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Lord Fowler: My Lords, perhaps I may interrupt the noble Baroness before she moves on. She made the case for encouraging pension provision, but can she say how introducing the 5 billion pension tax actually fits into that strategy of encouraging pension provision?

Baroness Hollis of Heigham: My Lords, the Chancellor of the Exchequer made a decision, which was entirely correct; namely, that pension provision should not be distorted by a retention tax—an ACT tax. Instead of investing in research and development, companies chose to pay out that money in dividends. Had companies made such investment throughout the 1990s, they might be in a healthier position now. The Chancellor corrected that anomaly, and the benefits can be clearly seen when we look at the current healthy state of the economy compared to that of most of our competitors.

As I said, the gracious Speech mentioned two health Bills. In this Session, we shall introduce a Bill to continue the process of modernising the delivery of healthcare based firmly on the founding principles of the NHS. The Health and Social Care Reform Bill would enable NHS foundation trusts to be created to free hospitals from Whitehall control, starting with the best performers. NHS foundation trusts will be set up as new public interest organisations accountable to local people.

Drawing from the examples of co-operative societies and mutual organisations in Britain and abroad, NHS foundation hospitals would be fully independent of Whitehall control, working for NHS patients and the public interest. They will be governed by a stakeholder council elected by members of the local community and NHS staff, and free to borrow from either private or public lenders up to a prudential limit established by the regulator based on their ability to service the borrowing.

Foundation hospitals will be at the cutting edge of the Government's wider reform programme for the public services. They will provide a new alternative to either monolithic healthcare provision, on the one hand, or shareholder-led for-profit provision on the other. The changes will support innovation and generate a new culture of public service enterprise.

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The Bill will also establish a new inspectorate for the NHS, independent of the Department of Health, to assess performance and enforce standards. A similar inspectorate will be set up for social services. These will strengthen accountability and transparency between the health and social care services and the public who pay for them.

I turn to the second Bill. We have already introduced the Community Care (Delayed Discharges etc.) Bill to bring an end to delays in the discharge of patients from hospital and to ensure that older people receive the right care in the right place at the right time. There are currently about 5,000 delayed discharges throughout the acute sector of the NHS on any given day. These delays are bad for the mainly elderly people who are affected by them and denied the support that they want and need. They are bad for the whole NHS as they take up resources which could be spent on providing direct patient care.

We have committed ourselves to increased funding for older people's services to guarantee faster access to a range of services and greater choice, amounting to an extra 1 billion annually by 2006. For many councils, however, the current system does not provide sufficient incentive to invest in the community services necessary to reduce delayed discharge. This Bill will provide a strong financial incentive for local authorities to use the additional funding to extend capacity. If a patient is delayed in hospital after he has been declared ready for discharge, local authorities will be required to reimburse the acute hospital for the cost of that person's bed, board and any personal care that he requires.

We are investing in our services and investing in our people. We are tackling the poverty of income, the poverty of life chances and education and—above all—the poverty of health which for too long have scarred our society. I am proud to draw the Government's achievements to the attention of the House.

3.52 p.m.

Earl Howe: My Lords, the beginning of a new Session of Parliament brings with it a sense of anticipation and, one hopes, a renewal of energy for the hidden delights that lie ahead. By its very nature, it is one of the watersheds of the parliamentary year, and hence a good time to take stock—which is why, unlike some, I positively welcome the debate on the gracious Speech as an opportunity to look at the broad sweep of government policy and government performance. This Labour Government have been in office for five and a half years. That is long enough for their achievements, or the lack of them, to be assessed with reasonable objectivity. By the same token, it is more than long enough to prevent Ministers, with any shred of plausibility, blaming the previous administration for whatever might be wrong with our national life. Of course, it is not impossible that in times of desperation they will continue trying.

