House of Lords - Explanatory Note
      
House of Lords
Session 1998-99
Publications on the internet
Other Bills before Parliament
Arrangement of Clauses (Contents)

Health Bill [H.L.]


 

These notes refer to the Health Bill [H.L.]
as introduced in the House of Lords on 28th January 1999 [HL Bill 15]

Health Bill [H.L.]


EXPLANATORY NOTES

INTRODUCTION

1. These explanatory notes relate to the Health Bill [H.L.] as introduced in the House of Lords on 28 January 1999. They have been prepared by the Department of Health, with input from the Scottish Office and Welsh Office, in order to assist the reader of the Bill and to help inform debate on it. They do not form part of the Bill and have not been endorsed by Parliament.

2. The notes need to be read in conjunction with the Bill. They are not, and are not meant to be, a comprehensive description of the Bill. So where a section or part of a section does not seem to require any explanation or comment, none is given.

SUMMARY

3. In December 1997 and January 1998, the Government published White Papers on its proposals for the National Health Service in England, Scotland and Wales (Cm 3807 The new NHS; Cm 3811 Designed to Care; Cm 3841 Putting Patients First). Further to the White Paper The new NHS, detailed proposals on quality and partnership in England were set out in the consultation document A First Class Service (HSC 1998/113), published in July 1998, and the discussion document Partnership in Action, published in September 1998. Further to the White Paper Putting Patients First, detailed proposals on quality and partnership in Wales were set out in the consultation documents Quality Care and Clinical Excellence, published in July 1998 and Partnership for Improvement, published in October 1998. Action has already been taken to implement many of the proposals set out in these documents. The Bill implements those proposals that require primary legislation.

4. The Bill's main purpose is to make changes to the way in which the National Health Service is run in England, Wales and Scotland. The Bill abolishes GP fund-holding in all three countries. It amends the National Health Service Act 1977 to make provision for the establishment of new statutory bodies in England and Wales to be known as Primary Care Trusts, and provides for NHS trusts in Scotland to take on additional functions.

5. The Bill amends the legislative framework for NHS trusts. It makes changes to the provisions in the National Health Service and Community Care Act 1990 concerning the establishment of NHS trusts, including retrospective changes to the purposes for which NHS trusts are established, and to the current NHS trust financial regime. It extends the Secretary of State's current powers of direction in respect of NHS trusts to cover all their functions, in line with other NHS bodies. It also replaces the provisions about special hospitals to enable NHS trusts in England and Wales, with Secretary of State approval, to provide high security psychiatric services.

6. The Bill provides for new arrangements aimed at improving the quality of the care provided to patients receiving NHS services. It places a new statutory duty of quality on NHS trusts and Primary Care Trusts and establishes a new statutory body for England and Wales, to be known as the Commission for Health Improvement, to monitor and improve the quality of health care provided by the NHS.

7. The Bill creates new duties of partnership within the NHS and between NHS bodies and local authorities in England and Wales, and provides for local strategies to be developed for improving health and health care. It provides for new operational flexibilities to allow NHS bodies and local authorities to enter into joint arrangements for the purchase or provision of health and health-related services (e.g. social care). The Bill also provides for the allocation of additional funding to Health Authorities on the basis of their past performance.

8. The Bill introduces measures designed to tackle fraud against the NHS. It creates a new criminal offence in England and Wales of knowingly making false representations to obtain exemption or remission from NHS charges. It also extends the functions of the NHS Tribunal to include imposing sanctions on family health service practitioners who have defrauded the NHS.

9. In addition, the Bill provides for the Secretary of State for Health to make regulations and directions securing compliance with aspects of a negotiated pharmaceutical price regulation scheme, to regulate the profits of companies outside the negotiated agreement and to set maximum prices for medicines supplied to the NHS. It also enables Her Majesty to regulate health care professions by Order in Council.

THE BILL

10. The Bill is in three Parts:

  • Part I makes changes to the way the National Health Service is run in England and Wales. Part I also makes provision for the control of prices of medicines supplied to the National Health Service in England, Wales and Scotland, and the control of profits made by suppliers;

  • Part II makes changes to the way the National Health Service is run in Scotland;

  • Part III is concerned with the regulation of health care professions, and includes various other miscellaneous and supplementary provisions.

