Clause 2 - Independent Regulator of NHS Foundation Trusts
Health and Social Care(Community Health and Standards) Bill
9:30 am
Mr Andrew Lansley (South Cambridgeshire, Conservative)
After only 12 hours of discussion, we have leapt to line 10 on page 1 of the Bill, where we come to clause 2. The purpose of clause 2 is to establish the office of the independent regulator of NHS foundation trusts and to introduce schedule 2. The amendments that we are debating are not concerned solely with clause 2, but stretch into schedule 2 as well. I was tempted for a moment to summarise the purpose of all the other amendments—I had even drawn up a list of them—but thought better of it. Other members of the Committee may like to debate those amendments, as they stray into subjects that are distinct from, although related to, my two amendments. It is those two amendments to which I shall speak.
The purpose of amendments Nos. 102 and 101 is to change the structure of the office of the independent regulator from one that consists of a person appointed by the Secretary of State to one of up to five persons, including a chairman, that has been appointed by the Secretary of State on the advice and recommendation of the NHS Appointments Commission. Amendment No. 102 would change ''officer'' to ''office'', and amendment No. 101 would do the more substantial job of creating an office of up to five persons appointed on the advice of the Appointments Commission.
There are two amendments that relate directly to mine. Amendment No. 169, in the name of the hon. Member for Oxford, West and Abingdon, seeks to appoint up to five persons to the office of the independent regulator, but it would be defective if we did not agree to amendment No. 102. Amendment No. 98, in the name of my right hon. Friend the Member for North-West Hampshire, looks for consultation with the Appointments Commission; his amendment is, to all intents and purposes, similar to part of my amendment No. 101.
What is this all about? It is about the manner in which regulators work in government. As my hon. Friend the Member for West Chelmsford said, we will
go on to discuss the substance of the work of the regulator and the extent to which the regulator is to be independent. For the sake of this argument at least, let us work on the basis that the regulator is independent and has substantial responsibilities. We can take that as read for this purpose.
How should regulators work? This is a non-ministerial department, and I cannot see a major difference between it and many of the other regulators appointed by Government for the purpose of regulating utilities. It is similar to Oftel—or, as it will be—Ofcomm, Ofwat, Ofgem, the Civil Aviation Authority and Postcomm. There are several regulators, most of which were initially established as single regulators. The directors general of the electricity supply, the gas supply, the Office of Fair Trading, Oftel and the water supply were all established as single regulators. However, all of that is changing, Mr. Griffiths.
There may be other documents, but the one that I used to establish this proposition was the Better Regulation Task Force's report, which was published in July 2001. The task force studied economic regulation. For these purposes, I dispute any assertion that what is proposed is not a parallel organisation, even though, in the strictest sense, it is not an economic regulator with the same functions as some other economic regulators. The manner in which it works is similar to many other regulators, although it may not exercise competition powers or a price control mechanism. Nevertheless, the organisation's relationship with those who are to be regulated is similar in many respects; it is a sort of licensing process.
With regard to the third recommendation, the then chairman of the task force, Lord Haskins, said of the questions that those involved asked themselves:
''Our final question proved the easiest: there was widespread agreement that regulators should be run by properly appointed boards.''
The task force's second recommendation concerns the question of whether regulators should be individuals or boards. The task force concluded:
''Regulatory regimes should be consistent and predictable. There is a trend away from individual regulators to a board structure—we support this development.''
The task force went on to recommend:
''The boards of regulatory bodies should include both executive and non-executive members. They should be appointed for their expertise rather than to represent stakeholder groups.''
The report was published in July 2001, and the Government responded in April 2002. They accepted the broad thrust of the recommendations, and that led directly to the consideration of legislative change in the water industry.
I confess that I have not taken the trouble to find the references, but I think that the Water Bill 2003 is changing Ofwat from an individual regulator to a board structure. For my sins, I have spent a considerable time discussing the structure of Ofcom, which will be established as a board. The Utilities Act 2000 established Ofgem on a board structure, where
previously there were individual regulators. The Government's response stated that
''Ofgem introduced a management board structure in advance of legislation—and they believe that their new board structure has increased the legitimacy and authority of their decision making process.''
The response went on:
''Ofwat has recently announced the strengthening of its decision making process by announcing its intentions to recruit non-executive directors to the OFWAT Board . . . The Government can see that a move to a more formal board structure could bring benefits.''
The Government have accepted that individuals should not be regulators, but that regulators should be boards. They have done so because they want to avoid the personalisation of the role of the regulator. It is one thing for political argument to swirl around the nature of the person who is Secretary of State, but it is another thing for an appointed regulator to be in that position. The Government have accepted the proposition in order to escape that.
The Government have also done it to avoid inconsistency in decision making, particularly at the point where individual regulators are changed and there may be something of a through-train between boards. Thus, some board members remain, even though, for example, the chairman or a chief executive of a regulator may change.
Also, this is being done to have less arbitrary decision making. In the past, there was not only arbitrary decision making by regulators, but severe tensions that grew up between those who were regulated and the regulator, because it was about personalities and not board structure. The proposal will also create more transparent decision making because the board structure itself will ensure that decisions are the product of open discussion rather than private contemplation.
I am nonplussed. When I saw that there was to be an independent regulator, I assumed that it would be an office with a board, because that structure has been adopted in principle across Government. It seems that the Government have not been joined up on this. Richmond house is not 200 yd from the Cabinet Office in this context, but about five years. The Department of Health has not caught up with the way in which regulators work in government. For my sins, I have spent much time discussing how they work. We may later discuss some further aspects of best practice that have not been incorporated into the legislation.
However, one thing is perfectly clear; the Better Regulation Task Force and the Government themselves believe that regulators should be in a board structure that combines executive and non-executive members. Those members should be appointed for their expertise rather than on the basis of representing stakeholder interests. That is not reflected in clause 2 or in schedule 2, as it should be. My amendments would move matters in that direction. However, it would be better if the Government were to make a commitment to reform the structure of clause 2 and schedule 2 to ensure that those principles, which are accepted elsewhere in government, are absolutely clear.