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So far as health is concerned, one thing of which we cannot accuse the Government is inactivity. Indeed, the past five years in the health service have been nothing if not brim full of reorganisation and change. So much so that, for some of us, life simply would not be the same without a major Bill each year reorganising one aspect or another of the NHS. This year—heaven be praised—is no exception to the rule. The effect has been one of frenetic activity and upheaval, all in the cause of that marvellous, seductive-sounding and all-purpose objective "modernisation". Modernisation is a word which, as in the language of Humpty-Dumpty, means whatever the Government choose it to mean. To that extent, it allows Ministers to claim success for whatever they happen to have done, however ghastly. Of course, it is another matter entirely whether all this relentless activity has actually improved the health service or made life better for patients.

I remember how, in 1997, the health service reforms initiated by the previous Conservative administration were lambasted by the incoming Government. GP fundholding, in particular, came in for enormous criticism on two grounds: the first being its bureaucratic cost, and the second its supposed tendency to create a two-tier health service. I think that there was a valid basis for criticism on the first count; but the second count was in large measure manufactured and overdone.

I raise the topic again not to rake over past battles, but to make a slightly wider point. Whatever one may have thought of the particular elements of the Conservative reforms—and I know only too well that the Minister did not like them—their objective was quite clear. It was to try to respond to two inescapable trends in healthcare: the increasing need for patients to feel empowered and to have choice; and the well-founded pressure on politicians to devolve to a local level the decision making about commissioning, about healthcare priorities and about looking after patients. The formation of NHS acute trusts was a means of creating autonomy at a local level, with matching accountability for money spent. The internal market, notwithstanding its adverse features, was designed not as an end in itself, but as a means of achieving the wider objectives of choice, autonomy and better treatment.

It was, however, not only the detail of Conservative policy that was repudiated by Labour; it was the wider objectives as well. When the idea of increased patient choice was put to the Prime Minister quite early on in the new administration, it was greeted with blank incomprehension. I remember the bile with which a certain Minister greeted my suggestion, in 1998, that there was a place for healthy competition in delivering healthcare. The Conservative aim of giving doctors greater power to decide what was best for their patients has been systematically undermined and frustrated by the entire sweep of the Government's reforms during their first five years in office. Instead of flexibility and local innovation, the Government introduced rigidities in the purchasing of services, poked into life by a combination of carrots and sticks from the centre.

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We may exchange banter in this Chamber about control from the centre and "getting the balance right", but the reality is that never has there been a Government more intent than this one on issuing directions, instructions, targets, initiatives, implementation plans, protocols, and guidance, clinical and non-clinical, to all segments of the health service. It is a syndrome described by the King's Fund as "relentless, almost hyperactive intervention". The NHS implementation plan for 2003–06 contains 186 separate targets—although I have to say that it is quite easy to lose count.

Lord Forsyth of Drumlean: My Lords, is my noble friend not being excessively modest? Is it not plain that, having repudiated the internal market and the whole idea of devolving power, and having smashed up what was put in place, the Government, as he said, are busily trying to reinvent it with the proposals for fundholding foundation hospitals? Has not my noble friend won the argument, and have not patients lost out because of the confusion on the government Benches over the past five years?

Earl Howe: My Lords, as is often the case, my noble friend is ahead of me. I shall come to make that point in a moment.

No one doubts the worthy intentions behind the Government's approach. We know that the Government want to make life better for patients. The effect, however, has been little short of disastrous. What you achieve when you keep telling professional people how they must do things is to demoralise them. Morale in the health service is, by common consent, at rock bottom. You cannot make the NHS attractive to professional people unless you give them job satisfaction. They have to feel that they can exercise their professional skills without constantly being second-guessed from outside and being managed to do what is not in the best interests of their patients.

The reason why the consultants voted the other day against the proposed new contract is that trust between doctors and government is now practically non-existent. They feel deprofessionalised. The reason why there are still 20,000 nursing vacancies is that fewer nurses nowadays want to work for the NHS. A third of new graduate nurses are not registering to practise. More and more GPs are retiring early to escape the burden of red tape and paperwork imposed by government. Junior doctors who have trained to be GPs are deciding in greater numbers to avoid general practice altogether. Doctors now work in what a leading academic recently described as a "macho-management culture". It is the culture of the health service which this Government have damaged, and that is the supreme irony when we know how precious the NHS ethos of public service is to Labour Ministers.

