Health and Social Care (Community Health and Standards) Bill

HL Deb 16 October 2003 vol 653 cc1053-92

The Parliamentary Under-Secretary of State, Department of Health (Lord Warner)

My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.

Moved, That the House do now again resolve itself into Committee.—(Lord Warner.)

On Question, Motion agreed to. House in Committee accordingly.

[The CHAIRMAN OF COMMITTEES in the Chair.]

Clause 18 [General powers]:

Earl Howe moved Amendment No. 182: Page 8, line 26, at end insert— "( ) An NHS foundation trust shall have the power to pay remuneration and allowances to any person without reference to future national agreements on pay negotiated by the NHS.

The noble Earl said: In moving Amendment No. 15, I am conscious that I am bringing us on to some controversial territory. The question it asks is simple: to what extent should foundation trusts be free to set their own pay and conditions for the staff they employ?

I am, by instinct and conviction, against the idea of trying to impose artificial prescriptions from the centre on an organisation of the size and diversity of the NHS. As far as I can judge from their pronouncements, government Ministers have embraced that view, too, in broad terms, although perhaps not universally. Therefore, direction from the centre, especially when the Bill before us purports to set the NHS free, should be looked upon critically and the assumptions underpinning it should be tested rigorously before it is retained as a feature of the new NHS.

Yet the idea that foundation trusts should not be bound by national pay agreements is one that was described by the Minister in another place as "preposterous", "absurd", "ridiculous", and to be treated with "complete derision". Colourful phrases such as those make me think straightaway that we are dealing here with more of a shibboleth than anything else because those words do not constitute a decent argument.

We already live in a competitive market for healthcare staff. The private sector, including agencies, compete with the NHS not just on the basis of pay rates, but also in terms of working conditions. Those who seek to cap the ability of foundation trusts to set their own pay rates point to the danger of predatory behaviour by those trusts which would disadvantage the rest of the health economy in the locality. I do not buy those arguments and I will explain why.

We all know that local labour markets in the South of England are different from those in the North. Recruitment and retention of healthcare staff in the South is hampered by the profusion of alternative jobs in other sectors, many less skilled and many better paid. Housing costs in the South are much higher than they are in the North. These disparities have been recognised by the Government in Agenda for Change. They were recognised by the Chancellor in the last Budget debate. There is no argument that local labour markets demand different responses and different rates of pay if we are to deal with the realities of life.

Agenda for Change contains much that is welcome relating to pay flexibilities. Potentially, there is flexibility amounting to 30 per cent in pay rates, which doubtless managers in foundation trusts would be free to use if they judged it to be necessary. Nevertheless, 30 per cent is an artificial cap and a cap which is not necessarily appropriate to the realities of the market, any more than previous formulas were. Under Agenda for Change, it is still necessary for the Government or the regulator to say to a hospital manager that he may not, for any reason at all, stray outside the prescribed formula, no matter how good a case he can present. That is unjustifiable.

I maintain that, in practice, there will be little to incentivise managers to stray outside the bounds of nationally negotiated pay agreements. Predatory behaviour by foundation trusts against other NHS bodies will be curbed by two principal restraints: the national tariff and the duty to co-operate under Clause 29 of the Bill. The national tariff will, in practice, limit what trusts are able to pay their staff. There can be no question of an unbridled bonanza of pay rises in foundation trusts.

However, in the event that the local health economy looks like being destabilised by pay differentials, the regulator has power to act. But I do not believe that that will happen. The private sector is already free to attract staff away from the NHS, and it frequently succeeds. But it does so not by offering higher hourly pay rates but rather by holding out the promise of a better working environment, more user-friendly hours and better staffing ratios. Anyone who is afraid of predatory behaviour by foundation trusts needs look only at that precedent, which tells us that pay freedoms are not simply about the hourly rate of pay.

I do not expect to receive many warm words from the Minister in response to the amendment. However, I hope that I will receive an answer that is not dismissive. If he disagrees with the extension of freedoms to foundation trusts, with respect, he needs to tell the Committee why. I beg to move.

Lord Clement-Jones

I suspect this is one of those areas of the Bill where noble Lords on these Benches part company with the noble Earl, Lord Howe, in his search for even greater flexibility than the Minister has proposed. That has been the watchword of most of his responses in the course of the Bill.

The Minister dealt with the issue on the third day of Committee, when he said: As the noble Lord acknowledged, first, NHS foundation trusts will implement the new Agenda for Change pay system. The Secretary of State will not support applications from NHS trusts without a clear commitment to implement Agenda for Change. Under the new pay system, NHS foundation trusts will be specifically represented in forums for national collective bargaining on staff terms and conditions of service".—[Official Report, 13/10/03; col. 628.] I welcome that statement.

However, we are concerned not only about the past and the present but also about the future. One of the key concerns of many of those who have reservations about foundation trusts is their potential impact, and their ability to offer better terms and conditions, on the local health economy in their areas.

That is one key issue that has not yet been fully addressed in terms of the future. I believe that the amendment of the noble Earl, Lord Howe, nicely teases that out and I hope that, in a sense, mine does, too, in terms of what the Minister and his colleagues propose for the future. As I read it, the Bill is silent on that subject. It is a question of whether or not foundation hospitals take part in future bargaining and negotiations. I believe that, as yet, that question remains unresolved.

From the way that the Minister responded on the subject of the regulator and his powers—he said that it was not the job of the regulator to consider that side of things—it is not clear whether the regulator will have the power to insist that foundation hospitals join, in a coherent manner, the national pay bargaining negotiations or whether he will be comfortable if each foundation hospital conducts its own negotiations, paying well outside the flexibility of Agenda for Change in future. What will make Agenda for Change last for the future? The answer to that is not clear at all. I believe that a number of unresolved questions of great importance derive from both amendments.

Baroness Finlay of Llandaff

I declared my views by adding my name to Amendment No. 185. In these two amendments, which appear to go in opposite directions, we are being asked to look into the future and speculate as to what might happen. We have already expressed concern about destabilisation of local health economies and about staff moving from one trust to another.

A duty of co-operation is set out on the face of the Bill, but I do not know how far one will have to be non-co-operative—that is, how many staff will have to move from one trust to another—to demonstrate that one really is poaching staff and destabilising the local health economy in staffing areas. We are already well aware of staffing problems in some parts of the UK. It would be incredibly easy for a foundation trust, freed of any rigours in relation to pay negotiations, to drive up the price per hour or people's salaries and drain local trusts of staff.

Agenda for Change is being introduced and it has been welcomed by the professions. I believe that even that will be difficult to regulate, if I may use that word, although it will not come directly under the terms of the regulator. Job descriptions can be subtly rewritten and a little more responsibility added so that, within a foundation trust, staff may do almost the same job but have a few more responsibilities and thereby move to a higher pay bracket.

Terms and conditions certainly need to be improved, but I have to disagree with the noble Earl, Lord Howe. When staff move, they do so for pay increases on an hourly rate. It is true that they also move for better conditions. I am aware of trusts which have very good staff relationships but, sadly, they will lose staff to another organisation where the hourly rate of pay is higher. There is a huge need for staff to have creche facilities and similar support organisations within the trusts in which they work. I do not see anything in the Bill to stop trusts doing that. However, I shall be gravely concerned if they are allowed to determine their own rates per hour. Therefore, I firmly support Amendment No. 185.

11.15 a.m.

Baroness Carnegy of Lour

The noble Baroness has expressed very clearly the view that I imagine would pertain in very large parts of the health service. That is entirely natural because it is the culture in which National Health Service employees have lived over many years.

At the same time, if one stands back a little from the health service, one sees that one problem involved in running 1 million people from the centre is that of national wage negotiations. That poses a big problem for the health service because of the different costs in different parts of the country and the fact that people are far better off in one part compared with another and that therefore, as my noble friend Lord Howe said, money is being paid unnecessarily to some or too little is being paid to others. That causes a great economic difficulty for the health service.

As can be seen from the record of industries that have moved into the private sector, an extraordinary difference occurs when national pay bargaining comes to an end. However, that subject is for another day because we are discussing only foundation hospitals.

Frankly, foundation hospitals are not going to be free at all. They will suffer from a combination of the barnacles that will be attached to what could be a very good ship by the governance arrangements, which we have already discussed, and the difficulties caused by bringing in politics and imposing national pay bargaining. Because foundation hospitals are not being allowed to negotiate their own arrangements, it will not be possible to use the money that they generate through greater efficiency to improve the pay and conditions of staff, which is what they should be able to do. It will not be possible for them to influence nearby hospitals with regard to improving their standards. As I believe the noble Baroness said, the only way that it will be possible to improve the pay and conditions of staff will be to alter their jobs so that they are promoted and do something extra. That is the present situation, and that hampers everything.

It is extremely unwise of the Government to prevent foundation hospitals being free. The whole idea will falter on that. Originally, I thought that my party's opposition to foundation hospitals was wrong, but the more I look at the Bill the more I realise that it cannot work. This is one of the main obstacles. I feel very strongly about this. The Liberal Democrats and the Government are 100 per cent wrong. I support the amendment.

Lord Warner

It is clear from this debate, and will become even clearer after I have spoken, that the Government are positioned very neatly between the noble Lord, Lord Clement-Jones, and the noble Earl, Lord Howe. I have to say that I feel pretty comfortable in that particular position.

However, I reassure the noble Earl that I would not dismiss with derision the points he makes. Certainly, we agree that NHS foundation trusts should have a degree of flexibility when it comes to staff pay and conditions; indeed, just as NHS trusts do now. Noble Lords probably will be impressed by the kind of practical issues raised by the noble Baroness, Lady Finlay. Those are important considerations.

With the state of my voice, I shall not engage in the kind of ringing phrases used by my noble friend in another place. I should like to set out what I think is pretty convincing architecture which the Government have put in place through the Bill and its policy approach. It is worth reminding the Committee that Ministers are not now involved in pay negotiations. They cannot unilaterally amend the results of those negotiations between employers and employees or introduce new ones. It is our belief that employment contracts are a matter for staff, unions and employers, not for third parties. We start from that position.

However, it is essential—we have said this on a number of occasions; no doubt I shall be accused by one or two noble Lords of having a mantra on this— that foundation trusts act in ways that are consistent with equal pay principles and do not prejudice the interests of the wider NHS, including NHS employers. As I said on an earlier amendment, a "beggar your neighbour" policy among NHS bodies serves no one's interest. The danger with the amendment tabled by the noble Earl is that it could encourage people along that particular path.

