring conference in March. The noble Baroness, Lady Williams, described the reforms at that time as privatisation by stealth and said that they amounted to a plan to dismantle one of the most efficient public services of any in Europe.

Of course, I do not hold the Future Forum responsible for its genesis. I accept that all its members have acted in good faith and worked hard in the service of the public. I also accept that they did broadly a good job within their remit. However, it has to be said that the whole of this Bill is topsy-turvy. Instead of consultation, pre-legislative scrutiny and a draft Bill, and a legislative process followed by implementation, we have implementation speeding ahead and an initial consultation on a White Paper whose responses, it has to be said, were largely ignored by the Secretary of State when they did not accord with his plans. Indeed, that evidence included a large number of "buts" and raised many issues. Many organisations thought that the White Paper contained some very risky proposals.

Then a Bill arrived without the evidence base that the noble Earl has always said should be present before legislating. There has been no pre-legislative scrutiny. Frankly, if ever a Bill would have benefited from a Joint Committee of both Houses, this is it.

Then, halfway through its Commons stages, there was an unprecedented pause and a listening exercise, which should have taken place at the outset. We have the Future Forum. This body, which has made many recommendations about amendments to the Bill, has no authority other than being appointed by the Prime Minister. The people making recommendations and active in public life on a much smaller scale than this, with much less responsibility than the Future Forum, are subject, as are all of who have been governors of schools, to completing a register of interests. None of the Future Forum has done so. That is not a satisfactory or businesslike way to proceed with creating public policy and taking it forward into legislation.

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Yesterday, I wrote to the noble Earl about Future Forum mark 2 and what influence its deliberations might have on the progress of the Health and Social Care Bill in your Lordships' House. I look forward to an answer to that. I have asked whether we will have a pause and whether we will be seeing amendments resulting from the Future Forum's deliberations.

I now turn to what the Future Forum has already said and I will use the Liberal Democrat's aspirations for the Future Forum and what it should bring into the Bill as my guide. We know that the Prime Minister thinks that the Future Forum has done the trick, but what of his deputy, Mr Clegg? Mr Clegg had 13 red lines. On this side of the House, we believe that seven of those have failed and six have fallen short, as my noble friend Lady Wheeler has said. I think that his score card stands at C plus, but my noble friends behind me think that that is probably too generous.

I am grateful to my noble friend Lady Wheeler for reminding the House that our duty in this House is to the NHS and the nation. It is our duty not to suspend our critical faculties when we look at the Bill. We believed that this was a deeply flawed Bill from the outset, but at least it was coherent. We now think that it is immensely more complex and bureaucratic. Ultimately, it will be more expensive for the taxpayer. That was mentioned by my noble friends in different ways.

Much has been said already about the Secretary of State's powers in the Bill. I suspect that that issue will test the House's powers of understanding and literacy, as my noble friend said. I also suspect that some of our lawyers will probably engage with it as well, so I will not refer to that in my remarks today. I want to look at some of the other issues that the Future Forum has tackled.

On more democratically accountable commissioning, we have to say that that has failed. The relevant clauses of the Bill do not yet contain elected members or councillors on commissioning consortia, while health and well-being boards are able only to give their opinions to consortia. Consortia are under no obligation to abide by that opinion. The call for a much greater degree of coterminosity between local authorities and commissioning areas was mentioned by my noble friend Lady Pitkeathley. Practice lists do not bear any relation to local authority boundaries, by and large, so they are not a reliable solution to this problem.

A call for no decision about the spending of NHS funds to be made in private and without proper consultation, as can take place by the proposed consortia, has failed. As my noble friends have said, consortia will not be as transparent as PCTs currently are because they do not have to abide by the Nolan principles on public life and the public meetings legislation. It is left up to them to decide what business to conduct in private and not in public. That is unsatisfactory and we are talking about billions of pounds of public spending. We have failed there.

Then there was the call for the complete ruling out of any competition based on price to prevent loss-leading corporate providers undercutting NHS tariffs and to ensure that healthcare providers compete on the quality of care. There is no doubt that something has been achieved here. However, there will continue to be a

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number of NHS services not covered by the tariff with greater competition from private providers. That means that price competition for those services has not been ruled out. So that has failed.

We need to turn to cherry picking, which could destabilise and undermine existing NHS services relied on for emergencies and complex cases. We have failed completely on that point. The Government's amendments addressing cherry picking require only that a provider be transparent in how it chooses its patients. It says nothing about preventing providers picking the easiest and most profitable patients. Furthermore, picking patents is only one part of cherry picking. Private providers will also be able to pick the easiest and most profitable types of treatment to provide-elective surgery, for example-while leaving the NHS to do the expensive loss-making treatments such as emergency inpatient care. Nothing in the government amendments prevents that and therefore risks destabilising those NHS services.

There was a call for government commissioning to be in full compliance with the Human Rights Act and freedom of information laws. The Liberal Democrats were particularly concerned that freedom of information should be extended throughout the Bill. That has not happened. It is an important priority for our discussions when we look at the Bill. Billions of pounds' worth of public money and millions of people's treatment are at stake.