That is why the Department of Health is not achieving the targets for recruitment of consultants, GPs, nurses and midwives. Meanwhile, the Government, who are pouring money into the health service, are getting less and less from every pound they put in. In fact, visible evidence of the new money, as

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the King's Fund has observed, is hard to find. The Government's obsession with bringing down the waiting list numbers and setting targets for A&E waits and setting more targets for urgent cancer waits has resulted in the well-known squeezed balloon effect. You reduce the problem in one area but you inflate it in another. Long-term waits for elective surgery have come down—that is a good thing—but it is doubtful whether elective surgery as a whole has seen any increase in activity. All that has happened is that more and more people are now waiting between six and 12 months, and the capacity problem remains as it was.

Cancer patients deemed as urgent may be seeing a consultant within two weeks, but other patients, who may have life threatening forms of cancer, are, as a result, suffering unacceptable and sometimes critical delays. Maximum waiting times for cancer and heart disease, fine in their intention, have the effect of demoting other, less high profile conditions down the list of clinical priorities. As one consultant anaesthetist graphically put it the other day, "If you don't have a vote-winning illness, then sod you".

And sad to say, the distortions of clinical practice brought about by government interference are in evidence throughout the health service. The orthopaedic department of St George's Hospital is told to stop accepting out-of-area emergencies in order that the targets on routine elective cases can be met. Waits in A&E in many hospitals are getting worse because there are not any beds on the wards. There are no beds for these emergency cases because elective surgery, at the behest of Ministers, has taken priority. So, in an effort to free up beds, patients are discharged too early. The result of that is that the number of emergency readmissions to hospital has risen sharply. That in turn can lead to cancelled operations, the number of which has shot up. Beds are in short supply because they are blocked by elderly patients with nowhere to go. Why do they have nowhere to go? It is because, thanks to the Government's well-intentioned but misguided drive to regulate care homes, there is now a drastic shortage of capacity in intermediary care. None of us can condone the practice of fiddling the waiting time figures but it is no wonder that this has been happening when managers have found themselves utterly unable to fulfil the mutually conflicting imperatives being thrust upon them by Whitehall. It is often the sickest patients who suffer.

We look around to see where the money has gone. Labour's manifesto in 1997 promised to cut the bureaucratic costs of the NHS and to direct the first 100 million saved into treating 100,000 extra patients. What we have actually seen since the Government came to office is not a fall but a rise in administration costs. Taking the latest departmental report as our guide, we see that costs anticipated for 2003–04 are likely to be 100 million up on those for 1997–98—a rise of some 40 per cent. So many administrators have been appointed in the NHS since 1997 that we are now in the extraordinary situation where, for the first time, there are more administrators in the NHS than there are beds.

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The Minister should not get me wrong. My purpose is not to belittle or rubbish every single initiative the Government have taken since they took office. Some, of course, have been positive. But having in 1997 reversed the direction of travel taken by the Conservatives in the sense that I have indicated, they have, it seems to me, taken the health service in the wrong direction for the better part of five years, and the NHS and patients have been the clear losers. It is only with the announcement of foundation hospitals in the gracious Speech that we see a welcome reversal of what has gone before. We hear a return of the language of choice, diversity of provision, professional autonomy and local ownership. We again hear about money following the patient. There is still much in the way of detail that we do not yet know but I say to the Minister that this is a new development in health policy which we find very welcome. It is time for the centre to let go.

If I have a criticism of foundation trusts as so far announced, it is that they are not to be rolled out more widely. Only three-star performers will be eligible for foundation status. But, as Gill Morgan of the NHS Confederation has observed, the very time when organisations need the most freedom to innovate is when they have been performing poorly. If devolution to front-line staff is a good thing, then more front-line staff should have the benefit of it. To contemplate only a handful of foundation hospitals, with freedom to borrow and expand, really does imply a two-tier health service to a degree that dwarfs anything that may have ensued from Conservative health policies. There are obvious questions about governance arrangements. But the real question about foundation status is the nature and extent of the freedoms to be accorded to them. Freedom means not simply "freedom to", but "freedom from". How much external monitoring and performance management will they remain subject to? How many restrictions will be placed on them by the financial regulator?

