Clause 165 - Mergers

Health and Social Care (Re-Committed) Bill – in a Public Bill Committee at 1:00 pm on 14 July 2011.

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Amendment proposed (this day): 194, in clause 165, page 147, line 29, after ‘applicant’, insert ‘(that is an NHS foundation trust)’.—(Paul Burstow.)

Question again proposed, That the amendment be made.

Photo of Roger Gale Roger Gale Parliamentary Assembly of the Council of Europe (Substitute Member)

I remind the Committee that with this we are discussing Government amendment 196 and clause stand part.

Photo of Owen Smith Owen Smith Shadow Minister (Wales)

It is a pleasure to serve under your chairmanship, Mr Gale. When I was speaking earlier, I was asking a few questions of the Minister. I will briefly refresh his memory with a quick run-through of those questions. When we were last talking, I could not bring to hand the National Health Service Act 2006, which is relevant to the clause, but I now have it.

The clause effectively compels foundation trusts seeking to merge to apply to and alert the regulator. My first question was: which regulator? As we learned on Tuesday, there are to be several regulators, or arms of regulators,  involved in mergers: the Office of Fair Trading, Monitor and Monitor through or with the Co-operation and Competition Panel.

The relevant section in the 2006 Act is section 56, “Mergers”, which says simply:

“An application may be made jointly by—

(a) an NHS foundation trust, and

(b) another NHS foundation trust or an NHS trust, to the regulator”.

Again, which regulator? Will the Minister clarify how it will be distinguished?

When the Minister spoke to us on Tuesday, there was some confusion. He suggested that it was on our part, but I suggest that it was not entirely clear what he was saying about who will do what. I will not quote him at length, but the key question is this: is it the case that the OFT will be responsible for considering only mergers between a foundation trust and a foundation trust, and/or where the turnover of one or both of the trusts is above the £70 million threshold?

Will Monitor consider mergers between foundation trusts and non-foundation NHS trusts? I think that that was what the Minister implied on Tuesday, and the CCP thinks that that is the case. If so, what will happen to the £70 million threshold where a non-foundation trust and a foundation trust merge? Will it disapply at that point? If so, where does it say so in the Bill? That is not clear to me at all.

My third question concerned expertise; I was only halfway through it when we broke. Does the OFT have the expertise to engage in such analysis? The key point is that the Minister said on Tuesday that the OFT has discretion not to refer where patient benefit outweighs the adverse effects on competition. Patient benefit includes patient choice, innovation and high-quality service provision. What expertise does the OFT have in respect of health care? As the hon. Member for Southport pointed out, if one rings the OFT and asks to be put through to its health division, one will be told that it does not have one. I therefore contend that its evident expertise in health care is extremely limited, to say the least.

The other point that I wish to make about expertise concerns Monitor and the Co-operation and Competition Panel. On Tuesday, the Minister said that it might be suggested that Monitor could consider all mergers—NHS and private. However, there are several complications with that approach, not least that mergers is a specialist area. I agree that the Office of Fair Trading is the expert in respect of mergers in a commercial setting.

The Minister went on to say that with the lower number of mergers that will be caught under the higher £70 million threshold—it is not clear whether that applies to NHS trusts as well as foundation trusts—Monitor would struggle to build up the expertise to consider those appropriately. I thought that that seemed an odd thing to say given that Monitor is ostensibly the sector-specific expert and, as we have now learned, it will be operating through the CCP.

I spoke to people at the CCP and was told that the CCP has so far dealt with 160 mergers. When I said to the Minister on Tuesday that the CCP principally dealt with mergers, he said that it does lots of other things apart from mergers. There are some other things that it does, but so far—and this is its information—it has dealt with 160 merger cases, five to 10 conduct cases,  around five procurement disputes and two market studies. Therefore, it has dealt with 160 merger cases compared with about 20 other things. I will come back to the question on market studies in a moment.

Surely the Minister will concede that if Monitor is going to operate through the CCP, there can be no question of its not having expertise to deal with mergers, because the CCP has dealt with 160 of them. What is this issue about its not having sufficient expertise? Crucially, the question of cost then raises its head. If the CCP has successfully dealt with 160 merger cases in its short period of office, at a cost of £2.8 million per annum, can it really be necessary to create Monitor, which apparently will not have the expertise to deal with mergers, at a cost of £130 million per annum?