We also had a call for ensuring that health and well-being boards are a strong voice for accountable local people in setting the strategic direction for co-ordinating the provision of health and social care services. There is a failure there. Consortia are under absolutely no obligation to abide by the views of health and well-being boards. So we go on. I will leave the failure regime, which was introduced at such a late stage, for our attention in a few weeks' time.

I am so pleased that there are Members in both Houses of all parties and across this House who are turning their attention to the actuality of the Bill and its applicability. I highly commend the noble Baroness, Lady Williams, and other Liberal Democrat Members-noble, honourable and plain activist-who have not swallowed the line that now all is well with the Health and Social Care Bill. I know how difficult it can be to find yourself at odds with your leadership, your party and your own Government. I have been there many times over the past 30 years. But in this case, our first duty is to the NHS, its patients and those who work in the NHS. We must proceed by not looking at theoretical structures and esoteric arguments. We must look outside the Chamber and hear the clinicians and patient groups and let them be the guide to what happens to the NHS in the future.

1.07 pm

The Parliamentary Under-Secretary of State, Department of Health (Earl Howe): My Lords, I agree with the noble Baroness, Lady Thornton, that this has been a timely debate. I thank the noble Baroness, Lady Wheeler, for calling it and all noble Lords who have spoken and contributed so eloquently. To pick up the baton handed to me by the noble Baroness, Lady Donaghy, who remarked what big plans my colleagues and I have in the Government's programme of

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modernisation of the NHS, the debate has indeed covered a great deal of ground. I will do my best to cover most of the key issues in my speech. To the extent that I do not, I will of course follow up those points in writing.

The noble Baroness, Lady Wheeler, asked why we needed to legislate at all. The Health and Social Care Bill seeks to create a stronger, more responsive and more innovative NHS-an NHS led by clinicians, with patients in control of their own care and with a resolute and unflinching focus on results. We must streamline the architecture of the health service to improve its efficiency.

My noble friend Lord Ribeiro directed us towards exactly the right starting point by referring to the core principles underpinning the Bill. Despite widespread support for these principles-and there has been such support-some thought that the detail of the Bill could be improved to better support those principles. So we took the unprecedented step of asking a group of independent health experts, the Future Forum, to recommend changes to the Bill. I would like once again to thank Professor Steve Field, the members of the NHS Future Forum, the hundreds of organisations and thousands of people who contributed to the listening exercise. We accepted all of the forum's core recommendations and we have since made significant changes during the Bill's Second Committee stage. I cannot accept the criticism of the noble Baroness, Lady Thornton, of the process. Stakeholders have in fact welcomed how the forum conducted itself-for example, Mike Farrar of the NHS Confederation and Hamish Meldrum of the BMA. I believe that the process has been hugely positive and has helped us to improve a number of our plans in different ways.

First, I would like to run briefly through some of the key changes that the Government are making. My noble friend Lord Ribeiro, as might have been expected of him, referred to clinical leadership. Some were concerned that too narrow a group of clinicians would be charged with designing services, so we have amended the Bill to place stronger duties on commissioners to ensure that all relevant health professionals are involved in the design and commissioning of services at every level-including clinical networks in relation to specific conditions and new clinical senates for broader areas. The governing bodies of clinical commissioning groups will need to appoint at least one registered nurse and one secondary care specialist.

The noble Lord, Lord Rea, questioned whether there would be public health input into the commissioning process. The Bill should require commissioning consortia or groups to obtain all relevant multiprofessional advice to inform their commissioning decisions, including public health but also other types of advice. The authorisation and annual assessment process should be used to assure this. We will make sure that a range of professionals plays an integral part in clinical commissioning of patient care and we have amended the Bill to place stronger duties on commissioners to obtain that advice.

We are committed to harnessing the benefits that competition and choice bring for patient care but let me make it clear, particularly to the noble Lords, Lord

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Rea and Lord Sawyer, that competition will never be about serving the interests of corporations. It will be about serving only the interests of patients and we have made changes to the Bill to reflect this. We have removed Monitor's duty to promote competition as though it were an end in itself. Instead, it will be under a duty to support services integrated around the needs of patients and the continuous improvement of quality. The choice of "any qualified provider" will be limited to those areas where there is a national or local tariff, ensuring that competition is only ever based on quality, not price. That will also ensure that there can be no cherry picking. I will come back to that point in a moment. There will be and can be no privatisation of the NHS. In fact, it will be illegal for current or future Ministers, the NHS Commissioning Board or Monitor to favour the private sector over the public sector, or indeed vice versa. While some will undoubtedly disagree, what matters is the outcome of care provided and the end results for patients, not the nature of the provider-public, private or otherwise.