The balance between freedom for staff, unions and employers to negotiate what is right for them, flexibility for NHS foundation trusts and looking after the interests of the wider NHS is precisely what we are achieving in the current arrangements that will apply to NHS foundation trusts. We have struck that balance. The issue of balance arises in different guises in the Bill.

As I said earlier, NHS foundation trusts will implement the new Agenda for Change pay system. Again, to repeat what was said earlier, the Secretary of State simply will not support applications from NHS trusts without a commitment to implement Agenda for Change. Under the new pay system, foundation trusts will be specifically represented in forums for national collective bargaining on staff terms and conditions. That will be a contractual right for all Agenda for Change staff so that they will be part of that negotiating process. They are not excluded from that negotiating process. They are not, in effect, outside it—that is to say, being told the results and having to lump it. They are part of the process of settling the terms under Agenda for Change. Because there are alternative means for enabling foundation trusts to sign up to Agenda for Change, there is no need, as the noble Lord, Lord Clement-Jones, suggested, to make legislative provision for this in the Bill. Perhaps I may say to the noble Lord, as an aside, that it is quite inappropriate to include a reference to Agenda for Change in legislation as it is a term based on the outcome of a nationally negotiated agreement between the employers and unions and not a statutory body or scheme in the sense that is usually used in a Bill.

Turning to the detail of Amendment No. 182, I do not know whether I shall reassure the noble Earl, but I shall try. We believe that it is not right to suggest that a foundation trust should or would want to have a right in statute to ignore future pay agreements when the vast majority of the staff will be employed on terms negotiated under such contracts as would be the case if we were to take the amendment at its face value. The noble Baroness, Lady Finlay, made an important point about the fact that NHS employers have many staff who do not stay in one place for their whole careers. They move around and there are some issues concerning their ability to have some sort of framework as points of reference, which Agenda for Change produces.

As I said, these national negotiations are a matter for employers and unions and not the Secretary of State. I emphasise again that it is also not for the independent regulator to interfere. Negotiations are not matters in which either the Secretary of State or the regulator should be involved. In concluding on why we do not think the amendment is appropriate, I should point out that we have had a number of discussions about partnership working. That is why NHS foundation trusts will be subject to the same statutory duty of partnership that applies to all NHS bodies—a duty to co-operate in the exercise of their functions.

In our view an amendment such as Amendment No. 182 would cut across that partnership approach and having to have regard to a wider NHS interest. For those reasons and some of the other reasons I have suggested, we believe that it is inappropriate.

Lord Clement-Jones

Although the Minister has just displayed admirable consistency with his previous response on Monday, I want to put on record that noble Lords on these Benches do not believe that it is wholly satisfactory. I well understand his unwillingness to include in the Bill references to Agenda for Change. That is simply a device to debate this issue once more. However, what is particularly troubling is the fact that the regulator will have no place in this process at all. I can well understand wishing to keep this as a matter between unions and employers, but to have no regulatory mechanism at all in these circumstances bodes very badly for foundation trusts. That is the root of many objections to foundation trusts, particularly on the staff side. No doubt we shall return to this issue.

Earl Howe

Once the Secretary of State has given approval for a foundation trust to be authorised on the condition that that trust signs up to Agenda for Change—quite obviously, in the light of what the Minister said—what would happen if the regulator did not see eye to eye with that point of view, was ambivalent about Agenda for Change and the foundation trust then decided that it did not want to have anything to do with it? Would the regulator be obliged to make Agenda for Change a condition of the licence in the light of the Secretary of State's point of view, or is the regulator free to say that he has no views on the matter?

Lord Warner

It is not for me to second guess the regulator who no doubt would want to take account of the Secretary of State's position in approving a particular applicant for foundation trust status. It would be a matter of public record that that was the Secretary of State's position and that that was the condition on which he had approved a particular application to go forward to the regulator in that sense.

The regulator would have to make his own judgments either before he had considered giving authorisation or after if, indeed, the behaviour had changed from that which was expected at the time he had given it. Both circumstances could apply. The regulator would need to consider whether in subsequent behaviour by a foundation trust there had been a significant breach of the conditions under which he had given the authorisation. The noble Earl and I could debate the issue all day, but none of us is clever enough to think of the myriad of circumstances under which that might happen.

The regulator would then make a judgment about whether he wanted more information from a foundation trust, or whether ultimately he thought that the trust's collective behaviour had been so significantly different from that suggested in its application for foundation trust status that he had to take some appropriate action. I repeat that the duty of partnership is there and would be an important issue if there was a gross change of behaviour by a foundation trust after an authorisation had been given.

I have done my best to try to clarify matters for the noble Earl.

11.30 a.m.

Earl Howe

I am most grateful to the Minister. I agree with him about the duty of partnership. That is in the Bill for a purpose and I share the noble Lord's interpretation of that purpose.

The fact remains that if the regulator is of a free market disposition and is indeed an independent entity then it does not really matter what the Secretary of State believes in these situations. If a foundation trust were to break away from Agenda for Change, and provided it did not destabilise the local health economy, I should not have thought that the regulator could object too much. So I think that we are entering some very interesting territory. I shall read very carefully what the Minister has said on the issue.

However, it seems to me that my noble friend Lady Carnegy was absolutely right—and I must disagree with the noble Baroness, Lady Finlay, for whom 1 have an enormous amount of respect and time—that a beggar my neighbour approach and driving up the cost of healthcare is not actually what happens in the healthcare economy. Yes, sometimes people leave hospitals because they will get a little more money, but it does not happen on a great scale. If the noble Baroness really fears that this will happen, then logically she should be against Agenda for Change, because that presents the same kind of opportunities for pay rises in the NHS.

The NHS cannot exist outside the whole economy. If we are going to have foundation trusts that are truly free to assume responsibility for themselves, their patients and for their local communities, there should be no place for a straitjacket of national pay agreements that does not take account of the realities of the local market place. If, in urgent individual cases, a manager judges that he can justify paying more than the maximum limit laid down by Agenda for Change in order, for example, to prevent a serious staffing shortage, he should be able to do so.

We can learn these lessons from Spain and Sweden where pay freedoms have been allowed with the result that productivity and morale have prospered without detriment to the rest of the health economy.

I am most grateful to all noble Lords who have taken part, whether or not they have agreed with me. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Earl Howe moved Amendment No. 183:

Page 8. line 26, at end insert— ( ) An NHS foundation trust shall have power to procure information technology systems subject only to compliance with such interoperability standards as may be specified in regulations.

The noble Earl said: I have just mentioned the experience of Sweden and Spain in pioneering the foundation trust model.

Alongside pay freedoms, the other lesson from those countries is the lesson of IT. On IT procurement the Government have returned to their age-old instincts: the IT contract for the NHS has been centrally drawn up and is being centrally managed. It will account for a vast sum of public expenditure. Recently, we understand, it has entered somewhat choppy waters. Why? Because the Government in their usual fashion have tried to impose too many risks and liabilities on the contractors, with the result that all but one of the three main bidders have walked away. The Government appear to be forcing an unrealistic pace on those contractors and it is said that the unprecedentedly tight deadlines have frightened off other bidders. Smaller suppliers on which the NHS depends are being squeezed out and if we are not very careful some may go to the wall. None of that has apparently deterred Ministers from pursuing their centralist policy. The NHS is to have the IT system that Ministers think is best for it.

Foundation trusts in Spain will say that one of the freedoms that has made the most difference to them is the freedom to procure their own IT. The only requirement imposed on them is interoperability with systems elsewhere. 1 must ask: why have the Government not looked more carefully at that model and drawn the lessons from it? I do not know what evidence the Government have for thinking that a giant, centrally managed government contract is likely to prove successful. The history of large national IT procurements in other departments is not exactly reassuring.

The NHS contract is immensely complex. Its broad specifications run to 550 pages without all the detailed technical requirements that one has to build in. Last year the DoH acknowledged openly, and 1 thought refreshingly, that there were "significant risks"—its words not mine—attached to the IT programme. Indeed, that is right.

So the Government have hang-ups about granting greater freedoms to foundation trusts as regards IT. I believe that that is a totally and unnecessary restriction. I really should like to hear the Minister's explanation. I beg to move.

Lord Warner

I hear what the noble Earl says about the IT strategy. I do not think that this is the place to have a long detailed debate about the Government's IT strategy. I shall try to deal with the amendment by relating why it is not compatible with the IT strategy.

I do not disagree with some of the thinking outlined by the noble Earl. It is worth bearing in mind that the regulator will have powers under Clause 6(3) to require that NHS foundation trusts comply with IT interoperability requirements to ensure that there is data integrity across the NHS.

I do not think that anyone in the Committee would disagree with the proposition—we have all learnt by mistakes made by successive governments regarding public procurement of IT—that there needs to be some common architecture for IT to operate successfully and for local systems to be able to transfer information from one part of the country to another. One of the uncomfortable facts of life for the NHS is that people move around and that records and information about them may need to move around. So a common architecture to ensure compatibility between local systems is an important aspect. Nothing in this legislation prevents the regulator ensuring that. There are many stand-alone systems that presumably are bespoke to a particular function in an office which do not come into that category.

PCTs may also include requirements on interoperability in their contracts with NHS foundation trusts. Let us stop and think about the issue. It is not in the interests of NHS foundation trusts to do other than ensure integrity and compatibility of NHS data flows and value for money in their own IT solutions. Why would they want to buy systems that are unable to relate to other parts of the NHS?

In the light of these considerations, we believe that the regulation-making powers proposed in the amendment are superfluous and would seem on face value to reduce NHS foundation trusts' independence from the Secretary of State, a matter about which the noble Earl and his colleagues have been so concerned. So the safeguards are there, without being oppressive where there are particular local systems that do not have linkages to other parts of the NHS.

Baroness Carnegy of Lour

The Minister said that he did not think that the amendment is good enough because it limits foundation trusts unnecessarily. The Government are missing an enormous opportunity to find out how IT could operate within a common architecture—which there must obviously be because, as the Minister says, people move about, statistics will be required and all the rest of it. The systems must be interchangeable, but surely foundation trusts might find new ways that would avoid the massive problem of one great system, which is what the Government are trying to operate with.

It is yet another missed opportunity—as is the pay bargaining arrangement, although this is of course on a much smaller scale—to discover how better ways could be found by foundation trusts. They could experiment and pioneer new ways, but that is being prevented by the arrangements. My noble friend's wording may not be ideal, but surely the Government should accept this one and let trusts see whether they can find ways—within the requirements of the Bill, of course—to improve the working of their IT. The Government are being remarkably narrow minded on the issue.

