House of Lords - Explanatory Note
Health Bill [H.L.] [H.L.] - continued          House of Lords

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Clause 51: Devolution

276. This clause sets out how the provisions of the Bill are to be treated for devolution purposes.

277. Subsection (1) provides that the provisions in the Bill that extend to Scotland are to be taken to be a "pre-commencement enactment", the meaning of which is set out in section 53 of the Scotland Act 1998. Section 53 (inter alia) provides for the transfer of functions, which are conferred in any Act of Parliament upon the Secretary of State, to Scottish Ministers in so far as they relate to matters devolved to the Scottish Parliament. By treating the provisions under clauses 36 to 46 as a pre-commencement enactment any new Secretary of State function conferred by those clauses will automatically transfer to Scottish Ministers, when the Scottish Parliament inherits its functions.

278. Subsection (2) provides for specified Secretary of State functions conferred by the Bill to be exercised by the National Assembly for Wales, instead of the Secretary of State, in so far as those functions are exercisable in relation to Wales. This will in effect transfer these functions to the Assembly. This provision will only be brought into effect following the transfer to the Assembly of the Secretary of State's functions in relation to the NHS under an order made under section 22 of the Government of Wales Act 1998.

279. The majority of the Secretary of State functions conferred by Parts I and III of the Bill will be exercised by the National Assembly. The provisions in clauses 26 to 31 (control of prices of medicines and profits) and clause 47 (regulation of health care and associated professions) will remain matters for the Secretary of State for Health. (Subject to the qualification referred to in paragraph 274, these are also reserved matters under the Scotland Act.)

280. In the commentary contained in these notes on the clauses to which subsection (2) applies, there are a number of references to the Government's intentions regarding the use of the powers the clauses confer. As regards Wales these intentions are, of course, subject to the views of the National Assembly for Wales.

281. Subsection (3) provides that the procedures for making subordinate legislation by the Assembly, as set out in section 44 of the Government of Wales Act 1998, will apply to the any functions transferred to the Assembly under the Bill.

282. Subsection (4) provides that the Secretary of State's power to make regulations conferring new functions on the Commission for Health Improvement (see clause 15(1)(e)) may only be exercised with the agreement of the Assembly.

283. Subsection (5) provides that the Secretary of State's powers to appoint the members of the Commission, make regulations concerning the Commission's membership and procedure, give directions about staff and make various determinations concerning remuneration and allowances may only be exercised following consultation with the Assembly.


Changes in NHS structures

284. The net impact of the measures in the Bill will be to help reduce NHS administrative costs.

285. The resources previously committed to fund-holders' management allowances will be re-deployed to Health Authorities and Health Boards and made available to support Primary Care Groups, Local Health Groups or Local Health Care Co-operatives (see paragraphs 44 and 237 of these notes). The costs of closing GP fund-holders' accounts and providing for any redundancy payments to GP fund-holders' staff will be met either from fund-holders' allotted sums (i.e. existing budgets), including any uncommitted savings from earlier years, or, where these are insufficient, from the funding which is being re-deployed from the GP fund-holders' management allowance. On the establishment of Primary Care Trusts in England and Wales under clause 2, resources to support them will be re-deployed from Health Authorities (and their Primary Care Groups or Local Health Groups) and from NHS trusts, in line with the functions conferred on them.

286. The abolition of GP fund-holding will reduce the number of commissioning bodies from 4,250 in 1998/99 to 650, with a consequent reduction in the numbers and costs of transactions handled by NHS trusts. Other measures in the Bill which will reduce administrative costs include the abolition of extra-contractual referrals (paragraph 55 of Schedule 4), the changes to the NHS trust financial regime (clauses 10 to 12) and the new operational flexibilities (clause 24).

NHS trusts

287. The changes to the NHS trust financial regime (clauses 10 to 12 and paragraph 61 of Schedule 4), as well as contributing to a reduction in administrative costs, will enable the Exchequer to achieve net savings of around £5 million per year through reduced borrowing costs.