The noble Baroness, Lady Wheeler, suggested that we had not implemented the Future Forum's recommendations on board meetings being held in public. It is not correct to say that we have not amended the Bill in regard to that, as we have made it a requirement for every clinical commissioning group to have a governing body with decision-making powers. To enhance transparency and accountability, governing bodies will be required to meet in public and publish their minutes, while clinical commissioning groups will have to publish details of contracts with health services. Openness and transparency will be the bedrock of a new, more patient-centred, outcome-focused and accountable NHS. We have amended the Bill in the way that I have described but, in addition, we have said that the governing bodies of commissioning groups must have at least two lay members: one to champion patient and public involvement, the other focused on overseeing key elements of governance such as audit, remuneration and managing conflicts of interest. Foundation trust governing boards will also need to meet in public.

The theme of integration loomed quite large in a number of noble Lords' contributions. Excellent care often means integrated care. We have strengthened the NHS Commissioning Board's duty to integrate services and introduced an equivalent duty for clinical commissioning groups. Health and well-being boards will be required to involve the public when identifying local needs and developing the joint health and well-being strategy. In future, I think there will be far more effective arrangements than exist currently for ensuring joined-up working across the NHS, public health and social care-a theme picked up by the noble Baroness, Lady Pitkeathley. We will have an NHS Commissioning Board setting common frameworks in which clinical commissioning groups commission services, a regulator to ensure that standards in care are met and greater transparency of outcomes, which will drive up efficiency and quality. I add that we have asked the NHS Future Forum to look at integration as part of its continued conversations with patients, service users and professionals. The forum will report back to Ministers later this year on what it has heard.

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The pace of change has also caused concern for some people, so in a number of areas we have made the timetable for change more flexible. No one will be forced to take on new responsibilities before they are ready to do so. However, those who wish to progress more quickly will not be prevented from doing so.

Let me now turn to some of the specific concerns which have been raised during the debate. The noble Baroness, Lady Wheeler, and my noble friend Lady Jolly referred to the Secretary of State's duties-concerns that were echoed by the noble Baroness, Lady Donaghy, and the noble Lord, Lord Sawyer. At present, the Secretary of State has a duty to provide or secure services himself but delegates that responsibility to strategic health authorities or primary care trusts by directions. Generally, he delegates nearly all his commissioning responsibilities to SHAs or PCTs, but he has the powers to alter that and vary the extent of delegations. Under the new system, the function of arranging the provision of services-that is to say, commissioning-will be conferred directly on the board and clinical commissioning groups by Parliament, providing stability for the system and removing the Secretary of State's ability to intervene arbitrarily in the day-to-day management of the commissioning process. That will free up those with the relevant expertise to focus on commissioning the best possible services for patients, free from political micromanagement.

Ministers are accountable for the NHS and will remain so. The Bill does not change the Secretary of State's overarching duty to promote a comprehensive health service, which has underpinned the NHS since it was founded. The Bill simply makes it clear that it should not be the responsibility of Ministers to provide or commission services directly. That should be the job of front-line organisations, free from interference. We are putting patients and professionals in the driving seat in order to create better quality care and better value for taxpayers.

The noble Lord, Lord Sawyer, said that there was not enough in the Bill to provide clarity. I understand why he makes that point. Every Bill that we scrutinise in this House needs to get the balance right between what is on its face and what is in regulations. We have republished our delegated powers memorandum, which sets out our justification for taking the delegated powers that the Bill proposes, and I hope that memorandum is well read and scrutinised.

The noble Baroness, Lady Wheeler, and others including the noble Lords, Lord Warner and Lord Sawyer, suggested that we were adding layers of bureaucracy. I think the noble Baroness said that the number of bodies would be increasing from 163 to 521, if I did not mishear her. I simply cannot accept that; it is not true that we are creating additional bureaucracy. The changes we made to the Bill as a result of the listening exercise do not create any extra statutory organisations at all and I do not recognise the figure that she cited. We remain absolutely committed to our promise to cut bureaucracy. We are removing layers of management by abolishing 151 PCTs, 10 strategic health authorities and half of the national health quangos. Administration costs across the health system will be cut by a third in real terms by 2014-15.

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The noble Baroness, Lady Wheeler, spoke generally about the Future Forum recommendations, particularly about some that in her eyes the Government did not accept. We accept all the core recommendations of the Future Forum report but there are some areas that need further work before the final decision is taken. Those include further work on the feasibility of a citizens' right to challenge poor quality services and lack of choice, and work to improve how continuing professional development is provided.

Some but not all of the forum's core recommendations to the Bill require amendments to the Bill. For example, clinical networks and clinical senates will be hosted by the commissioning board, and will not need to be provided for by amendments to the Bill.

The noble Lord, Lord Warner, asked about phase 2 of the Future Forum's activities. We announced in August that the forum will provide further independent advice on four themes: information, education and training, integrated care and public health. While the first phase of the forum's work focused largely on the Bill, the second is focusing on non-legislative aspects of the reforms. It will report back to the Government later this year and publish its advice, as I indicated earlier, and we will draw on that advice as we work to implement the reforms across the piece.