11. Part I of the Bill is mainly concerned with implementing those proposals set out in the White Papers The new NHS and Putting Patients First which require primary legislation. This part of the Bill therefore makes a number of changes to the structure of the NHS in England and Wales.

12. Clause 1 abolishes GP fund-holding. Clauses 2 to 7 (and Schedule 1) are concerned with the local administration of the NHS. They make provision for the establishment, functions and funding of Primary Care Trusts and enable the Secretary of State to make additional payments to Health Authorities on the basis of their past performance. Clause 7 is concerned with the distribution and exercise of functions. It provides the mechanism by which Health Authorities and Primary Care Trusts will inherit the majority of their functions and deals with the powers of the Secretary of State and Health Authorities to direct NHS bodies about the exercise of their functions. Clauses 8 to 12 make a number of changes to the legislative framework for NHS trusts.

13. Clauses 13 to 18 (and Schedule 2) concern the quality of services provided by NHS bodies. They place a duty of quality on NHS trusts and Primary Care Trusts, establish a new statutory body to be known as the Commission for Health Improvement and as a consequence abolish the Clinical Standards Advisory Group.

14. Clauses 19 to 25 implement measures to strengthen partnership working, both within the NHS and between the NHS and local authorities. They create a new duty of co-operation within the NHS and extend the duty between NHS bodies and local authorities, provide a new statutory mechanism for strategic planning to improve health and health care services, and provide for NHS bodies and local authorities to make payments to one another and make use of new operational flexibilities to improve the way health and health-related functions are exercised.

15. Clauses 26 to 31 concern the control of prices of and profits on medicines. They enable the Secretary of State to make regulations and directions securing compliance with aspects of a negotiated pharmaceutical price regulation scheme, to regulate the profits of companies outside the negotiated agreement and to set maximum prices for medicines supplied to the NHS.

16. Clauses 32 and 33 are designed to tackle fraud in the NHS. They create a new criminal offence of knowingly making false representations to evade or gain a reduction in NHS charges, and provide for the disqualification of practitioners from providing services under Part II of the National Health Service Act 1977 in cases of fraud.

17. Clause 34 enables NHS trusts in England and Wales, with Secretary of State approval, to provide high security psychiatric services. Clause 35 makes provision for the Registrar General to provide the Secretary of State with information about births and deaths for the purpose of the health service.

18. Part II of the Bill makes changes to the National Health Service in Scotland, implementing those proposals set out in the White Paper Designed to Care requiring primary legislation. Clause 36 abolishes GP fund-holding. Clauses 37 to 40 amend the existing legislative framework for NHS trusts. They make changes to the establishment of NHS trusts, provide a mechanism for NHS trusts to take on the responsibility for making arrangements for the provision of family health services and amend the constitution of NHS trust boards. Clause 41 confers a new duty of quality on NHS trusts and clauses 42 to 45 make a number of provisions regarding the financing of Health Boards and NHS trusts. Clause 46 provides for the disqualification of practitioners from providing Part II services in cases of fraud.

19. Part III of the Bill deals with miscellaneous and supplemental issues. Clause 47 (with Schedule 3) makes provision for Her Majesty to make Orders in Council regarding the regulation of health care professions. The remainder of this Part of the Bill includes a number of supplementary and miscellaneous provisions, relating, in particular, to orders and regulations under the Bill, consequential and transitional provisions, amendments and repeals, devolution, commencement of the Bill provisions, the extent of the Bill and the short title.

OUTLINE OF THE EXISTING LAW

20. This section provides a brief description of the current legislative framework for the NHS. The legislative framework for the NHS in England and Wales is mostly set out in the National Health Service Act 1977 ("the 1977 Act"). This has been amended quite substantially by various enactments, notably by the National Health Service and Community Care Act 1990 ("the 1990 Act"), the Health Authorities Act 1995 ("the 1995 Act") and the National Health Service (Primary Care) Act 1997 ("the Primary Care Act").

21. Under the 1977 Act, the NHS is essentially split into two different systems. The first is the system which consists primarily in the provision of health care in hospitals. It also covers those services described as "community health services", for example, the services provided by district nurses, midwives or health visitors in clinics or individuals' homes, and the provision of medical services to pupils in state schools. This is the subject of Part I of the 1977 Act. The responsibility for securing the provision of these services to patients rests with the Secretary of State, although under his powers in section 13 of the 1977 Act he has delegated most of his functions to Health Authorities. Health Authorities enter into arrangements with bodies known as NHS trusts for the provision by the trusts of hospital and community health services.

