National Health Service (NHS Payment Scheme—Consultation) (No. 2) Regulations 2022

Considered in Grand Committee

Moved by

That the Grand Committee do consider the National Health Service (NHS Payment Scheme—Consultation) (No. 2) Regulations 2022.

My Lords, I start by wishing everyone a happy new year and welcoming the noble Lord, Lord Allan of Hallam, to his position. It gives me great pleasure to speak in this debate and I welcome the opportunity to discuss these draft regulations.

The Health and Care Act 2022 marks an important step in the Government’s ambitious health and care agenda. Noble Lords will be fully aware of how wide-ranging a piece of legislation it is. I think we can all agree with its overall objectives; making it easier for health and care organisations to provide joined-up care is vital.

With the introduction of integrated care systems came the opportunity to review how the financial frameworks in the NHS worked and tailor them to make them consistent with the new integrated approach. The Health and Care Act replaces the NHS national tariff payment system with the NHS payment scheme by inserting new Sections 114A to 114F into the Health and Social Care Act 2012. As with the tariff, the NHS payment scheme will set rules around how commissioners establish the amount to pay providers for healthcare for the NHS. It does not set the amount of money available but intends to make sure that available resources are used as effectively and efficiently as possible.

Before a new payment scheme can be published, NHS England has a duty under the Health and Social Care Act 2012 to consult on the proposals for the new scheme, as it did with the tariff. NHS England is required to consult each integrated care board, each relevant provider and other such persons it considers appropriate. It opened the consultation on the proposals for the 2023 to 2025 payment scheme on 23 December 2022, which is scheduled to close on Friday 27 January 2023.

This brings me to the purpose of these regulations, which is relevant to how those consulted respond and what this means for NHS England. The purpose of this SI is to set these objection percentage thresholds at 66%, which will be reached if the requisite percentage of either integrated care boards or providers object. I believe this is a proportionate level to ensure that a qualified majority can require NHS England to reconsider its proposals, while minor objections cannot stop them. I also consider laying these regulations to be a relatively administrative process. The objection percentages are not changing compared to previous consultations on the tariff; we are maintaining the status quo with 66%. I commend these regulations to the Committee.

My Lords, I thank the Minister for his comments. I too wish everybody a happy new year. My question is quite simple, and it reflects the discussions we had during the debate on the Act that we passed: is 66%, which is two-thirds, too high a level for the objections? It is a higher order to achieve than, let us say, 60%.

While we await the tariff, I reiterate, so that it is on record, that the important bit is not the level at which the trusts and ICSs can object but how the tariff will vary according to the needs of the population. When we had the debate, we focused on existing inequalities in health and how to minimise and reduce them. One way of doing that is to address the needs of the population who have greater need in healthcare, and therefore the tariff needs to be different. It is a high order to require 66% of ICSs, trusts or providers to object.

I would like the Minister to confirm that the tariffs will reflect the need for the levelling-up agenda to improve healthcare, particularly in more deprived populations, and to comment on why 66%, which is two-thirds, was chosen.

My Lords, I am pleased to be able to take the reins from my noble friend Lady Brinton, starting with this short but important statutory instrument. I echo the happy new year wishes and thank the Minister for his welcome. I understand that a key function that we perform in this House is to ensure that legislation is implemented in the way that Parliament intended as we put flesh on the bones of primary legislation through statutory instruments such as the one we are considering today.

Today’s statutory instrument is a small element of an important part of our modern health service infrastructure: the mechanism for pricing services within the NHS’s internal market. It was a prompt for me to read more pages of tariffs and rules than I ever intended or wished to do, which is mind-boggling and fascinating in equal measure. The subject of our debate today is not the substance of the payment scheme but rather the trigger for when the scheme might be reviewed if there are objections.