My noble friend Lady Jolly took up the subject of education and training, which was also the theme of a number of other noble Lords' contributions. It is vital that any changes to the funding of education and training have to be introduced in a careful phased way that does not create instability. We are therefore going to take our time to develop the proposals, working with our health and social care partners, and through further consultation. We will be publishing more details about that in the autumn and will bring forward an amendment in due course.

We think that individual employers with appropriate professional input and leadership are best placed to plan and develop their own workforce and assess what workforce and skills are needed on the front line to provide affordable, safe and high-quality care. Health Education England is being established to support healthcare providers and provide national oversight of workforce planning, education and training. It will be a lean and expert organisation and will provide leadership for effective workforce planning and the provision of high-quality education and training that supports innovation, value for money and better skills. We have also been working closely with strategic health authorities, which are managing the transition to the new system.

I turn to specific questions about the subject of competition, an issue raised by the noble Baronesses, Lady Wheeler and Lady Donaghy, and the noble Lord, Lord Rea, among others. "Promoting competition", which was the original wording in the Bill, could have been interpreted in a number of ways. It could have been interpreted as proactively encouraging new providers of NHS-funded services to come forward or existing suppliers to compete for more services, irrespective of what was in the best interests of patients. Addressing anti-competitive behaviour is about preventing potential abuses by providers and commissioners to ensure that the system works in the best interests of patients.

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"Promoting competition" might also have been interpreted as requiring action where Monitor felt that there was insufficient competition in place, such as where there was a single dominant supplier of a particular service. The Bill now provides that Monitor should consider acting in such cases only if the provision of services is not economic, efficient or effective, or if a provider is abusing its market position to the detriment of patients.

A number of noble Lords were worried about cherry picking, especially the noble Lord, Lord Rea, and the noble Baroness, Lady Thornton. Those two noble Lords in particular were mistaken in their analysis of the position. We have consistently said that we would prevent private companies from cherry picking easy, profitable NHS services. We fully agree with the Future Forum's call for additional safeguards against private providers being able to cherry pick profitable NHS business. We have made changes to the Bill to ensure that competition is about quality, not price; for example, there will now be a specific duty on Monitor to ensure that providers are paid in line with the complexity of the cases that they treat. Providers will have to set and apply transparent eligibility and selection criteria.

In her wide-ranging speech, the noble Baroness, Lady Wheeler, also covered the subject of the private patient income cap. Professor Field told the Commons committee in June that the Future Forum heard a wide range of views on that subject. He expressed the personal view that, because of the mixed views on this area, the forum could not make a strong recommendation as a body. In the eyes of many, the current cap is arbitrary and unfair. Foundation trusts tell us that the private income cap is unnecessary and restricts their ability to innovate and maximise income to deliver improved NHS services. We are confident that, as and when the cap is lifted, private income will benefit NHS patients. We are determined that that should be seen to happen. However, we will explore whether and how to amend the Bill to ensure that foundation trusts explain how their non-NHS income is benefiting NHS patients.

My noble friends Lady Jolly and Lord Ribeiro and the noble Lord, Lord Warner, spoke about reconfiguration. Although I have extensive notes on that important subject, I suspect that there is not time to cover it now. However, we will no doubt return to it, as we will to the many questions asked of me by the noble Baroness, Lady Pitkeathley.

I shall cover a couple of smaller issues. My noble friend Lady Jolly asked whether directors of public health would report directly to the chief executive of a local authority. We expect directors of public health to be of chief officer status and to report directly to the chief executives of local authorities. We are engaging with local government and public health stakeholders about how best to ensure that they have appropriate status.

Now that the Bill has passed to this House, I look forward to the debates that we will have in the weeks and months ahead. In preparation for those, my office will be in touch with interested Peers to arrange briefings with the Bill team and Library officials about any of the issues that we have been debating today and indeed

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any others that are troubling noble Lords. Those are likely to take place between Second Reading and Committee.

On the question of organigrams, I refer the noble Baroness to the original White Paper that we published, which contains a rather good one. We will also shortly be publishing a statement of accountabilities in the NHS, which will set out the roles and responsibilities of each organisation in the system.

Thanks to the excellent work of members of the Future Forum, the Bill has the potential to free clinicians to lead, to enable patients to take control and to focus the NHS on improving the quality of outcomes-principles that I hope we can all agree upon as we move forward to the next very interesting stage of the parliamentary process.

1.28 pm

Baroness Wheeler: My Lords, this has been an excellent debate. I thank all noble Lords for their contributions, particularly the update from the noble Baroness, Lady Jolly, on the Liberal Democrat conference programme. As noble Lords have said, this is a timely debate; it is a precursor, an overture or a limbering-up for the debates that we are about to have. I am sure that we are all looking forward to that in the coming weeks. With that, I beg leave to withdraw the Motion.

Motion withdrawn.

