We understand that the policy intentions of the National Health Service (Amended Duties and Powers) Bill (‘the Bill’) are to establish a duty on the Secretary of State to provide NHS services, to make reforms to the NHS in such a manner as to remove its susceptibility to procurement and competition laws and to reduce the level of non-NHS health income that NHS organisations can receive.
This Bill, were it to become law, would reverse a proportion of the changes made under the Health and Social Care Act 2012. The Department considers that a reasonable estimate of the cost of implementing this Bill would be in the order of at least tens of millions of pounds.
The costing does not reflect the opportunity costs, organisational restructuring and associated staff and redundancy costs that may need to be accommodated. Significant costs could also arise from implementation costs, including legal costs. There are also likely to be significant costs associated with the transitional changes required to give effect to the Bill’s provisions. For example, Clause 5 gives the Secretary of State power to direct clinical commissioning groups and the NHS Commissioning Board. Such a power materially changes the character of these organisations, which have been established to exist outside of a traditional NHS ‘hierarchy’ and to minimise the risk of political micro-management.
Competition and procurement legislation
A key policy aim of the Bill – and particularly clauses 6, 9 and 11 is to attempt to remove the susceptibility of the NHS to existing competition and procurement legislation. To achieve this aim the system would have to change significantly.
As well as the above changes, we believe that the Department would need to set aside significant levels of contingency budgets in order to allow for the extra costs associated with legal challenges to NHS procurements.
Direct costs would be incurred from; Part 1, clause 2 (new section 2c), subsections (2) - (7)) and clause 6 (new section 9 subsections (18) - (21) and Part 3 clause 12 of this Bill attributed to the Secretary of State for Health being required to:
- Fulfil an amended role in relation to mergers between NHS Trust / Foundation Trust;
- provide guidance on cooperation and social solidarity;
- seek advice from relevant parties and issue directions;
- adjudicate on any complaints they consider appropriate; and,
- deal with any NHS Contract references to arbitration under Section 3.
The Health and Social Care Act 2012 made changes to Monitor’s functions and the Secretary of State’s powers of direction over commissioners. This Bill proposes to make similar changes, albeit opposite to the 2012 Act under Parts 1, 2 and 3 for changes to Monitor’s and the Competition and Market Authority’s (CMA) functions and to reintroduce Secretary of State’s powers of direction over commissioners.
Parts 1, 2 and 3 of this Bill will incur new costs. To fulfil these new Duties, advice would be required from experts from an organisation similar in scale to what is currently spent on competition in Monitor. This function (other than mergers) could be delegated to Monitor, or within the Department, but some redundancy costs could be expected for those not wishing to transfer, or from winding down the function in Monitor if it returned to the Department. For 2013/14 this cost was £1,588,554 which included 30 staff. At least this level of cost would be directly incurred in addition to what is currently spent as a result of Part 3, clause 12; Part 1, clause 2, (new section 2c, subsections (2) - (7) and Part 2 clause 6 (new section 9, subsections (18) - (21).
In particular the functions set out in Part 3, clause 12 are currently undertaken by the CMA. Therefore, a similar function would be required to be established to support the Secretary of State in making decisions, as the CMA is likely to retain its existing staff to work on other market investigations. This is because the CMA has a legal duty to refer a merger for an in-depth investigation where:
(a) a relevant merger situation has been created or arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a relevant merger situation, and
(b) the creation of that situation has resulted, or may be expected to result, in a substantial lessening of competition within any market or markets for goods or services in the UK.
The Secretary of State would potentially issue guidance on the role of competition and choice, and would have a role in the adjudication of complaints in these matters. At the moment, this role is undertaken by Monitor. This would require a resource in the scale of the Competition and Cooperation Panel that undertook this role prior to the Health and Social Care Act 2012, indicative figures for which are set out above.
Clause 7, (new section 43, subsections 1-6) and clause 8 of the Bill would provide the Secretary of State with the power of direction over the level of NHS Foundation Trust and NHS Trust non-health service patient income.
Private patient income cap
We note that the Bill does not define the level of non-health service patient income which NHS trusts could collect, but note that the Shadow Secretary of State said during the Second Reading of the Bill that (Official Report, 21 November 2014, column 574):
“It reduces the private patient income cap back down to single figures”
Reducing the private income cap to 9% would mean that the following NHS organisations experience a shortfall totalling £50 million as of 2013/14:
PRIVATE PATIENT INCOME
Shortfall in income through loss of funding if the Bill became law
The Royal Marsden NHS Foundation Trust
Moorfields Eye Hospital NHS Foundation Trust
Great Ormond Street Hospital for Children NHS Foundation Trust
Royal Brompton and Harefield NHS Foundation Trust
 Monitor’s competition functions were established by the Health and Social Care Act 2012. In the transition year 2012-13 Monitor hosted the Cooperation and Competition Panel at a cost of £1,068,099. The cost for 2013-14 also included hosting the Cooperation and Competition Panel.