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.)
The membership of a foundation trust consists of those employees and members of the public who, in their separate constituencies, are eligible to elect representatives to sit as governors. Of these two constituencies, the staff constituency is the one that is more easily comprehensible. That is not to say that all is crystal clear. Paragraph 3(4) states that you will not actually have to be employed by the trust to count as a member of staff; and the notes tell us that agency nurses and people employed by sub-contractors are examples of those who might fall into the category of non-employees.
I am not clear how far this is supposed to go. Perhaps the Minister can explain. Could it, for example, include people who work for companies which act as suppliers to the trust? No doubt the Minister will say that these are detailed matters for the trust itself to determine, but it is rather difficult to see where the line can reasonably be drawn and why, therefore, the paragraph was inserted at the last minute in another place.
Should a trust include all agency nurses who had worked for it in the past year or only, let us say, those who had worked for a certain number days? One can envisage all kinds of arguments and bureaucratic complications arising from this debate.
I imagine that one category of person the Government have in mind is someone who works for a PFI contractor servicing the trust. It would be helpful to hear from the Minister what is the up-to-date position on the issue of retained employment in PFI hospitals because it is very clear that this is the single biggest stumbling block preventing financial close on a number of PFI projects currently pending. What guidance, if any, will be given to trusts on this aspect of the staff constituency?
If we look further down at paragraph 8, we see that the staff constituency appears to be very much the poor relation of the public constituency. Whereas the public constituency members must comprise at least 50 per cent of the board, the staff constituency membership of the board need consist of only one person. I am not quite sure why this is and it would be helpful to hear the Minister's thinking on how important the staff constituency and the staff governors are regarded as being. I beg to move.
We have tried very hard to explain our general approach in relation to Schedule 1. The legislation deliberately sets out only minimum eligibility requirements for memberships of NHS foundation trusts in order to allow individual NHS foundation trusts the flexibility to tailor their own arrangements to meet local circumstances and on the basis of local conditions. I do not want to keep repeating that during the course of the debate, but I want to make it absolutely clear to the Committee that that is why we are not putting a great deal of prescriptive requirements into the legislation.
I find it slightly ironical that, after the debate on Tuesday in which there was a great deal of protestation from around the Committee about the problems of micro-management of the NHS, centralisation and laying down the law from Westminster and Whitehall, we now have a string of amendments which seek to do just that to this legislation.
Having got that off my chest, I feel a lot better. I shall turn now to the points raised by the noble Earl and explain our concerns about Amendment No. 22.
The amendment, if implemented, would prevent individuals not directly employed by foundation trusts from being eligible for the staff constituency. We believe that that would run quite counter to the flexibility arguments I have used. I do not know whether it is motivated by concerns that the constituency may allow inappropriate groups of people to have access to membership, but paragraph 3(4) simply gives NHS foundation trusts discretion to include those people who carry out functions of the trust, although not directly employed by the trust, to become members of the staff constituency. It certainly does not require them to do so, but it would enable, for example, the kinds of staff to which the noble Lord, Lord Walton, referred to fall into that group.
I shall have to write to the noble Earl about PFI contracts, as it is quite a technical issue. I will do that as soon as possible. Some staff groups are commonly not directly employed by trusts—for example, people working in contracted-out services, such as catering. However, these people have a keen interest in the organisation because they work there. Many of them were, in many cases, previously employed by the NHS and are now contractor staff, contributing to the services it provides. It is right, therefore, that they can also be members of the staff constituency. We believe that the amendment would prevent that and that it would be wrong to prevent people who often work in the hospital under a different contract of employment from direct employment with the NHS participating in these changes in the way provided for in the legislation.
Of course the staff are not a poor relation—the Bill provides for staff provision. But, as we have said consistently, this set of changes in relation to NHS foundation trusts is all about giving patients and local communities a much greater say in the development of their health services. The provision of at least one does not in any way prevent—we would not expect it to prevent—a much larger representation where it is appropriate in relation to particular foundation trust applications.
That is as clear as I can make the Government's position. I encourage the noble Earl to withdraw, or the Chamber to reject, the amendment.
I had intended this to be a standard probing amendment. I think we all understand what the effect would be of removing this sub-paragraph—indeed, that was not my intention, as the noble Lord will appreciate. I understand that the Government are not being prescriptive as a whole in the schedule, but that surely does not mean that the Committee is not entitled to discuss the provisions it contains. I think that probing amendments are entirely in order, particularly in Committee.
The Minister has been helpful in drawing our attention to a number of aspects of this sub-paragraph. My main purpose for wanting to discuss it was that there had to be a reason why it was inserted into the Bill in another place at a late stage. I think we are closer to discerning what those reasons are. I beg leave to withdraw the amendment.
Quite unusually, this amendment means exactly what it says, and I hope the noble Lord might consider accepting it. The thought behind it is that it is as well to limit rather than increase the number of people around a table. This may be a novel thought to Members of Her Majesty's Government, but numbers tend to add confusion rather than simplify anything. I beg to move.