22. The other main part of the NHS structure is what might be described as "the NHS in the high street". This is dealt with under Part II of the 1977 Act which governs the arrangements made by Health Authorities for the provision of services by the following professionals: general practitioners (GPs), general dental practitioners (GDPs), ophthalmic opticians and ophthalmic medical practitioners, and chemists. They provide what are termed general medical services (GMS), general dental services (GDS), general ophthalmic services (GOS) and pharmaceutical services (PhS) respectively. The remainder of Part II contains other provisions relevant to the provision of these high street services, which are often referred to as family health services.

23. The 1990 Act and the Primary Care Act introduced a number of changes to these systems of health care. Broadly speaking these changes were as follows -

  • the 1990 Act introduced a divide between the planning and purchase of Part I services, on the one hand, and the provision of those services, on the other; and

  • the Primary Care Act in effect enabled what were previously Part II services to be delivered, not under Part II, but under a more flexible system within Part I of the Act. These changes applied only to doctors and dentists, and not the other family health services practitioners.

24. The two systems, Part I and Part II, are very different. It should be noted that despite the changes introduced by the Primary Care Act the provision of Part I services is distinct from the provision of services under Part II. The changes proposed in this Bill will not alter this divide. What follows is a more detailed description of the two systems.

Part I system: hospital and community health services

25. The system provided for under Part I of the 1977 Act is the system under which all of the NHS, apart from family health services, is provided. The core duty to ensure the provision of a health service is laid upon the Secretary of State (section 1) in extremely broad terms, and is supplemented by the provisions of the subsequent sections.

26. Section 2 confers wide ranging powers for the Secretary of State to provide such services as are appropriate to, and to do any other thing whatsoever which is calculated to facilitate, or is conducive or incidental to, the discharge of any duty imposed on him by the Act. Section 3 sets out those general services which it is the Secretary of State's duty to provide to such extent as he considers necessary to meet all reasonable requirements. Most of the services that may be described as hospital and community health services are included under this section. Section 4 imposes a specific duty on the Secretary of State to provide special hospitals for persons detained under the Mental Health Act 1983 who have dangerous, violent or criminal propensities. The services provided under this section are often referred to as "high security psychiatric services" and are presently managed outside the normal hospital system by Special Health Authorities established under section 11 of the 1977 Act. Further miscellaneous powers and duties are imposed on the Secretary of State by section 5.

27. Part I of the 1977 Act (as amended by the 1995 Act) goes on to provide for the setting up of statutory bodies known as Health Authorities (section 8) and Special Health Authorities (section 11). Health Authorities are established to act for the area set out in their establishment order and together cover all of England and Wales. Special Health Authorities are established for specific functional purposes which the Secretary of State directs them to perform on his behalf (e.g. the National Blood Authority).

28. Although the main functions under Part I of the 1977 Act are conferred on the Secretary of State, the Act provides a mechanism which enables the Secretary of State to devolve to Health Authorities the responsibility for performing these functions, whilst retaining the ability to control how those functions are performed. The Secretary of State may direct a Health Authority or Special Health Authority to exercise his functions on his behalf (section 13). He may also give directions about the exercise of functions by a Health Authority or Special Health Authority (section 17). The Secretary of State has exercised his powers under these sections on many occasions but the principal instrument is the National Health Service (Functions of Health Authorities and Administration Arrangements) Regulations 1996 (S.I. 1996/708). Schedule 1 to those Regulations lists those "specified health service functions" of the Secretary of State that he has delegated to Health Authorities. The Secretary of State has directed Health Authorities to exercise most of his functions under Part I, in particular sections 2, 3, and 5. It is these Regulations by which Health Authorities have their functions in respect of Part I services conferred upon them. There is very little further prescription in primary legislation as to what the Secretary of State must do or how he must do it in relation to the provision of Part I services.

