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Earl Howe: My Lords, this has been a useful debate. I am very grateful to the Minister for her helpful and thoughtful comments. I agree with the noble Baroness that a distinction must be made between management costs and bureaucracy. But if there is a disagreement between us at the margin it is whether the savings of paper to which she referred will result in overall savings to the NHS at the end of the day once the Government's reforms have been put into practice.

I am a little disappointed not to have had from the noble Baroness a fuller picture of what is going on currently on the ground at regional offices, health authorities, primary care groups and so forth in that the bill for administration appears to be growing quite alarmingly, if anecdotal evidence is to be believed. The estimates that I have seen for the costs of administering the PCG/PCT structure range from £150 million to over £300 million a year excluding start-up costs. That is

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much greater than the cost of fundholding. I do not believe that that should come as any surprise. Any system that seeks to control the commissioning functions and budgets of every single GP, to control the co-ordination of many different bodies and agencies, including local authorities, and engage in almost continuous consultation with local interest groups is bound to result in a considerable burden of management and administration.

As to the amendment, I never sought to suggest that there was always direct comparability between one NHS body and another. Clearly, that would be an absurd suggestion. However, the kind of statistic that I propose in the amendment is, I believe, useful as an initial standard of comparison not only for internal management purposes but also to inform the general public. I shall read carefully the words of the Minister, but in the meantime I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 11 not moved.]

5.45 p.m.

Clause 3 [Primary Care Trusts: finance]:

Earl Howe moved Amendment No. 12:

Page 2, line 38, at end insert (", including an identified minimum sum to meet the need for investment in primary care").

The noble Earl said: My Lords, when primary care groups were first proposed 16 months ago one of the main concerns of GPs was the need to protect current levels of investment in primary care. The establishment of unified budgets for PCGs meant that GMS funds to pay for staff, premises and computers in GP practices were in danger of being squeezed by the other elements of the unified budget--namely, secondary care and prescribing--the direct consequences of which would be a fall in investment in primary care infrastructure.

Secondary care and prescribing are both areas in which costs have the potential to spiral upwards. The unified budgetary structure allows for a measure of flexibility in the way that funds are utilised. But the concern of the General Practitioners' Committee was that the unified budget could be put under enormous strain. That led directly to an agreement with the Government in the middle of the previous year that within the unified budget allocated to PCGs a specified level of funding would continue to be available for general practice infrastructure. That minimum level of funding is equivalent to the present levels of expenditure from the money that health authorities allocate for general medical services with an allowance for inflation.

Amendment No. 12 is intended to address exactly the same issue in the context of primary care trusts. The quality of frontline services should be protected. Without the proper level of investment in staff, premises and computers within GP practices the standards of primary care will suffer. These are not minor concerns. The investment in the practice infrastructure can represent up to 30 per cent. of the income of a GP practice. Therefore, the issue facing GPs is one that will weigh heavily with them as they consider any proposal

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to progress from PCG to PCT status. They will look ahead and see a PCT board that is controlled by lay members who have been appointed by the Secretary of State. It will be that board, not the executive below it--certainly not the GPs themselves--that determines how the unified budget is spent. The board will take advice from the executive, which we understand will have a professional majority on it, but need not accept that advice.

I should like to put some questions to the Minister. First, to what extent is it intended that there should be mechanisms to safeguard the investment in infrastructure in GP practices? Secondly, does the noble Baroness agree that that infrastructure is of key importance in the delivery of a quality agenda? Thirdly, does the Minister also agree that the views of local medical committees should play a major part in informing primary care trusts as to what levels of investment are needed, as indeed they do under present arrangements? I beg to move.

Baroness Thomas of Walliswood: My Lords, we have general sympathy with this amendment. These days one hears a great deal about investment in the infrastructure of hospitals and the importance of it. The current level of investment in GP practices is quite a small proportion of the total expenditure in that area of medicine. I look forward with interest to the comments of the Minister in response to the noble Earl, Lord Howe.

Baroness Hayman: My Lords, I thank the noble Earl, Lord Howe, for raising the matters addressed by Amendment No. 12. We are fully aware of the significance of these matters to GPs and to other members of the primary care team. The Government, too, place great significance on securing appropriate investment in developing primary care.

That is why the modernisation fund includes £82 million specifically for investment in GP practices in the coming year, 1999-2000. It is also reflected in the guarantees, to which the noble Earl, Lord Howe, also referred, which the honourable Member, the then Minister of State for Health, gave in his letter of 17th June last to Dr. John Chisholm, chair of the BMA General Practice Committee, on the minimum levels of investment in GP practice infrastructure to be delivered by health authorities and primary care groups.