288. Enabling high security psychiatric services to be provided by NHS trusts (clause 34) should facilitate improvements in the efficiency and effectiveness with which the resources for these services are used. The precise financial impact, including any transitional costs, will depend on the nature and timing of any changes introduced and cannot be estimated until detailed proposals are drawn up.


289. The full-year costs of the Commission for Health Improvement (clauses 14 to 17) will depend on the extent of its investigative work. It is estimated, as a planning assumption, that in the first full year costs will be around £7 million.

290. These provisions relating to improving quality, together with those relating to partnership between the NHS and local authorities (clauses 19 to 24) and increasing incentives to Health Authorities for good performance (clause 6) are expected to improve the overall quality of services and the efficiency and effectiveness with which the NHS and local authorities deploy their resources for patient and client care.


291. The provisions designed to combat fraud in the NHS (clauses 32 and 33) are initially likely to cost around £100,000 per year, assuming around 200 prosecutions of the new criminal offence and around 35 additional referrals to the NHS Tribunals. These costs are likely to reduce over time as the deterrent effect of these and other counter-fraud measures takes hold.

292. It is not practicable to estimate the savings flowing from the Bill provisions separately from other fraud measures.

Pharmaceutical Price Regulation Scheme

293. The Pharmaceutical Price Regulation Scheme (clauses 26 to 31) is designed to provide reasonable prices of branded prescription medicines for the NHS and fair rates of return for the pharmaceutical companies which supply them. The Government is currently negotiating a revised voluntary scheme with the pharmaceutical industry. Clauses 26 to 31 concern the control of prices of medicines and profits. They enable the Secretary of State to make regulations and directions securing compliance with aspects of a negotiated scheme, to regulate the profits of companies outside the negotiated agreement and to set maximum prices for medicines supplied to the NHS. The effect on NHS costs will depend on the nature of the agreement reached and the level of compliance by companies.


294. The overall effect of the abolition of GP fund-holding, the introduction of Primary Care Trusts, the abolition of extra-contractual referrals, and the changes to the NHS trust financial regime will enable an increase in the proportion of money spent in the NHS on direct patient care.

295. The number of staff working for or on behalf of the Commission for Health Improvement will be a matter for the Commission itself to decide. It is likely that there will be a small body of core staff, supplemented with teams recruited on a short-term basis from the NHS and elsewhere to carry out reviews.


296. The impact on pharmaceutical companies of the provision relating to the Pharmaceutical Price Regulation Scheme (clauses 26 to 31) will depend on the nature of the agreement reached and the level of compliance by companies. An interim regulatory appraisal has been produced and is available in the libraries of both Houses of Parliament. A further appraisal will be completed when details of the new scheme have been agreed.


297. The provisions of the Bill will be brought into effect on one or more dates appointed by the Secretary of State by order. Clause 1 and 36 (repeal of the law about fund-holding practices), clause 2 to 5 (Primary Care Trusts), clauses 14 to 18 (the Commission for Health Improvement), clause 34 (high security psychiatric services), clauses 37 to 40 (NHS trusts, Scotland) and clause 47 (regulation of health care and associated professions) will be brought into effect on appropriate dates at the earliest opportunity after Royal Assent. It is envisaged that the vast majority of the remaining provisions of the Bill will be in force by April 2000. The clauses in Part I of the Bill may be brought into effect at different times in England and in Wales. In so far as the provisions affect Wales, they will be brought into effect by the National Assembly for Wales, rather than the Secretary of State (see clause 51).


298. Section 19 of the Human Rights Act 1998 requires the Minister in charge of a Bill in either House of Parliament to make a statement about the compatibility of the provisions of the Bill with the Convention rights (as defined by section 1 of that Act). The statement has to be made before Second Reading. On 28 January 1999 the Baroness Hayman, Parliamentary Under-Secretary of State for Health, made the following statement:

    In my view the provisions of the Health Bill are compatible with the Convention rights.

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Prepared: 2 february 1999