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Baroness Noakes: I rise briefly to correct a remark I made earlier. I referred to a piece of legislation passed in 1988 rather than 1998. Sometimes it seems like only yesterday that we were still in power. At this late hour, my memory slipped for a moment.

Earl Howe: I hope that the Committee will forgive me if I strike a somewhat different note from that sounded by the noble Baroness, Lady Barker, in the last group of amendments. The cap on the ability of foundation trusts to raise income from private patients is, for us, the single most unnecessary piece of interference in the whole Bill. It is striking that a Bill which professes to be concerned with giving hospitals greater freedom should in fact seek to place greater restrictions on foundation trusts than are in place on non-foundation trusts. What mischief is this provision meant to address?

Over the years we have seen the development of a partnership between the private and the public sectors to the mutual benefit, I believe, of both. That partnership can take many forms, but its advantage for the NHS is not simply to generate additional

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income, which it certainly does, but often to ensure that state-of-the-art facilities are available to NHS patients which, but for the private sector, would not be available owing to their unaffordability.

My honourable friend Chris Grayling in another place gave some examples. At Basildon and Thurrock General Hospitals NHS Trust there is an MRI scanner that is used out of hours by private patients. The revenue from those patients defrays the costs of the scanner. University Hospital Birmingham NHS trust has both MRI and CT scanners, as well as other services which are all frequently used by the private sector. My honourable friend quoted several other similar examples. One hospital said that private patient use of in-patient services and equipment generated #2.5 million last year for the trust, money that was then available to fund patient care.

The consequence of a cap on private income will be that, taking the last financial year to 31st March as the base year, no foundation trust will be able to increase the proportion of its income derived from private work beyond the proportion recorded in that base year. That is an absurd and potentially damaging restriction. If a trust is currently generating, let us imagine, only small sums by way of private income but wishes to invest in a new MRI scanner and then use private patient income to defray part of the cost, it will be illegal for it to do so. That is the consequence of what the Government are doing. Removing the cap on private income would not be "doing down" the NHS or allowing hospitals to be taken over by private patients; it is about protecting the mutually beneficial partnerships that currently exist to bring real benefits to NHS and private patients alike.

The Government have done a great deal over the past few years to promote and encourage these partnerships. They are now seeking to put a brake on them—a brake that could lead to perverse and illogical consequences. Suppose a set of services provided by a foundation trust were relocated to another hospital; then the total income of the foundation trust would fall. But, as a consequence, its income from the private sector would also have to fall at the very time when it needed to make up for the revenue it had lost. How can that be logical?

Similarly, if a foundation trust finds that it cannot invest in an expensive piece of equipment because to do so would infringe the cap on private income, it might be tempted to buy in the necessary capacity from a private provider. That would be a way of getting round the rule, but it would almost certainly cost the foundation trust a great deal more than renting out its own machine to private patients in-house. In another situation a trust might find that it had temporary spare bed capacity but that it was unable to offer it to private patients because to do so would breach the legal cap.

This measure will force foundation trusts to behave in ways which defy reason and which are not to their financial advantage. But we know why it is there. It is there not as a means of benefiting NHS patients but as a means of avoiding further embarrassment over the Bill with certain quarters of the Labour Party. That is a very poor reason for including it.

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Nothing that I am seeking to do would interfere with the overriding provision in the Bill that the principal purpose of a foundation trust is to provide healthcare services to NHS patients. I seek to do away only with a piece of dirigisme that works against the interests of the NHS.

Baroness Barker: I return to one of the points I made in the previous debate. No one knows with any certainty what is the real costs of the provision of private services within the NHS. In his remarks, the noble Earl, Lord Howe, concentrated almost exclusively on the subject of capital equipment costs. By far the biggest cost in the NHS is for staff and nursing care. A respected health economist, William Laing, tried to carry out an exercise to find out what was the cost of an NHS pay bed but could not do so because the information was not available. We therefore have to ask basic questions about costs, profits and profitability. Some 130,000 extra NHS patients could be treated each year if the 3,000 NHS beds currently devoted to private care were reincorporated into the mainstream healthcare service. That would go a long way towards wiping out waiting lists.

