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Baroness Carnegy of Lour: I should like to hear the Minister's answer to my noble friend Lord Blackwell.

Lord Warner: We do not want to anticipate the detail of the way in which a particular regulator will behave in particular circumstances. I have made it clear that he must take account of the Secretary of State's performance of his duties, as is appropriate, at a particular point in history.

Earl Howe: That is an extremely revealing answer. My noble friend Lord Blackwell put his finger on the issue: is it or is it not the case that the Secretary of State, at one remove, will be micro-managing the health service? That is what it amounts to. It appears that there could be circumstances in which the Secretary of State was doing just that. This is not ruled out by Clause 3. That is what my amendments were designed to get to the heart of.

I am grateful for the backing and support of my noble friend Lord Peyton on these amendments.

Lord Warner: Can the noble Earl explain to the Committee how, if his party was in office, he would cope with the situation? If the wording was removed and the circumstances in which the Secretary of State had to perform his duties in relation to healthcare were to change over time, how would he deal with the issues I have outlined?

Earl Howe: First, the Conservatives are not in office—we have a Labour Government—and we on this side have a duty to ask the Government questions, not the other way round. Secondly, I do not think the Minister's question is very well put. The point at issue is not whether the regulator should have a general duty to abide by the duties in the 1977 Act—we can see why that should be. The question is whether his every step should mirror the steps of the Secretary of State. That is the point with which I take issue.

Once again, we shall need to return to this matter as we debate the rest of Part 1. How independent foundation trusts will really be, despite the appearances that the Government like to construct, is a very important issue. In view of the time, I do not intend to spend further time on the amendments, but no doubt we shall come back to them later. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 111 to 113 not moved.]

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Earl Howe moved Amendment No. 114:

    Page 2, line 6, at end insert—

"( ) In performing his duties under this Act, the regulator must have regard to such of the following as appear to him to be relevant in the circumstances—
(a) the principles under which regulatory activities should be transparent, accountable, proportionate, consistent and targeted only at cases where action is needed;
(b) the different needs and interests of persons using NHS services and in particular of the different interests of children, and of those living in rural and urban areas; and
(c) the principles set out in the compact between the Government and the voluntary sector and the codes of practice set out under it."

The noble Earl said: It is perhaps a statement of the obvious that by creating the new office of a regulator, the Bill gives rise to regulation in a new form. The hazards inherent in that process are equally obvious: they are, in simple terms, that the principles of good regulation may not be at the front of everyone's mind when the time comes for the regulator to take up his or her duties. My amendment is designed to address that concern.

The principles of good regulation were enunciated by the Better Regulation Task Force. They were: transparency, accountability, proportionality, consistency and a duty to act only where necessary. We need to decide whether those principles should be reflected in the regulator's statutory obligations as laid out in the Bill.

This is not some dry, theoretical issue. I take the view that deregulation, when it is put into practice, acts directly to enhance operational freedom. The corollary is also true. So we can see that these are principles which have a direct bearing on the extent to which foundation trusts are truly free of unnecessary red tape.

I have made the assumption, rightly or wrongly—the Minister can tell me which—that when an Act of Parliament is silent on the duties of a regulator, no duty that is not explicitly mentioned in the Act can be ascribed to him. It is quite remarkable, to me at least, how so little in the way of general duties for the regulator is laid down in the Bill. Foundation trusts are supposed to be responsive to the health needs of their patients and the local public. You would have thought, therefore, that the regulator might be given a general duty to ensure responsiveness on the part of NHS bodies which he oversees, but there is no such duty. Nor is there a duty to ensure that NHS bodies fulfil their proper duty towards the various elements of the population in a balanced way.

This is not the same as talking about a comprehensive health service, free at the point of need. It is about such things as being aware of the differing needs of patients in rural and urban areas and about interacting with local authorities in configuring children's services, particularly where there are children's trusts.

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We would also expect to see some mention of the NHS's duty to interact constructively with the voluntary sector. That should not merely be on the wish list—it is a statement of the Government's policy. The Department of Health website says that all NHS organisations in England should be,

    "signed up to a geographically relevant Local Compact by 31st March 2004".

We need to ask, in the light of that unequivocal statement, whether the regulator will be required to adhere to the compact which, at national level, is an agreement between the Government and the NCVO. For one thing, it is quite possible that at some point in the future, organisations in the voluntary sector such as hospices will elect to apply for foundation status. The Bill provides for that. If that happens, those voluntary organisations would, of course, come directly under the wing of the regulator.