29. Health Authorities and Special Health Authorities are funded under the provisions of section 97 of the 1977 Act, as substituted by paragraph 47 of Schedule 1 to the 1995 Act and amended by section 36 of the Primary Care Act. Health Authorities are paid money in each year under section 97(1) and section 97(3). Section 97(1) concerns the remuneration of persons providing Part II services and is dealt with below. Section 97(3) concerns Part I expenditure and administrative costs. Under section 97(3) a Health Authority is paid money not exceeding the amount allotted to it by the Secretary of State. This amount is allotted towards meeting its "main expenditure" which includes all expenditure attributable to the performance of its Part I functions, all its administrative costs, and certain other expenditure. The money paid in respect of Part I services is therefore cash-limited. To enforce the cash-limits set by the Secretary of State, Health Authorities have various financial duties imposed upon them by section 97A of the 1977 Act (as substituted by paragraph 48 of Schedule 1 to the 1995 Act and amended by paragraph 23 of Schedule 2 to the Primary Care Act).

Part II system: family health services

30. The system provided for under Part II of the Act is quite different. The broad structure of the Part II system is similar for doctors, dentists, opticians, and chemists. For convenience, therefore, the existing system will be described as it applies to doctors. (There are significant differences in the systems for the other professions, most notably relating to chemists and opticians, but those differences are not relevant for the purposes of this Bill.)

31. Under section 29 of the 1977 Act, it is the duty of each Health Authority in accordance with Regulations to arrange with medical practitioners to provide personal medical services for all persons in the area who wish to take advantage of the arrangements. These services are described as general medical services (GMS). A principal feature of this system as it operates in practice is that (apart from certain exceptional cases) it is not the Health Authority itself which provides the GMS; instead, it enters into separate statutory arrangements with independent practitioners for the provision of those services. GPs are therefore not employees of the HA; they are independent professionals who undertake to provide GMS in accordance with the body of Regulations governing that activity. Those Regulations are currently the National Health Service (General Medical Services) Regulations 1992 (S.I. 1992/635) as amended.

32. It is the duty of each Health Authority, in accordance with Regulations, to administer the arrangements made for the provision of GMS and the other family health services. The Health Authority must also perform such other management and other functions relating to those services as may be prescribed. In contrast to the Part I system, therefore, the duty to make the arrangements for these services is conferred directly upon Health Authorities, rather than upon the Secretary of State. Nonetheless, in exercising functions under Part II, Health Authorities may be the subject of Secretary of State directions issued under section 17 of the 1977 Act.

33. Remuneration of persons providing Part II services is for the most part not cash-limited (in other words the Secretary of State must pay whatever it has cost the Health Authority, and he cannot impose a ceiling on the expenditure).

The National Health Service and Community Care Act 1990

34. The 1990 Act introduced a number of changes in the systems described above.

35. Section 5 of the 1990 Act, and the immediately following provisions, provided for the setting up of bodies known as NHS trusts. These are semi-autonomous bodies set up to assume responsibility for the ownership and management of hospitals or other establishments or facilities previously managed or provided by a Health Authority; or to provide and manage hospitals or other establishments or facilities which were not previously so managed or provided. A trust's functions are conferred by its establishment order made under section 5(1) of and by Schedule 2 to the Act. Some NHS trusts, known as "acute trusts" provide mainly hospital services. Other NHS trusts, known as "community trusts" provide mainly community services. Those which provide both hospital and community services are often known as "integrated trusts".

36. All the NHS hospitals in the country are now run by NHS trusts. NHS trusts have no money paid to them directly by the Secretary of State, but instead obtain orders for their services placed by Health Authorities and GP fund-holders. The nature of the arrangements between Health Authorities and trusts is, however, not that of an ordinary contract enforceable at law. Instead, the 1990 Act provided for a system of NHS contracts (section 4), which are explicitly not contracts enforceable at law (section 4(3)), but are subject to arbitration by the Secretary of State.

37. A further change introduced by the 1990 Act was the creation of fund-holding practices of GPs providing services under Part II of the 1977 Act. The fund-holding system did not essentially alter the Part II services they provide. However, the practices in question are given a sum of money known as an allotted sum with which to purchase, on behalf of their patients, from whatever provider they see fit, some of the care under Part I which would otherwise have been purchased by the local Health Authority. Thus there are two types of purchaser or commissioner of services: namely Health Authorities and fund-holding practices.

