Response to Stephen Phillips MP

I want to thank those constituents who subscribe to the 38 Degrees website who have written to me about the Governments proposals in relation to the National Health Service and the proposed primary legislation which has been introduced in Parliament in this regard. I have corresponded with most of you before on this subject. According to the 38 Degrees website, independent legal advice has been obtained in relation to the Bill which is currently before Parliament. I have read that advice in its totality, though not the instructions which were given to the junior Counsel who prepared it, nor the manner in which this was supplemented (if at all) orally, neither of which have been made public by 38 Degrees. I have to say that this calls into question the validity of the advice tendered, since an answer without the question and views of those asking it is essentially valueless. In fact however, the advice appears largely inconsistent with what 38 Degrees have to say about it. In this respect, the 38 Degrees team have published on the website that purports to be their summary of what the legal advice says. I am extremely concerned on your behalf that this is not a wholly inadequate prcis of that advice, but is misleading in a number of respects.

All our summary documents, along with emails about the campaign, press releases and blog posts (including this one) have been checked for accuracy and signed off by our legal advisers. Obviously a short summary cant include everything raised in over 50 pages of advice that is why we also made the full opinions and executive summaries of those opinions, prepared by the lawyers, publicly available so people can look at the details for themselves.
The discrete concerns which this summary to which your emails have referred me drawn attention are, firstly, the removal of the Secretary of States duty to provide, and secondly, opening the NHS up to competition law. Below, I address these in reverse order, since, as most of you are aware, it is the latter which has given me cause for concern myself. Competition The summary provided by 38 Degrees states that, [t]he Bill contains a number of measures which will increase competition and integration and/or make it almost inevitable that UK and EU competition law will apply as if it [the NHS] were a utility like gas or telecoms. The first bullet point of the Executive Summary of junior Councels [sic] Advice in fact states, in my view correctly, [t]he current procurement law contained in the Public Contracts Regulations 2006has always applied to NHS purchasing with the effect that any goods or services required by NHS health providers to enable them to promote health care themselves are subject to those Regulations where the value of the good or services required exceeds the prescribed thresholds. The final sentence of the second bullet point makes the same point in relation to the nonlegislative non-commissioning reforms introduced by the last Government, about which I imagine few of those who have written to me protested at the time.

Mr Phillips is quoting from sections of the legal opinion relating to procurement law. Our quote refers to competition law. It is clear that procurement law applies at the moment to PCTs. The important point in relation to procurement law is that it will also apply to increased numbers of inexperienced commissioning consortia. As the legal opinion points out in the executive summary:

The procurement regime is a complicated and developing body of rules and case law which gives rise to enforceable rights in the High Court and makes available draconian remedies and penalties for breach of the Regulations. The practical and financial implications of ensuring that goods and services are procured compliantly are considerable. There is a real risk that there will be a deficit of incumbent expertise in new consortia to cope with the regulatory burden. It appears however that the government has simply failed to grapple with the frontline issues in procurement, has wholly underestimated the increasing rather than diminishing complexity int eh area and has had no or perhaps little regard to the administrative and financial burdens arising from the regime. It is interesting that Mr Phillips does not deal with this argument.
As junior Councel [sic] concludes in the sixth bullet point, [a]s regards the applicability of domestic and European competition law to the NHS, it is likely that, even as matters stand, and in view in particular of recent non-statutory reforms which increase the involvement of the private and third sector in health service provision [i.e. the reforms introduced by the last Government], competition law already applies to PCTs and NHS providers. Whilst it is correct that the next bullet point records that the Bill will serve to reinforce that conclusion, there is another way entirely of properly summarising this advice which has evidently eluded the 38 Degrees team, namely that there is no change between the present competition regime and that which will be brought into being if and when the Bill becomes law. Competition law applies within the NHS now; it will apply in the future. For the 38 Degrees campaign team to suggest that it make it almost inevitable that there will be an application of competition law which is not already present thus both misrepresents the content and conclusions of junior Counsels advice and misstates the position. [1]

It is good to see that Mr Phillips agrees with our legal advice. It is interesting that others, namely the Department of Health and the Liberal Democrats, take a rather different view from that of Mr Phillips. The Department of Health, for example, has argued that PCTs would not now be considered as undertakings for the purpose of competition law, thereby essentially arguing that competition law does not currently apply. The Liberal Democrats, on the other hand, seem to think that competition law can be limited in some way, when in fact it is clear that the UK government has no power to limit competition law. The Lib Dems also seem to think Foundation Trusts can be protected from being considered an undertaking in some way. It is therefore wrong to suggest, as does Mr Phillips, that the situation is clear cut. The truth is set out in our legal opinion and is that the current position is uncertain. Due to recent reforms it is likely that competition law applies. However, the Bill makes it even more likely. Therefore, the legal advice stated, The reforms introduced by the Bill however will serve to reinforce that conclusion and introduce elements which make it even more likely that domestic and European competition law applies to the NHS. There is nothing in the Bill which has or can have the effect of preventing the application of competition law. Nor can the Act preserve the enforcement of competition law to the sectoral regulator, Monitor, since a breach of the prohibitions on anti-competitive conduct gives rise to actionable claims in the High Court by any person affected.