Royal Assent

1.28 pm

The following Acts were given Royal Assent:

Police Reform and Social Responsibility Act,Fixed-term Parliaments Act.

Independent Commission on Banking

Debate

1.29 pm

Moved By Lord Myners

To call attention to the report of the Independent Commission on Banking; and to move for Papers.

Lord Myners: My Lords, in the words of Hunter S Thompson, banking is a,

"shallow money trench ... where thieves and pimps run free and good men die like dogs".

As he is claimed to have said, it also has a negative side.

I propose to avoid politics in my contribution today. I am mindful of Bill Shankly's observations about the importance of life, death and football, and the matter of banking security, probity and safety is too important to fall back into cheap political point-scoring. However, I shall ask several questions and I am delighted to see the Box filling so that the Minister has no excuses for not answering questions, either in the House or in writing afterwards.

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The purpose of the Motion is to discuss the Vickers report of the Independent Commission on Banking. To me it has been rather like a Chinese dinner: I felt quite full after I had first read it but within a short period I became hungry again. It simply fails to address some of the most critical issues currently confronting us in establishing a safer and more economically effective banking system. The Chancellor of the Exchequer sent the ball into the long grass a year ago when he established the Independent Commission on Banking. This dog has come back with the wrong ball.

Let us start with a little context, particularly in the circumstances of the horrendous loss announced by UBS this morning, here in London-a loss of $2 billion, apparently as a consequence of trading by a single person in exchange-traded funds. The current situation in continental Europe feels very similar to the one that we experienced in the UK in the summer of 2008, in the months before I joined the Government. In particular, French banks appear to have lost the confidence of professional depositors, particularly dollar depositors. Major banks are now selling at less than half their price to book value. Senior credit default swaps are trading at a premium of 350 basis points. Funding is taking place at 130 to 150 basis points over LIBOR. These are exactly the conditions that we saw afflicting Royal Bank of Scotland in the early autumn of 2008. France is not alone in these problems. It simply is not a sustainable situation. An early and massive recapitalisation of the European banking system along the lines of the action that we took in 2008 is now absolutely imperative.

Turning to Vickers, there is a massive lacuna in the report. Vickers spends no time at all examining the causes of the collapse of the banking system. He learns no lessons as a result of it. He appears to have completely overlooked a number of the issues in his terms of reference. He says nothing about moral issues, which he was asked to address. Nor does he say much that might inform the UK Government's negotiations with other countries and multilateral agencies-an explicit requirement in his terms of reference. He does not examine radical solutions; size-capping is not on the list. He does not look at the case for proposing a new enterprise bank along the lines of KfW. He is strong in assertion but weak in evidence in many cases, and frankly lazy in one particularly important piece of evidence. That said, it is better than doing nothing. On that basis, most critically, we should get on with it, rather than delay implementation as has been suggested.

Vickers does not ask core questions about the role of banks. As I said, he fails to opine on the causes of failure; rather, he falls back on the assumption that there will be future failures, so we should find the best way of mitigating and managing them. Ring-fencing and increased capital will help in some way but they will not address the core failures of management and governance, which were at the heart of the banking failure. Put simply, bad management can burn through capital very rapidly. This is not addressed at all by the Independent Commission on Banking, which says nothing about the governance of banks, the competence of their boards of directors or, indeed, the role of the owners-the shareholders-who have been strangely silent. The most critical thing that shareholders can do

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is to appoint people to boards of directors, yet they stand somewhat distant from that. Over the next year or so I shall strongly urge, through the Kay review, that we change our approach to the appointment process for directors of public companies to put this very much in the hands of institutional investors as members of nomination committees.

The ICB does not reflect on the role and responsibilities of banks in our society and economy. Let us look at it in context. For more than 180 years until the mid-1980s, bank assets in the UK very rarely stretched either side of 50 per cent of GDP. Over the past 25 years, that figure has risen to 600 per cent. I see no evidence that there has been a concomitant increase in economic or social benefit. It has been achieved, on the whole, by leveraging up the impact of a declining return on assets to manufacture a continued, sustainable-or, as it emerged, unsustainable-level of return on equity by putting more and more risk into the banking system. The regulators failed to spot it; they failed to take any action. In many respects, the Independent Commission on Banking has simply swallowed hook, line and sinker the lines produced by the bank lobby on the importance of credit and the banks in supporting the economy.

Let us look at some facts. British banks have assets and liabilities of more than £6,000 billion. Is that significant to UK industry? Loans to UK industry and business-big, medium and small-are approximately £200 billion. Less than 3 per cent of the total assets of our banks are accounted for by loans to business. A further £1,000 billion represents loans in support of home purchases. The remaining £4,500 billion or so is used simply for speculation. If jobs are at risk as a consequence of changes in the banking system, they are not, on the whole, the jobs of ordinary folk. The jobs that would potentially be at risk from Vickers if he had come up with radical solutions are those of international bankers and speculators.