One issue of particular concern is pay. I wonder whether the Minister could tell us the extent to which foundation trusts will be able to determine their own levels of pay. Many people see a danger in staff being siphoned away from non-foundation hospitals and recruitment difficulties thereby being exacerbated. Freedom to set pay and to borrow is desirable but if foundation status is not extended more widely, the repercussions could be serious.

The measures to establish the commission for healthcare audit and inspection and the commission for social care inspection are, again, broadly welcome to us. Indeed, as the Minister knows, we have long argued for a rationalisation of the various health inspectorates. I put down only one marker at this stage, and it is a marker called "independence". We shall look very carefully at how CHAI in particular is legally constituted and the degree to which it is free not simply in managerial terms but also in terms of its budget.

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It is a shame not to be able to end my speech with a welcome for the remaining NHS measure announced last week, but I cannot. The delayed discharges Bill is, to my mind, an idea that is wholly misconceived. The root cause of bed blocking is not any lack of co-operation between hospitals and social services, it is the loss since 1997 of 60,000 places in care homes—a loss both caused and acquiesced in by the present Government. Fining local authorities for something over which they have little, if any, control is simply to deprive them of the very resources they need for care home residents. Far from stabilising services, it will destabilise them. Far from cementing local partnerships, it will undermine them. But worst of all perhaps, it will bring with it the inevitable consequence of such artificial mechanisms—the perverse incentive. All of a sudden, a GP trying to find a care home place for a patient need only refer that patient to hospital to ensure that a place is found. Independent care home providers looking for fee rises will see local authorities under the threat of fines as an easy target for such rises. To place such undue emphasis on hospital discharges will mean that those waiting for help from social services at home may well be disadvantaged.

The Local Government Association has condemned those proposals as,


    "costly, unworkable and based on a flawed analysis of the real problems".

That is the position in a nutshell, and it is why I fear that the passage of this Bill through your Lordships' House will not be an easy one.

I started my speech by referring to the hidden delights of the coming Session. It is a Session which, in so far as it relates to health and social services, shows every sign of being as lively and as intense as any that I can remember. On these Benches, we stand ready to ensure that the House continues to hold Ministers to account fully, systematically and in detail, in their pursuit of the radical proposals outlined today.

4.10 p.m.

Lord Clement-Jones: My Lords, I, too, welcome the new parliamentary Session, although it has clearly started in the same old way. In the debate on the Queen's Speech in the other place, the Secretary of State for Health insulted everyone left right and—particularly—centre; we have the general bandying about of statistics without hard evidence of progress; and we still have huge capacity problems.

It appears that it is unlikely that the 2004 targets—of 7,500 more consultants and 2,000 more GPs—will be met. The total numbers applying to medical school, even with the prospect of five more medical schools, appear to be dropping fast and will, it seems, be too low to meet the 2008 target of 15,000 more doctors. Moreover, what new money there is does not appear to be reaching where it should. Cancer treatment and research and hospice care are just a few examples. Targets for accident and emergency waits are not being met. Meanwhile, the Secretary of State and Mr Nigel Crisp play a "bad cop, good cop" routine with NHS staff. The Prime Minister gave a worthy interview to the Health Service Journal on the state of the NHS and

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promised further modernisation of the health service. Then, lo—just to add to our pleasure—we had the announcement in the Queen's Speech of yet another NHS reform Bill. We have all been here several times previously. It is "Groundhog Day" in the NHS.

My point is not just that we have another NHS reform Bill but that we still have countless loose ends from previous Bills. First, specialised commissioning is an area of real concern in many specialties. When the Health Act was going through the House, we were repeatedly assured by Ministers that everything would be fine with clusters of primary care trusts developing specialised commissioning skills. That ideal appears to be as far away as ever. Ministers are now desperately trying to find a better way of doing things with a review that started in March. Can the Minister today enlighten us on what progress is being made?

