My Lords, I am very grateful to the noble Lord for his detailed and careful explanation of the reason for this statutory instrument. I still regard it as a flawed set of regulations and I am not surprised that your Lordships’ Secondary Legislation Scrutiny Committee has reported it for the specific attention of the House on the grounds that the regulations may imperfectly achieve their policy objective. It is my contention that the regulations undermine a core part of the Health and Social Care Act 2012. They certainly run against the spirit, if not the letter, of what the noble Earl, Lord Howe, told the House during the passage of the Bill. Although the noble Lord has been very careful to differentiate between acute and non-acute trusts, the actual impact of what is being proposed is that NHS trusts and foundation trusts, which provide 96% of the tariff work for the NHS, are effectively disabled from using the tariff objection mechanism because it is mathematically impossible for them to trigger it alone. They would need some of the very small-scale, private providers to join in. The effective silencing of the voice of the NHS front line in the tariff-setting process displays a shocking degree of arrogance on the part of NHS England. It seems to be bent on punishing these providers for having the temerity to object, as they did in the last financial year.
The noble Lord has carefully described the national tariff. I suspect that noble Lords know more about it than they ever thought they wished to. As he says, it is very important in terms of the income going to most NHS providers. The 2012 Act provides for a statutory duty to consult on the proposals that NHS England and Monitor make. There is also a parallel right to object to the tariff proposal if they have insignificant numbers. The current threshold is 51% of commissioners or providers, either individually or based on the proportion of services they provide. This is called the share of supply. I do not think that 51% could be said to be not setting a pretty high threshold. I understand entirely that this mechanism is not meant to be used regularly, but current experience shows that it actually works. It was not used in the first year of its operation, but it was used in the 2014-15 financial year, with 75% of providers by share of supply making an objection. The reason they objected was that the tariff changes made, particularly for specialist services, would have an enormously negative impact on the providers of those services and, by definition, on the specialist services themselves.
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Specialist services are vitally important to the NHS and its patients and are often accessed only by a small number of people with some of the rarest and most complex conditions, ranging from cancer to congenital heart disease. Obviously, those services are expensive to provide. My understanding is that demand is hard to predict, and that there was a late amendment to the proposal in 2014-15 to introduce a marginal rate for those services whereby providers would be paid just 50% of the tariff price for services that exceeded their own projections of patient demand. The noble Lord
made great reference to uncertainty for the health service because of the tariff objection, but surely he would agree that the introduction of this proposed marginal rate would cause huge uncertainties for the organisations providing those specialist services. That is why they triggered the mechanism.
We know that the Government, NHS England and Monitor went back to the drawing board and returned with a solution, moving £500 million over to providers from the commissioning side, increasing the marginal rate for specialist services to 70%, and allowing providers the option of remaining on the previous year’s tariff. The noble Lord seemed to find it quite shocking that this actually happened and that it caused a huge problem for his department and NHS England. I would have thought that it is evidence that the mechanism worked. The Government had to think again and had to find resources from somewhere else in their pot—which clearly they did.
I remain puzzled about the real rationale for why on earth NHS England—which is clearly the body that wants the change—wants to do this. The only rationale that I can see is that essentially NHS England is so offended by the fact that these providers could object to the mechanism that it is determined to rewrite the rules so that they can never again object in the way that they did in 2014-15.
I turn to the regulations, which to me seem unbalanced, risky and rushed. The imbalance is quite extraordinary. It gives every single licence provider in the country the same say over the tariff as a large-scale provider. One or two noble Lords in your Lordships’ Chamber have chaired NHS foundation trusts, and we have a current chairman of such a trust. Taking Guy’s and St Thomas’ as an example, it would be extraordinary if a small-scale provider, providing services for a few thousand pounds, was given a similar weighting as Guy’s and St Thomas’ and other hugely important NHS foundation trusts. That does not seem a very fair approach.
Increasing the trigger threshold from 66% essentially means that, given the ability of providers to vote with the share of supply status being removed, even if all NHS trusts and foundation trusts were to object to a proposed tariff, they would account for only 62% of all providers. So clearly, NHS England designed this to ensure that NHS providers collectively would never be able to object to the tariff. This is a manipulation of the rules. It is not a statement of principle. It is underhand and completely unjustified. This level of democracy would make the North Korean Government proud. What is being proposed is outrageous and NHS England should be ashamed of itself. I wonder about the board of NHS England sometimes, as I try to understand what is in board members’ minds when they agree to such a proposal.
It is clear from what the noble Earl, Lord Howe, said to me in debate in 2012 that he recognised that there needed to be a process for adjudication on Monitor’s proposals if a sufficient number of those who would be affected by them objected; otherwise, they would have no way of disputing proposals other than by judicial review. I think it would have shocked the noble Earl, Lord Howe, at the time if a suggestion had been made that even if all the NHS providers objected to a
proposal, they would in fact not have enough votes to trigger the arbitration mechanism. Quite clearly, for individual foundation trusts, the noble Earl, Lord Howe, has pointed them in the right direction. In future, because they cannot use this mechanism, it is an open invitation to go for judicial review.
If the Minister is so worried about the timing and the disruption to planning, there are two simple alternatives: either publish the tariff proposals earlier or accept that there are likely to be judicial review proceedings in the future, at enormous expense. I remind him of what is happening in Manchester with the JR proceedings in relation to the reconfiguration of specialist services, which is putting back changes for many months. So I really do not understand why the Department of Health agreed to this. Of course the financial situation facing the NHS is considerable, but it is as considerable for individual NHS trusts as it is for the department, and surely they can expect to be treated fairly. This is not treating them fairly.
I am also concerned about the way that this was rushed through, which was highlighted by your Lordships’ scrutiny committee and the consultation process. I have to admit to past form but when a consultation document is issued on 13 August, to be completed by 11 September, your Lordships know that something fishy is going on. To sneak it out for just 29 days is not on. In fact, it is amazing that so many NHS providers were able to respond, and that is tribute to them and their representative organisations.
The Minister mentioned the consultation. This is the Department of Health at its very best. Some 82% of those responding did not want the objection threshold raised. Just under two-thirds also disagreed that the weighted vote of providers should be removed. What was the point of consulting? Clearly, there was no point: 29 days’ consultation, August to September, and no notice taken of the comments coming back.
It really is disappointing that the Minister has brought this regulation before us, but I listened with great care to what he said at the end, because that was very important. He knows that NHS Providers has made a specific proposal to him, to which there were three elements: first, a far more transparent process for setting the national tariff through an open-book approach; secondly, a genuinely collaborative approach to developing the tariff each year—this is what is required—achieved through the set-up of a new form of strategic stakeholder group overseeing the development of the tariff; and, thirdly, the good offices of the Department of Health to exercise some oversight and scrutiny over whether the open-book approach and strategic stakeholder group are working effectively. The Minister went some way but not quite as far as I had hoped, so I hope that he might reconsider this within our debate tonight.
It is clearly important that there is ownership. If the Minister does not have NHS Providers owning this process, it will be unhappy. Judicial review proceedings are certainly a factor that would have to be considered. At the end of this whole sorry saga, I would have thought that it would have been much better if the department and the noble Lord agreed the elements that we need to see, going forward, which have been proposed by NHS Providers. I beg to move.