The National Health Service (Primary Care) Act 1997

38. The Primary Care Act introduced a new option for the delivery of family health services. Personal medical services (PMS) and personal dental services (PDS) may be provided under agreements known (in the initial stage at least) as "pilot schemes". These agreements are made between the Health Authority and one or more of the persons listed in section 2(2) or section 3(2) of the Act, which includes NHS trusts, GPs, and NHS employees. Pilot schemes allow PMS and PDS (essentially the same as GMS and GDS) to be provided under the Part I system. The Health Authority funds the services provided under a pilot scheme from its cash-limited allocation under section 97(3).

39. These provisions allow PMS and PDS to be provided otherwise than through the regulatory system of Part II of the 1977 Act. They enable Health Authorities to agree with pilot providers locally the content of the services and the conditions under which those services will be provided. The Primary Care Act also included provision for a permanent regime (under sections 28C and 28D of the 1977 Act, as inserted by section 21 of the Primary Care Act).

Wales

40. The functions of the Secretary of State in relation to the NHS are exercised in Wales by the Secretary of State for Wales (see the Transfer of Functions (Wales) Order SI 1969/388).

Scotland

41. The legislative framework for the NHS in Scotland is set out in the National Health Service (Scotland) Act 1978 ("the 1978 Act"). It is broadly similar in structure and content to the 1977 Act, being split into Parts I and II in the same way. Instead of Health Authorities, services are commissioned by Health Boards. The 1990 Act and the Primary Care Act described above made similar provisions for Scotland as for England and Wales.

COMMENTARY ON CLAUSES

Clause 1: Repeal of law about fund-holding practices

42. Sections 14 to 17 of the 1990 Act provide for the establishment of fund-holding practices as part of the NHS internal market. These practices consist of one or more general medical practitioners (GPs) who provide either general medical services (under the 1977 Act) or personal medical services (under the Primary Care Act), but who are also given an additional sum of money (known as an allotted sum) to purchase certain goods or services for their patients.

43. The 1990 Act provided for regulations to be made which set out the procedures for application and recognition as a fund-holding practice, the purposes for which the allotted sum may be used, and renunciation or removal of recognition. The details of the fund-holding scheme can be found in the National Health Service (Fund-holding Practices) Regulations 1996 (SI 1996/706) as amended.

44. The White Papers The new NHS and Putting Patients First set out the Government's proposals to replace the NHS internal market. As part of these changes fund-holding will be abolished and Primary Care Groups (Local Health Groups in Wales) and Primary Care Trusts will be established. Under existing powers (c.f. section 16 and paragraph 12 of Schedule 5 to the 1977 Act), a process is already underway to establish Primary Care Groups and Local Health Groups as Health Authority committees. Primary Care Groups and Local Health Groups may in time become Primary Care Trusts, which will be established under the powers conferred by the Bill (see clauses 2 to 5, 7 and Schedule 1).

45. All GPs will be covered by a Primary Care Group (Local Health Group in Wales) or Primary Care Trust, which will also involve other health professionals, social services and members of the local community. Primary Care Groups, Local Health Groups and Primary Care Trusts will be responsible for improving the health of their local community, commissioning services, developing primary and community care and exercising functions delegated to them by Health Authorities.

46. The repeal of sections 14 to 17 of the 1990 Act by clause 1 will abolish the fund-holding system. The transitional arrangements for winding up the fund-holding scheme will be made under the powers conferred by clause 49. The transitional provisions will cover arrangements for closing the fund-holding accounts of residual fund-holders; the transfer of those assets, rights and liabilities that need to be transferred to the Health Authority; and any provision for those that are to remain with the former fund-holders.

Clause 2 and Schedule 1: Primary Care Trusts

47. Clause 2 provides that the Secretary of State may establish new NHS bodies to be known as Primary Care Trusts. Primary Care Trusts will take on the function of arranging the provision of (or "commissioning") health services, currently exercised by Health Authorities and GP fund-holders. In addition they may also become providers of services under Part I of the 1977 Act, a function currently performed by NHS trusts. It is envisaged that, at least initially, provider Primary Care Trusts will provide only community health services. However, clause 7 provides the potential to broaden the range of Part I services that they may provide in future.