As the Minister pointed out, the Government’s intention is to maintain a 66% objection rate for triggering a further consultation period, which is unexceptional as it maintains the previous level. However, like the noble Lord, Lord Patel, I am curious as to why 66% was picked, particularly as I understand that it will not trigger a referral to the Competition and Markets Authority, which would have been a major step, but simply a further consultation period. There may be an argument for why a 51% or 60% threshold would not be appropriate, given that the threshold triggers something less significant than the previous regime.

I am also curious about the experience that we have had over the last decade or so while the other tariff scheme has been in place. Does the Minister have data on the levels of objections received in previous consultations? I suspect that they were much lower than the level we are talking about here but, as we review the scheme, it would be interesting for us to understand whether we were previously getting 10% objection levels, or 50%. I assume that there must be some experience of that within the National Health Service.

I thank the Minister for introducing this statutory instrument. It is a great pleasure to follow the noble Lord, Lord Allan, for the first time in his new role. I am sure there will be many more times, and we all wish him well. Of course, from these Benches, I echo the happy new year greetings. The new year gift to the Minister is that on no side are we opposing these regulations today. I am sure that will make him absolutely delighted as he starts 2023.

The consultation that we are talking about here is important because, as noble Lords have said, the NHS payments scheme governs how billions of pounds of taxpayers’ money is spent. Of course, quality of care and value for money have always to be at the core of our health service and its decision-making, and we need financial management within the health service to be able to deliver both quality of care and value for money in parallel—they are not an either/or. We saw during the pandemic what happens when the NHS strays from these principles, and we do not want to allow such events to happen again.

The former tariff system which these regulations form part of replacing sought to deliver a more competitive environment to drive up quality and to improve outcomes for patients yet, regrettably, it was often something of a rather rigid system that did not allow for the flexibility that individual commissioners actually needed. Therefore, giving local decision-makers the tools that they need to improve services in their areas is absolutely vital to ensuring that the NHS meets the needs of patients where they are, not where the system thinks they should be. The noble Lord, Lord Patel, raised an important point about meeting the needs of patients where there is variability across the country, and it would be helpful if the Minister could offer us some comment on that. With that in mind, a rigorous and effective consultation on changes is absolutely vital, because we know that, when done properly, payment schemes can deliver a meaningful impact on patient outcomes.

I thank noble Lords for their contributions to the debate. A number of issues were raised which, as ever, shows the diligence of noble Lords, particularly as I believe none were raised in the other place—so good for us. Let me try to address them.

Most of the comments were around whether 66% is the right threshold. My understanding is that it was kept at 66% because that is what historically the number has been, so it was decided to continue with that for reasons of continuity. At the same time, I accept the point that the consequences now in terms of it no longer being a Competition and Markets Authority review are not so high. To my mind, the real question is: what circumstances have we seen where it has fallen between 50% and 66%? Clearly, no one would ever say we should have a threshold of less than 50%, but should it be somewhere between those figures?

I think I need to give the disaggregated figures to be able to give a specific answer. I have aggregated the responses where generally there were much larger majorities. Looking at the last three years, for instance, in 2019-20, the figure for those responding positively was 66%, so right on the threshold; it was 78% in 2021 and 77% in 2021-22. So those figures are fairly high. However, if I may, I will come back with the disaggregated figures, because it is only those that give the real data.

The noble Lord is correct that the idea behind having the ICSs involved in these is very much to try to set them around local needs, to make sure that they are understanding that and reflecting some of the inequalities that might exist in their local area.

To address to some extent the point about ministerial or political input, obviously having those thresholds set does not stop Ministers being involved in the decision and seeing that, even if it is a lower threshold, the point raised about particular local circumstances can mean that something needs to be overruled. Funnily enough, it was something we have been talking about in terms of Ministers today. The Secretary of State was saying that with the procurement function, while it is seen by a lot of people as a bit dry and boring, you actually have tremendous buying power and can move the needle very significantly, whether in getting economies of scale in terms of purchasing and purchasing power, incentivising innovation or buying British—which is exactly the point that the noble Baroness, Lady Merron, made. I know that is very much understood by the current ministerial team. I cannot speak historically, but that is very much on our agenda at the moment.

Motion agreed.