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Lord Carter: I am extremely glad that the Minister has been able to explain so clearly the particular problems in relation to the Isles of Scilly. I shall read what she said in Hansard. It is the answer that I expected. It appears that the orders are not so wide as we thought they were, but I shall need to read her response.

I still do not entirely understand the Government's response to a point that I made earlier. I do not believe that the Minister dealt with it. I referred to the power to abolish or establish a new health authority, which seems to me to be a substantial power to be made by order. The best thing for me to do is to read what the Minister said and to take advice. In the meantime—

Baroness Cumberlege: Perhaps I can help the noble Lord. It concerns consultation; it does not concern the power to abolish.

Lord Carter: I am extremely grateful to the Minister. I beg leave to withdraw the amendment.

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Amendment, by leave, withdrawn.

[Amendment No. 38 not moved.]

Clause 6 agreed to.

Clause 7 [Financial provisions]:

On Question, Whether Clause 7 shall stand part of the Bill?

Baroness Jay of Paddington: I beg leave to oppose the Question that Clause 7 stand part of the Bill. I do so because of the considerable confusion and concern which still remains—at least on these Benches—about the short and long-term impact of the Bill on the public purse. The arguments that have been put forward throughout the debates, both in this Chamber and in another place, to suggest that this Bill is a very important and necessary measure have largely concerned savings in public expenditure that will result from it.

In the initial Financial Memorandum to the Bill when it was published, the figure of £150 million was mentioned as a saving in public expenditure. As I understand it, that was later informally amended in Committee and on Report in another place to £60 million, and then subsequently to £50 million. The figure for savings of £3 million for Wales has seemed to be reasonably consistent. At the same time, there is concern about the transitional costs, which were mentioned and allowed for in Clause 7 of the Bill: why they are necessary; what is their sum; and precisely how they will be expended. There has been difficulty in establishing the overall size of the potential savings which will arise from the enactment of the Bill and the precise size of the interim expenditure.

It is not surprising that there is concern about the transitional costs and the size of any expenditure that the Secretary of State, under this Act, may provide to cover that period. As the Committee will remember, very substantial costs indeed accrued to the public purse the last time that there was any reorganisation of the health service. I am sure that the Committee will recall the very large sums of money which were spent in establishing the internal market. I have today received a rather glossy version of the Health Director which talks about a "managed metamorphosis" into the new health service authorities. It is published with the touching and seasonal picture of a butterfly emerging from a chrysalis. It speaks in considerable length and glowing terms about the transitional arrangements which will be needed between now and next April to establish the new health authorities. But it does not mention any costs.

There has been an equal lack of clarity in the Bill and the speeches, both from the Minister in this Chamber and her honourable and right honourable friends in another place, about how those long-term savings are to be made. We have heard and been told again this afternoon that all the important functions of the regional health authorities will not be lost. They will simply be transferred either to local health authorities and trusts or to the regional outposts of the Department of Health. If those functions are to be satisfactorily maintained and just simply relocated, how can very substantial savings be made?

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One of the suggestions has been that salaries and allowances to health authority members will be reduced by the abolition of the regional health authorities and the merger of the district health authorities and family health service authorities. We on these Benches have sometimes queried the size of the salaries bill and the expenses for members of those authorities, but savings in that area cannot possibly add up to some of the sums that have been mentioned.

It was also suggested in Committee in another place that savings would be made because the regional function of compiling reports and statistical work would no longer be necessary. That brings forward another worry about the reduction in public accountability through the reduction of information. But again, if that is to be a source of major savings, it does not seem to be a very important one.

Overall, as we know, regional staff have already been reduced. It is not in the areas of the regional health authorities that the enormous explosion in managerial costs has occurred in the past few years. It has been further down the line at the trusts and health authority level. What assurances do we have that there will not be a similar enlargement of management costs which will eat very substantially into those savings—savings which, as I said, have not been accounted for very much?

The other financial information mentioned in the guidance to the Bill is that the money that is saved—the very large sum of £150 million which was originally mentioned—

    "will be reinvested in patient care".

That is what the financial memorandum says. How is that to be monitored and reported on? How are we to know exactly how the money will be redirected from those savings? It is unclear where those savings will be made at such a substantial level. How will they be transferred?

I should like to ask the Minister about several matters before the Question is put to the Committee. Can she tell us the precise size of the savings, where they will come from and how the money from those savings will be deployed? I should also like some reassurance that a great part of those savings will not be swallowed up by extravagant expenditure on the transitional costs or legitimate expenditure on maintaining functions which were previously carried out by the regional health authorities.

