My Lords, I say at once that I welcome certain aspects of the regulations we will debate tonight, specifically the help for social enterprises. However, I am concerned about their potential impact on the NHS, the enforced tendering of services that will entail and the potential confusion between two different sets of procurement regimes for the health and social care sector.
These regulations implement the main public sector procurement directive agreed by the EU in 2014 but also introduce a number of UK-specific changes intended to open up public procurement, including for small businesses. The directive replaces the old system of type A and type B services, and the new light-touch regime will apply to health and social services—formerly Part B services.
Contracts in the category will fall under the new rules if they are valued at above €750,000. Above the threshold, commissioners will have to publicise in advance their intention to award contracts and announce the contract award decision after it has been made. This regime will sit alongside the healthcare-specific requirements in the NHS (Procurement, Patient Choice and Competition) Regulations 2013 and Section 75 of the 2012 Act, which we debated in your Lordships’ House on 24 April 2013. I am sure that the noble Earl will recall that lively debate.
The introduction of this new regime has been delayed for NHS-funded healthcare services until April 2016 to allow commissioners time to adapt. The Government have argued that this is necessary because of the need to ensure that commissioners and other key stakeholders are fully prepared. The Government have stressed that other contracting authorities, such as local authorities, are not subject to these additional domestic regulations and therefore need to follow the new rules for the light-touch regime as soon as they come into force.
However, the Government have also been forced to acknowledge that there are concerns about the scope for potential confusion as a result of the existence of two regimes side by side for another 12 months.
The Opposition have sought two different legal opinions, both of which advised that these new regulations could force the tendering of NHS health and social care services to go beyond the requirements of the Section 75 regulations under the 2012 Act. Practically all health services will be above the €750,000 threshold. This would escalate the level of service tendering and privatisation of health and social care services as well as wasting vast amounts of money on pointless tendering procedures when the money would be far better spent delivering services for NHS patients.
At best, the new procurement regulations are confused and unclear. NHS services have an additional year because the new regulations do not come into force for health services until April 2016, whereas they came into force on 26 February 2015 for all other areas. Council social care services have to comply with these new regulations immediately so, in effect, two procurement systems will be operating for health and care until 2016. There will undoubtedly be confusion over the definition of some services, to do with whether they are strictly social care or include elements of healthcare as well, and therefore whether they are subject to these regulations and there is a requirement for them to be advertised and tendered. The advice we have—I think experience in the last three years shows that this will be the case—is that CCGs will understandably err on the side of caution to avoid legal challenge and therefore advertise or tender services in case the new regulations are found to apply to them.
What happens if an NHS body wishes to commission a contract that includes elements of clinical healthcare and social care? This will not be completely unknown, given the effort that we all support towards trying to integrate health and social care. The question arises: which regime will the NHS body have to follow? Will it not be driven to split out these elements in two separate contracts to comply with two separate legal requirements? What about the potential for legal challenge? Would it not drive a wedge between joined-up commissioning of health and social care?
The regulations also fail to take advantage of many of the flexibilities in the 2014 directive that could have exempted the NHS from having to run pointless tenders. They also fail to incorporate the flexibilities in the directive that would have allowed NHS bodies to decide not to tender when there are wider strategic interests that mean a comprehensive local health service must continue to be provided by a key NHS provider.
These missed opportunities reflect the Government’s political imperative to turn the NHS into a market and pave the way for private sector operators to deliver more NHS services. The imposition of market mechanisms when they are not needed, and the failure to allow CCGs flexibility to decide when tendering is the right approach for patients, will create wholly unnecessary additional cost and uncertainty at a time when NHS bodies should be focused on meeting the needs of an ageing population and improving services.
We are already seeing the impact because many CCGs undoubtedly believe that there is no alternative to full-scale tender. A vast amount of resources is being consumed, with no benefit to patients. The evidence is clear. Commissioner spending on private providers has increased from £4.1 billion in 2009-10 to £6.3 billion in 2013-14. The proportion by value of community health services provided by private sector providers has increased from 12% in 2010-11 to 18% in 2012-13. Private provider spending on mental health services increased by 12% between 2010-11 and 2012-13. Overall, the Department of Health’s annual accounts suggest that some £10 billion of the total NHS budget of £113 billion is spent on care from non-NHS providers.
Some large contracts have attracted particular attention and concern. For example, in Staffordshire, CCGs are seeking bids for a 10-year contract worth £1.2 billion for cancer and end-of-life care, which is potentially likely to significantly involve private sector providers. Then there is the Bedfordshire case. The Bedfordshire CCG awarded a five-year contract to Circle as prime provider, assuming a total risk for musculoskeletal services worth £120 million. A local NHS provider has subsequently refused to sign the contract under which it would provide some of those services because it would see a referral drop of 30%, thereby putting at risk its trauma services, which are cross-subsidised by musculoskeletal services. There are other examples of bizarre decisions being made by clinical commissioning groups because they feel that they must put services out to tender, and by doing so they seem to have no analysis of what that would mean for the viability of the whole health service system.
A recent study by the British Medical Journal found that one-third of contracts to provide clinical services awarded in the year from 2013 were secured by private providers. A study by the NHS Support Federation found that, of 80 contracts awarded, 54 went to non-NHS providers. We have also seen what I can describe only as a ludicrous intervention by the competition authorities in sensible service changes in Dorset and then Bristol.
I am sure that the noble Earl will want me to refer to the recent King’s Fund study, which concluded that any benefits from competition,
“can be outweighed by costs and difficulties of competitive process”.
As the study says, it is also clear that CCGs remain very uncertain about procurement and tendering rules. They are spending a lot of money on legal advice. A lot of that legal advice is very risk-averse, which is why so many services are being put out to tender.
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We have debated these matters on a number of occasions, both in the passage of the 2012 Act and in the debate on regulations. Every time we have debated them, the noble Earl has been clear. In the debate on 24 April, he said that,
“it is NHS commissioners and no one else who will decide whether … and how competition in service provision should be introduced”.—[Official Report, 24/4/13; col. 1508.]
Again, in my noble friend Lord Turnberg’s debate on competition, I quoted him as saying that clinicians will be free to commission services in the way they
consider best. I have no doubt that he will say the same again tonight. The point I put to him is that it simply does not feel like that in the National Health Service. We know that there has been pressure from NHS England on CCGs relating to some services. I come again to the advice that CCGs often get. They are spending millions of pounds on legal advice where they are being advised to tender out services.
In conclusion, we welcome aspects of these regulations. They could have gone further on opportunities for social enterprises and employee-controlled organisations, but we have very great concerns about the impact of these regulations on the National Health Service. The point I to the noble Earl is: why are the Government proceeding at such an unseemly pace? I have had the great joy of being at Question Time most days during the last five years. The noble Earl and I are rather alone tonight, but when issues about Europe come up at Question Time there is not unalloyed enthusiasm for European directives on the part of the noble Earl’s colleagues. Yet the Government have rushed in to implement this directive a year before they had to. Doing so creates the confusion of two different sets of regulations operating for the health and social care sector. Given the uncertainty that these new regulations cause, and the total lack of consultation over their potential impact on the NHS, there is a strong case for deferring implementation until after the next general election. I earnestly hope that the noble Earl might be able to announce he will do that tonight. I beg to move.