It would be simple if we just used the expertise of the CCP. We could even put it on a statutory footing. Apparently, the fact that it is not on a statutory footing is a problem because there is a danger that its words will not be heeded when it protests about the conditions of a merger. It is simple—put the CCP on a statutory footing and save £127.5 million.

Photo of Kevin Barron Kevin Barron Chair, Standards and Privileges Committee, Chair, Standards and Privileges Committee

My hon. Friend will have read, as I am sure all members of the Committee have, that the Government’s response to the Future Forum said exactly that. It said:

“We will maintain the existing competition rules for the NHS introduced by the last Government”— who did this without all this statutory regulation that we are going through now—

“(the Principles and Rules for Co-operation and Competition), and give them a clearer statutory underpinning.”

That is not the case in this Bill, and we have not been told why.

Photo of Owen Smith Owen Smith Shadow Minister (Wales)

I am grateful to my right hon. Friend. I am not so sure that that is the case. Perhaps they are getting a statutory underpinning, but only through being folded into Monitor. That seems to be what is happening.

Photo of Owen Smith Owen Smith Shadow Minister (Wales)

Absolutely, it is not. It is not clear at all. My right hon. Friend is absolutely correct to say that it is not clear, and that applies to so many other things in this Bill.

What is equally unclear is how this body, which is evidently expert—it has dealt with 160 mergers at a cost of just under £3 million per year—will be configured now that it has to sit within Monitor. If Monitor will be operating through it, what happens to the way in which it is structured right now? At the moment, it has a panel of very eminent and expert people, including Lord Carter of Coles, Andrew Taylor, Guy Beringer QC, John Wooton, John Swift QC, Professor Peter C Smith, one of the world’s leading health economists, and Professor Dame Janet Husband. They are all eminent people who are expert in health care and competition law.

Are all those people being kept on in addition to the non-executive directors who will sit at the top of Monitor? Are we going to have a set of non-executive directors at the top, and then a separate panel of non-executive  directors advising an arm of Monitor—“the CCP division”, or whatever it is going to be called—that will apparently have around 15 staff and is the front end in dealing with competition? It all seems a bit confused to me, so I would be grateful if the Minister cleared up what will happen with respect to the panel and how exactly the CCP will work.

The final point that I would like to raise about this merger clause is about consultation, and the nature of the consultation that FTs will have to engage in before they consider a merger. The clause completely cuts from the 2006 Act subsections (5) to (10) of section 56, which is entitled “Mergers”. Crucially, section 56(8) says:

“In the course of the consultation the applicants must seek the views of—

(a) any Patients’ Forum for an applicant,

(b) the staff employed by the applicants,

(c) individuals who live in any area specified in the proposed constitution as the area for a public constituency,

(d) any local authority”— and so on.

That is an important clause, which essentially compels potential mergers, or mergees, to consult with the wider constituency. I would be grateful if the Minister pointed out where, under the new legislation, a similar duty is placed on them, or whether that might be specified in the licence conditions, as other things might be. Can he offer us a guarantee that that consultation will be specified in the licence conditions? I think that patients and the public around trusts that might be merged or might take up FT status would be extremely keen to hear that reassurance from the Minister.

Photo of Paul Burstow Paul Burstow The Minister of State, Department of Health

Thank you, Mr Gale; it is a pleasure to serve under your chairmanship for this last home stretch of our Committee deliberations.

To inform this debate on clauses 165 and 166—and, I hope, to avoid the confusion that exists around these issues—I would like to clarify what we are proposing on three related issues. I mean, first, the types of mergers that NHS trusts and foundation trusts will be able to participate in; secondly, the requirements for NHS trusts and foundation trusts to secure approval for such transactions; and, thirdly, the arrangements for reviewing the potential impact on competition of such transactions.

I should say, however, that so far much of this debate has centred on clause 71, which we debated on Tuesday. Clause 71 was about mergers in relation to activities. The clauses before us today are about organisational mergers. They are distinct things, and the opportunity to explore mergers around activities, which is what the Enterprise Act 2002 provides for, came when we were scrutinising clause 71. However, we have already raised some of these issues in this stage, so I want to ensure that there is clarity about both by the end of the scrutiny of this set of clauses. There are clear distinctions, which is, I think, why there is some confusion on the part of the hon. Member for Pontypridd and some of his hon. Friends.