Lord Boyd-Carpenter: It would be helpful if my noble friend the Minister could possibly tell us what now are thought to be the likely financial consequences of this measure. As the noble Baroness opposite said, it is perfectly true that on occasion changes of this kind involve transitional expenditure which exceeds what was hoped would be the outcome of those changes. I do not know whether that is likely in this case but I suppose that it is possible. In any event, in view of the fact that rather different figures, both plus and minus, have been given of the effect of this Bill on public expenditure, it

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would be very helpful if my noble friend would spend a few minutes bringing the Committee up to date on the matter.

Lord Stoddart of Swindon I should like to ask the noble Baroness to do just that. I am thoroughly confused now. My noble friend mentioned that there had been a revision of the figures, first down to £60 million and then to £50 million. I took a small part in Tuesday's Committee stage, when the noble Baroness reiterated (recorded in Hansard at col. 1519) that there would be savings of around £150 million. Indeed, I asked her a question about that. I asked where the £150 million was going to and would Parliament be informed about where it was going. I am now thoroughly confused. Is the figure £150 million, £50 million or £60 million that will be saved?

I feel that we are entitled to know—if £150 million is still a relevant figure—when that amount will be saved and how Parliament will be told when that amount has been saved and where it has gone to within the National Health Service, as my noble friend requested.

Baroness Cumberlege: Perhaps I could deal first with the principle and then go on to the savings in particular. The Committee has now agreed all the issues of principle in the Bill and there can be no reason not to agree to the financial provisions.

When fully implemented, the Bill will not lead to additional costs. In fact it will result in substantial savings. But this clause is needed to give legislative cover for spending in the transitional stages and for technical changes to the basis of NHS funding. Savings after 1st April 1996, when the transitional stages are completed, will continue to be realised year after year.

The effect of the clause is as follows. It permits money to be paid by Parliament to cover expenditure under the Act. Any expenditure incurred by the Secretaries of State during the transition stage will be paid under this provision—for example, expenditure arising our of liabilities inherited from abolished authorities or out of additional staff costs while transferred staff are still employed by them.

It also permits money to be paid to cover any increases in spending under any other Act. This is essentially a technical point. The new system will be cheaper to run than the old; nevertheless new sorts of payments may be needed under existing Acts. For example, it is obvious that payments are not currently made to health authorities under the 1977 Act because these new health authorities do not yet exist. So from 1st April 1996 this will be a new sort of expenditure under Section 97 of the 1977 Act, which this clause needs to cover.

It provides for sums received by the Secretary of State to be paid into the Consolidated Fund. There will be cases where the Department of Health receives sums relating to transfer to the Secretary of State of some of the rights of the regional health authorities. For example, regional health authorities may have rights to sue for sums due on a contract. When the rights transfer to the Secretary of State on the abolition of the regional health authorities, provision is needed for such sums to be received.

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In regard to the individual savings—an item raised by some Members of the Committee—we estimated that the abolition of regional health authorities and the merger of district health authorities and family health service authorities would result in savings approaching £60 million in 1995-96. By 1997-98, when the new structure is fully implemented, those savings will rise to approaching £150 million a year. Over £100 million of the total savings figure results from the abolition of regional health authorities and the consequent reduction in overlap of work between the central department and the regions. The remainder is due to the replacement of district health authorities and family health services authorities with the new authorities. In addition, savings from the elimination of overlapping functions between regional health authorities and the NHS Executive will contribute to the savings of £50 million to be made in the running costs of the Department of Health by 1997-98. The total figure is £150 million made up of the two sums of £100 million and £50 million.

My noble friend Lord Boyd-Carpenter asked about transitional costs. Whenever one brings about a change there are always costs. Of course, we shall try to keep these costs to a minimum. But the key point about the reorganisation is that it will enable substantial benefits to be made year in year out in the long term. As regards the money that is to be saved, an undertaking has been given that it will be reinvested in patient care. There will be close monitoring of that. When we set priorities, go into the PES round and draw up budgets for the year, those items will be closely monitored.

6 p.m.

Baroness Jay of Paddington: Perhaps I may ask the Minister to give some details of the monitoring and how it will be reported to Parliament. I think that noble Lords have demonstrated this afternoon the concern that if that money is saved—the Minister has clearly explained the difference between short and long-term savings—it should be reinvested in patient care. How will we know that that money is being spent?

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