HOSPITAL ENDOWMENTS (SCOTLAND) BILL (Hansard, 28 January 1971)

§ THE MINISTER OF STATE, SCOTTISH OFFICE (BARONESS TWEEDSMUIR OF BELHELVIE)

My Lords, I beg to move that this Bill be now read a second time. This Bill is concerned, in the main, with hospital endowments which were given on or before November 5, 1946. These are the endowments to which Section 7(2) of the National Health Service (Scotland) Act 1947 applies, and in the Bill they are termed "relevant endowments". The most important single provision of the Bill is that all these endowments will be taken over by a central trust, to be called the Scottish Hospital Trust, instead of being held severally by the various hospital boards. The Bill also provides that the income from these endowments will be distributed by the Trust by a single comprehensive scheme; this will be by Statutory Instrument subject to an Affirmative Resolution of both Houses. The Bill mainly follows the recommendations made by a Working Party under Professor Robert Browning, of Glasgow, which considered the allocation of hospital endowments and reported to the Secretary of State for Scotland in 1969.

Before dealing with the Bill in any, detail I will explain why it deals only with pre-November, 1946, endowments; that is, only with endowments which were given before the setting up of the National Health Service was announced. The principal reason for not bringing later endowments within the scope of the Bill (and, indeed, the reason why they were excluded from review under the 1947 Act) is that these donations were given to specific hospitals in the full knowledge that the hospitals were shortly to become, or had become, the responsibility of the Secretary of State and in the belief that these moneys would be devoted to purposes of that particular hospital. To make such endowments subject to review now would be unjust and would quite posibly discourage people from leaving money to hospitals in the future.

In bringing forward proposals for review and re-allocation of pre-1946 endowments, however, we are continuing a principle which was introduced under the 1947 Act. When the National Health 1067 Service was set up, the endowment position of the different hospitals varied very widely. Some had little or no endowments; these were particularly the former local authority hospitals, including many mental hospitals. Others, and especially the large voluntary hospitals in cities, were very richly endowed in comparison. In an integrated National Health Service, it was thought right to do something to narrow the gap between the poorest and the richest hospitals; and this was done by a series of separate schemes, prepared by the Hospital Endowments Commission and introduced in 1954 and 1955, whereby capital holdings were transferred between boards so as to provide each board of management with a minimum income of £2 per bed per annum. Regional Hospital Boards were given a small block of capital, and enough capital to produce an annual income of about £100,000 was transferred to the Scottish Hospital Endowment Research Trust.

These arrangements proved fairly satisfactory; but 15 years have passed since they were made, and circumstances have changed in that time. There have been changes in the location and numbers of beds on which the last re-allocation of capital was based; it has come to be recognised that more needs to be done for the patients and staff in our long-stay hospitals; and the value of money has so changed that if £2 per bed was a reasonable minimum in 1954, it certainly requires to be increased now. While part of the intention of the Bill is thus to bring tip to date the arrangements for ensuring that every hospital board receives a reasonable minimum income from pre-1946 endowments, the centralisation of these endowments is a new step. While obviously many of the boards have managed their endowments with prudence and skill—and this naturally applies especially to the major boards, such as those responsible for our teaching hospitals—it was the Working Party's view that a central trust, comprising members specially skilled in finance and investment matters and advised in its day-to-day investment management by an expert in the field, would overall be able to achieve a better performance and a maximum income consistent with the best use of capital.

1068 The report of the Working Party which has provided the basis for the main provisions of this Bill was the subject of consultations with hospital boards and other interested bodies. The redistribution of income which we are proposing is bound to mean that some boards will lose in order to help others; naturally some, but not all, of these have expressed objections, while on the question of centralisation of the investments some boards have maintained—and we accept the justice of their claim—that they have done perfectly well in the management of their own endowments. But we have accepted the view of the Working Party that the success of a centralisation policy, which we are sure is the right one, depends on its being applied to all pre-1946 endowments—the arrangements would lose very much of their value if boards were allowed to opt out of them. And while there will be a loss of income for some in order to raise the level of others, we believe that those who have been most fortunate in the past in receiving large sums in legacies and donations are also those who are most likely to benefit in this way in future. As I have said, later donations are not affected by our proposals. As my right honourable friend the Secretary of State and my honourable friend the Under-Secretary of State have said in another place, we would wish to make it very clear that hospitals and hospital boards will still be able to accept donations and legacies. They represent a most useful source of supplementary income which is free from any central control.