The important point is that the impact of competition law applying has not yet been properly debated. In addition, whether something should be done to prevent competition law applying has also not been properly debated or thought through.
As paragraph 45 the advice [2] although I am not entirely sure that any lawyer has sufficient expertise to offer an opinion in this area the principal concern is instead a practical one owing the administrative burden on consortia to comply with a competition regime which already applies. That is an existing administrative burden, but it follows that the conclusion itself is a million miles from what you may have been led to believe the advice says by the 38 Degrees website.

Once again, it seems that Mr Phillips has mixed up competition law and procurement law. Paragraph 45 of the legal opinion is clearly discussing procurement law. As mentioned above, it is the applicability of procurement law to increased numbers of inexperienced commissioning consortia where the administrative and financial burden arises. Furthermore, as the legal opinion points out, it is experienced commercial providers with deep pockets that stand to gain. Given that there might be no or insufficient expertise in procurement in consortia, there is a very real risk that the functioning of consortia is compromised, at least initially, by the sheer regulatory burden involved, under threat of potentially draconian remedies available to unsuccessful bidders through litigation. Commercial providers on the other hand will already be familiar with and are likely to have had considerably more experience of the procurement regime. (para.45) Once again, Mr Phillips fails to deal with either of these points.
The Secretary of State The second advice prepared by junior Counsel deals, in essence, with the existing general duties of the Secretary of State. The 38 Degrees summary in this regard suggests that there is some fundamental change between what is proposed and the current regime.

Yes we do! There is a fundamental change. Our legal advice supports this: It is clear that the drafters of the Health and Social Care Bill intend that the functions of the Secretary of State in relation to the NHS in England are to be greatly curtailed. The most striking example of this is the loss of the duty to provide services pursuant to section 3 of the NHS Act 2006, which is currently placed on the Secretary of State. This will be transferred to the commissioning consortia, and reformulated accordingly. In real terms this means that, effectively, the government will be less accountable in legal terms for the services that the NHS provides. (Bullet 1, executive summary)
In fact however, as paragraph 2 of this opinion makes clear in its first sentence, Currently, the duty in section 3(1) has been delegated to the Primary Care Trusts. This duty (in section3(1) of the 2006 Act) is a duty as to the provision of certain services. It is more specific than the general or target duty in section 1(1) to promote a comprehensive health service, but is still a general duty as paragraph 9 of the opinion points out. It is, as that paragraph also makes clear, the main duty in relation to the provision of health services and, as already noted (and as per paragraph 3 of the Executive Summary of the opinion), is currently delegated to the PCTs which the Government proposes abolishing. [3] That duty will then fall to the commissioning consortia which will be established. Other than changing commissioning responsibilities from PCTs to consortia, it

follows, again, that there is no significant change between the current position and what is proposed.

Once again, the change looks subtle but it is actually very significant. If Mr Phillips had completed the quote from the legal opinion this would have been clear: Currently, the duty in section 3(1) has been delegated to Primary Care Trusts (PCTs). However, this is pursuant to statutory powers of delegation (for example under section 7 of the NHS Act 2006), and these powers can be exercised in a different way, or not exercised at all, if the Secretary of State so chooses. (Bullet 2, executive summary) The legal opinion then continues to note the impact of these changes: Effectively, the duty to provide a national health service would be lost if the Bill becomes law. It would be replaced by a duty on an unknown number of commissioning consortia with only a duty to make or arrange provision for that section of the population for which it is responsible. Although some people will see this as a good thing, it is effectively fragmenting a service that currently has the advantage of national oversight and control, and which is politically accountable via the ballot box to the electorate. (Bullet 3, executive summary)
Paragraph 14 is important in this regard. It (correctly) records the existing position in the following terms, viz., The duties set out in Sections 1 and 3 of the 2006 ct [sic] are executed on behalf of the Secretary of State by Primary Care Trusts[t]hus, in practice, it is the PCTs which decide which services are priorities in each local area, on behalf of the Secretary of State.