Vickers had to meet some simple tests: to foster a more stable and competitive banking system; to promote resilience; to facilitate resolution; to remove risks to public finances; and, finally, to promote responsible competition. My judgment is that Sir John and his commission have proposed several measures that will reduce risk and be good for the economy in promoting stability. However, in many places the logic of his thinking is poor and there is an absence of strong supporting data. On the issue of competition, Vickers has completely failed to come up with appropriate solutions. Most importantly, the proposed timetable is unnecessarily generous to banks and bankers, creating continued uncertainty and posing numerous risks of moral hazard in the interim-hazard that past experience suggests may be abused by banks.

I turn now to the detail. First, regarding ring-fencing, the key words are "strong" and "flexible". The proposal is sensible but will the ring-fence hold? The intention is clear. Flexibility in what is inside and outside the ring-fence is preferable to prescription. However, it is difficult not to conclude, on reading the ICB report, that it believes that separation is inevitable. The arguments for rejecting separation but proposing segregation are among the weakest in the ICB's report. The ICB clearly intends the split to be real. It talks about strict

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limits on cross-funding, the need for separate boards of directors and independent chairmen, and disclosure by both banks of a standard appropriate for the Stock Exchange. In saying that this is better than full separation, the ICB advances some frankly naive arguments. It says that,

"benefits from the diversification of earnings would be retained".

This is nonsense. Investors diversify their portfolios and risks through portfolio construction.

The document says that the supply of capital might be available if required. Again, one would be wrong to assume that a cheap supply of capital should come from a related party. If a bank needs more capital, it should turn to its external shareholders. It goes on to say that agency relationships for one-stop shopping might be attractive. I cannot believe that the Vickers commission really believes that nonsense. It talks about shared expertise and states:

"Some operational infrastructure and branding could continue to be shared".

It is very clear in my mind that Vickers believes that the banks will be forced by their shareholders to split, so I do not know why he did not recommend that. I simply do not understand why the ICB stopped at a halfway point, save under the pressure of lobbying from the banking industry. Who in the mean time will monitor this ring-fence-the Bank of England, which failed on the whole to see the emergence of the crisis? I think not.

On capital, UK retail banks should have 10 per cent core equity capital plus loss-absorbing capital-bail-in bonds or cocos-of a further 7 to 10 per cent. Banks were clearly inadequately capitalised before the crisis and were overleveraged. However, as I said, no amount of capital can make up for bad management or poor stewardship. Vickers's proposals are actually not significantly higher than those in Basel III. He does not reflect at all on the availability of supply of non-equity loss absorbing capital. He makes an assumption that this capital is available, which I find very questionable. Radical solutions, such as addressing the offsetability of interest against debt in bank capital structures, are simply not considered by Vickers. He has adopted a very conservative, central line approach. Nor has he given any serious consideration to the emergence of "shadow" banks or the passporting of activities by EU-based banks into the United Kingdom to come under the ring-fence.

On the issue of capital, the UK's four largest lenders have risk-weighted assets of about £2 trillion, implying a need to raise at least £140 billion of as yet untested, and therefore expensive, securities. Vickers expresses no view and seeks no evidence to test whether that type of capital is available. What are we going to see? We are going to see liability management in which some forms of debt will be forced into loss-absorbing debt. We are going to see bankers charging higher margins for their loans, lower margins on deposits and almost certainly paying no dividends. The only dividends that we can expect from UK banks in the foreseeable future will be distributions of debt instruments.

I wish to ask the Minister about some practical issues in this respect. Will the continuing uncertainty about the treatment of senior debt lead to a buyers'

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strike? Both Lloyds Banking Group and RBS plan to issue £10 billion to £15 billion of such debt instruments next year. There will be serious consequences for the funding of those banks if this uncertainty is not addressed. What will the Government do to mitigate this? Has HMT received assurances that the ICB's proposals will be compatible with the European Commission's CRD4? Mr Banier has said that he broadly supports this but I wonder whether he had actually seen the Vickers report when he was in Marseille last Friday. Perhaps the Minister can tell us that. Perhaps the Minister can also tell us, if the banking system is going to be made secure and safe, whether the bank levy will be dropped because surely we do not need the bank levy if the banking system is secure as a result of the Vickers proposals.

On competition, Vickers gives no serious consideration at all to the size of banks. No serious proposals are examined to encourage new entrants. No proposals are made to establish a national investment bank along the lines of Germany's KfW. There is no obvious reason why a challenger bank will emerge, yet he almost forces Lloyds into the arms of National Australia Bank-a bank which has been active in the UK since 1987 and has done nothing which seems to me to represent innovation, customer service and challenge. Frankly, he has dropped the ball on competition completely and yet ducks the issue of putting banking to the Competition Commission for a period of time rather than at least starting a slow burn review. Where I say that Vickers has been lazy is over the economic impact. There is an assessment that the cost of the ICB's proposals will be £4 billion to £7 billion per annum for UK banks. Where did Sir John get this figure from? Amazingly, he got it from investment bank analysts. He simply averaged the number produced by investment bank analysts, which were guesses not forecasts-teenage scribblers, as the noble Lord, Lord Lawson, once described them-based on trying to anticipate what Vickers was going to propose. It is quite extraordinary that a senior economist could put forward such a number as viable.