Those guarantees have subsequently been confirmed in the guidance to health authorities and primary care groups on allocations for 1999-2000. The guarantees go further than any previous ones in ensuring that the investment in GP practice infrastructure will increase year on year. In practice we expect that most primary care groups and primary care trusts will want to invest above that floor. But the floors provide a guarantee for GPs and their teams in areas where, for whatever reason, the investment priorities of the local health community, and in particular of the primary care group and health authority, lie elsewhere.

I hope that it will be helpful to the House to say in response to the amendment that I can confirm that in their plans for primary care investment, primary care

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trust expenditure will be subject to the same government commitment in maintaining the level of spending on GMS infrastructure that covers primary care group expenditure. That guarantee will be secured in the same way as that which now applies to primary care groups; that is, reliance on the Section 97 powers, as extended by Clause 3. We shall also be publicising this commitment in a further paper about primary care trusts which we are planning for publication next month. In response to the specific question about LMCs, primary care trusts will have the same relationship with LMCs as health authorities now do in any decisions they take over GMS matters.

Given that assurance and confirmation of our intention to maintain the level of expenditure on infrastructure within primary care trusts, I hope that the noble Earl will feel able to withdraw the amendment.

Baroness Carnegy of Lour: My Lords, with the leave of the House, before the Minister sits down perhaps I may ask the noble Baroness a question to which I shall be grateful if she can find out the answer. It will save putting down another amendment relating to Part II of the Bill about Scotland. There is much concern among GPs about the squeezing out of expenditure on infrastructure in Scotland. Will the answer the noble Baroness has just given be replicated in Scotland? Will the Government make sure that those amounts are reasonably protected? That would be of great comfort to general practitioners in Scotland.

Baroness Hayman: My Lords, I shall resist the temptation to give an off-the-cuff response. I undertake to find out and respond to the noble Baroness as soon as possible.

Earl Howe: My Lords, the answer to the Minister's last point of her main response is yes, I do feel able to withdraw the amendment. Her answer was extremely helpful. I am grateful to the noble Baroness for the assurances she has given. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

6 p.m.

Baroness Hayman moved Amendment No. 13:

Page 2, leave out lines 39 to 45.

The noble Baroness said: My Lords, I announced during the earlier debate in Committee on Clause 3 of the Bill that we would be bringing forward a government amendment to refine the definition of the prescribing costs that will be included in health authorities' and primary care trusts' unified budgets. That is the main purpose of these amendments. The main feature of the amendments is a new schedule to the 1977 Act defining health authorities, and primary care trusts' "main expenditure" (which is cash-limited) and their "general Part II expenditure" (which is demand-led).

Before I address the amendments in any detail I should offer your Lordships some background. I know that it is an area of interest to the House. Unified

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budgets--which we announced in the White Paper, The new NHS--will create for the first time a single financial envelope covering the commissioning of hospital and community health services; primary care prescribing; and investment in general practice infrastructure--the issue which we have been addressing. This is essential to achieve our objective of aligning clinical and financial responsibility: offering those closest to patients the maximum scope to deploy NHS resources in ways that best meet patient needs.

In the past, distinctions between these funding streams have made it difficult for local clinicians to make changes that they know would be beneficial. They could see ways of saving in one area of activity to support much needed improvements elsewhere but did not have the power to move resources around to achieve that. As local needs or clinical practice changed, it was difficult to adjust patterns of expenditure.

We want a system that is more responsive. Moving to unified budgets will give health authorities and, after this Bill is enacted, primary care trusts greater flexibility in deciding the most appropriate balance between these three areas of expenditure. This will enable health authorities, primary care groups and trusts to decide relative priorities between and within the three areas of activity and match the resources to those priorities without the artificial barriers imposed by the present separation between the different funding streams.

The unified budget itself does not depend on the Bill. Two elements of the unified budget--hospital and community health services, and GP practice infrastructure--are already part of health authorities' cash-limited budgets. But these are managed separately and divided by a statutory ring fence.

The third element, prescribing costs, can be brought within the unified budget using existing powers in Section 97 of the 1977 Act. Those powers allow expenses incurred by family health services practitioners--that is, GPs, dentists, pharmacists or optometrists--to be designated as part of health authorities' cash-limited main expenditure.

Indeed, in effect prescribing costs were partially brought within wider cash limits by the previous administration through the fundholding scheme. It is right to acknowledge that one of the important lessons we can learn from fundholding is that when offered the opportunity to handle a budget which brought together prescribing with an element of hospital and community services expenditure and funding for practice staff, many fundholders were indeed able to find efficient and effective ways of providing services for their patients.