48. Primary Care Trusts will be established as corporate bodies with their own budget for local health care. The population coverage of a Primary Care Trust is likely to vary from place to place but typically a Trust is likely to serve a population of at least 100,000 and have a budget of around £60 million or more. They will be accountable to the local Health Authority and subject, like other NHS bodies, to directions given by the Secretary of State (see clause 7). Their membership will include local health professionals and managers, with the Chairman and lay members appointed by the Secretary of State.

49. Clause 2(1) inserts two new sections into the NHS Act 1977: sections 16A and 16B.

50. The new section 16A gives the Secretary of State the power to establish Primary Care Trusts. The bodies will be established by orders, which will specify the area for which the Trust will be established and certain limitations on the functions it may exercise. The PCT order will also set out the name of the Trust and the date it will become operational (paragraph 1 of the new Schedule 5A to the 1977 Act, as inserted by Schedule 1 to the Bill).

51. It is envisaged that proposals to establish a Primary Care Trust will be generated locally. The views of Primary Care Groups, NHS trusts and local communities will be taken into account in considering such proposals. The Secretary of State will direct Health Authorities under the new sections 16C and 17 of the 1977 Act (see clause 7) to make preliminary selections on his behalf of those proposals which will go forward to consultation and those which will not. It is the Government's intention that the directions will provide that Health Authorities must select a proposal if it has been made or endorsed by either a Primary Care Group or an NHS trust providing community services locally, and if it meets certain requirements as to the form and content of the proposals. In addition the Health Authority will also be able to initiate its own proposals.

52. Once a proposal to establish a Primary Care Trust has been selected or initiated by a Health Authority, it will be the subject of a consultation conducted in accordance with the regulations made under subsection (5). These regulations will provide that the consultation must be conducted by the Health Authority and that the result must be reported to the Secretary of State. It is envisaged that they will also make provision for matters such as who must be consulted, the information that must be provided for consultation, the period in which consultation must be conducted and for reporting to the Secretary of State the results of consultation, including the form such a report must take.

53. Regulations will place a further duty on the Health Authority to consult before the Secretary of State can dissolve a Primary Care Trust, or amend an order to establish a Primary Care Trust, except where the change to the order is a minor change. The requirement to consult will not however apply where it appears to the Secretary of State necessary to dissolve the Primary Care Trust as a matter of urgency. A similar power exists in connection with NHS trusts (paragraph 29(3) of Schedule 2 to the 1990 Act). It is designed as a safeguard of last resort if, for example, patient safety is at risk.

54. It is intended that there will be a clear distinction between Primary Care Trusts that are able to commission services, and those which may also provide services directly to patients. Progression from a "commissioning-only" Primary Care Trust to a "commissioning-and-providing" Primary Care Trust will be subject to consultation and the approval of the Secretary of State, in the same way as when a Primary Care Trust is first established. The new section 16A, inserted by clause 2, sets the framework for this in two ways. First, subsection (3) allows the Secretary of State to specify in the PCT order whether the Primary Care Trust is prohibited from providing services directly. A Primary Care Trust that is subject to such a prohibition will therefore not be allowed to provide services directly until its order is amended. Second, the Secretary of State will be able to amend a PCT order only after any consultation requirements, set out in regulations made under subsection (5), have been met. (See commentary on clause 7 for further discussion of Primary Care Trust functions.)

55. The provisions for delegation and joint exercise of functions in the new section 16B will be similar to those made for Health Authorities in section 16 of the NHS Act 1977. They will enable Primary Care Trusts to choose how they arrange for the performance of their functions. For example, it will be possible for Primary Care Trusts to pool administrative support services such as IT, estate and payroll management with other NHS bodies. It will also be possible for committees and staff members of a Primary Care Trust to perform functions on behalf of the Trust and for Primary Care Trusts to enter joint commissioning arrangements with Health Authorities and other Primary Care Trusts.

56. Subsection (2) of clause 2 gives effect to Schedule 1 to the Bill, which inserts a new Schedule 5A in the 1977 Act. The new Schedule makes additional, detailed provisions in respect of Primary Care Trusts. In particular it includes provisions in respect of PCT orders, constitution, membership, staff and property.

 
contents continue
 
House of Commons home page Houses of Parliament home page House of Lords home page search Page enquiries

© Parliamentary copyright 1999
Prepared: 2 february 1999