For context, it is also important that this debate should recognise as a first-order issue the legal difference between the status of NHS trusts and foundation trusts. Unlike foundation trusts, NHS trusts remain subject to the Secretary of State’s powers of direction. As a  consequence, all mergers involving NHS trusts, whether these are around activities or organisational issues, continue to require the Secretary of State’s approval. Autonomous, accountable foundation trusts, however, would not be subject to the Secretary of State’s direction, as established in legislation brought forward by the previous Government in 2003, and then in 2006.

I hope that hon. Members will forgive me if I refuse to take interventions at this stage; I want to make sure that this is clearly on the record, so that hon. Members have a chance to be clear about where this all takes us.

The first issue is about what types of mergers NHS trusts and foundation trusts would be able to participate in. Legislation would permit organisational mergers between foundation trusts, between NHS trusts, and between foundation trusts and NHS trusts. An organisational merger would involve both organisations ceasing to exist and a new one being established by statutory order. Legislation would not permit an organisational merger between an NHS trust or a foundation trust and a private entity.

An acquisition by an NHS trust or foundation trust would be a different form of transaction, where the acquiring trust would continue to exist. The legislation would permit a foundation trust to acquire all or part of another foundation trust or NHS trust, and will permit an NHS trust to acquire all or part of another NHS trust. However, legislation would not allow an NHS trust to acquire an NHS foundation trust, nor for either an NHS or foundation trust to be acquired by a private entity.

Joint ventures involving an NHS or foundation trust would be different again. These transactions would involve the merger of activities between two or more organisations—for example, providing pathology services, but the organisations each continuing to exist separately.

I will deal with some of the hon. Gentleman’s other specific questions, then come on to the second issue of approval requirements for mergers involving NHS or foundation trusts.

The hon. Gentleman asked about the Co-operation and Competition Panel continuing to review trust-to-trust and trust-FT mergers. The Secretary of State, as I have said, will continue to have the ability to seek the CCP’s advice on these specific mergers where it relates to an NHS trust merging or a trust and an FT merging. The OFT will not review mergers involving NHS trusts. As we discussed while debating clause 71 on Tuesday, the CCP will transfer to Monitor. My right hon. Friend the other Minister set out last week the basis on which that would be given effect in regulations and elsewhere.

A question was also asked about the expertise of the OFT—again, we debated that at some length on Tuesday in clause 71. The OFT has experience and expertise in regard to mergers and will always seek the views of Monitor, and through it, the CCP, on FT-to-FT mergers.

I move on to the second area, the approval requirement for mergers involving NHS trusts or foundation trusts. Any form of merger involving an NHS trust would remain subject to the Secretary of State’s approval, as now. That is not the case for foundation trusts, and  clauses 165 and 166 apply to organisational mergers and acquisitions where two whole trusts merge, or a trust acquires another trust.

Clause 165 deals with a merger between a foundation trust and another foundation trust or an NHS trust, and clause 166 deals with a foundation trust acquisition of another foundation trust or an NHS trust. The current wording of clause 165(2), which deals with mergers, and clause 166(2), which deals with acquisitions, requires that foundation trusts obtain the approval of the majority of their governors before a merger or acquisition can take place. That is an important safeguard and assurance for the local community, from which those governors come, and an essential part of the increased accountability that the Government want to see in this model.

The purpose of our amendments 194 and 196 is to clarify that the requirements for governor support apply only to foundation trusts. When it comes to reviewing mergers involving NHS trusts and foundation trusts—this is the third strand—as to their impact on competition, we agree with the previous Government’s principles and rules of co-operation and competition. Those require that mergers involving NHS trusts or foundation trusts should be permitted only

“where there remains sufficient choice and competition or where they are otherwise in patients’ and taxpayers’ interests”.

That was in the principles and rules for co-operation and competition that were in place in March 2010; they have not changed since the election one iota in that regard. That is consistent with the principles of the UK’s general merger control regime, as set out in the legislation introduced by the previous Government under the Enterprise Act 2002, and is reflected in the approach to merger reviews currently operated by the Co-operation and Competition Panel.

However, there is currently legal uncertainty as to when and where the 2002 Act would apply to mergers of activities involving foundation trusts. As a result, under the current arrangements for review of mergers involving foundation trusts by the Co-operation and Competition Panel, there is always potential risk of duplication or—worse still—double jeopardy.

That is why we have proposed under clause 71 that mergers involving foundation trusts should be referred to the OFT for review. That would establish a single merger control regime for foundation trusts and reflect the models of sector regulation and concurrency that the NHS Future Forum supported, and it would minimise duplication of specialist skills and expertise by doing so. We would always expect the OFT to take advice from Monitor and secure objective evidence of the costs and benefits of proposed mergers, including the likely impact on access to the quality of care.

