Health and Social Care Bill

My Lords, I very much appreciate the opening speeches from both sides on this group of amendments. I particularly recognise that the noble Baroness, Lady Thornton, has put a great deal of care and consideration into the amendments that she has tabled and they represent a huge amount of work, particularly without the benefit of a Bill team. It is also clear from both speeches that now is the moment to start the debate about the application of EU and domestic competition law to the NHS. The Bill contains a number of measures that could increase competition within the NHS at the expense of collaboration and integration and which, in my view and that of many of my noble friends, increase the risk that UK competition law will apply as if healthcare were a utility like gas or telecoms. Amendment 288G is the first of a number of amendments tabled by me and my noble friends seeking to minimise that risk. I am not against competition in the NHS—I suspect that very few of us are—but it must be where it is appropriate. It is not appropriate in all circumstances. Public and patient benefit can often be secured in other ways. We have discussed integration of services throughout the Committee as an alternative and as a complement to competition. Having a balance and choosing the appropriate mechanism that is best for patients is what the debate about Monitor’s powers has focused on to date. I accept that EU competition law has had some application within the health service for some years now. However, along with many others, I do not want to see EU competition law apply universally across the health service so that our commissioners and providers are required to operate a market-based NHS, red in tooth and claw, without being able to choose where it should apply and where it should not. In my view and that of my noble friends, the risk, for reasons that I shall explain, of a number of elements of the Bill being taken together increases the likelihood of NHS services being found by English and EU courts to fall within the scope of UK and EU competition law. These include potential deregulation of FTs from 1 April 2016, in terms of Monitor no longer having the power to set special conditions under Clause 109 for foundation trusts. That is what Amendment 288G is designed to address. The stand part debates for Clauses 110 to 112, which I support, are also relevant. Secondly, there are so many new areas where the Competition Commission is deployed. First, there is the role where Monitor has given notice to include a special condition in a licence in determining whether the matters subject to the proposed condition are potentially contrary to the public interest and whether the special condition provides a remedy. That is Clause 99. There is also its role in reviewing the development of competition in the NHS in the provision of healthcare and the exercise by Monitor of its functions in relation to the provision of healthcare services. That is Clause 76. Its role where there are objections in setting the method of setting prices for the national tariff by Monitor is in Clauses 118 onwards. Finally, there is oversight of foundation trust mergers as a result of the application Part 3 of the Enterprise Act. Thirdly, after the potential deregulation of foundation trusts and the role of the Competition Commission, there is the lifting of the private patient income cap for foundation hospitals, in Clauses 161 and 162, which open the way for some foundation trusts to derive the majority of their income from private patients. In that context, I am very pleased to see Amendment 299ZA, tabled by the noble Earl. If EU competition law were to apply in an unrestrained manner across the NHS, private sector companies that bid unsuccessfully for NHS contracts could make a European competition complaint and challenge commissioning decisions in the courts, and/or the status of foundation hospitals, undermining the mainstream of the NHS in the delivery of services such as intensive care units, A&E, emergency cover, teaching, training and research. The number of such complaints across the EU has increased over recent years. It was, of course, to minimise the risk of the unrestrained application of EU competition rules that the rules of co-operation and competition and the Co-operation and Competition Panel were devised in 2008. But this Bill, on the face of it, goes much further in encouraging competition. There is a view that the incorporation of those rules in statute is yet another reason to believe that the NHS is at risk in this way. The applicability of domestic and European competition law to an NHS body, whether commissioner or provider, essentially turns on whether it is an undertaking for the purposes of competition law. Only a grievance between undertakings and abuses committed by dominant undertakings are within the scope of the Competition Act 1998 and Articles 101 and 102 of the Treaty on the Functioning of the European Union. There is, in fact, no definition of the term, ““undertaking”” in domestic or European legislation, so the scope of the term has been developed and considered through case law of the domestic and European courts. I do not propose to give your Lordships a legal lecture—I do not believe I would be able to—but briefly, there are two cases in particular that are of some importance. The question of whether an NHS trust is an undertaking for the purposes competition law was considered by the Competition Appeals Tribunal in the case of BetterCare Group Ltd in 2002. BetterCare was a UK provider of residential and nursing home care, which complained to the OFT that the North and West Belfast Health and Social Services Trust, acting as a purchaser of nursing and residential care home services, was abusing its dominant market position in Belfast. The OFT rejected the complaint on the basis that the trust was not an undertaking for the purposes of competition law. On appeal of the OFT’s decision by BetterCare, the Competition Appeals Tribunal determined that the trust was acting as an undertaking both in the purchasing of services from BetterCare and in the direct provision of