My second point involves the abolition of the CHCs and the creation of patients' forums and the Commission for Patient and Public Involvement in Health. That was finally agreed in the Health Act but the saga stumbles on. It appears that the Department of Health is contemplating only 600 staff being available for 600 patients' forums. That will clearly be grossly inadequate in light of their new responsibilities, particularly in relation to primary care; it is also contrary to earlier government assurances. ACHCEW, which is still with us—just—calculates that 1,600 staff are in fact needed. An anticipated 300 offices now seem to have been boiled down to 28. How many offices will there be? What are the Government's conclusions about the resources that are needed? Is not a decision long overdue?

Nothing demonstrates the knee-jerk reflexes of the current Secretary of State more than his reaction to the recent rejection of the new contract by consultants in England and Wales. He did not examine the reasons for the rejection. Those reasons are a desire for flexibility; basic mistrust of the way in which government performance management can impact on hospital management; and concern that the new deal would be available only to the "deserving few", in the words of the NHS's head of human resources. What did the Secretary of State do? He announced the reform of merit awards in a way that punishes consultants who do not conform to the new terms and introduced a new sub-consultant grade in the teeth of opposition from junior hospital doctors.

I come to the legislation announced in the Queen's Speech. The NHS reform Bill has two main elements: the introduction of foundation hospitals and the introduction of the new commission for healthcare, inspection and audit. On foundation hospitals, the Liberal Democrats share many of the Government's aspirations as regards decentralisation. Only through that do we believe that we can properly devolve responsibility to where it belongs and deliver better patient care. However, we want to go further. We want decentralisation to democratic regional bodies that can take a strategic role in decision-making, and we want the decentralisation of commissioning to local authorities.

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We agree that there is a need for greater diversity and provision but there are many unanswered questions. Why force that status on a select group of hospitals? It appears that that will involve at most the 35 or so three-star hospitals, although the figures could even be even lower. The figure of 12 hospitals has been quoted, out of a total of 400 or so hospital trusts. As the BMA and others have put it, why not make the freedoms that are available to foundation hospitals available to all hospitals? Furthermore, why should we not allow local communities to choose whether their local hospitals become foundation hospitals? Why not establish how foundation hospitals operate through a series of pilot schemes? As the Government's own adviser, Mr Adair Turner, has warned—in a report that the Government failed to publish—that carries the danger of creating a two-tier system of healthcare. That system will reward the few at the expense of the many.

Will foundation hospitals be genuinely independent from the Department of Health, or will the Department of Health continue to tangle them in targets? Will the command and control complained of by chief executives continue?

In a press release on 22nd May, the Secretary of State talked about NHS foundation hospitals being established as,


    "free-standing legal entities free from direction by the Secretary of State for Health".

However, they will be subject to performance monitoring from commissioners. The concern here is not that there is proper enforcement of contracts for patient care but that that will become just another way of enforcing government targets at the expense of local patient priorities.

When will the Government give more details about the powers that the new hospitals will have, and in particular about financial powers and real independence? Will they consult on those powers?

On the new CHI, it has taken a long time for the Government finally to stumble on the right solution for the inspection of acute hospitals. A series of Bills has moved towards the conclusion that we now see appearing before us. The first NHS reform Bill under this Government set up the Commission for Health Improvement. The National Care Standards Commission was set up under the Care Standards Act 2000. The next NHS "re-reform" Bill amended the provisions affecting CHI. As soon as the NCSC was set up, the Government decided to merge the inspectorates so that private and NHS hospitals, for example, would have the same inspection regime. We were arguing for the conclusion that was arrived at in the latest NHS reform Bill during the passage of the first reform Bill. However, the Government were not listening at the time.

The crucial test for the new CHI is whether it is truly independent of Government and whether it can genuinely provide a focus for the myriad inspection powers that currently exist in the health service.

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I have argued on previous occasions that we desperately need to simplify our performance management, clinical governance and inspection regimes in the NHS. The position at the moment for each hospital is similar to the fact that roads in London are dug up just when the last lot of workmen have gone away.