On the timetable, quite frankly-I am aware that I am at my time limit-Mr Bob Diamond will not be here until 2019. The other leaders of our banks will not be in office until 2019. It is just an extraordinary risk to allow this situation to continue. There is no reason given-we recapitalised the banking system over a weekend in 2008-why something much more radical could not be done in the interim. In the mean time we live in a world in which the sort of extraordinary events announced by UBS this morning can take place. Does the Minister accept that if that $2 billion loss had been incurred by Royal Bank of Scotland or Barclays, the Treasury would potentially stand behind those banks? Does the Minister accept that we underwrite that gambling casino spirit until 2019? If Royal Bank of Scotland comes to the Treasury and says, "In the light of Vickers we want to split our bank into two, and by the way, Minister, we now think you could sell the retail bank but the taxpayer will be left with the casino bank", will that be acceptable to Her Majesty's Government?

I would like to ask many other questions but I realise that I am time-limited. I look forward to the response from the Minister, an ex-banker. I am only

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sadly disappointed that the noble Lord, Lord Sassoon, the Treasury Minister, is not responding to this debate on behalf of the Government. I beg to move for Papers.

1.46 pm

Lord Lawson of Blaby: My Lords, the whole House is greatly indebted to the noble Lord, Lord Myners, for enabling us to debate the important subject of the report of the Independent Commission on Banking in the week in which it came out. He said that he did not want to engage in party politics. None of us here does; that goes without saying. In the spirit of agreement, I point out one particular area where I agree with him. As far as I am aware, this is not something which has been raised before he raised it today, but I hope the Government will agree to it-that once the proposals recommended in the Vickers report are implemented, the bank levy should be abandoned. That makes excellent sense and I hope that the Government will respond positively to it.

However, it is remarkably quixotic of the noble Lord to have raised this subject-although I and the whole House are delighted that he did-because, of course, the Government of whom he was a member produced the most disastrous and dysfunctional system of bank regulation imaginable-I absolve him completely from it; it was in place before he took Gordon Brown's shilling-and are therefore highly culpable. They are not uniquely culpable. I agree with the noble Lord's comments about causes. The root cause is the greed and folly of all too many bankers. Most of us are subject to greed and folly. The problem with bankers is that the temptations are greater and the consequences are graver. However, that is all the more reason to put in place a really effective system of bank supervision and bank regulation. I deeply regret that the previous Government tore up the greatly improved system of bank supervision and bank regulation which I put in place in the Banking Act 1987, and, as I say, put in place something which was completely dysfunctional.

Incidentally, I hope that we can have an assurance that the legislation will be separate and discrete and not something tacked on to some other piece of financial legislation.

What is important, however, is that the Vickers report, although not perfect, is actually rather better than the noble Lord, Lord Myners, indicated. There are some omissions. I have not read every word of the report but I regret, for example, that there is, as far as I can see, no discussion of the Board of Banking Supervision which I created under the 1987 Act and played an important role in by, in short, enabling some poachers to become gamekeepers-some recently retired investment bankers and commercial bankers who would give extremely good advice to the Bank of England, which had responsibility for this area. They had a duty to give that advice. That arrangement was destroyed by Mr Brown and it should be resuscitated. I do not see anything about that in Vickers.

Nor do I see anything about the role of bank auditors, which is very important. Again, one of the things that I introduced in the 1987 Act was a regular and important dialogue between the bank auditors

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and the bank supervisors, whereby each could inform each other, to create a more effective system and be more aware of when things were going wrong. Again I say to the Government, a recommendation on this front came unanimously from the most recent report of the Economic Affairs Committee of this House. I hope that we will have an opportunity to debate it in, I stress, this Chamber at a reasonably early date.

What Vickers did was be extremely tough on capital requirements and loss-absorbency requirements. It is right to be as tough as that. However, the timing is important and, bearing in mind the state of the economy, it should be phased in gradually, although the Government must commit clearly to doing it and not let the banks erode it at the edges or anywhere else.

However, the most important issue to which I should like to address most of my remarks is the structural separation proposal in the Vickers report-the separation between what it calls retail banking and investment banking. Retail banking is a bit more than retail banking, but nevertheless that is the jargon. I have to admit that I did not do that in the 1987 Act, but the reason I did not is that, at that time, there was a de facto separation which had been there for ever. All of us can remember that we had the so-called joint stock banks and investment banks which in those days were known as merchant banks. They were completely separate organisations with separate cultures. Very often the merchant banks operated on a partnership basis, which is an important difference. There were two different sorts of institutions and cultures, and that worked extremely well. We now have to introduce that by law.