Of course the fundholding scheme also had important limitations. It left artificial barriers between emergency care and other services, for example. And it only ever covered around half the country. But over the past year it has been interesting to see the GP commissioning group pilot schemes managing budgets effectively on a larger group basis--some of a similar size to primary care groups. The 1998 report of the University of Birmingham Independent Health Service's Management Centre on GP commissioning groups found that the groups sought continuously to improve their prescribing

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and promote high standards of care. They took their responsibilities seriously and adopted a range of tactics in order to monitor and develop individual, practice and group prescribing practice, including development of formularies, setting up prescribing groups, open sharing of prescribing data and use of incentive schemes. Most used professional pharmaceutical advice for management and peer review purposes--it is another example of where other professionals such as pharmacists need to be involved--and nurses were also employed as advisers. Quality was addressed, as well as cost issues, including the importance of developing a peer review culture; and over a quarter of the pilot sites projected underspends on their prescribing budget--which I think is interesting.

Our new approach will for the first time bring all hospital and community services within a unified budget and will extend the flexibilities and freedoms of unified budgets to the whole country. This means--and let me be up front about this--that we will for the first time bring all prescribing expenditure within a unified cash limit. Equally, we are not putting a cash limit around prescribing expenditure itself. We are bringing that prescribing expenditure, £4.4 billion in England, within a wider unified budget of some £24 billion in England. Many GPs already have experience of working with this kind of approach, and hospital prescribing has always been managed as part of a wider overall cash limit.

Let me turn now from the overall policy context to the purpose of the amendments before us. It is critical that the new arrangements should operate in a fair and equitable way. The amendments are addressed to this, and are designed to ensure that we apply the principle of aligning clinical and financial responsibility as accurately as possible at local level.

As I have explained, Section 97 as it stands does already allow us to create the unified budgets that we are putting in place from April 1999 for health authorities and primary care groups. But in practice the framework which the existing Section 97 provides does not enable us to align clinical and financial responsibilities as accurately or equitably as is desirable. The main reason for this is that, under the existing powers, we would be bringing within a health authority's cash-limited budget the cost of drugs dispensed in its area, rather than the drugs prescribed by GPs and other practitioners in that area. In other words, we should be asking the GPs in a PCG to take responsibility not for expenditure on the drugs they had prescribed for their patients but on the prescriptions presented at chemists within the area of their PCG.

In some health authorities there is a significant mismatch between the two. Up to around 25 per cent. by value of the drugs dispensed in some authorities are prescribed elsewhere, and up to around 15 per cent. of the drugs prescribed by some authorities' practitioners are dispensed elsewhere. At primary care group level the discrepancies could well be more marked.

The amendments address this issue by allowing the Secretary of State to apportion payments for drugs among health authorities to take account of

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cross-boundary prescribing and dispensing. They allow health authorities to make comparable arrangements for primary care trusts.

To put it another way, and I hope more simply, these amendments will refine the definition of prescribing costs so as to enable those costs to be charged to the health authority or primary care trust where the prescription was written rather than where it was dispensed. We need to achieve this because the crucial decision is that of the GP or nurse on whether to prescribe for a particular patient and, if so, which drug. The patient's decision on where to get the prescription dispensed should be of lesser significance to the arrangements for attributing prescribing costs. These amendments will deliver that objective. They will also enable the apportionment process to be used to average out those elements of drug costs that are outside the influence of the person doing the prescribing, for instance, the amount deducted from pharmacists' reimbursement to reflect average discounts. This will be more equitable for health authorities and primary care trusts, again ensuring our principle of aligning clinical and financial responsibility is implemented as fully as possible.

These practical arrangements for attributing drug costs will build on the well-established systems which are familiar to health authorities and currently operate for tracking spend against GP fundholders' budgets or against non-fundholders' indicative prescribing budgets. What will change, by virtue of these amendments, is that these refined attributions can be used as the basis for determining what prescribing expenditure counts against a health authority or primary care trust's unified budget. In other words, we will be aligning those responsibilities at practice and health authority or primary care trust levels.

I apologise to the House for the fact that the resultant amendments are lengthy and technically complex. They have to be so because they amend Section 97 of the 1977 Act, which is in itself a complex piece of legislation. They are also complex because they are designed to provide for an equitable charging system which can be operated by adapting the existing well-established NHS systems for remunerating dispensing contractors. Despite this legal complexity, the purpose of the amendments is straightforward. They are designed to deliver the fair and accurate charging of prescribing costs to health authorities' and primary care trusts' unified budgets. I commend the amendments to the House. I beg to move.

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