Currently more than 20 bodies have the right to enter and inspect NHS hospitals. We need to ensure that CHI has the authority to ensure that it is the key body to which all other bodies look for validation on the ground, whether that involves the NPSA, the National Clinical Assessment Authority or the royal colleges.

As regards independence, when the Secretary of State announced the merging of CHI and the acute independent hospital inspection side of the National Care Standards Commission, he said that the new body would be at least as independent of government as the Audit Commission. But will it, for example, be allowed to choose its own meaningful performance measures, along with the need to check for adherence to NICE guidance and national service framework standards? I have the highest regard for Sir Ian Kennedy, the new chairman, but we will be scrutinising the provisions of the new Bill very carefully to make sure that this is indeed so. We shall also be arguing for direct accountability to Parliament.

A key plank of the Queen's Speech is the plan to fine or—in new Department of Health-speak—to cross-charge local authorities that fail to arrange for swift discharge of hospital patients into care homes. It is quite clear that not a single organisation supports the proposals—not the NHS Confederation, not the Local Government Association and not the directors of social services. The Government, after some prompting, have finally begun to understand the need for integration between social services and the NHS. Pooled resources and joint working were the product of one reform Bill and care trusts and partnerships were the product of a subsequent Bill.

We supported those concepts, although we argued for more radical change at each stage. Yet, we must now assume that none of that is working. The Government believe that they need to coerce local authorities at high speed—by next April—into compliance with the Government's wishes. Yet, as all of us know, the lack of care home places and of capacity is a direct result of lack of resources. This bright idea is the result of what is now called "health tourism", where a government Minister latches on to an idea gained from a brief trip abroad and then tries to implement it in the wholly different context of health and social services. This particular idea was the product of a trip around Sweden. The foundation hospitals were the product of a trip to Spain. Ministers do get about, don't they?

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The report by the Select Committee on Health pointed out that, even if the highest estimates are discounted, we have lost 34,000 care beds in recent years. With 6 per cent year on year increases in funding for social services, there is a reasonable prospect of attracting more players into the care home market and finding better home care solutions. But fining local authorities and social services departments for the failure of investment by this and the previous government is grossly unfair.

I know that my noble friend Lady Barker will be referring in more detail to the findings of the Health Select Committee in its excellent report. The report took a far more balanced view about how the problem of delayed discharges could be dealt with. It pointed out that management of discharge needs radical overhaul in many hospitals; a multi-agency team is needed to manage the process of discharge. It pointed out that the system could create the wrong kind of care: support at home is crucial.

Finally, it stated that cross-charging brings a real risk, as the noble Earl mentioned, that perverse incentives will be created that will undermine partnerships that have taken time to develop and foster an unproductive culture of buck-passing and mutual blame between health and social care. The committee argues strongly for positive not negative incentives. I hope that Ministers will read the report from cover to cover before they bring a Bill forward to this House.

A mental health Bill was the key Bill that did not appear in the Queen's Speech. On these Benches, we thoroughly approve of the fact that it did not. Despite all the indications to the contrary, it is clear that the Government have shied away from trying to force through that draft Bill in its current form. The Bill, as drafted, fundamentally confused the needs of mental health patients and service-users with a Home Office security agenda relating to people with severe personality disorder. I am not surprised that there have been tensions between the Home Office and the Department of Health.

The final nail in the coffin of the Bill was the report by the Joint Human Rights Committee, which pointed out the lack of safeguards in the Bill and that it could include those with learning difficulties. We urgently need to update our mental health laws. At the same time I welcome the pledge by the Leader of the other place to bring back a mental health Bill in due course. I just hope that the Government will have listened to all those organisations and the opposition parties and will bring back a Bill that is in far more acceptable form.

Finally, it was a pleasure to see the Tobacco Advertising and Promotion Act pass into law recently. I hope that the Government will redeem themselves for their tardiness in backing the Bill by now seriously considering a ban on smoking in public places, so that passive smoking is reduced and public health improved, as recently recommended by the BMA

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which calculates deaths from passive smoking at 1,000 a year. I look forward to the Minister's response to that particular point and to the debate generally.


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