The principles in the compact are good ones: for example, the principles of fairness and equity in applications for NHS funding. Unless there is some reference on the face of the Bill to those principles and the duty of the regulator to abide by them, they might as well never have been articulated, for all the relevance they will have to the regulator. They will simply not be part of his job description. I beg to move.

4.45 p.m.

Lord Peyton of Yeovil: I feel that my noble friend deserves support; I particularly applaud his dazzling faith. His amendment requires that a regulator—somebody who is about to make a government regulation—has regard to transparency, accountability, proportionality, consistency and targeting, all of which are favourite words of governments. However, if you thumb through the pages of regulations that your Lordships have approved in advance and been able to do nothing about in practice, these things are somehow never present. Still, my noble friend's persistence in advocating virtue in the place of sin is admirable.

Baroness Cumberlege: I, too, support my noble friend on this very well thought through amendment. When regulators have been introduced in this country, they often feel they have to win their spurs by being very tough. If one looks across the Atlantic to the United States, one sees the enormous damage that very tough regulators have done to the electricity industry, for instance, in order to keep down prices.

Price is not an issue here, but it seems to me that having a board of regulation, as the Minister said might happen in the future, is very good indeed. The Minister has said that he will pursue that. Introducing that element would moderate some of the excesses of an individual who would feel they had to be very tough. When a person comes in to a new post such as this and wants to make a mark, they could easily go off beam. The amendment would, I feel, keep the

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regulator on the straight and narrow, and nothing concentrates the mind more wonderfully than having it in legislation.

Lord Blackwell: I particularly support proposed paragraph (a), which refers to regulation being,

    "targeted only at cases where action is needed".

We had an interesting intervention earlier from the noble Lord, Lord Hunt, about the movement from managed to regulated activities. The important thing about regulation as opposed to management is that regulation only addresses situations in which we move away from acceptable norms and activities, whereas management tries to encompass everything that organisations do. But without the amendment I can see nothing in the Bill or schedule which describes what the regulator should be doing, other than the clause we have just debated, which effectively seems to pass on any targets, priorities or initiatives that the Secretary of State should impose on him. Unless we pass the amendment, the regulator could equally well be defined as a manager at one step removed. Therefore, I support the notion that we need a definition like this, which makes it clear that the regulator should deal only with exceptions.

Lord Warner: It may surprise the noble Lord, Lord Blackwell, that I agree with his concerns, but not with his solution. In particular, proposed paragraph (a) of the amendment is totally superfluous. As a public office holder, the regulator is under a duty to act proportionately and reasonably. The Bill has been drafted with a view to establishing a light-touch regulator. Clause 23, in particular, requires the regulator to intervene only where contravention or failure is significant. We simply do not believe that we need paragraph (a).

Paragraph (b) would add nothing whatever to the regulator's duty to ensure that there is comprehensive provision of healthcare in line with the Secretary of State's duties under the 1977 Act, which I justified in an earlier debate and which seemed to cause some upset to some noble Lords. We do not believe that paragraphs (a) or (b) are necessary.

Perhaps I could develop the slightly different arguments about the compact in relation to paragraph (c). We of course support the compact with the voluntary sector, and one would not disagree with the spirit of the provisions set out in paragraph (c). As a recent chairman of the National Council for Voluntary Organisations, I would not dare do other than to support the spirit of that amendment. As head of a non-ministerial department, and consistent with his common law duty to behave reasonably and proportionately, the office of the independent regulator will already be expected to work within the compact, as agreed with the community and voluntary sector in 1998. There would therefore be an obligation on him or her to act in co-operation and in the spirit and letter of the compact.

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To reinforce the point, the Department of Health is determined to see all NHS organisations in England signed up to a geographically relevant local compact by 31st March 2004. Applicants are likely to have local compacts in place when they become NHS foundation trusts. The duty in Section 11 of the Health and Social Care Act 2001 on NHS organisations to make arrangements to consult and involve patients and the public will also apply to NHS foundation trusts and provide an additional statutory incentive for NHS organisations not already signed up to a local compact to do so. The local compact will be one of several mechanisms through which NHS organisations will be able to demonstrate their compliance to their Section 11 duty.

Therefore, there is already a framework in place to ensure that, in effect, the requirements in paragraph (c) are provided for under a mixture of current legislation and the new Bill. It might help noble Lords to know that, in an audit of progress in February, we found that more than half of NHS trusts and primary care trusts were either already members of a local compact or working towards it. We expect the next audit of progress, in February 2004, to demonstrate that, overwhelmingly, trusts and primary care trusts are signed up to a local compact. For the reasons that I have given in detail, paragraph (c) is also unnecessary.

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