Lord Warner

I do not want to go through the detail, but this House and the other place have umpteen times debated the problems of local initiatives in IT because, with the best of intentions—not just in the health service but across the public service—people have taken projects forward to a point where it subsequently becomes inevitable that they cannot inter-relate to other parts of the public service. We have only to consider the criminal justice system, to cite another example from outside the NHS where that is a problem.

We are trying to strike the right balance, which we think we have done, in enabling a common architecture. That is a rather grand phrase, but local initiatives often—because, for good reason, they are designed around local needs—do not necessarily meet the needs of a wider agenda and cause problems for inter-relation with other systems. I ask the noble Baroness to reflect on that: it is not as though we do not have a lot of experience of that going wrong. We must ensure that the national frameworks are right. That is in the best interest of people locally.

Earl Howe

I am again grateful to my noble friend for her support. We must ask which approach carries the greater risk: the Government's approach—which, by their admission and in my estimation as a non-IT specialist, carries considerable risk; or the approach floated in my amendment, which I advocate, under which foundation trusts should have a measure of freedom to procure and commission a system that suits their needs. The Minister and I agree that there must be interoperability and compatibility. That is not in dispute. Clearly, different parts of the NHS must speak to each other through their IT systems. But the Minister has not made the case for imposing a giant national system on the NHS.

Baroness Howarth of Breckland

May I intervene on two counts? Having been involved in at least four government computer systems, the real difficulties have been in gathering comparable information across large areas. When local projects develop programs, interface—what the noble Earl calls interoperability— is not always as easy to achieve in this fast developing technological world as one would hope.

However, I must tell the Minister that we would all feel much more comfortable with the debate if he had not rather firmly put us in our place by ruling out the big debate about the strategy for development of government IT and had been more forthcoming with information. The National Care Standards Commission and the Food Standards Agency—I declare an interest in both as a member of the boards—have had difficulties with their systems. On the other hand, it would be a real mistake not to have a system that can produce information because of the problems with small project-based systems.

11.45 a.m.

Earl Howe

I take due note of what the noble Baroness has said from her experience. I am sure that her first point is extremely pertinent.

I do not intend to prolong the debate, but I share the disappointment expressed by the noble Baroness that the Minister could not have taken us more into his confidence on the Government's thinking on IT contracts. Nevertheless, we have had a useful exchange of views, and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Earl Howe moved Amendment No. 184:

Page 8, line 26, at end insert— ( ) An NHS foundation trust shall not be required to obtain permissions from or provide information to any strategic health authority.

The noble Earl said: This is a probing amendment about strategic health authorities. We have been led to understand that strategic health authorities will have no role whatever in performance-managing foundation trusts. The fact that they are nowhere mentioned in the Bill is, on the face of it, confirmation of that understanding. However, I should be grateful if the Minister would clarify what functions, if any, strategic health authorities will continue to have in relation to foundation hospitals. In particular, I believe that money from the NHS Modernisation Fund is usually channelled through SHAs. How will such money now be distributed to foundation trusts?

The amendment is phrased as it is because I would not want the Minister to think that I am advocating a further line of reporting for foundation trusts beyond those that are being created for them. Nevertheless, one benefit of performance management is that it can often prove helpful to a trust as a means of identifying any problems at an early stage and of providing appropriate practical assistance. The intention is that all NHS acute trusts should achieve foundation status within five years, so the question arises: what role will strategic health authorities have after that? Will there be a mechanism to substitute for the constructive role currently played by SHAs?

One of strategic health authorities' other main roles is to provide oversight of specialised commissioning arrangements. HIV/AIDS, renal services, haematology, neurosurgjcal services and neo-natal intensive care are examples of services provided across more than one PCT. Presumably—although we shall debate this in more detail when we reach Clause 29—foundation trusts will have an important role in delivering those jointly commissioned services. For those services not to be overseen by anyone is unthinkable. They are often extremely complex and difficult arrangements to establish and deliver. Equally, from time to time disagreements between hospitals need to be sorted out. I see no mechanism in the Bill to resolve those disagreements other than the broad duty of co-operation set out in Clause 29.

At the same time, I am instinctively uncomfortable with the thought that the role of SHAs should be replaced by enhanced functions for the regulator, who is not close to local events or circumstances and could not necessarily add much value to the process of ensuring genuine local collaboration. Ministers will need to explain this area much further if we are to be comfortable about the future of specialised services over the longer term. I hope that the Minister can enlighten us. I beg to move.

Baroness Andrews

I shall deal specifically with the terms of the amendment. It invites us to explore the relationship between SHAs and foundation trusts. It is an opportunity to make clear that, while foundation trusts are firmly within the NHS and subject to national standards of performance, they will not be overseen or performance-managed by SHAs. Each NHS foundation trust will take full responsibility for the outcomes that it achieves as regards volume, quality and responsiveness to patients. So they will not be required to obtain permission from, or to provide information to, any SHA. The amendment is not necessary.

I shall attempt to answer the noble Earl's other questions. Strategic health authorities—the local headquarters of the NHS, if you like—will continue to have a significant role in establishing and implementing the vision of the local health economy, the long-term plan and the shape of the overall development of services in their area, backed by commissioning decisions of primary care trusts. In addition, we expect that SHAs, together with higher and further education institutions, will continue to be involved in making arrangements for education and training through workforce development confederations. So, however the foundation trust programme evolves, there will be a continuing role for the strategic work to be done by SHAs.

The noble Earl also asked about commissioning arrangements. The strategic health authority has responsibility for specialist commissioning. We know that those 37 areas of specialist commissioning are very important aspects of the NHS's work because they deal with some very rare conditions with very small groups of people who need to be thoroughly protected—for example, aspects of renal care or paediatric services. The relationship between SHAs and foundation trusts in relation to commissioning will be as it is now. It will be contracted in the same way, and the same arrangements will apply to the relationship that now obtains with the trusts. But the nature of the contract will change. Contracts will be binding and legal. We are making those for foundation trusts because we want greater transparency so that we know exactly what will be delivered. We want better security in innovation and development. The changing nature of the contract should enable us to deliver that. There will be no change in the capacity to commission or the trust's ability to commit to delivery.

The noble Earl made a point about the role of the modernisation agency and the position of SHAs. To the extent that any public funds are made available for any central initiative—for example, the national framework initiatives—foundation trusts should have access to an equitable proportion of those funds, wherever the source is. Such funding might be paid by way of a grant or injection of public dividend capital from the Secretary of State under Clause 11. That could be distributed by SHAs for that purpose.

The noble Earl also raised the question of CHAI. It will continue to have a role in the inspection of foundation trusts. Its functions will closely mirror its functions in relation to other NHS bodies. It will encourage improvement, carry out annual reviews, publish performance ratings and carry out value-for-money studies. But the main difference is that they will report those aspects, not to the Secretary of State, but to the independent regulator.

I confirm what the noble Earl said about the duty of partnership. It is in the Bill for a purpose. That duty of partnership is very much to ensure that, although foundation trusts are a different animal, they are firmly within the NHS and will work with SHAs in the appropriate way. For example, they will be able to continue to provide much of the information that they provide to SHAs at present, as part of their own commissioning arrangements. We look forward to that partnership flourishing in the future.

Baroness Cumberlege

In the past, we have looked at SHAs as holding the ring in the local economy. We know that in the future some people will be outwith the ring—foundation hospitals. If a foundation hospital finds that a specialist service such as neonatal intensive care, for example, will be uneconomic, or that it cannot attract the necessary staff, and decides to discontinue the service and not to seek a contract with the primary care trust, the regulator can come in and look back at something that has already taken place, but he cannot prevent something happening. What happens in those situations?

Baroness Andrews

As I understand it, the SHA will have a view on that. What we expect to happen is largely what happens now: people, including the other commissioning bodies, will get around the table to discuss the needs of the local community and how they can best be met. There may be another contract for specialist commissioning with another hospital in another area that can offer an even better service. I would expect such discussions to happen just as they do now.

Baroness Finlay of Llandaff

Perhaps I may explore further the information flow that will be available to a strategic health authority. If I heard the Minister correctly, the foundation trust will not have to report to the strategic health authority. So the strategic health authority will be able to invite information, but it will be up to the foundation trust to give or withhold whatever information it might perceive to be in its best interest. On the basis of the information it receives, the strategic health authority will take a decision on specialised commissioning. I am concerned that they will then be able to ask CHAI for information founded on only an inspection that it might have carried out some time ago. Changes that might occur in the local health economy could be disguised in the name of commercialism. I do not see how the strategic health authority will be able to obtain detailed information if the foundation trust decides that it does not want to disclose it and just wants to have the contract continued.

I am sorry to push the Minister further, but I am worried about an information gap appearing between those responsible for highly specialised commissioning and those who will provide the services. Until now, as the noble Baroness, Lady Cumberlege, said, the strategic health authority has had a duty to hold the ring on services in an area, and has done so.

Baroness Andrews

One of the points that I did not make in response to the noble Baroness, Lady Cumberlege, was that the regulator can also protect specialist services essential to the NHS, because he can require the provision of certain services under Clause 14. That extra security is built in.

In response to the very detailed question about information flow, I understand that the SHA cannot require the trust to provide information, for the reasons that I explained. But the sort of information coming forward from the trust at present, which informs its commissioning process and delivery, will obtain and continue to flow in the same way. I do not share the noble Baroness's concerns about an information gap. But, if it would help, I will write to her to try to spell out, for the purposes of the debate and for other Members of the Committee, how we see the process working. As the noble Baroness must know, the contracts between the trusts and commissioners are quite detailed. The changing nature of the contract may involve more information being exchanged than at present. We will certainly write to noble Lords and set that out in a little more detail.

Noon

Baroness Masham of Ilton

As there are queries and concerns about specialised services, will the Minister spell out to us all, rather than just to my noble friend, the exact duties that strategic health authorities will perform?

Baroness Andrews

Yes, I am happy to do that for the noble Baroness, Lady Masham.

Earl Howe

Not for the first time, the Minister has given the Committee a full and enlightened reply, for which I am very grateful. In many ways, her reply covered even wider ground than my own remarks and we should be grateful for that. Nevertheless, the points raised by my noble friend Lady Cumberlege and the noble Baroness, Lady Finlay, were extremely well put. They are not alone in feeling unease about specialised commissioning and quite what power and leverage the strategic health authority will have in those circumstances. I heard what the Minister said about the power of the regulator, but this is one instance when her offer to enlighten us further by way of a letter will be gratefully received. In the mean time, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 185 not moved]

Clause 18 agreed to.