elderly care by its own statutory home. This was for various reasons, but of particular importance in the current context, is that in providing care through its own homes, the trust was also a participant in a market for residential care, alongside independent providers, and the trust was in a position to generate the effects that the competition rules seek to prevent. In FENIN, a case brought by an association of companies involved in the marketing of medical goods used in Spanish hospitals, the European Court of First Instance in 2003 upheld a decision by the European Commission rejecting a complaint alleging abuse of a dominant position by 26 bodies or organisations, including three Ministries of the Spanish Government, which run the Spanish national health system. The Commission had rejected the complaint on the grounds that these bodies were not acting as undertakings in their dealings with suppliers. The Court of First Instance considered that where an organisation purchased goods not for the purpose of offering goods and services as part of an economic activity but in order to use them in the context of a different activity, such as one of a purely social nature, it does not act as an undertaking simply because it is a purchaser of those goods. The complainants appealed the decision to the European Court of Justice, which, in 2006, dismissed the appeal, confirming the view of the Commission and the CFI that a purchasing activity is subject to competition law only if it is undertaken for an economic purpose, such as the supply of goods or services on a market rather than for a purely social purpose. The Commission’s argument, summarised in paragraph 24 of the ECJ judgment and accepted by the court, makes the point that it is the act of placing goods or services on a given market that characterises the concept of economic activity, not purchasing the activity as such. By the same token, it is generally established that an entity is unlikely to be an undertaking if services are provided on a universal basis on the principle of solidarity—that is, they are funded by the state. However, as the NHS European office itself states, European Court decisions are case-specific. There is uncertainty about how they apply generally. So it is my contention, precisely in the light of these cases, that if there is no regulation of foundation trusts by Monitor, no special licensing for foundation trusts after 2016, constant involvement of the Competition Commission and no cap on PPI of any kind, foundation trusts will risk falling within the definition of an undertaking for the purposes of domestic and European competition law. NHS trusts may well be acting as an undertaking when carrying out specific functions of a commercial nature. At the end of the day, the question is whether there is a market for particular healthcare services. There is already a market for private patient services, which is being emphasised and expanded by the provisions of this Bill. Many of us are worried about the future for NHS providers rather than the application of EU competition law to commissioners. We are worried that our local NHS hospital, particularly if it is in London, where already the major trusts compete for private patients, will be chipped away at by private competitors. Markets could be created in a number of different areas of healthcare that it delivers. There is a danger that a hospital trust would increasingly be treated as an undertaking under European competition law across the range of its services, so that unless it competed effectively in those markets, it would no longer be viable as a local NHS facility. It might be said that this is certainly not the case currently. Only elective surgery is really part of a market. But there is nothing precautionary in the Bill. There is nothing to prevent such a market being created or arising in the future. What is to prevent a future Government deliberately creating a market? Perhaps my noble friend the Minister can tell us. Why have nursing homes, which deliver nursing and social care paid for by public money, become subject to competition law? It is because the previous Government deliberately set out to create a market. The King’s Fund, in an excellent document of November this year, entitled Economic Regulation in Health Care: what can we learn from other regulators?, states: "““The market in health services is heterogeneous. The challenge facing the regulator will be to determine when competition is ‘appropriate’. In health care, as in other sectors, there are some services that are natural monopolies and others where competition may bring benefits. There is almost no evidence to guide this at present, although there are some ideas about how far different sectors in health care lend themselves to competition.""Monitor will need to develop a nuanced approach, balancing its proactive intervention powers to remedy market failures and its concurrent powers with the competition authorities””." This is very laudable, but all this assumes that Monitor will be able to pick and choose what rules of co-operation and competition to apply. This Bill could open up the NHS to competition in a new and radical way in the future, even if not now. There seems to be little or nothing to prevent that taking place. I have seen the department’s response to the counsel’s opinion by 38 Degrees, which raises the European competition issue by reference to a number of issues in the Bill that overlap with those that I have raised, and in some cases go beyond them. This does not essentially argue the case, but it simply makes assertions in response. Simple assertions will not suffice. The Department of Health needs to produce independent counsel’s opinion to back up its assertions that the risks have been properly assessed in respect of commissioning and that the contents of the Bill, particularly those areas that I have outlined, do not increase the risk of EU competition law applying, or that they intend to mitigate them by specific amendments. Failing that, on these Benches we will be seeking major changes to the Bill, and I look forward to the reply of my noble friend the Minister.