EU law and the Health and Social Care Bill

And now for something completely different.

The Health and Social Care Bill is approaching report stage in the House of Commons, and the campaign group 38 Degrees has obtained legal advice about it from Stephen Cragg and Rebecca Haynes.

Legal advice on the Health and Social Care Bill

The advice covers a number of things, but I’m most interested in what it says about EU law. The summary provided by 38 Degrees on its website says, based on the advice, that

Taken together, these changes increase the likelihood of NHS services being found by the courts to fall within the scope of UK and EU competition law

and

The new commissioning groups will be subject to EU procurement rules whenthey commission local health services. This is likely to be costly, given the likely larger numbers of commissioning groups as compared to PCTs now and our Counsel warns that it appears the government have not planned for this significant increase in cost.

The first statement seems to me fair enough. Cragg and Haynes do advise (para. 72 of the advice) that the bill would

 make it even more likely that domestic and, in principle, European competition law applies to the NHS

although to put that in context, they advise (para. 69) that it’s

 very far from certain and it is not safe to assume that the FENIN decision determines that competition law is not applicable to the NHS, either as it currently stands or as it will emerge from the Bill

and (para. 70) that

It cannot .. be assumed that competition law does not currently apply to the NHS system, even in the absence of reforms.

That view is based on considering two key cases: the ruling of the Competition Appeal Tribunal in 2002 on Bettercare v Director General of Fair Trading, which ruled (para. 290) that the activities of a health and social services trust in Northern Ireland

in running its statutory residential homes and engaging in the contracting out of social care to independent providers are for the purposes of the Competition Act 1998 to be regarded as economic activities for the purpose of deciding whether North & West is an undertaking within the meaning of section 18(1) of the Act.

and the ECJ’s judgment and the Opinion of the Advocate General in case C-205/03 FENIN v Commission. In that case, the Advocate General suggested that whether or not health providers were undertakings within EU competition law depended on whether the state intended to exclude the market from health care or whether the private sector also plays a part. That argument was not considered by the ECJ, which considered it inadmissible on technical grounds; the Court ruled on other grounds that the health provider was not an undertaking.

In short, it’s not clear whether NHS trusts including PCTs, or the new commissioning consortia, are undertakings within EU competition law. Undoubtedly the government will try to hold the line that they’re not, and neither Bettercare (which was about social care, which might make a difference) nor FENIN establishes beyond doubt that they are. But as Cragg and Haynes say, there is already a good argument that competition law applies. Given the Advocate General’s opinion in FENIN, it is reasonable to argue that further opening the NHS to market forces increases the chances of that argument succeeding in future.

What I’m less happy about is the way 38 Degrees presents the advice it’s been given on the application of public procurement rules. Its summary,

The new commissioning groups will be subject to EU procurement rules whenthey commission local health services. This is likely to be costly …

does not say, but might nonetheless give the impression, that EU public procurement rules don’t already apply to the NHS. But the legal advice makes clear that they do. The very first line of the “executive summary” of the advice says

The current procurement law contained in the Public Contracts Regulations 2006,which derives from European law, has always applied to NHS purchasing with the effect that any goods or services required by NHS health providers to enable them to provide health care themselves are subject to those Regulations where the value of the goods or services required exceed the prescribed thresholds.

At paragraph 32 the advice says

The application of procurement law is not by any means new to the NHS

and at paragraph 45 it goes on

Just as procurement law currently applies to NHS bodies engaged in purchasing,there is no question but that it will apply to the purchasing functions of Foundation Trusts, the Commissioning Board and consortia under the new Act.

The procurement point arising out of the advice is not a legal one at all in fact, but is simply about the capacity of the new consortia, which are expected to be smaller than PCTs, to cope with procurement rules. The lawyers’ and 38 Degrees’ concerns about that may well be justified.

In response the government might argue, first that the procurement of health services, as “Part B” services in terms of EU procurement rules, do not in any event attract the full, detailed rules requiring a full tender process; second, that their smaller size makes it less likely the consortia’s contacts would pass the threshold (about £150,000) at which the procurement rules bite; and third, that current EU Commission proposals for reform of the procurement framework would help commisisoning consortia. Para 2.2 of that Commission consultation paper raises the possibility of a lighter procurement framework for local contracting authorities. If that comes to pass, I suppose it’s arguable that creating smaller commissioning consortia could even help NHS purchasing escape the full rigour of procurement law.