I take the noble Lord’s point about uncertainty and confusion that I know exists in certain parts of the health service as to what all this means. I can tell him that officials in the department have had some very productive discussions with both the OFT and the Competition Commission to ensure that their approach need not set unnecessary hares running as regards apprehensions that a purist competition-based approach will be taken by these bodies. I am satisfied that that will not happen. My advice is that the Competition Commission, in particular, has welcomed the input of departmental officials in terms of the factors that need to be brought into play when making a judgment on what is in the best interests of the health service and patients.
At the same time I am aware that a number of useful events and conversations took place within the health service itself when we clarified with providers the considerations that the OFT and the Competition Commission will look at in proposed mergers. We are ensuring that when proposals are made the benefits of mergers are clearly defined in terms that will resonate with the competition authorities. The noble Lord is right that we are in new territory in many senses, but I am optimistic that the system will work in the way that it should. It is certainly about looking at competition aspects but, more pertinently, looking at the criteria that I mentioned earlier, such as the public interest in the case of licence modifications, the test of appropriateness in pricing methodology, and in the case of mergers, the interests of patients in the health service. The OFT and the Competition Commission must take into account the benefits of a proposed reconfiguration if they consider it under the Enterprise Act 2002. I remind noble Lords that that is the governing Act, so in theory at least, we have been in this situation for more than 10 years. In doing so the competition authorities must consider whether those benefits would outweigh any substantial lessening of competition that they find.
The noble Lord asked about the tariff, and in particular, primary care. We agree that payment mechanisms need to be aligned to drive better outcomes and better value for patients. They also need to be responsive and flexible, for example to enable services to be provided in an integrated way. Monitor and NHS England will work together to move the tariff in this direction. They are best placed to do that given their different roles.
The noble Lord asked me what would happen if the tariff proved to be inadequate. We expect the tariff in future more closely to relate to the costs of providing particular services. If the price payable for a service would make it uneconomic for a provider to provide a service, Sections 124 and 125 of the 2012 Act provide for a process for local modifications of the price payable.
My advice is that NHS England and Monitor are working very well together in this regard. Guiding principles have been defined and six shared principles for pricing have been agreed: that the pricing mechanism should enable and promote improvements in care for patients and taxpayers; that it should enable efficient providers to earn appropriate reimbursement for their services; that it should have regard to sustain the NHS offer in the long run; that it should not preclude the delivery of the Secretary of State’s mandate for NHS England; that it should have regard to the principles of better regulation; and that it should support movement towards a fairer playing field for providers.
I hope that I have answered most if not all the questions, but I undertake to write to noble Lords if I have failed to do that.