For NHS trusts, we do not face legal uncertainty, in so far as we would not expect an NHS trust under the Secretary of State’s direction to be subject to UK merger controls of activities merging under the 2002 Act. Given that, it would not be appropriate for mergers involving NHS trusts to be referred to the OFT. In any event, we are committed to supporting all NHS trusts to achieve foundation trust status, or become part of a foundation trust in due course. However, during the transition, we would still wish to consider the potential impact on patients and patient choice, and competition  of mergers involving NHS trusts, in line with the principles set out by the previous Government, as I have just reported. That is why the Secretary of State would retain the ability to request advice from Monitor through the Co-operation and Competition Panel, as I have set out.

I hope that I have been able to address the concerns that still seem to stem from our debate on Tuesday and the amendments discussed today.

Fiona O'Donnell (East Lothian) (Lab) rose—

Photo of Roger Gale Roger Gale Parliamentary Assembly of the Council of Europe (Substitute Member) 1:15, 14 July 2011

Order. I do not regard it as good practice to call hon. Members once the Minister has wound up. The Opposition spokesman has indicated that he wishes to intervene.

Photo of Owen Smith Owen Smith Shadow Minister (Wales)

I do not think there is any confusion among the Opposition about the extent to which the Enterprise Act differentiates activities. The Act is clear about activities that lead to two bodies no longer remaining distinct entities and, in effect, merging. The issue is the traditional non-applicability of that to NHS bodies. That is where legal doubt enters.

I am grateful that the Minister has confirmed that the OFT will not review mergers involving NHS trusts. That prompts the question I asked earlier: does the £70 million threshold not apply to that?

Photo of Fiona O'Donnell Fiona O'Donnell Labour, East Lothian

I apologise, Mr Gale. Over the lunch break I lost track of where we were. My hon. Friend will be aware that the Minister of State, the right hon. Member for Chelmsford, has questioned a Scottish MP taking such an interest in the Bill, but on Tuesday the other Minister, in answer to my hon. Friend the Member for Leicester West, said,

“The OFT would therefore be required to address mergers between providers of health care services, social care services or health care products…There would also need to be special arrangements for mergers involving organisations in Scotland, Wales, Northern Ireland or overseas.”––[Official Report, Health and Social Care (Re-committed) Public Bill Committee, 12 July 2011; c. 457.]

Has my hon. Friend the Member for Pontypridd received any clarity? Are we going to see mergers between English and Scottish, French and English, English and Welsh organisations? Is he able to enlighten me?

Photo of Owen Smith Owen Smith Shadow Minister (Wales)

I am grateful to my hon. Friend for those important observations. [ Interruption. ] The Minister says from a sedentary position that he was quoted out of context. I challenge him to find the reference and look back at it, because I do not think he was. That comment about Scotland, Wales and foreign mergers was dropped out of a wide blue sky by the Minister, in the midst of a discussion about clause 71. At the time it raised a question in my mind: is it possible for a merger to take place between an NHS trust or a foundation trust in England and one in Scotland or Wales? I think that is wholly impossible, unless the Minister is rewriting the rules of devolution as we go along, but if it is possible to do it, that is news to us and we should be grateful if he enlightened us.

Photo of Kevin Barron Kevin Barron Chair, Standards and Privileges Committee, Chair, Standards and Privileges Committee

Does my hon. Friend think that the Government’s response to Future Forum which talked about giving the Co-operation and Competition Panel a “statutory underpinning” to ensure it retained its “distinct identity” looks a bit thin when no changes are being proposed to statute to make good that promise?

Photo of Owen Smith Owen Smith Shadow Minister (Wales)

On many occasions during this long Committee, my right hon. Friend has pointed out gaping holes in the Bill and he has just identified yet another.

A gaping hole that I raised with the Minister during my last set of remarks was the rationale for excising section 56(5) to (10) of the 2006 Act, which relates to consultation. I think the Minister was trying to indicate that the fact that more than half the governors of an FT would have to agree to seek a merger made it okay. I agree that that is a good provision, but I think he was implying that that was somehow sufficient safeguard for the local populace, and I am not sure that that is correct. Can he point to where else in the Bill it states, as it did in legislation introduced by the previous Government, that when seeking to merge trusts would need to go out to consultation with staff, the local populace and the local authorities. That is a crucial question and I should be grateful for an answer on that, as well as elucidation on the possibility of mergers with bodies in Wales and Scotland.