I support what my noble friend has said. The whole concept of a hospital's public constituency seems to me inherently flawed. The system is, by its very nature, socially excluding. Hospitals will land up with members who, being self-selected, will almost certainly be unrepresentative of the population at large. As such, these members will have absolutely no responsibility to have regard to the interests of people who may not have registered as members but who may nevertheless have an equal or better claim to have their interests represented on the board. Homeless people, those whose first language is not English, people with mental health problems and those seriously ill with long-term conditions will not be in a position to be active as members of a foundation trust. We are looking at a government model for the articulate middle classes.
In the worst-case scenario, hospitals will find that the governors who are elected by the public are people with narrow axes to grind on behalf of special interest groups. I am not clear from the Bill how this situation can be avoided. It is a phenomenon, as we know, known as entryism. The membership list could conceivably consist of only a very few individuals.
I do not think that the idea of a public constituency has any real validity unless there is a sensible minimum number of members. Below that sensible minimum entryism really will occur, almost regardless of anything else that is done.
Paragraph 4 simply says that there needs to be a minimum number of both public and staff; it does not say what that minimum should be. Of course the Minister will say that the Government do not want to be prescriptive, and I understand that. But do they really envisage that there should be a different minimum number for each foundation trust? Or are they prepared to say roughly what sort of minimum they envisage as sensible?
I also support my noble friend Lord Peyton. One of the advantages of a Bill having several days in Committee is that one can think about the previous day's debates and how they will play into some of the later amendments put before us. This amendment is trying to achieve some structure around what the Government are proposing.
I have very serious reservations about handing over governance to an elected body. My earlier amendments, as the Minister has said, tried to get the necessary politics, the necessary accountability, into a rightful place with Parliament and the Government, freeing up the NHS from day-to-day political interference.
In discussing earlier amendments, the noble Lord, Lord Lipsey, who I am very pleased to see in his place today and who is an authority on electoral matters, argued the case against these reforms. At our previous sitting, he said,
"this Bill seeks to create a system that embeds politics in the management of our hospitals. Is that what we want?".—[Official Report, 7/10/03; col. 202.]
My answer to that is, "No, that is what many of us do not want". If noble Lords will indulge me, I shall do as the noble Lord, Lord Walton, has done in previous debates, and refer to past experience. Personal experience is one of the things that noble Lords bring to this Chamber. When I was first involved in the NHS, we had elected members. Mine on the whole were fairly reasonable, when they turned up; on the whole, they did not turn up. In Lambeth, the elected members were totally unreasonable. I remember these events very distinctly, because I was part of the same region. Those members fought their political battles within the governance of the NHS and in that particular health authority. They left in the middle of meetings for press briefings. They took the chairman to court and fought legal cases against the chair. They brought in their supporters to disrupt the meetings. They actually locked members of the board out of the boardroom and, in the end, the police had to come and attend regularly to ensure that there was some discipline in the governance of the NHS. The governance disintegrated and the commissioners were brought in. That did not happen overnight but took months and months and, as a consequence, no decisions were reached. The authority incurred enormous debts and the rest of us in the region had to bail it out. The staff were demoralised, and it took the local service years to recover. I am not exaggerating—I was there, and I saw that happen.
I accept that Lambeth may be one of the very worst examples of that happening, but it is easy to forget, in these arrangements, what politicising the health service is going to mean. As the noble Lord, Lord Lipsey, rightly said, we will then have party factions and Whips. We will bring in the party political system right down to ward level and into primary care trusts, and so on. That is dangerous, and it is not what the health service is about. The health service is about treating individual patients. We should reconsider the system that is being proposed.
In a previous debate, the Minister said that he was trying to get a system that was "fit for purpose". This is not fit for purpose; it is dangerous, and it has fundamental flaws. The Minister said that he would listen carefully to good arguments. Throughout the Committee stage of the Bill we will be putting forward good arguments. The Minister should listen well; in fact, he told us that he was going to. Perhaps he could tell the Committee, "We as a government have decided to think again". I hope that he will surprise us, will take account of what we are trying to do throughout the Committee stage and rethink some of the proposals.
It would be a masterpiece of understatement to say that very few people in this Chamber would want to use the experience of Lambeth at a particular point in history as the basis for public policy. There is a fundamental difference, on the question of participation, between the position of noble Lords in some parts of the Chamber and the Government's position. We are concerned here to introduce a set of changes to enable communities and patients to participate more in the running of the health service locally. That is what we are about. We are trying to create a governance structure that achieves that objective. As I said, we will be prepared to listen to well thought out changes and proposals, but they must be proposals that do not deflect us from that particular key objective. Later on in our discussions, noble Lords will see the Government being very flexible and responding positively to some amendments. I do not want to anticipate that, but I wish to whet noble Lords' appetites so that we can make good progress towards those amendments.