Paragraph 14 does indeed record the existing position. It makes clear that these duties are fulfilled on behalf of the Secretary of State and, as explained in the following paragraph: The Secretary of State retains direction making powers in s8 of the NHS Act 2006. These directions can be about any aspect of the delivery of services or the functions which have been delegated to these bodies by the Secretary of State. Therefore, whilst the functions in s.3(1) are currently delegated to PCTs, this is something for which there is a power and not a duty, and so the Secretary of State retains overall control of the health service, which is reinforced by the additional power to give directions to PCTs and other bodies. (paragraph 17). Furthermore, Mr Phillips fails to mention the new hands off clause that the legal advice highlights and explains: This kind of wording is often used in statutes to mean that a public body only has the power to act when steps to be taken are really needed or essential, rather than because the public body thinks something is desirable or appropriate. A court looking at this kind of wording would expect the public body (the Secretary of State in this case) to demonstrate why no other course of action could be followed, which is a high test to meet. (paragraph 32) It is wrong for Mr Phillips to attempt to brush aside concerns whilst failing to dealing with the crux of the matter.
Paragraph 16 is also important. It points out, again correctly, that the duty contained in section 1(1) of the 2006 Act, about which the 38 Degrees summary makes such a song and dance is, (i)

a general or target duty, and (ii) that it is therefore essentially meaningless other than as a general guide as to how other powers and duties contained in existing law (and which will remain) should be interpreted. Indeed, as the final sentence of paragraph 16 of the Opinion points out, Such cases [i.e. cases in which the duty contained in section 1(1) has been successful invoked] are, however, rare and the majority of the case law in this area consists of cases where judicial review claims have been unsuccessful. Another way of putting that, is hat [sic] far from the section 1(1) duty being critical, as it is referred to in the 38 Degrees prcis of what this legal advice say, it is in fact the precise opposite other than as an overarching principle (which will remain). In this regard, the reader of what 38 Degrees has to say in its summary might be forgiven for thinking that if the proposed reforms become law, the Secretary of State will no longer be subject to the general or target duty to promote a comprehensive health service. If so, paragraph 21 of the Opinion is revealing in that it has to say about the Governments Bill, viz. there is no change at all in section 1(1). Whilst the Bill will, of course, effect other changes in this area see, for example, paragraph 22 of the Opinion of junior Counsel there is, as that paragraph records, no secret about these. The Government believes, as do I, that to secure a comprehensive National Health Service for the 21st Century, something which we all regard as being essential in our society, it is appropriate not to manage from the top down and to ensure that the principle of subsidiary is followed to its logical conclusion so that real power is returned to local people and professionals to control the services which are available to them.

Our concerns relate to the removal of the Secretary of States duty to provide, contained in s.3(1) and s.1(2) of the 2006 Act. Mr Phillips here discusses the duty to promote. These duties are not the same and should not be confused. We have outlined above the concerns that exist around s.3(1) and the introduction of the hands off clause. The concern in relation to s.1(2) and the duty to provide therein, is that with the removal of this duty, there is no person or body with the duty necessary to promote a comprehensive health service. As the executive summary of the legal opinion makes clear: There will be severance between the two duties, if the Bill becomes law, as the bodies that will have the duty to arrange services pursuant to section 3(1) (the commissioning consortia) do not have a duty to promote a comprehensive health service. Instead of simply stating the obvious, that there is no change to s.1(1), it would be helpful if Mr Phillips could explain to us and our members how he proposes to address the issues raised by the legal advice.
38 Degrees In my view, the truth of the matter about these two opinions which have been obtained from junior Counsel is that they do not support or record the views which those behind the 38 Degrees website evidently wish they did. In consequence, the conclusion to which I have been coming with regard to the 38 Degrees website over the last few months, namely, that it is effectively a creature of the left and its opposition to the reforms which the last Government started is, I am afraid, one that is considerably strengthened. In those circumstances, I regret to have to make clear that I will not in future be responding to campaigns run by what purports to be, but what to me is evidently not, a non-political campaigning organisation which I firmly believe is misleading you all, whichever political party you support.

The concerns of 38 Degrees remain and include: The loss of the duty to provide on the Secretary of State; The removal of accountability from the Secretary of State and the impact of the hands off clause; Severance between the duty to provide and the duty to promote a comprehensive health service in England; The potential impact of competition law on the NHS, given that it is even more likely to apply under the Bill; and Increased administrative and financial burden on commissioning consortia due to the application of procurement law and the impact of this given the expertise and deep pockets of private companies. 38 Degrees will not be distracted by criticism of them or by implied criticism of their advisers. Our concerns, as demonstrated by this response, remain the vitally important issues raised by the Bill.
[1] See, for example, paragraph 16 of junior Counsels advice, viz., Although the Bill marks a significant restructuring of the NHS, recent reforms implemented through policy and operational guidance have done much to alter its landscape, even in the absence of legislative changeThere is therefore already considerable involvement of the private sector in the provision of NHS health care services, and paragraph 32, viz., The application of procurement law is not by any means new to the NHS since all NHS Trusts are expressly referred to in Schedule 1 to the Regulations [and] are currently within the scope thereof. They routinely engage with the procurement regime. [2] Notably, this paragraph commences, Just as procurement law currently applies to NHS bodies engaged in purchasing. See also paragraph 82, The NHS has already developed a structure whereby it is more likely than not that NHS Trusts are undertakings for the purposes of competition law. I agree. [3] As, in the view of junior Counsel again in my view correctly is the position in relation to the general duty contained in section 1(1) of the 2006 Act: see paragraph 14 of the Opinion.