Clause 19 [Information]:

Earl Howe moved Amendment No. 186: Page 8, line 41, leave out from first "the" to end of line 2 on page 9 and insert "regulator requires

The noble Earl said: Once again, in Clause 19 we see the phenomenon of the independent regulator being elbowed aside by the Secretary of State. Subsection l(a) specifies that an authorisation, must require an NHS foundation trust to disclose such information as the Secretary of State specifies to the regulator".

Once again, why is it necessary for the Secretary of State to specify anything at all in this context? Why is not the regulator able to specify the information that he requires? Why does the Secretary of State also need to receive information? I fear that foundation trusts will find that they are supplying the same amount of information as they were before they became foundation trusts. This time, however, they will be sending it in two directions at once. They may actually find that they are churning out even greater amounts of paper than before if the Secretary of State and the regulator do not make a concerted effort to avoid duplication of data collection. That does not conjure up a happy picture because, although data collection is a necessary fact of life in any public service, I thought that the aim was to reduce bureaucracy to foundation trusts not to perpetuate it at current levels.

Nor do I fully understand why it is necessary in Subsection (2) to empower the regulator to ask any other health service body to deliver to him any information that he may request. That provision is extremely sweeping. For a start, it seems to ignore common-law rights of patient confidentiality. I hope that the Minister can reassure me on that particular issue. However, the provision also suggests that the regulator will be able to demand information from PCTs and non-foundation acute trusts that they may already be sending to the Secretary of State. Again, that is a recipe for duplication. To the extent that the information requested by the regulator is not information to which the Secretary of State has access, one has to ask why such an additional burden needs to be imposed on health service bodies. I beg to move.

Baroness Finlay of Llandaff

I rise to support the wording of the first amendment, but I will oppose the second. I will try to explain why. As is already well known, I am concerned about the involvement of politics in the day-to-day running of the NHS and the flow of political influence prior to an election, with the need, perhaps, to boost the voting ratings by using the NHS as a political football. That is why I was keen to see the Secretary of State a little out of the loop and the regulator left to specify what he felt was really required from foundation trusts. However, I am concerned about leaving out subsection (2) in Amendment No. 187, especially in the light of the Minister's comments in reply to my last question. It is essential that the regulator can draw on as much information as possible.

I return to points that I made previously about the network provision of care and data from organisations such as the cancer registries. Such information may be very important to the regulator to examine to determine the performance of the foundation trust to see whether it really is delivering the quality care that it claims. There has to be a check for the regulator on information from an external source as well as the information that is provided within the trust. I have tremendous reservations about that. In fact, I would not want anything to stop the regulator's ability to seek information from wherever he felt it should be sought in order to reach an informed decision. With those two different views, I support one amendment but I am afraid to say to the noble Earl, Lord Howe, that I cannot support the second in this group.

Baroness Andrews

It is such a relief to have the noble Baroness, Lady Finlay, on our side even for half the time. One out of two cannot be bad. To address the noble Earl's concerns, I will explain why it is difficult for us to accept his amendments in terms of what we are trying to do with Clause 19. For the Secretary of State to be able to set standards to allocate resources and plan provision of health care across the NHS in line with his responsibilities under the relevant Act he must be able to determine what he needs to know and draw upon information gathered across the NHS. It goes much wider than simply finding out about foundation trusts themselves. The amendment would restrict the Secretary State's ability to carry out his duties with respect to the NHS, and the second amendment would restrict the regulator's ability to monitor compliance with the terms of the authorisation.

Clause 19 requires the NHS foundation trust to provide information to be used for national policy development, planning decisions, manpower planning and tracking, and so forth. Those are matters that extend far beyond the regulator's function. If the amendment were agreed, it would be up to the regulator to provide such information as he thought relevant. However, it would hardly be appropriate for him to decide what information the Secretary of State needed with regard to those much wider matters.

I reassure the noble Earl on two points. First, the intention is definitely not to replicate existing data collection. Foundation trusts will have earned their autonomy. There is no line management or performance relationship. We simply expect the information requirement from NHS foundation trusts to be a subset of that required by NHS trusts at the moment. Members of the Committee will be pleased to hear that the Department of Health is currently undertaking work to streamline information requirements throughout the NHS. We are well aware of the arguments about bureaucracy, excessive information and paperwork, and we are doing our best.

Let me also reassure the noble Earl on the point that he made about confidentiality. The independent regulator does not have the power to require confidential information. The data protection rules apply fully. In any case, common law rights of confidentiality are not affected by this clause.

The second purpose of Clause 19 is to ensure that the regulator is able to obtain the information that he needs to set the terms of authorisation and monitor compliance with those terms and statutory obligations, as well as investigating breaches. As the noble Baroness, Lady Finlay, said, he may well need access to information from sources other than foundation tr5usts. The noble Baroness gave the example of the cancer networks in Wales. There are many other examples: it could be information from the PCTs on their commissioning needs or on the services that they have already received from the foundation trusts. The amendment would remove his power to require NHS bodies to disclose information that is essential for any proper judgment to be made about the performance of the foundation trust.

I reassure the Committee that they are legitimate concerns, and we take them seriously. We do not expect the regulator routinely to collect data from bodies other than the foundation trusts. Nor do we expect that the provision of the information will place a significant burden on them. He is most likely to require specific information if he needs to take specific action, such as varying the terms of authorisation or investigating breaches. Such information may well differ from that routinely submitted to the Secretary of State.

I hope that, with those assurances, the noble Earl will feel able to withdraw his amendment.

Earl Howe

The noble Baroness, Lady Finlay of Llandaff, need not worry; my second amendment was very much in the nature of a probe. To my delight, the Minister has satisfied me in every respect on that matter.

There is no argument between us about the need for data collection, providing that the data are necessary. My concern is about the regulatory burden. The Minister has satisfied me on that, in large measure. My fear is, for example, that non-foundation trusts could find themselves submitting information to strategic health authorities, as well as to the regulator. However, it appears, in the light of what the Minister told us about the way in which the power will be used, that that would be unlikely and that the regulator will seek to avoid doing it.

It has been a helpful exchange. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 187 not moved.]

Clause 19 agreed to.

Clause 20 agreed to.

Clause 21 [Fees]:

[Amendment No. 188 not moved.]

Clause 21 agreed to.

Clause 22 agreed to.

Clause 23 [Failing NHS foundation trusts]:

[Amendment No. 189 not moved.]

Clause 23 agreed to.

Clause 24 [Voluntary arrangements]:

Earl Howe moved Amendment No. 190: Page 10, line 19, leave out '"may" and insert "must

The noble Earl said: In moving Amendment No. 190, I shall speak also to Amendment No. 191.

Clause 24 deals with voluntary arrangements. I should be grateful to hear a little more from the Minister than the clause discloses about how the power that it confers is to be used. In the first instance, it is not clear why, if the regulator is satisfied that it is necessary to introduce a. moratorium or to move to a voluntary arrangement, he then has an option to choose between those two courses of action or, indeed, to do neither. Nor is it clear what the implication of each is for the trust. I would hope that he would issue warnings to the trust in the first instance, before taking any irrevocable step. However, supposing that he specified that there should be a voluntary arrangement, what would be the financial effect on the operation of the trust?

We all hope that the provisions laid out in Clauses 23 to 25 will not in practice be required, but there needs to be certainty about them. If a foundation trust were forced into dissolution because it had failed and there were unmet liabilities, who would bear the responsibility for those liabilities? How would the creditors be paid?

The other amendment is designed to give the foundation trust some control over whether its financial difficulties can be resolved under the provisions of the Insolvency Act 1986 that are brought into play by Clause 24(2). As the Bill stands, the regulator is always in the driving seat in deciding upon a moratorium or voluntary arrangement; but we know from the commercial world that it is often the organisation itself that has the best understanding of its dilemma. It would seem sensible, if ever that were to happen with a foundation trust, to allow the board to approach the regulator and ask him to issue a suitable notice under subsection (1). I hope that the Minister will look upon that suggestion constructively; it is intended as a helpful suggestion. I beg to move.

12.15 p.m.

Lord Warner

I accept the spirit in which the noble Earl moved the amendment. Before I deal with the amendments, I shall take the opportunity, as this is our first discussion about the insolvency regime for NHS foundation trusts—I share the noble Earl's wish that we will not need to use the arrangements, but we must make adequate provision—to inform the Committee that the department has prepared a paper setting out our proposals for the secondary legislation, which will, in effect, establish a bespoke insolvency regime for NHS foundation trusts, under Clauses 24 and 25. I have arranged for copies to be placed in the Library, and I tried to arrange for copies to be sent to noble Lords who had spoken in the debate. I detect from the noble Earl's remarks that they may not have arrived. I certainly asked for them to be sent to everybody before today's debate. I will check the arrangements and try to ensure that they are available to noble Lords during the lunch break.

I did not propose to go through the letter, which is fairly detailed—it is about four or five pages of detail—not least because I wanted to preserve my vocal chords. I shall speak briefly on the amendments. I can see that they are intended to ensure that the regulator imposes a moratorium or voluntary agreement, if it is appropriate to do so. We do not think that the amendments are necessary. Although the regulator's power to impose voluntary arrangements are discretionary, the clause sets out clearly the situations in which he would exercise the power; that is, when it is "necessary or desirable".

It is highly unlikely that we would get to the point of dissolution without some kind of interchange between a foundation trust that was in difficulties and the regulator—and, indeed, some of their creditors. It would be unusual for that to happen without some interaction between the trust and others, including the regulator. The regulator is also under a duty to act reasonably, which would include exercising his powers under Clause 24, if it were in the public interest to do so. He has an overriding responsibility to protect the NHS. If a voluntary agreement were the best way of protecting NHS interests and assets, one would expect him to use his discretion sensibly.

I hope that the noble Earl will read the detailed arrangements for a bespoke insolvency system for the NHS. I am happy to discuss it with him, if that would help, after he has had time to consider the details.

Earl Howe

That was a helpful reply. I shall not exercise the Minister's vocal chords any more than I have to. I have not yet received the letter to which he referred, but that may not reflect in any way on his office: I confess to not having opened my post this morning. I look forward to receiving the letter, and, no doubt, we can return to the matter at a later stage, if need be. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 191 not moved]

Lord Warner

moved Amendment No. 191A: Page 10, line 24, after "arrangements)" insert "including any related provision of that Act The noble Lord said: This is a technical amendment to ensure that the policy intention for the insolvency regime can be properly applied in practice. Other sections of the Insolvency Act 1986—not in Part I— will require modification to allow the insolvency regime for NHS foundation trusts to be fully effective. All that the amendment does is to give powers to make such necessary modifications to the Insolvency Act at a later stage. I beg to move.