Photo of Paul Burstow Paul Burstow The Minister of State, Department of Health

On the point that is at the heart of the hon. Gentleman’s confusion, which was rehearsed again just now, we are debating under these clauses organisational mergers—where two organisations come together and cease to exist and are succeeded by a new organisation. On Tuesday we debated mergers of activities, where two organisations—

Photo of Paul Burstow Paul Burstow The Minister of State, Department of Health

I am trying to deal with the hon. Gentleman’s confusion. On Tuesday we were dealing with mergers of activities and the way they are regulated now and will be in future, in relation to the Enterprise Act 2002. That was clear in the way I set it out again today. I am surprised that the hon. Gentleman found it so surprising that clause 71, which is explicit about the application of the Enterprise Act, would not therefore apply the thresholds, which I shared and which he today has acknowledged are in that Act. He only discovered that afterwards, not having done his homework beforehand.

We have set out matters very clearly. I am still puzzled by the fact that on the one hand the Opposition have deployed arguments that suggest they are wholly opposed to the notion of concurrency and having a sector-specific regulator, while on the other they seem to be in favour of it. It is not clear whether they are for or against that, which is a great pity for those outside the Committee who are trying to understand the Labour party’s position. I urge that the amendment be made and that the clause stand part of the Bill.

Amendment 194 agreed to.

Photo of Roger Gale Roger Gale Parliamentary Assembly of the Council of Europe (Substitute Member)

Before we proceed, let me clarify the procedure. There is no rule, but custom and practice suggest that once the Minister has been called to wind up the debate, and given that I allow, as I did, a fair  amount of time for hon. Members on either side of the Committee to leap to their feet if they wished to intervene, I would not normally expect to call anyone from the Back Benches. It is up to the Minister to decide to what extent he wishes to answer points that have been raised; that is not the duty of the Chair to determine. Where the Minister indicates that he would prefer not to give way, but is prepared to take further interventions once he has sat down, that is a different matter. That is what happened in this case. I trust that clarifies it.

Mr Hood has already indicated that he does not anticipate a stand part debate on this clause and I will now shock the Committee further by indicating that I do not propose to have a clause stand part debate on clause 166 either, because the two amendments that we are debating, with the ones that have been called, deal with acquisitions. What I am saying to the Committee is that if there are matters relating to acquisitions that Members wish to raise, they may take the opportunity to do so as and when they catch my eye, if they catch my eye.

Photo of Paul Burstow Paul Burstow The Minister of State, Department of Health

I beg to move amendment 195, in clause 165, page 147, line 31, leave out paragraph (a).

Photo of Roger Gale Roger Gale Parliamentary Assembly of the Council of Europe (Substitute Member)

With this it will be convenient to discuss Government amendment 197.

Photo of Paul Burstow Paul Burstow The Minister of State, Department of Health

The amendments would require an NHS trust to obtain the Secretary of State’s support for an application either to merge with or to be acquired by a foundation trust. The two changes together would align the requirements for Secretary of State approval for mergers and acquisitions in an organisational sense. Achieving foundation trust status is a significant step for an NHS trust: it moves from being subject to the Secretary of State’s direction to being an operationally autonomous organisation that is accountable to the patients and the community that it serves.

Section 33(1) of the National Health Service Act 2006 requires an NHS trust to obtain the support of the Secretary of State for an application to Monitor to be authorised as a foundation trust. These two amendments would extend the requirement for the Secretary of State’s support to an application from an NHS trust to achieve foundation trust status by merging with or being acquired by a foundation trust. That would ensure that an NHS trust must have the Secretary of State’s support for an application to Monitor in this regard.

Amendment 195 would therefore retain the current requirement under section 56 of the 2006 Act for an NHS trust to obtain the support of the Secretary of State in an application to merge with an FT. Clause 166 creates a new specific power for a foundation trust to acquire another foundation trust or an NHS trust. Amendment 196 would add to that by requiring that where an NHS trust is to be acquired, the NHS trust must first obtain the support of the Secretary of State in the same way as they would for a merger. The amendments, therefore, bring the requirements for the Secretary of State to support an NHS trust application to be acquired by a foundation trust into line with requirements for the Secretary of State to support an NHS trust in regard to mergers.

