Mr. Swayne: I have some questions for the Minister on clause 5 which essentially gives the Secretary of State the same powers with respect to income generation. Will the hon. Gentleman spell out precisely the ways in which he sees that taking place? I should be interested in his analysis of the extent to which he expects the NHS to be able to export its management skills, certainly in the short term and in ways that he believes will be attractive to the private sector.
Mr. Denham: The hon. Gentleman asked about management skills. The primary intention of the clause is to enable the NHS and Department of Health bodies to exploit intellectual property in innovation generated by staff, essentially through the development of so-called spin-out companies, in the development of new pharmaceuticals, medical procedures or devices and so on. At the moment, we can achieve that only by licensing. In some situations it cannot be achieved, for example, where there is no obvious licensee or further development is necessary. In such cases, the spin-out company route is needed so that the new treatment can be brought in for the benefit of patients. A spin-out company will be formed by bringing in outside funding without further investment by the NHS or the Department of Health. The previous work done to develop innovation gives the NHS or the Department of Health body its shareholding.
Without going into detail, we must recognise that we need clear procedures for managing risk with spin-out companies. We intend that, in all proposals, approval of a business case by officials acting on behalf of the Secretary of State will be required. The proposal is very much in line with wider Government policies for the successful development and exploitation of intellectual property rights.
Mr. Swayne: Would the remarks made by the right hon. Friend the Secretary of State about the possibilities of marketing occupational health schemes to the private sector come under the aegis of the clause?
Mr. Denham: My understanding is that the development of NHS Plus, the organisation envisaged in the NHS plan to market occupational health services, would not require use of the powers, but I acknowledge that the provision goes wider than our specific aim of developing the exploitation of intellectual property rights. It might be used in several other ways to provide a flexible or different means of income generation.
Question put and agreed to.
Clause 5 ordered to stand part of the Bill.
Terms and conditions of employment by health service bodies
Mr. Hammond: I beg to move amendment No. 70, in page 5, line 15, leave out `and any directions given' and insert `made'.
The Chairman: With this it will be convenient to take amendment No. 71, in page 5, line 40, leave out `and any directions given' and insert `made'.
Mr. Hammond: I shall address the amendments tightly. The wider issue involved is best dealt with in a short clause stand part debate. The amendments would remove the reference to directions so that the Secretary of State could make regulations, but not directions. My understandingI am sure that the Minister will helpfully correct me if I am wrongis that regulations under the provisions of the National Health Service (Primary Care) Act 1977 would require a statutory instrument to be laid. They could be debated in Parliament, whereas directions are given by the Secretary of State without the necessity of or possibility of any form of parliamentary scrutiny. The amendments would simply ensure that, where the Secretary of State interferes in matters such as the terms and conditions of employment used by primary health care trusts or health authorities, he does so in a way that is transparent and scrutinised by Parliament.
Mr. Denham: As the hon. Gentleman said, the amendments would remove the power to make directions in relation to employment practices but would leave intact the power to make regulations. The core issue is whether there are circumstances in which it would be appropriate or better to use directions rather than regulations.
We are talking about keeping both options open. To give an example, we are working with NHS staff organisationsthat is the primary aim of the clauseto design a job evaluation system to ensure that a modernised NHS pay system respects the principles of equal pay for work of equal value. If the design is successful, and the scheme with all its elements is agreed, it will need to be implemented consistently throughout the NHS.
We could use regulations or directions to ensure that all NHS employers use the agreed job evaluation scheme, which is at the heart of the equal pay for equal value system. However, should problems arise over detailed interpretation in particular locations, we may need the flexibility to deal with the matter by direction. We would rather not have to publish enormously detailed regulations that covered every eventuality because we did not have the power to make directions in specific cases.
Governments have long recognised that in the health service there are times when regulations are appropriate and times when directives are appropriate and it is preferable for the Secretary of State to have the flexibility to choose between the two mechanisms, as necessary.
Mr. Hammond: I am not entirely convinced by the Minister's argument. I can, of course, see the attractiveness to the Secretary of State of having the power to give directions, because they are not subject to scrutiny or indeed to publicity. However, I think it would be convenient to the Committee if I seek leave to withdraw the amendment and continue the substantive debate.
Amendment, by leave, withdrawn.
Question proposed, That the clause stand part of the Bill.
Mr. Hammond: I shall attempt to be brief. The undisguised essence of this provision is to maintain a nationally directed pay system.
Mr. Dawson: Hear, hear.
Mr. Hammond: The hon. Gentleman shouts, ``Hear, hear,'' from the Back Benches, rather confirming everything I believed and performing, as he often does, in the stereotype role in which my mind has cast him.
We have in the national health service a productive organisation. It is not merely a body that performs the public function of procuring access to health care and ensuring that it is available free at the point of need. It is also the virtual monopoly provider of health careprobably the single most important good that this economy produces. The NHS produces just under 6 per cent. of gross domestic product. It is a very large, productive enterprise, with 1 million employees.
The Government seem to believe that the best way to run such an enterprise is as a single structure. There is no example anywhere in the world of a productive organisation with 1 million employees producing the equivalent of nearly 6 per cent. of our GDP. Even organisations on a much smaller scale in the commercial world operate on a properly devolved basis. I will not bother to pursue the Secretary of State's assertion to me on Second Reading, recorded in Hansard, that the Chinese army ranked as such a productive organisation and should be considered as a good example. I invite the Minister to look that up.
Whether it is a good or bad thing to want to put in place a single national pay and conditions structure, it is likely to prove a futile exercise. The Government have embarked on a process of proposing paying cost of living supplements beyond the London weighting area. I represent an area just outside London and I will be a grateful recipient of some modest additional assistance towards the great challenge of recruiting and retaining NHS and other public sector staff in that area. I have already been on the receiving end of an outburst from NHS staff in Dorset who will be excluded from these arrangements, yet, as many hon. Members will know, housing in parts of DorsetPoole, for exampleis extremely expensive.
That is not a criticism of the Government's proposal, but simply an observation that, wherever one draws lines, artificially from Whitehall, one creates another problem. If the Minister decides tomorrow to include Dorset, the problem will be the next countymy geography of the south-west is not too hot.
Mr. Swayne: My constituency straddles that boundary and I have constituents living opposite each another in the same street who are affected differently because one is employed in Dorset and the other in Hampshire.
Mr. Hammond: My hon. Friend emphasises our problem. If one takes a rational and sensible approach to the provider side of the national health servicenot its function in ensuring equitable distribution of the availability and access to health that it is free at the point of need, but its more nuts and bolts function as a producer of health careone must realise that its future lies in devolving more power from the centre and acknowledging the different conditions that obtain in different parts of the country. Self-evidently, a nurse living in Dorset will have higher living costs than a nurse living in rural Northumberland. Until the NHS can offer local structures and sufficient flexibility to take those factors into account, as every commercial organisation must do to survive, those recruitment and retention problems and the problems that NHS staff in relatively expensive areas on relatively modest salaries face will persist.
The Government are going precisely the wrong way in seeking regulation-making or direction-making powers to determine the way in which every health authority and every primary care trust and NHS trust in the country deals with its staff. There has to be scope for flexibility if we are to succeed in maintaining, retaining and recruiting the necessary work force in all parts of the country. It cannot be a coincidence that, reversing the trend of the 1950s and the 1960s, the trend in large commercial organisations in the past three decades has been to decentralise power and authority over such decisions and to recognise that production units must operate semi-autonomously. The proposal is a retrograde step and gives the lie to the proposition that this is a decentralising Bill.