On Question, amendment agreed to.

Clause 24, as amended, agreed to.

Clause 25 [Dissolution etc.]:

Baroness Noakes

moved Amendment No. 192: Page 10, line 38, leave out subsection (2). The noble Baroness said: Amendment No. 192 deletes subsection (2) of Clause 25. We now turn to the dissolution provisions of the Bill. Subsection (2) concerns the consultation arrangements that the regulator must carry out before winding up a foundation trust. Our amendment is a probing one.

Clause 12, which deals with the prudential borrowing code, lays down that the regulator should consult the Secretary of State, the foundation trust and other persons that he—the regulator—considers appropriate. But under Clause 25 there is a different formulation based on the regulator having to comply with an order on consultation. Are the Government saying that they do not believe that the regulator would get the consultation right in the case of dissolution? What kind of order is envisaged? Would it be a separate order for every dissolution or would it be a generic one? If it is to be generic, why cannot the discretion of the regulator be relied on, as the Government are content to do under Clause 12? I beg to move.

Lord Warner

The regulator clearly has an important role in considering whether a foundation trust needs to be dissolved in order to protect NHS services. That is why the Bill provides for secondary legislation in this area to prescribe the process leading to the dissolution of a foundation trust. It includes requirements on the regulator to consult in making his decision about the future of a foundation trust. It is not a matter of not trusting the regulator; it is a very important and potentially contentious area. It is important that the consultation arrangements are right and appropriate.

It is expected that the consultation requirements cover a range of interests, including bodies with responsibilities for NHS services; that is, the strategic health authority, PCT commissioners, Patients Forums, the oversight and scrutiny committee, staff representatives, the Secretary of State and significant creditors, as well as the governors if they have not been removed already under Clause 23(4).

We think that it is right that the independent regulator consults these groups—there may be others—so that he or she has the relevant evidence required to reach such an important decision about the future of an NHS foundation trust. It certainly would not be in the spirit of the Bill to encourage any arbitrary action in this area. We will put forward secondary legislation in the appropriate form at a later stage, which will go into more detail on the consultative arrangements. I hope that that clarifies matters for the noble Baroness.

Baroness Noakes

I thank the Minister for that reply, from which I take it that the regulations will be generic regulations and not specific to particular dissolutions.

Lord Warner

Perhaps I may reassure the noble Baroness on that point.

Baroness Noakes

I am grateful to the Minister, who, interestingly, said that dissolution is an important matter and that, therefore, it is important to get consultation right. I think that the subtext is that the prudential borrowing code—some of us have significant doubts about its relevance and importance—is not an important matter. We have at least had some light shed on the Government's thinking. I shall consider carefully what the noble Lord said. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Noakes moved Amendment No. 193:

Page 11, line 1, at end insert— ( ) any other body specified by the regulator

The noble Baroness said: In moving Amendment No. 193, I shall speak also to Amendments Nos. 194 and 195, which concern the transfer of assets and liabilities on the dissolution of a foundation trust. Amendment No. 193 extends the bodies to which property or liabilities could be transferred under subsection (3) to include any other body specified by the regulator. The list in subsection (3) is quite restrictive. It does not allow transfer to a special health authority or to a local authority. There could be some circumstances where that could be appropriate. It does not allow transfer to a private sector healthcare provider, which might be appropriate in, say, diagnostic and treatment centres—or whatever it is that we are now supposed to call them. In general, subsection (3) shows a considerable lack of imagination about what might appropriately be done with assets on a dissolution. Our amendment would allow a greater range of opportunities to be considered.

Amendment No. 194 tackles a different issue. It provides that property or liabilities not transferred to the people specified in subsection (3) should be transferred to the Secretary of State; that is, assets and liabilities cannot be left in limbo but must be transferred somewhere. That would prevent the regulator from abandoning liabilities, including assets with a negative value.

In another place, Conservative Members often asked Ministers what would happen to liabilities at the end of the day. They were stonewalled. I hope that the Minister will give us a clear answer today. On our last Committee day, I talked briefly about the doctrine of "standing behind" public sector bodies, whereby the Government are expected to pick up the liabilities of any public sector body, should that situation arise. As far as I am aware, there has never been a case where a public sector body—especially one like a foundation trust, which is classified to central government—has been allowed to go bust without having its liabilities picked up. In that debate, I referred to the Treasury's view that the Government will pick up foundation trust liabilities.

In effect, my amendment expresses what "standing behind" is all about; namely, that the Government will pick up any liabilities. If the Minister thinks that that is not the case, how would the regulator pick and choose liabilities that would be left stranded? The Bill contains no rational way for any deficit to be shared among creditors. I cannot believe that the regulator has an absolute power to determine which creditors are paid and which are not.

Finally, Amendment No. 195 provides that liabilities cannot be transferred under Clause 25 without the consent of the person to whom they are being transferred. For example, can the regulator foist liabilities on another foundation trust without that trust's consent? I hope not, which is why our amendment provides for consent. These amendments may seem to be matters of detail, but they raise issues of very real substance which could have practical implications should the unfortunate situation of having to wind up a foundation trust occur, which is not beyond the bounds of possibility. I beg to move.

Lord Warner

Perhaps I may set out the context of the amendments before turning to them specifically. As I have said before, an essential aspect of the new disciplines being placed on management as the quid pro quo for additional freedoms which come within an NHS foundation trust is that the Secretary of State does not intend to guarantee debt. I have said that before. It is important that we begin at that point. In the event of a failure by a foundation trust, the Government would stand behind NHS patients and behind essential NHS services—that is, the protected services—which would be part of the authorisation. They would not stand behind or bail out poor management. I say that again, and it is a point to which we may return several times in later discussion. To ensure that we do not end up bailing out NHS foundation trusts, the Bill includes provisions for a special failure regime with the primary aim of protecting the staff and assets required to deliver NHS essential services. Before turning to the amendments, perhaps I may explain why I shall not address all the detailed points. The insolvency paper I referred to when responding to an earlier amendment deals with some of the specific matters raised by the noble Baroness.

Amendment No. 194 would require the Secretary of State to pick up all the property and liabilities of a dissolved NHS foundation trust. We have made our intentions quite clear. The effect of Amendment No. 194 would amount to a guarantee on foundation trust viability and thus would be wholly inconsistent with our policy aims. For that reason, we do not think that the amendment should be accepted.

Amendment No. 193 seeks to ensure that the property of a dissolved foundation trust can go to any body specified by the regulator. Here we return to the important point about what should happen to the protected assets of a dissolved NHS foundation trust. Those assets may be transferred only to other NHS foundation trusts, PCTs, NHS trusts or the Secretary of State because they are protected assets of the NHS. In a dissolution of a foundation trust, it would not be right to enable those assets to be transferred to other alternative bodies. In responding to another amendment, I shall return to the matter of non-protected assets; the distinction here is between protected assets and non-protected assets.

A private healthcare provider, for example, could be asked to step in and manage a service previously provided by a failed foundation trust. This would be effected either by a franchising arrangement or by tendering for contracts. But the assets associated with that service would remain within NHS ownership and the service would remain free at the point of use. The Bill as currently drafted ensures that NHS assets are not transferred to a private provider in the kind of circumstances that I have indicated; that is, where they are protected assets. We believe it is right that such assets, which are crucial to the delivery of NHS services—and in the spirit of what I have said about the Secretary of State standing behind patients and NHS services, but not bailing out failing management— should be retained. That is consistent with ensuring that those assets could not be privatised or sold off to pay the debts of a foundation trust whose management, in that particular situation, would effectively have failed. That is why Amendment No. 193 would be inappropriate.

I turn now to the non-protected assets. Once the Secretary of State has arranged for the transfer of those property rights and liabilities essential to the continuity of NHS services, any remaining property and liabilities will be subject to normal insolvency rules. Potentially this could include assets such as retail facilities, car parks and buildings used solely for the provision of private patient care or other income-generation activities. One possibility—it is not the only one—is that such assets could be transferred to creditors, including the Secretary of State, who may himself be a creditor in these circumstances. Alternatively, they could be sold off to meet the liabilities of the failed foundation trust in the same way that trust-owned assets can be sold off at present. That covers the distinction we make here between the protected assets for NHS services and the non-protected assets.

Amendment No. 195 would ensure that dissolved NHS foundation trust assets and liabilities could not be transferred to another body without that body's consent. We believe that this amendment is unnecessary because both the Secretary of State and the regulator are under a common law duty to act reasonably. Foisting unwanted things on to other bodies would not be deemed reasonable. Discussions with bodies that were to receive the assets and liabilities of a dissolved foundation trust would in any case form part of the transfer process because the regulator would be required to consult those bodies before the powers in Clause 25, including the transfer of property and liabilities, could be exercised.

I have done my best to address and deal with the points raised by the noble Baroness, but more detail is set out in the letter that I mentioned earlier.

12.30 p.m.

Baroness Noakes

It is clear that we shall not be able to conclude our deliberations on these issues until the letter to which the noble Lord referred has surfaced and noble Lords have had an opportunity to read it.

I wish to comment first on the point made about discipline on management and not guaranteeing debt. I have never heard an explanation of how not guaranteeing debt results in imposing discipline on management. I understand that nothing in the Bill would make management responsible for the debt. Any debts built up by a foundation trust would remain the debts of that trust and would have nothing to do with the management. Perhaps I may suggest that that is a piece of empty rhetoric.

Further, I would suggest that the Minister has not yet explained how, if certain liabilities are not to be picked up for one reason or another, the regulator is to choose between them. Given that there is no framework covering the payment for certain liabilities, I am concerned whether such an ability to pick and choose between liabilities, leaving some of them stranded and therefore not met, satisfies human rights law. No doubt we can expand on that point further.

I look forward to reading the letter, in particular in order to understand how protected and non-protected assets are really defined and to see how the process will work in practice. I had assumed that the importation of the Insolvency Act provisions was much more a matter connected with the voluntary arrangements. Clearly that is something that I shall have to consider further. On that basis, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 194 and 195 not moved.]

Clause 25 agreed to.

Schedule 3 agreed to.

Clause 26 agreed to.

Clause 27 [Mergers]:

Baroness Noakes moved Amendment No. 196: Page 11, line 35, leave out paragraph (a).

The noble Baroness said: In moving Amendment No. 196, perhaps I may speak also to Amendments Nos. 197 and 198. These amendments concern Clause 27, which deals with mergers involving NHS foundation trusts.