Photo of Debbie Abrahams Debbie Abrahams Labour, Oldham East and Saddleworth 1:30, 14 July 2011

It is lovely to see you again, Mr Gale. This group of clauses relates to what is at the heart of the Bill: maximising competition. The Secretary of State has said that he wants to maximise competition and create a health system in which the number of purchasers and providers is maximised, and in which a citizen-consumer competitive market drives forward the forces of “creative destruction” in the NHS. Hon. Members may remember that from earlier discussions and it does relate to the different parts of the Bill.

I can hear people ask, “Won’t constant entry and exit from the market be prohibitively expensive? After all, you can’t just set up a hospital at the drop of a hat.” That is true, unless there is a system in which the barriers to market entry and exit are low or non-existent, and that is what these clauses do. In effect, they set up a new insolvency regime for foundation trusts. The Bill allows FTs to fail and the clauses enable them to be bought out by new market entrants. We are already seeing that. My hon. Friend the Member for St Helens North (Mr Watts) has seen documents to that effect in relation to Whiston hospital; there is also evidence from Trafford health care trust as well. What about the patients in all this? The Bill pays scant regard to patients. There are no protections for them, as we are seeing with Southern Cross. The first duty of such companies is to maximise the money that the company generates for their shareholders, as enshrined in company law.

I am sure that the Government will say that I am scaremongering, but there are direct parallels between the Bill’s effect—opening up the NHS to wholesale competition, removing the private bed cap to generate income, replacing the social purpose of NHS trusts with an economic focus and allowing foundation NHS trusts to dispose of their assets as well as raise loans—and the events at Southern Cross.

The conditions that led to the failure of Southern Cross will be repeated under the Bill. In effect, it allows foundation trusts to fail and private equity companies to buy NHS facilities and equipment. That may not be confined to foundation trusts. In an article in Primary Care Today, a law firm questions what will happen to primary care estates. I urge the Government to think again, and I appeal for the support of Members who are concerned about the measures.

Photo of Owen Smith Owen Smith Shadow Minister (Wales)

In some respects, this is another amendment that we welcome. It clarifies that the Secretary of State must be consulted before an NHS trust, not a foundation trust, is acquired or seeks to make an acquisition. That was clear in the National Health Service Act 2006. It was also clear that the trust would have to consult its local patients, local populace and local authority, but that is no longer clear—it has been wiped from the Bill, unless I have misread it. I have twice asked the Minister about that, and he has singularly failed to comment, so I assume that I have not misread the Bill, the Minister just does not want to talk about it.

The Minister has told the Committee on a few occasions, and he repeated it today, that an NHS trust or foundation trust cannot merge with a private company, which is a good thing, but such mergers would be a bad idea. However, NHS trusts and especially foundation trusts  can acquire a private company. There is no provision in the Bill, as far as I can see, that dictates the possible size of such private companies.

Photo of Tom Blenkinsop Tom Blenkinsop Labour, Middlesbrough South and East Cleveland

Is my hon. Friend concerned, as I am, that the interaction between clauses 71 and 165 might result in there being no stopgap to prevent NHS trusts from ending up in the private sector?

Photo of Owen Smith Owen Smith Shadow Minister (Wales)

I will be explicit. I do not know about the Minister, but I have come across things known in the market vernacular as “reverse takeovers”, which describes what happens when a small company acquires a large company at a knock-down price. We all know that is effectively a merger because, although it has been acquired, the larger company effectively runs the smaller company. It would be interesting to know whether there are any provisions in the Bill that would stop an FT from acquiring part or all of Bupa or Assura Medical, which is part of Virgin and is active in the consortium in the Minister’s constituency, in what would effectively be a reverse takeover.

Photo of Dan Byles Dan Byles Conservative, North Warwickshire

Might an FT’s taking over of a private company be considered nationalisation, of which the hon. Gentleman may well approve?

Photo of Owen Smith Owen Smith Shadow Minister (Wales)

It is a slightly bizarre point. If a small company were being taken over by an FT, what I have said would clearly be irrelevant; it would be relevant only if it were a very large company, or a subsidiary of a very large company, being taken over. Let us say that a big pharmaceutical firm decides that one of its arms that provides services to the NHS—an arm’s-length, stand-alone, separately listed company—can be acquired by an FT. What certainty can there be that that is not in effect a reverse takeover, in which the larger parent company exercises some degree of control over the public foundation trust?

Photo of Simon Burns Simon Burns The Minister of State, Department of Health

Presumably the hon. Gentleman supported the Labour Government’s measures when they allowed the University College London Hospitals Trust to take over the privately owned London Heart hospital about three years ago. The problems that he is speculating about did not occur.

