My Lords, I am grateful to both noble Lords who have spoken. First, I hope that I can reassure the noble Baroness, Lady Finlay, on the question she posed about the cross-border aspects of patient flows and the tariffs that apply. The tariff will apply only to services commissioned by commissioners in England: that is to say, CCGs and NHS England. Any provider who provides healthcare services for the purposes of the NHS which are covered by the proposed tariff will be able to object to Monitor’s proposed methodology, so I do not see that patients in Wales or on the border need to be anxious about this.
The noble Lord, Lord Hunt, asked a series of questions. First, he questioned the wisdom of allowing Monitor to fine providers. It is worth saying that the discretionary requirements which Monitor can impose, as laid down in these regulations, are based on those used for other regulatory offences. In fact, they are based on Part 3 of the Regulatory Enforcement and Sanctions Act 2008. That menu of options has been picked up and put into the 2012 Act.
As regards fines, we need to be clear—and it is certainly my understanding—that Monitor regards fines as a last resort. It will need to consider each case carefully and has a responsibility to ensure that its regulatory actions are reasonable, while deterring poor conduct in the future. It must also consider whether its other powers would be more appropriate. I understand the point that the noble Lord has raised but it is unlikely that we will see Monitor exercising this power with any frequency. We must bear in mind that 10% of turnover is of course a maximum figure.
The noble Lord asked about the thresholds as laid down in the regulations. The 20% threshold relating to licensing is based on a similar process which was in place for modifying licences in the energy sector. We considered that the situation here in the health service was comparable, and it is a threshold that commanded general acceptance.
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On pricing, the thresholds are higher than for licensing because the threshold for licensing was based on precedents for objections to licensing changes in the energy sector, as I mentioned. However, there are no precedents for price-setting in any other sector. We have proposed a higher threshold for pricing because the group of potential objectors is wider. We consulted on this and, following that, we concluded that setting the thresholds at this level would achieve the balance that I referred to earlier between the interests of patients, the interests of commissioners and the interests of providers.
We have taken on board the concerns raised by stakeholders during the consultation and we will of course keep the thresholds under review as the system beds down. We will carry out a review of the licensing regime as a totality in 2016-17.
Turning next to the noble Lord’s question about the foundation trust pipeline, the 2014 deadline for reaching foundation status has, I think, done quite a lot to galvanise the NHS trust sector and drive improvement. However, in the light of the Francis report, we have allowed the NHS Trust Development Authority to agree trajectories for NHS trusts to reach foundation trust status but to go beyond 2014 on a case-by-case basis. In doing so, we will ensure that the primary focus of the NHS Trust Development Authority and of NHS trusts themselves is on improving the quality and sustainability of services for patients.
The noble Lord asked whether I felt that the regulations might lead to a target culture, which could have perverse effects. I do not see the regulations in that light. There are in fact no targets for healthcare standards in these regulations. The regulations set the thresholds for objecting to Monitor’s proposals on licensing and pricing, as I have described, so in that sense they are very narrow in their focus.
Next, the noble Lord asked me about the role of the Competition Commission. The commission clearly has wide experience of determining similar questions in a number of other sectors. It is the body best placed to consider these questions for the purpose of the new licensing and pricing regimes. It will not apply a competition-based approach but, rather, a test of public interest in the case of licence modifications and a test of appropriateness in the case of the pricing methodology. However, I am sure that I do not need to remind the noble Lord that the issue of competition in the health service is not by any means new, and it was for that reason that the Co-operation and Competition Panel was set up under the previous Administration. As he knows, that panel has now been absorbed into Monitor.