Amendment No. 196 seeks to strike out paragraph (a) of Clause 27(2). It states that a merger requires the support of the Secretary of State if one of the parties is an NHS trust. I hope that the Minister will confirm that if the merger involves two foundation trusts, the support of the Secretary of State would be wholly irrelevant. That is an important point.

Noble Lords will recall our earlier debate on the involvement of the Secretary of State in the creation of foundation trusts. We queried why that matter could not be left entirely to the regulator, and why it is necessary for the Secretary of State to have a veto on the independent judgment of the regulator at that stage. By the same token, we do not believe that the Secretary of State should have a veto or anything approaching that when it comes to mergers of foundation trusts. Those matters should be wholly within the powers of the regulator.

Amendment No. 197 is a probing amendment to ascertain what role the Government envisage for the Independent Reconfiguration Panel. While the panel is still an unknown quantity, having issued only one report, it seems to us right in principle that the panel should be consulted as a part of any merger decision. The amendment requires only consultation, it does not require the regulator to act on the advice of the panel.

Lastly, Amendment No. 198 rewrites subsection (6) of Clause 27. The existing subsection requires merger applicants to consult in accordance with regulations. Our rewritten subsection would require the merger applicants to consult in every case—that is, whether or not there are any regulations, and additionally in accordance with regulations. An onus should be placed on the applicant to consult, whether or not any regulations are issued.

Over time, it is inevitable that mergers of foundation trusts will take place. That is why we believe it is important to get these provisions right. I beg to move.

Lord Hunt of Kings Heath

My noble friend may wish to consider this point between now and Report. There will be any number of reasons for foundation trusts being involved in mergers, but there will be occasions where a merger takes place because of the weakness of one organisation and it is felt that a more successful organisation should, in essence, take over. There have been a number of examples of that within NHS trusts. However, the governance arrangements in such mergers are not always satisfactory.

Let me give an example. In my own patch some years ago, the Birmingham Heartlands Trust merged with the Solihull NHS Trust, which was in great difficulty. The Heartlands Trust had very strong leadership. Having agreed to the merger, the first thing that happened is that the people who gave incredibly strong leadership to the Heartlands Trust had to apply for their own jobs within the new trust structure. On my reading of the clause, that would happen again in such circumstances.

It does not make sense. It makes sense where you have a merger of organisations of equal strength, but my reading of the clause is that where a weak performer merges with a stronger organisation, the new governance arrangements in Schedule 1 would, nevertheless, kick into place. I argued, and the House accepted, that there should be transitional arrangements for NHS trusts going forward to NHS foundation trust status, so there is a case for giving the regulator discretion, in the circumstances I have discussed, to allow the governing body arrangements—particularly in relation to the board of directors—to continue in order to achieve continuity. My noble friend may care to look at that issue between now and Report.

Baroness Cumberlege

The noble Lord, Lord Hunt, raises an interesting question. You seldom get a genuine merger in the private sector. That is also true, as the noble Lord said, in the National Health Service. Sometimes the word "merger" is a misnomer for a takeover—and where there is a takeover there are always aggrieved people.

When one considers mergers and the research that has been carried out on them in the private sector, one finds that they take longer than anticipated, that the benefits are less than anticipated and that they do not achieve the savings anticipated. It is a very distracting process, and many people come out of it extremely bruised.

If you are a shareholder in the private sector you can anticipate these things and disinvest immediately or later on. In the public sector, in the National Health Service, you do not have the opportunity to do that. The least we can do for our public—who are shareholders but cannot make choices in that respect—is to consult with them and ascertain their views.

Although I appreciate what the noble Baroness, Lady Noakes, said about the fact that there are bound to be mergers—I am sure that there are—one of the matters that disturbs even those who have the greatest expertise in the NHS is the concern that bigger is not always best. Huge hospitals are now specialising with great expertise, but they are not that good in dealing with multi-pathologies and patients who have a range of problems.

I hope that the foundation hospitals, if they come into being, are successful. I hope also that there will not be too many takeovers—which I foresee—in the future.

12.45 p.m.

Baroness Carnegy of Lour

In replying to his noble friend Lord Hunt, the Minister will probably remember that in any merger between two foundation trusts there will be attached a huge membership, governors who have been elected by members, and directors who have been appointed by the governors. So there will be a political, with a small "p"—or even, perhaps, with a big "P"—thread running through the discussions on any take-over. When my noble friend Lady Cumberlege refers to aggrieved people, she is thinking about what has happened so far with NHS trusts. However, the grievance may take a more difficult form in a merger of two foundation trusts.

Lord Warner

I have listened carefully to the points made by my noble friend and to the comments of the noble Baronesses. I shall consider what they have said. They raise important issues in regard to governance arrangements if there are mergers. I shall write to my noble friend as quickly as possible and copy the letter to other noble Lords.

The discussions in another place highlighted a gap in the Bill in that it did not provide adequately for mergers of NHS foundation trusts after establishment. We recognise the importance of ensuring that such mergers should occur in a way that balances the need to minimise bureaucracy with the need to safeguard the interests of the NHS and NHS patients. That is why we have brought forward these provisions. That is the context in which we are discussing the amendments.

Amendment No. 196 would remove the veto of the Secretary of State over mergers involving NHS trusts. We believe that it is entirely appropriate that the support of the Secretary of State should be required before an NHS trust applies for NHS foundation trust status through a merger with an NHS foundation trust, just as his support would be required if the NHS trust was making an individual application for NHS foundation trust status.

If the Secretary of State did not have this power, there would be effectively a backdoor route for NHS trusts to become NHS foundation trusts without obtaining his support. In effect, there would be a short cut into foundation trust status without going through the processes that other applicants now have to go through. NHS trusts are ultimately subject to performance management by the Secretary of State, and he will be well placed to judge whether they are in a fit and ready state to move forward to an application to the regulator. It is important to preserve those arrangements in order that we do not create loopholes.

Amendment No. 197 requires the regulator to consult the Independent Reconfiguration Panel. I remind your Lordships that the Independent Reconfiguration Panel is not a statutory body and so we are up against the issue, upon which we keep touching, of whether it is right to refer in primary legislation to a body or concept that is not statutorily established. On those grounds, it should not be referred to in legislation.

However, the regulator can take advice from any person he thinks appropriate. This could include the Independent Reconfiguration Panel. I am certainly happy to give the assurance that it is not the Government's intention to exclude it. I shall not outline the details of the arrangements for consultation, but they are fairly extensive and contain many safeguards.

As regards Amendment No. 198, which relates to consultation on mergers, we will require applicants for mergers to carry out the kind of comprehensive public consultation that would need to occur for any major reorganisation in the NHS. Clause 27(6) provides for the Secretary of State to make regulations setting out the consultation requirements. Compliance with these regulations would be a condition of authorisation.

We have included this power—believe it or not— because we intend to use it. We expect to introduce the regulations under Clause 27(6) before any applications are made for mergers involving foundation trusts. These are likely to require consultation with the local public and patients— including patients forums, once established—staff, other local NHS bodies and local authorities, including overview and scrutiny committees.

This important measure is designed to ensure that the views of local communities and stakeholders are sought, listened to and taken into account. However, we do not believe it would be appropriate to remove the Secretary of State's discretion on whether to make regulations and what they should contain, particularly as the requirements may themselves change over time. That, effectively, is what this amendment would do.

The requirement that a consultation should be "adequate" is simply not necessary. As a matter of law, consultation must be adequate. If it is not, it is open to challenge in the courts.

Baroness Noakes

I thank the Minister for that reply and other noble Lords for their contributions to the debate. The noble Lord, Lord Hunt, raised an interesting point about continuity of management. I suggest that such a provision would be very difficult to draft because the Bill is predicated on mergers, and a merger has no dominant party. What the noble Lord, Lord Hunt, referred to was a takeover, and there is no provision in the Bill for a takeover. It is probably counter-cultural to the NHS to suggest that there might be a takeover. So while the Bill maintains the fiction of merger, I suspect that the points that he has raised, which I completely accept are valid, may be extremely difficult to accommodate in the Bill.

Lord Hunt of Kings Heath

I am grateful to the noble Baroness for giving way. Does she agree that, because of that, it might be appropriate to look at whether the regulator could be given discretion so that he or she could exercise judgment in those cases? I agree with her that it is quite difficult to set hard and fast rules here.

Baroness Noakes

That is a very constructive suggestion, and I hope the Minister will take it into account.

So far as the Secretary of State's consent is concerned, we will have to agree to differ. We see that the sticky hands of the Secretary of State are far too apparent in relation to foundation trusts. It would be no bad thing, we think, for the regulator to have complete say about whether or not foundation trusts were set up or merged in due course, but we will doubtless not progress that argument.

I take the Minister's point that the Independent Reconfiguration Panel is a mere figment of the Secretary of State's imagination and therefore cannot be referred to in the Bill. But that is a pity, because then we cannot refer to anything that requires the regulator to consult. If the regulator is not required to consult, the independent reconfiguration panel may wither on the vine, but that may of course be what the Secretary of State intends.

I was grateful to the Minister for his reply on consultation and his assurance that the regulations would be out before there was ever any issue of a merger. That will deal with the point in my amendment. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 197 and 198 not moved.]

Clause 27 agreed to.

Clause 28 agreed to.

Clause 29 [Co-operation between NHS bodies]:

[Amendment No. 199 not moved.]

Clause 29 agreed to.

Clause 30 agreed to.

[Amendment No. 200 not moved.]

Clause 31 [Patients'Forums]:

Lord Clement-Jones moved Amendment No. 201:

Page 13, line 19, leave out subsection (2) and insert— (2) In section 15 (establishment of patients' forums) after paragraph (l)(b) there is inserted "and (c) for each foundation trust."

The noble Lord said: In moving Amendment No. 201, I shall also speak to Amendments Nos. 202 and 203.

We come to one of the largest question marks at the centre of the Bill and one of its major flaws—namely, the failure to provide for patients forums for foundation trusts. The key question in relation to Clauses 30 and 31 is why parts of the existing legislation are not being amended so that foundation trusts are put on the same basis as NHS trusts. This is the mystery of the dog that is not barking; I am sure the Minister will be putting on his deerstalker and trying to elucidate matters later in the debate.

Let us first look at the existing legislation. Section 11 of the Health and Social Care Act 2001 provides for public involvement in consultation. This is a very general provision, which states that it is the duty of everybody to which the section applies, including NHS trusts, to make arrangements with a view to securing, as respects health services for which it is responsible, that persons to whom those services are being or may be provided are, directly or through representatives, involved in and consulted on—

1. "(a) the planning of the provision of those services,
2. "(b) the development and consideration of proposals for changes in the way those services are provided, and
3. "(c) decision to be made by that body affecting the operation of those services".