Now may I turn to the details of the Bill? Clause 1 of the Bill establishes the Scottish Hospital Trust, and prescribes its duties and obligations in relation to the endowments which will be transferred to it. Clause 2 provides for the pre-November, 1946, endowments to be transferred to the Trust, apart from income which boards have accumulated from such endowments, and the sum which has been transferred to the Scottish Hospital Endowment Research Trust. The Trust will continue to function under its own statutory provisions, and its financial position is not affected by this Bill. There are one or two cases where we consider that special arrangements should be made 1069 either to exclude endowments from transfer or to attach special conditions to the transfer, and the clause also makes this possible. Clause 3 sets out in detail the powers which will be given to the Trust. Apart from the normal powers of trustees, one or two points are of special interest. The Trust will be given certain special powers in connection with narrower range investments and investment in unit trusts and property unit trusts. We think it is right in this case to relax some of the normal limitations on the powers of trusts, since the Scottish Hospital Trust will be required under the next clause to appoint an investment expert as adviser. Under Clause 3, the Trust will also be able to make loans to hospital boards against their own shares in the Trust capital it will be able to accept, as well as the "relevant" endowments, any other endowments which a hospital board may wish to transfer voluntarily to the Trust for investment and management on their behalf. It can give advice to hospital boards on the management of such endowments; and there is specific provision empowering the Trust to accept any new endowments which may be offered directly to it in the future.

Clause 4 requires the Trust to appoint an investment expert as adviser on the management of its funds. This is the provision which justifies the special investment powers to which I referred under the previous clause. The adviser may be an expert or a firm, and may be employed by the Trust as a member of its staff or appointed on agreed terms. Clause 5 and Clause 6 are mainly formal in character. They provide for voluntary transfer of post-1946 endowments to the Trust; for the capital value of relevant endowments to be calculated by methods prescribed in regulations; and for the arrangements relating to borrowings by boards.

Clause 7 deals with the distribution of the income of the relevant endowments. This will be carried out under schemes to be made by the Secretary of State from time to time. So far as the distribution of income is concerned, the Trust will act solely as an agent of the Secretary of State. A new scheme will be made at any time when it is found desirable to alter the arrangements. For example, 1070 the intention is that as a start the minimum level of income will be £3 per bed (as recommended by the Working Party), the balance being distributed to boards in proportion to the capital which they have transferred to the Trust under Clause 2. Later, some other figure may be thought to be appropriate. The schemes made under this clause will also prescribe the purposes for which income is to be used: both in general terms and, in some cases for specific purposes, such as the award of prizes and the upkeep of memorials, where such purposes are contained in existing schemes and the boards concerned want them to be retained.

Your Lordships may be interested to note that, for the first time, the State Hospital at Carstairs will benefit. This hospital, which caters for mentally disordered patients requiring treatment in conditions of special security, has not been included in previous distributions because it is not established under the National Health Service; but we feel that its need for some endowment income is as great as that of other psychiatric hospitals. It performs similar functions, and there is interchange of patients and staff between Carstairs and the other hospitals. Your Lordships will also have noted the ample opportunity which will be given for the expression of opinion on these schemes before they are made. All hospital authorities will be given an opportunity of making representations on them—this will be done by circulating a draft of the scheme. Thereafter, the scheme will be laid in draft and be subject to the Affirmative Resolution procedure. We acknowledge that hospital authorities should have every chance to make their views known when we come to the arrangements for distribution of income, which naturally will always be a subject of prime importance.

Clauses 8 and 9 deal with the administrative expenses of the Trust, its other administrative arrangements, and its obligation in regard to the audit of its accounts. Clause 10 is a consequence of one of the provisions of Clause 3. As I mentioned earlier, the new Trust will be given certain extended investment powers, and we think that the same powers should be given to the Research Trust, which is similarly served by investment experts. Clause 11 provides that regulations, other than those of a Procedural nature made 1071 under Clause 8, shall be by Statutory Instrument subject to the Affirmative Resolution procedure—the same as is being provided in regard to the income distribution schemes to be made under Clause 7. Clauses 12 to 14 and the Schedule do not, I think, call for any comment, being of a formal nature.

This Bill, or one very like it, was first introduced by the previous Government, but the Dissolution of Parliament prevented any progress being made then. In the debates in the other place it has been generally welcomed by both sides and a number of improvements have been made to it. I think that it represents a sensible revision of the arrangements for handling the pre-Health Service hospital endowments, and I hope that your Lordships will agree that the Bill should now be read a second time.