I return to the noble Lord, and what happened when he was a Minister. It is now two and a half years since I first wrote a piece in the Financial Times calling for this separation. The noble Lord was the Minister responsible. Did he respond to that? Not at all. He is now keen on separation, as far as I can make out, but he was totally uninterested when I proposed it in March 2009.

Although I do not have time to go into them, the important points are laid out in Vickers, which states quite clearly why this is necessary. The question is whether the ring-fence will be adequate or whether complete structural separation is needed. I fear that the ring-fence will not prove adequate. You will not get the two different cultures, which is absolutely vital. There is the idea that different boards will make all the difference. For a time in the early 1990s, I was on the board of Barclays Bank. It is not the boards that can ensure that this happens; it is the management that are important, not least because it is they who get the bonuses. If you have one top management, you will effectively have one culture. There is also only one group of shareholders if there is not complete separation. Therefore you will not get the benefits we seek.

Complete separation may well be seen to be necessary. I therefore hope that the Government, while implementing ring-fencing and doing it without delay, will monitor it very carefully. If there is any sign that the measures are inadequate they should seize the opportunity to go further, and make it clear in advance that they will do so. The arguments against it are weak in the extreme, as the noble Lord said. Why is the idea of the one-stop shop so important? One thing that it does is reduce

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competition; but the Vickers report was meant to promote competition. It is completely absurd. The report says something very darkly about there being legal impediments to complete separation. I assume that it must be referring to EU law, but that is an avenue and whole new dimension that I do not have time to address.

In conclusion, I should like to make to the Government one practical suggestion that relates to the Royal Bank of Scotland Group, mentioned by the noble Lord, Lord Myners. This was the biggest disaster area of all the disaster areas in British banking, as a result of which the Government on behalf of the taxpayer have the largest stake. As the proprietor of the Royal Bank of Scotland, the Government now have a great opportunity, which does not need legislation, to separate out the retail banking from the investment banking within the group and to have two separate companies. I am not talking about privatisation; that will come later. At this stage there should be two separate entities with a separate board and management on the retail and small business side-the old joint stock banking side-that will provide the money that small and medium-sized enterprises need at present. You will then have an entity that has no other raison d'être but that.

1.57 pm

Lord Newby: My Lords, I congratulate the noble Lord, Lord Myners, on initiating such a timely debate. Indeed, it is so timely that some of us have been struggling to read every last word of the Vickers report before we drafted our speeches. Indeed, some may have failed to do so.

It is also a great pleasure to follow the noble Lord, Lord Lawson, who, at Second Reading of the Banking Bill last year made the most powerful case I have yet heard for splitting retail banking from wholesale and investment banking. When he did so-and I supported him-the mood was very different from that of today. Those who argued for a complete split or for a firewall were in a small minority. There were some noble exceptions, including the noble Lord, Lord Blackwell, and the noble Baroness, Lady Ford. Indeed, the mood of the time was admirably captured by the noble Lord, Lord Myners, who said:

"I should say to the noble Lord, Lord Newby, that the separation was not something that I and the Government reject because we believe that it cannot be done. We believe that it can be done but do not believe that it is necessary that it should be done".-[Official Report, 10/3/10; col. 282.]

In the same debate the noble Baroness, Lady Noakes, said:

"My own party does not have a definitive view on the right way forward in terms of structure", [Official Report, 10/3/10; col. 279.]

of the banks. I am very pleased that the Conservative Party now has a definitive view.

Why then has this mood changed whereby we now have a near consensus for at least what Vickers is proposing? It is partly because over the past 18 months there has been a growing realisation of the advantages of making such a change. For example, I have been struck by the comments of Sajid Javid, a Conservative MP in another place, who was an investment banker

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on Wall Street when Glass-Steagall was in place and remained an investor as it came off. He described in words of one syllable how the banking in which he worked started to behave much more riskily with the funds available. It is a very compelling argument.

It has also become even clearer that if anyone had hopes that the banks would mend their ways, those hopes were forlorn. There have been a number of examples of that, including the continuing unwillingness to lend to many small firms on reasonable terms, and the continuing payment of huge salaries and even bigger bonuses. Like the heart attack patient who continues to have a daily full English breakfast, the banks have gone back to business as usual.

If there is now almost total agreement on the desirability of separation, what are the concerns and pitfalls? Clearly, cost is not an issue. Although it is easy to mock the cost estimates that have been produced, nobody is mocking their order of magnitude. If the order of magnitude of cost is £4 billion to £7 billion, the fact that broadly speaking that equates to the bonuses that bankers pay themselves each year gives some sense of how difficult that is likely to be, particularly against the estimated annual cost of another banking crisis of £40 billion. I suspect that we will hear no more, even from the BBA, about the cost of the proposals.

The next question is: how can we be sure that it works? The noble Lords, Lord Myners and Lord Lawson, expressed concerns about the efficacy of the proposals. How do we know that we will get what we want? Some people were particularly concerned to read in the papers yesterday that Bob Diamond says that Barclays can live with the proposals. I must say that that was not a reassuring comment.

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