That is a very general provision which is being amended to include foundation trusts. But when one looks at that section, that was always intended. It was purely coincidental that that section went through on the 2001 Act; it was not part of the 2002 Act. The Minister may have had a crash course in the history of this particular part of patient and public consultation. I hope he has, because it is very convoluted and hard fought.

Without the patients forums provisions, that is not a very useful piece of stand-alone legislation. There are no sanctions for failure to comply. Indeed, the provisions are extremely vague in the way in which they are applied.

Let me turn to something rather more specific which was deplored on these Benches and the Conservative Benches as not being nearly as satisfactory as the one-stop shop provided by community health councils. We had that debate on both Bills as they went through this House.

Section 15 of the National Health Service Reform and Health Care Professions Act 2002 provides for the establishment of patients forums. Such forums have very specific duties under that section. They must monitor and review the range and operation of services provided by, or under arrangements made by, the trust for which it is established; obtain the views of patients and their carers; provide advice and make reports; make available to patients and their carers advice and information about those services; and so on. These are very specific provisions.

Section 16 provides additional functions for PCT patients forums. The Government have simply provided for PCT patients forums to have a degree of responsibility for reporting on foundation trusts. But there is no extension of the power, for instance, to insist that foundation trusts respond to the concerns of the PCT patients forums. Ultimately, no separate patients forum is specifically provided for by amendment to Section 15 of the 2002 Act. That is a major hole in the middle of the Bill, which the amendments are intended to remedy.

There are other aspects which the Government have provided for. They give the Commission for Patient and Public Involvement in Health a role in relation to foundation trusts. However, it appears that they have very little capacity to fulfil that and none of that makes up for the fact that no patients forums will be provided for in the Bill.

Having set up the architecture of patient and public involvement for individual NHS trusts, it seems inexplicable that the Government have gone down this route. Do they believe that the board of governors will fulfil this role? We heard, as we went through the Government's provisions, that the role of the board of governors will be utterly minimal. There is nothing like the detail setting out what kind of public involvement mechanism there will be for the board of governors. So far as one can see, the role of the board of governors will simply be to elect the non-executive directors.

This seems a very shaky model, particularly when the Government were extolling its virtues. Indeed, they extolled its virtues on the basis of the recommendations of the Bristol inquiry. The Bristol inquiry put forward a model which the Government claimed to be implementing when putting forward the patients forums. I have not looked back at the precise form of the parliamentary commitment given by Ministers as the legislation on patients forums went through, but it seems a far cry from the Government's commitment to patient consultation and involvement at the time that both pieces of legislation went through for the Government now to say that foundation trusts will not be included in that.

There is grave disquiet on these Benches. It seems that what the Government will eventually allow to happen is the withering away of patient information and consultation. That seems a somewhat extraordinary step only a year after the passing of the 2002 Act. We need considerable tightening up in this area. I very much hope that the Government will have a change of heart on this matter and move forward to put foundation trusts on all fours with NHS trusts. I beg to move.

1 p.m.

Earl Howe

I rise to support the noble Lord, Lord Clement-Jones, in all that he has said. He has put the case extremely well. Only a few months ago Parliament agreed to the creation of patients forums as successors to community health councils on the clear understanding that every NHS trust and every PCT would have one; in other words, both providers and commissioners. Never was there even a hint from Ministers that the creation of foundation trusts would render those assurances null and void as regards the providers. Only when this Bill was published did we realise that the goalposts had been moved even before they had been planted into the ground. So now, just as the new national system of patient and public involvement is being rolled out in statutory instruments, we are engaged in debating a Bill which ensures that that system will be condemned to a limited span of life. It is a state of affairs that must be unique in parliamentary history and demonstrates either a lack of candour by Ministers originally or else—which I find more likely—policy-making on the hoof and simply a disregard for undertakings given.

The argument that patients forums are no longer needed because of patient representation on boards of governors was dealt with very well by the noble Lord. It is an argument that rests on a false premise. Accountability has three strands: the governance strand; in other words, the mechanism by which an organisation is controlled and managed to ensure that it delivers; the scrutiny strand to make sure that what has been promised is properly delivered; and patient and public involvement, which influences the delivery of services to match the needs of users. Neither scrutiny nor patient and public involvement can be done in-house. They require an arm's length relationship to ensure impartiality and to avoid conflicts of interest. Governors are an intrinsic part of their organisation. Their lack of impartiality will mean that they cannot also be scrutineers. To blur the distinction between those three strands of accountability is bound to lead to all three of them being compromised.

It is no good the Government saying—as they do— that PCT patients forums will perform the scrutiny and involvement roles in foundation trusts. The remit of a PCT patients forum in this context is a much more limited one, as the noble Lord correctly said. At the end of the day foundation trusts can ignore what they say. That is a long way from the kind of influence and leverage that patients forums will have in ordinary NHS trusts. The absence of a duty to create a patients forum in every foundation trust should not be looked at in isolation, I suggest. It should be seen against the background of an absence of legal accountability elsewhere. Neither governors nor, indeed, members of a foundation trust are accountable in law to anyone at all.

The Government are saying that it is up to the constitution of each foundation trust to determine whethe there is a patients forum within the hospital. That is one instance where I could have wished that the Government had chosen to be more prescriptive, not less. That lays me open as an easy target for the Minister but I would find it surprising if he did not agree with me—as Ministers have stated repeatedly in the past—that a patients forum should be seen as one of the essential checks and balances in the delivery of a responsive and patient-centred health service.

Baroness Pitkeathley

There is one thing of which there can be no doubt and that is this Government's complete commitment to the absolute necessity of putting patients and their families absolutely at the centre of the NHS. We have ample evidence of that in the setting up of the Commission for Patient and Public Involvement in Health, the other arrangements and, indeed, the huge consultation exercise which is going on at the moment in the Department of Health about patient and public involvement. The governance arrangements for foundation trusts offer the opportunity to further this issue. There can be absolutely no question of a withering away as the whole issue of patient and public involvement has now gained such momentum that no provider of health services can ignore it. The absence of specific duties for patients forums within the foundation trust structure is an anomaly. I very much hope that the Minister will be able to reassure us about the Government's continued commitment to ensuring the maximum patient and public involvement in foundation trusts as throughout the rest of the health service.

Baroness Finlay of Llandaff

I should have liked to add my name to these amendments but due to a clerical oversight on my part 1 did not. Of course the Government have tried to put the needs of patients and their families at the heart of things. Like the noble Baroness, Lady Pitkeathley, who has just spoken, I view this matter as an oversight. I am flabbergasted that these amendments were not incorporated in the Bill before it reached us.

I have a major concern regarding patients who are extremely ill. They will be in-patients in the foundation hospitals. They are quite different from the medically well who will constitute the public who will be consulted and may join a board of governors. They are very different from the medically slightly unwell who will probably express opinions out in the community. When patients are very ill, no one should underestimate how vulnerable they are and how difficult it is for them to express concern or dissatisfaction with any aspect of their care. Attention to detail is absolutely crucial in improving the quality of care that they receive. Without a patients forum right at the heart of the provider who is providing services for these very ill people, I fear that their vulnerability could be overlooked and that they could be subject to a paternalistic and, dare I say, even arrogant approach by the management of a foundation trust who, for whatever benevolent reason, believe that they know best what is right for those patients and do not give them a forum in which to express themselves. I find it astounding that we do not establish a patients forum right at the heart of this measure. I urge the Minister to look very seriously at the proposals before us.

Baroness Carnegy of Lour

Once again the noble Baroness, Lady Finlay, has reminded us what it feels like to be inside a hospital. We in this House find it easy to conceive how the public will view these hospitals. We can imagine how the members of a trust will view the hospital. We can imagine how they will feel about the board of governors and so on.

In hospitals, where there are vulnerable people— and almost all patients will be vulnerable, especially long-term patients—there must be some mechanism. Most of us who visit people in hospitals have seen the problems there and how difficult it is for families and patients to express their complaints. For example, people may want to complain about the way in which they are fed—about whether it is ensured that they can get the nourishment that they need and reach the cup of tea that has been served up. There are all those small things that people find it very difficult to complain about, on which a person's life may depend.

I hope that the Minister does not simply tell us how the governors will be able to deal with those important matters. I cannot see how a trust can operate properly without a mechanism to deal with them.

Lord Hunt of Kings Heath

I agree with my noble friend Lady Pitkeathley. I am disappointed by some comments made by noble Lords on the matter, because they display a lack of trust in the leadership of foundation trusts in ensuring that there will be proper and effective patient involvement in their activities. I hope that we shall not be prescriptive and that we will allow each foundation trust to make its own arrangements.

I simply ask noble Lords to consider the consultation documents issued by applicant foundation trusts in the first wave. What is so impressive about that documentation is how much effort and focus has been devoted to the arrangements that they want to make to ensure that public and patients are involved and can make their views known. It is very unlikely that any future foundation trust will want to go forward without having robust patient involvement arrangements. I hope that we shall show some trust in those organisations to make their own arrangements, subject to the overriding considerations in the Bill.

I agree with the noble Lord, Lord Clement-Jones, in his reference to the distinction between patient representation and the work of governing bodies. It is very important that the two are kept distinct. Governing bodies are not there to carry out the role of patients forums or organisations like them. I am worried that a number of foundation trusts are referring to the governing bodies as patient councils. They are not patient councils or members' councils but governing bodies. It is very important to keep that distinction.

1.15 p.m.

Lord Warner

The architecture that we have constructed is not quite as shaky as the noble Lord, Lord Clement-Jones suggested. 1 am grateful for the points made by my noble friends Lord Hunt and Lady Pitkeathley.

The Government totally accept the need for independent patient involvement. Patients need to be satisfied that their interests are considered at all stages of patient care. However, independent scrutiny and monitoring of NHS foundation trusts will be carried out by PCT patients forums and overview and scrutiny committees of local authorities. Advice about patient and public involvement will be provided to them by the Commission for Public and Patient Involvement in Health. That is the context in which we are discussing the matter.

PCT patients forums will carry out a range of roles with respect to NHS foundation trusts, including monitoring and reviewing services commissioned by the PCT; monitoring how successful NHS foundation trusts are at achieving involvement, including some capacity for inspection; advising NHS foundation trusts on the range and operation of services that they provide, and on encouraging involvement; representing the views of members of the public; and being able to refer relevant matters to relevant bodies—for example, the independent regulator or the overview and scrutiny committee. Those bodies will be engaged in the work of NHS foundation trusts.