Photo of Owen Smith Owen Smith Shadow Minister (Wales)

I do not mind admitting when I do not know something, so I confess that I did not know about that. I will look into it and find out whether the London Heart hospital is, as I suspect, a very small company. I am intrigued to know about that.

Mr Burns rose—

Photo of Owen Smith Owen Smith Shadow Minister (Wales)

No; I will finish the point, because it is not a silly point or a ludicrous one. There could well be reverse takeovers. They happen in the business world all the time, as the Minister would know if he had worked  in business, and it is perfectly possible to imagine that large companies might seek to exercise greater control over foundation trusts through their subsidiaries or through some sort of financial engagement. In fact, I would be flabbergasted if that did not happen at some point.

Photo of Tom Blenkinsop Tom Blenkinsop Labour, Middlesbrough South and East Cleveland

The Minister has just clarified that mechanisms for allowing trusts to take over private businesses already exist, so the Bill is redundant. In addition, we are ignoring the arguments that we established in clause 71, on which we had a tied vote. The clause states that a trust can merge with other bodies, but it does not define whether the most prominent position in that relationship would be occupied by the trust or by the other bodies, other businesses or other enterprises.

Photo of Owen Smith Owen Smith Shadow Minister (Wales)

That is very relevant. It is also relevant that the £70 million threshold will not apply in respect of non-FTs that get involved. What would happen if a non-FT sought to acquire a private company of some scale or description? What if that private company’s turnover is greater than £70 million?

I would like touch on the concept of Chinese walls within Monitor. As the architecture in the Bill concerning takeovers, mergers and acquisitions becomes more and more labyrinthine—[Interruption.] With respect, the Minister, the hon. Member for Sutton and Cheam, can read back over his extraordinarily labyrinthine description of the architecture in Tuesday’s Committee, including the stuff about Scotland, Wales and overseas territories, which he has again failed to explain to us. It is labyrinthine and confused, and I suspect that those in another place will agree with me.

Given the confusion, I would also like to address how on earth Monitor is going to operate the Chinese walls that we have heard about. There will apparently need to be Chinese walls between the parts of Monitor that deal with competition, mergers and the regulation of the FTs. How on earth can that occur within one building? Each aspect will undoubtedly have a bearing on the others. The decision about whether an FT is allowed to merge or acquire another company is clearly relevant to competition and to regulation. All three are interlinked, and it is extraordinary that we are asking Monitor to be poacher and gamekeeper—regulator and preventer of anti-competitive behaviour, or promoter of competition, depending on what time of the year we are talking to the Government about it. That is an untidy and unsatisfactory scenario. If the Minister could spell out again—because he has failed to do so in the past—how the Chinese walls will work in practice, we would be grateful.

Photo of Roger Gale Roger Gale Parliamentary Assembly of the Council of Europe (Substitute Member)

I caution the Minister not to seek to reopen matters that have already been debated.

Photo of Paul Burstow Paul Burstow The Minister of State, Department of Health

Thank you, Mr Gale. The hon. Gentleman is trying to kick some mud up, because part of the function of an Opposition in scrutinising a Bill is to create a sense of confusion where there is none. When those who follow our proceedings read how we have set out clearly the differences between mergers in respect of activities and mergers in respect of organisations, it will be clear—

Photo of Paul Burstow Paul Burstow The Minister of State, Department of Health

No, because the hon. Gentleman will be neither helpful nor informative.

Photo of Owen Smith Owen Smith Shadow Minister (Wales)

Will the Minister explain the difference between activities and organisations?

Photo of Paul Burstow Paul Burstow The Minister of State, Department of Health 1:45, 14 July 2011

I want to help the Committee and I want to make progress, so that we adequately scrutinise the remaining clauses.

The hon. Member for Oldham East and Saddleworth started the debate by repeating a set of arguments that those who follow our proceedings will have noted that she has turned to on several occasions. They are truly fantastical. She wants people to accept a conspiracy theory about the Government’s intentions. The idea that the plans drive at solely competition, quite regardless of patients’ interests, is manifest nonsense. The way that the clauses are now amended makes that absolutely clear. Monitor’s role is not about promoting competition; it is about protecting and promoting the interests of patients and enabling integration.