There is a case to be made that using NHS beds in this way, without full and proper costing, distorts independent healthcare. I believe that now, with such a major structural change in the provision of health services taking place, is the time to find out the exact cost of the provision of services. That is the right thing to do.

Lord Brooke of Sutton Mandeville: Once again, I shall be extremely brief. I have no intention of improving on the examples which my noble friend Lord Howe gave in the admirable speech with which he introduced this short debate. However, I cannot help remarking that it is one of the ineluctable laws of this administration that when they introduce legislation that is intended to free things up, the consequence is that they end up with greater restraint and restriction than there was before.

I am not in any way a veteran of the proceedings of the Committee stage of this Bill. I did, however, sit through the entire proceedings of the Licensing Bill. It was introduced—and much testimony was paid to this fact—to free up the industry, and would be welcomed by those practitioners who work in the licensing industry. I read within the past fortnight that those who are practitioners in the licensing industry estimate that their costs will have gone up by #1 billion as a result of the legislation with which they are now faced following the passage of the Act. It is a tragedy of Euripidean proportions. I hope that some day somebody will do a Ph.D analysis of it.

I shall not expand on the point except to say that on a priori grounds I automatically support my noble friend.

Lord Warner: Let us just remember that NHS foundation trusts will have a primary purpose of providing NHS services to NHS patients based on

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need and not the ability to pay, and free at the point of use. They have an obligation to meet the needs of their communities and not just those who are able to pay.

If there is spare capacity knocking around in the NHS—although some noble Lords suggested earlier that there was not very much—it should be available to meet NHS needs. The noble Earl acknowledged that the Government have moved a long way down the path of encouraging partnerships between the NHS and the private sector. Nothing in these provisions prevents this kind of partnership working, with the private sector providing services under contract to NHS patients through NHS trusts or, indeed, NHS foundation trusts. Diagnostic and treatment centres would be good examples of where the skills and abilities of the private sector are being used for the benefit of NHS patients. Again, the PFI system is another example of that kind of partnership.

To ensure that NHS foundation trusts continue to focus primarily on servicing the needs of NHS patients, the terms of authorisation of an NHS foundation trust will place strict limits on the extent to which they can undertake private patient activity. We make no apologies for that; it is, I am afraid, an area where we have to disagree with the Opposition Front Bench.

Income derived from the provision of services to private patients will be capped as a percentage of total income from clinical activities. The percentage will be fixed as the percentage that applies for each NHS foundation trust in the financial year ending April 2003. This will prevent foundation trusts doing a higher proportion of private work than they do today. That was explained pretty clearly in the other place; I am merely repeating the Government's position on this issue.

As regards the concern of the noble Baroness, Lady Barker, there will be increasing amounts of financial flows of information that will reveal the price of NHS services, which will enable direct comparisons to be made with private services provided by the trust. There will be the ability to infer profit, if one wants to do so. However, I suggest to the noble Baroness that the critical issue, which we have provided for in the Bill, is to cap income. As the noble Lord, Lord Hunt, suggested, it would be pretty strange if foundation trusts were engaging in private work that was a loss-maker rather than an income generator.

11.30 p.m.

Earl Howe: The Minister and I agree on one thing, which is that the primary purpose of a foundation trust is to provide services to NHS patients. I have no argument with that, but that is why I believe that the Government are being short-sighted over this issue.

I concentrated my remarks on capital equipment, as the noble Baroness, Lady Barker, said, because the expansion of privately provided beds is likely to be via the DTCs in the years ahead rather than any in-house expansion in NHS trusts.

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The Government's position will lead not only to perverse consequences but to adverse consequences for NHS patients. It is directly counter-productive. I heard the Minister repeat the Government's position, but I did not really hear him justify it. The truth is that there is no real justification apart from doctrine; that is highly regrettable, when the Government in many other ways are freeing themselves up from the rigid thinking that dominated their first few years in office.

Clause 15 agreed to.

Clause 16 [Protection of property]:

[Amendment No. 172 not moved.]

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