Preparing for Brexit: the legal view

The Nuffield Trust has invited leaders from across health and social care in the UK to share what they are doing to prepare for Brexit. In the third in the series, Sharon Lamb gives a legal view.

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Published: 18/12/2017

Please note that views expressed in guest blogs on our website are the authors' own and do not necessarily reflect the views of the Nuffield Trust.

Preparing for BrexitNow that the Government has reached a financial settlement with EU27 and the focus turns to key issues in any trade deal, a question health care lawyers often get asked is whether Brexit means that procurement rules will no longer apply to the award of contracts for NHS services. These are the rules that mean health service commissioners in England must advertise openly for major contracts and treat all potential suppliers equally.

Given the heat around NHS procurement and political voices calling for the nationalisation of public services, the interest is unsurprising. The answer has a major impact on the structure and approach of NHS health economies and, for private providers and investors, their appetite to plough further investment in NHS markets.

Last month, the UK took the first legislative steps for a new procurement and trading landscape with the introduction of the Trade Bill, which contains enabling powers for the UK to become a member, in its own right, of the Government Procurement Agreement (GPA). The GPA is a plurilateral agreement within the framework of the World Trade Organisation, meaning that not all WTO members are members of the GPA. The UK is currently only a member of the GPA through its membership of the EU.

What does the GPA cover?

The GPA covers procurement only – not competition or merger rules. It does not currently cover health services, nor does it cover as wide a range of contracts as EU and UK procurement rules. GPA contract coverage is decided in deals between countries. In principle, the more a country is prepared to open up its own contracts to other countries, the more access it gets into other markets.

In theory, and as part of an expansionist trade policy, the UK will be able to set new rules about which contracts are to be covered. In reality, however, procurement rules are a cornerstone of any trade deal and the UK is unlikely to have free rein.

The deal with the EU, the UK’s biggest trading partner, will be most important and the EU’s chief negotiator has already said this should avoid being on WTO terms alone and secure common ground in fair competition and state aid.

What will the UK want to include in deal talks?

Given how long trade deals take to negotiate, the UK is likely to want to quickly adopt the current rights and obligations it has under the GPA, meaning that NHS services are excluded from these procurement rules. This is likely to be a ‘bare minimum’ position and the UK will probably want to widen the level of covered contracts, especially given the importance of the EU trade relationship and the expansion of international trade.

But will the UK want to include health as part of any trade deal?

Sensitive subject

Historically, countries have been reluctant to open up public health services to international procurement law. We only have to remember the controversy about whether NHS services fell within negotiations between the UK and US on the Transatlantic Trade and Investment Partnership to appreciate the sensitivity of the topic. There was similar anxiety in Canada during the EU/Canada trade negotiations, with the parties agreeing a statement that the treaty did not require governments to privatise any service.

Is this anxiety a red herring? Arguably yes. Despite trade deals usually requiring bidders from other countries to be treated equally, any serious bidder for an NHS health contract would no doubt set themselves up as a funded bidding entity with an office and staff in the UK, and therefore be treated as a UK bidder in the normal course.

The rules and regulations

Where does all this leave us so far as European directives on procuring health care services that have already been incorporated into UK law?

Health care contracts are governed by a dual regime – the UK procurement rules, which derive from the EU, and NHS regulations on patient choice, procurement and competition.

The UK may try to simplify or streamline some of the EU-derived regulations, and UK courts will have greater freedom of interpretation of health care procurement rules. Even so, it is worth remembering that the 2015 procurement rules are still quite new, were intended to streamline and introduce flexibility in public procurement, and were also influenced by the UK Government.

Market and choice: now and in the future

Importantly, these rules did not come out of the blue. They are the natural outcome of successive government policies of a market and choice in health care services. And, if there is to be a market, then principles of fairness and transparency are always likely to play their part.

These market rules are also supplemented by the NHS constitutional right of patients to choose their health care provider (public or private) for some services and, where providers meet commissioner requirements, to be placed on lists from which patients choose care.

The real issue will be whether UK government policy will continue to maintain a market and choice of health care services. The independent sector provides an estimated 10 per cent of NHS services (a figure that excludes primary care provision by GPs) and may also be a source of capital and revenue funds for health developments, which could be important given limits on government borrowing. Reversing or limiting the market in health care services may also send a protectionist message to countries the UK might want to strike expansionist trade deals with.

Predicting political and policy changes is fraught with hazard, but what is clearer is that Brexit itself is unlikely to change the procurement rules that apply to health care.

Sharon is a Partner at McDermott Will & Emery UK LLP and a Senior Associate Fellow at the Nuffield Trust. 

Please note that views expressed in guest blogs on our website are the authors' own and do not necessarily reflect the views of the Nuffield Trust.

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