Individual NHS foundation trusts may decide to put in place arrangements reflecting many of the functions of patients forums, if they believe that such arrangements are a helpful way in which to discharge their accountability and ensure patient-led monitoring mechanisms. There is nothing in the Bill to prevent trusts from going down that path in the application that they make for foundation trust status.

PCT patients forums will also promote the involvement of members of the public in consultations, decisions and policy development by NHS foundation trusts, and advise on encouraging involvement and on compliance with their Section 11 duties. As I said, they will carry out other roles, too. There is extensive provision for patient involvement in the new world opening up with NHS foundation trusts.

However, I recognise that there are strong feelings and concerns about the issue across the House, and I am prepared to give an assurance that we will consider the issue further. More specifically, we shall certainly consider whether we can give more reassurance to Members of this House and those outside who feel so strongly, by requiring NHS foundation trusts initially to have a patients forum, while retaining the discretion to disband them if, subsequently, they seem unnecessary, given the other arrangements in place locally that I have outlined. We should not dismiss the present architecture quite as quickly as many noble Lords have done, but I am happy to give the assurance that we will carefully consider an alternative to provide more comfort for patient interests, and to show that we are really serious about patient involvement on the providers' side.

Baroness Carnegy of Lour

I wonder whether that is the right answer. It is the sort of answer that the Government are inclined to give—that we shall have a temporary arrangement and see what is necessary. It sounds all right, but if one was setting up a foundation trust it would be particularly irritating to have a temporary arrangement and then to have to think of something else.

Would it not be better to put into the Bill a provision that foundation trusts have a duty to have some arrangement for patient consultation? We should change the Bill, leaving foundation trusts to make the arrangement they want. Would that not be a better answer? I do not know what my noble friend Lady Cumberlege or the Liberal Democrats think about that, but it strikes me that that would be a better response from the Government.

Lord Clement-Jones

I welcome some of the Minister's words but, like the noble Baroness, Lady Carnegy, I have my doubts about the rather tentative way in which the Minister rounded off his response. We had a firm, hard assurance from the Government, but then we find that the actual words are very flabby when written down on paper. That is the problem with the measure on these Benches, and, I suspect, on the Conservative Benches as well.

Like the noble Baroness, Lady Finlay—although I am rarely flabbergasted by what the Government do— I am mildly surprised by the fact that they have not included the sort of provision that we have suggested. I should have thought that a way of creating a more acceptable context in creating foundation trusts would have been to bolt them into the patients forum structure.

The noble Lord, Lord Hunt, more or less alleged that we have a lack of trust in trusts. Of course, one can turn on the moral imperative in these circumstances, but it is not that we have a lack of trust in trusts. People tend to do what they are obliged to do, and it always creates a problem if there is an optional extra for which they have to find money out of existing budgets. One sees that in social care and, no doubt, if the amendment is not passed, we shall see it in health care as well. After all, the staffing costs and other costs of patients forums are met in existing NHS trusts through the Commission for Patient and Public Involvement in Health. That will not be the case for foundation trusts.

The noble Lord, Lord Warner, says that he totally accepts the need for patient and public involvement, but everything becomes conditional after that. He says, "If the trust believes", "There is nothing to stop them", and so on. There is no requirement. The PCT patients forum is of course a very different animal, as I explored in my opening remarks. Above all, there is no requirement on the foundation trust to respond to anything that a PCT patients forum says to it. The Government have deliberately omitted amending that provision in the 2002 Act. None of this is accidental or co-incidental. It is all utterly deliberate, which is depressing.

When the Minister talks about an alternative, I hope that he is going to consider seriously the alternative contained in the amendment, otherwise I assure him that the issue will come thundering back on Report. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 202 and 203 not moved.]

[Amendment No. 204 had been withdrawn from the Marshalled List.]

Clause 31 agreed to.

Clauses 32 to 34 agreed to.

Schedule 4 agreed to.

Clauses 35 to 37 agreed to.

Schedule 5 [Audit of accounts of NHS foundation trusts]:

Baroness Noakes moved Amendment No. 205: Page 128. line 37, leave out ", in the public interest,

The noble Baroness said: I shall speak also to Amendments Nos. 206 and 207. The audit provisions in Schedule 5 are rooted in the audit arrangements for local authorities. I remark in passing that they are a more logical fit with the imposition of the Audit Commission as auditors, about which the Liberal Democrats spoke earlier. The amendments seek to challenge one part of those arrangements in relation to public interest reports.

In the Bill, the Government have tried to create bodies that are accountable to their members. That is the driving force behind their proposals, as I understand it. The guide to foundation trusts referred to that as local public ownership and accountability. In the guide, which was issued in December, we were told that there would be, accountability mechanisms to local people",

most notably through governance arrangements that would define accountability to the local community. That is all very well. However, the audit arrangements are one of the strongest forces for underpinning accountability, and in them we find no mention of local members or the local community.

I suggest that that is another of the confusions at the heart of the Bill's approach to foundation trusts. They are local when it suits the Government to make them local, but not otherwise. In effect, our amendments replace the concept of public interest with the interest of the members of the trusts. Public interest may be too restrictive a notion in terms of what auditors should report on as a result of their audit effort. Local foundation trusts are not local authorities. They should be primarily accountable to their members according to the Government's doctrine.

Many other aspects of Schedule 5 could usefully be amended to reflect the role of the board of governors, which appears nowhere in it. I hope that the Minister will be prepared to look again at those arrangements to reflect the kind of accountability that the Government say that they espouse. I beg to move.

Lord Warner

We found the amendment slightly surprising. Membership provides a mechanism for the public to get involved in the running of hospitals, but NHS foundation trusts do not use membership as a means of deciding who gets what type of service. They have a much broader responsibility, providing NHS services for the benefit of the public generally, not only for the members of the NHS foundation trust. It is therefore appropriate that the auditor should determine whether a report should be made for the interest of the public generally and not only for members.

The amendment seems to narrow the obligations of the auditor and leave the general public out of the picture. Whatever the intentions may have been, the amendment does not benefit the public because it narrows the auditor's responsibilities.

Baroness Noakes

I thank the Minister for that brief response. I think that he failed to deal with the point that I put to him, which was that nothing in the schedule related to the accountability structures that the Government have alleged that they are creating. Accountability to the members of the trusts is completely absent from Schedule 5. I shall reflect on his answer and perhaps table a raft of different and more extensive amendments to consider on Report. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 206 and 207 not moved]

Schedule 5 agreed to.

Clause 38 [General duty of NHS foundation trusts]:

Baroness Barker moved Amendment No. 208: Page 15, leave out line 6 and insert "ethically, and put and keep in place arrangements for the purpose of monitoring and improving the quality of health care provided by and for that body

The noble Baroness said: The amendment is very simple but none the less important. Clause 38 sets out the general duty on NHS foundation trusts that they must exercise their, functions effectively, efficiently and economically". Nowhere does it require hospitals to act ethically. Our amendment would restore that fundamental duty in healthcare to foundation trusts.

One could recite many different examples in which hospitals have acted efficiently and economically, but under the regime put forward for foundation trusts they would not be required to act ethically. Medical ethics might at times not be efficient or economic, but are nevertheless important. It is perhaps no surprise that my colleagues in another place considered the amendment when it was revealed that A&E services had effectively been completely distorted earlier this year, to make sure that A&E performance figures met the time scales put on them. That may have been a demonstration that they could work efficiently and economically, but I am not sure that it was at all ethical.

I am not a doctor and do not pretend to be. However, I am sure that in many different medical fields there are efficient and economic practices. Whether they are ethical or not is a separate matter. The issue that comes to my mind is the performance of caesarean sections in maternity provision.

It is wholly wrong that foundation trusts should not be subject to such a duty. I am sure that their staff would wish to act ethically. Therefore, the provision should be in the Bill. We talked earlier about a duty of equality, and the amendment is about the quality of the care provided by the hospitals. The amendment may be simple, but it is of fundamental importance. I beg to move.

1.30 p.m.

Baroness Finlay of Llandaff

I support the amendment. I know that everyone is hungry and I do not wish to give a lecture on bio-ethics, but I remind the Committee that as well as autonomy, beneficence and non-maleficence, there is also the principle of justice. Justice demands that the patient has the right to the best treatment within the resources available, but it also demands the just allocation of resources. It is completely dependent on management to allow the just allocation of resources and to allow the other principles of ethics to be invoked. Beyond those four principles, there are also issues surrounding scope and the size of the decision, and so on. That is a fundamental and important principle if foundation trusts are really to serve the population they are intended to serve; that is, people who are extremely vulnerable.

Baroness Andrews

Would that we had time for a seminar on medical ethics. We would probably enjoy it a lot, lunchtime or no.

As the noble Baroness has said, it is a simple but important amendment and I understand the case that she makes. Under Clause 38, the independent regulator will monitor the NHS foundation trusts' performance against that duty through their audited annual financial statements. I want to make sure that that is clearly understood.

Under Clause 44, an NHS foundation trust will be under a duty to put and keep in place arrangements for the purpose of monitoring and improving the quality of healthcare provided by and for that body. It would be an unnecessary duplication to include that duty also in Clause 38, but specific only to NHS foundation trusts.

I would ask whether the term "quality" would imply an ethical dimension. I hope that it would always do so. However, I can reassure the noble Baroness that foundation trusts will be bound by the Human Rights Act 1998. That will ensure ethical and equitable behaviour. On those grounds, it is unnecessary to duplicate a duty in the legislation.

Baroness Barker

I thank the Minister for her thoughtful answer. I was worried to hear her say at the beginning of her response that the independent regulator would review foundation trusts through their financial statements. We are talking a completely different language when discussing ethics.

Perhaps the Minister shone a torch on the reason for including the amendment in such a belt-and-braces fashion. 1 admit that it is a belt-and-braces fashion and there is a good reason for it. When one looks at the Bill in its entirety and sees the number of words devoted to finance, efficiency, and so on, the one area in which it is deficient above all others is that of ethics. I will reflect further on the Minister's suggestion that quality implies ethics. When we reach Clause 44, I do not doubt that we shall discuss the issue further. For the moment, and in view of the hour, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 38 agreed to.

Clause 39 agreed to.

Lord Warner

This may be a convenient moment to take a break in the Committee's proceedings until after Starred Questions. I beg to move that the House do now resume.

Moved accordingly, and, on Question, Motion agreed to.

House resumed.

Baroness Andrews

My Lords, I beg to move that the House do now adjourn during pleasure.

Moved accordingly, and, on Question, Motion agreed to.

[The sitting was suspended from 1.34 to 2 p.m. for Judicial Business and to 3 p.m. for Public Business.]