At the heart of the reforms is the essential concept and belief that we want to hardwire into the NHS: that no decision about a patient or carer should be made without their involvement. That means in both how the NHS is run and how an individual’s health care is provided. That is an essential part of a modern, high-quality national health service. I suggest that if the hon. Lady’s rhetoric is endorsed by her colleagues, it would be fair to describe the Labour party as having emerged from the general election and abandoned its manifesto commitments to become anti-choice, pro-poor standards and in favour of propping up failing organisations. One might reasonably draw that characterisation from the gross distortions that have been cast on the Government.

Let me deal with one or two of the issues raised by the hon. Member for Pontypridd. First, foundation trusts do not have shares. They cannot be traded on the stock market and, as a consequence of that, they cannot be acquired. We have made it clear that they are public benefit organisations.

Photo of Paul Burstow Paul Burstow The Minister of State, Department of Health

That knowledge did not come across in the way the hon. Gentleman made his arguments. To repeat: the Bill makes it clear that the guiding principle of the legislation is that foundation trusts continue to be public benefit organisations that are there to provide services to the NHS. Along with their duties to have regard to the NHS constitution, that is the ultimate safeguard. FTs cannot be taken over by private entities. We have already discussed that at length, but I want to make it clear again. FTs can, however, as they do under the existing arrangements, have joint ventures. That was fine under the previous Government and it is a good way for capacity to be extended and for services to be improved.

The hon. Member for Oldham East and Saddleworth asked whether there could be staff buy-outs of FTs. I undertook to write to her, but if I deal with that question now, that might save the correspondence. The answer is absolutely not. FTs have no equity, as I have just said, so they cannot be bought or sold. We want to  encourage staff-led organisations. Indeed, the previous Government, of whom she was not part, supported the idea of the right to request for staff, and they provided public money to support NHS staff to acquire and set up social enterprises. Many of them were trumpeted by the Labour party when it was in government. we think that the idea of social enterprise is of the time, and it is something that we want to continue to support.

The hon. Member for East Lothian asked about mergers between FTs and Scottish and Welsh trusts. That probably strays back to clause 71, but it is possible that an English NHS trust could combine activities—I stress activities—with those of an NHS organisation over the border in Wales or Scotland. It is not possible, however, for the English NHS trust to merge with an organisation such as a Scottish health board. I hope that finally puts that particular concern to rest.

There was a general question about the continuing assertion that the proposals mean privatisation by the back door.

Photo of Paul Burstow Paul Burstow The Minister of State, Department of Health

I will answer a question on that specific point.

Photo of Emily Thornberry Emily Thornberry Shadow Minister (Health)

I genuinely do not know the answer to this question, and I wonder if the Minister can help me. Will foundation trusts be able to sell off their property so that they have an operating company separate from a property-owning company, in the same way as Southern Cross did? That would be privatisation through the back door.

Photo of Paul Burstow Paul Burstow The Minister of State, Department of Health

That was not the question that I was expecting. We had that question on Tuesday, and I gave the hon. Lady an answer then. It might have been one of those occasions when I was giving her lots of examples and there was an exchange going on across the Committee. I urge her to read Hansard, because I have specifically talked about leaseback arrangements.

The final thing I wish to say is that the hon. Member for Pontypridd has asked several times about the obligations on organisations to consult and involve the public, and I am happy to make it clear for him and other members of the Committee and beyond that we expect the licences to reflect legal requirements, including requirements for local involvement and consultation in relation to organisational change.

Photo of Owen Smith Owen Smith Shadow Minister (Wales)

Labour Members absolutely believe in patient choice. We introduced it. We absolutely believe in standards. We raised the standards in the NHS, as the OECD and lots of other international bodies—[ Interruption. ]

Photo of Roger Gale Roger Gale Parliamentary Assembly of the Council of Europe (Substitute Member)

Order. I am having some difficulty differentiating heckling and private conversations. I would prefer to hear neither.

Photo of Owen Smith Owen Smith Shadow Minister (Wales)

I am grateful to you, Mr Gale. I do not think that anyone could contend that Labour did not adequately support the NHS. We tripled its budget, I think, and built more hospitals in our period in government, which resulted in the highest standards and the highest level of patient satisfaction ever known in the NHS. We created the NHS and we will continue to support it, and people will continue to trust us to do so. Again, however, the Minister did not adequately answer the questions about acquisition, nor did he address at all—for the third time now—the question about consultation.

Paul Burstow indicated dissent.

Photo of Owen Smith Owen Smith Shadow Minister (Wales)

He did not, and nor did he properly address the issue of Chinese walls.

Amendment 195 agreed to.

Clause 165, as amended, ordered to stand part of the Bill.