We shall consider the issues carefully, but I should like to say what the downside is of the two amendments. Before I go on, however, I should put on record what I saw in the Daily Telegraph this morning. At a fringe meeting of the Conservative conference, Greg Clark, the head of policy at Conservative Central Office, said that one of the key principles for any future Conservative government was being committed to promoting more choice for communities and citizens. That seems to me to involve a participative approach. It is good to see that the news has travelled to Blackpool, as it suggests that we are getting support for the measures in this Bill.
Amendment No. 24 would require fixing a maximum membership in each constituency. That would risk excluding potential members, solely because of an arbitrary cap. We stated in A Guide to NHS Foundation Trusts that,
"there will be no limit on the number of people who can register as members if they meet the eligibility criteria".
That quote is from paragraph 2.10.
It would be totally unfair to exclude people who wanted to get involved in their local services because membership was limited. There is nothing to be gained from setting a maximum figure for membership. Amendment No. 24 is not well founded.
Amendment No. 25 would require a minimum membership of 50. Here, the arguments are slightly different. It would be wrong to set any arbitrary figure for local membership, as proposed in the amendment, as the circumstances of each NHS foundation trust will be different. We will discuss that matter when we arrive at the debate on governors and non-executive directors, so I shall not rehearse all the arguments. Many of the same arguments occur.
It is eminently more sensible, as the Bill provides in paragraph 4 of Schedule 1, to require individual foundation trusts to set their own minimum membership numbers as part of their constitutions, which are subject to the approval of the independent regulator. That would take into account the diversity of trusts. Classically, trusts range from those such as Rotherham, which has a single provider, a single commissioner and a clearly defined geographical territory, and places such as Moorfields, which draw their patients from an extremely wide geographical area. The same arguments apply to governors as to membership, in not being arbitrary in setting particular limits from Westminster and Whitehall.
Specifying a minimum of 50 members would not ensure a genuinely representative membership. Fifty is too low a number of members for NHS trusts which become NHS foundation trusts and is likely to be too low for an NHS foundation trust that is established as a new organisation. We can tell from the work done by the first-wave trusts that there is a huge response from people wishing to be governors of trusts. In one case, well over 1,000 people came forward just to be governor, offering their services in that role. We are seeing a much more positive response than many noble Lords suggest. Some noble Lords are being too pessimistic about some of the public responses in some parts of the country. The amendment suggests an arbitrary requirement for a minimum membership, and we suggest that noble Lords rethink their proposal.
I am grateful to those noble Lords who have participated in the debate on my modest amendment. I was reminded in the course of the discussion of a question that I once asked the noble Lord, Lord Hunt of Kings Heath, who used to speak for the Government on this subject. I asked him how many committees there were sitting under the aegis of the National Health Service. I realise that that was a terribly unfair question. I might as well have asked him to count the grains of sand on the seashore. He had no idea how many committees there are. However, I do not want to dwell on that painful subject.
I do want to say this. I have come to believe that keenness to serve on a committee perhaps ought to be considered as a very serious disqualification. The noble Lord, Lord Hunt, will be familiar with this thought of mine, although it did not persuade him. My feeling about committees is that they are almost always too large. Half of those sitting on them would be much better employed using their very important knowledge on much more important things, and the other half probably ought not to be released anywhere. When the Government say rather baldly, as the Minister did just now, that their aim is to have more participation, I hope they will bear in mind that they could get participation from all sorts of people who would produce only confusion and delay. Therefore, as the discussion went on, I began to think that my amendment was more and more worth attention. While I should be happy to withdraw it now, I must tell the noble Lord that certainly my present intention is to return to the subject later. I beg leave to withdraw the amendment.
I should point out that there is a mistake in the Marshalled List and that Amendment No. 27 should come before Amendment No. 26. Therefore, I shall call Amendment No. 27.
In moving Amendment No. 27, I shall speak also to Amendment No. 26. It must be apparent to the Minister after a day in Committee and in the short time we have been speaking today that there is deep scepticism about the Government's arrangements as set out in Schedule 1, and in particular, as the noble Earl, Lord Howe, made clear, to the whole concept of the public constituency. It is notable that those criticisms come not only from the Opposition Benches but with great force from the noble Lords, Lord Lipsey and Lord Harris. I think that they have both made a particularly telling contribution in the course of the Bill.
In the Committee's first sitting, the Minister was very adamant about the shape of the governance. He said:
"We were trying, as we have done all along, to design something that was fit for the purpose".—[Official Report, 7/10/03; col. 214.]
That is precisely the bone of contention between us. Our view particularly on these Benches is that these provisions are not fit for the purpose. Undoubtedly as we go through the Bill and when we reach Report stage some of those propositions will be tested.
The Minister believes that we are all being far too pessimistic in our view of the governance arrangements. It is always tricky in these circumstances, but, as the Minister heard last time from my noble friend Lady Barker, we would like to see fundamental changes to the governance arrangements. However, on the basis that there is to be a public constituency, I think that the biggest nonsense within these provisions surely must be the requirement to pay #1. We do not know whether 5,000 people will pay #1, or 10,000, or whatever. When the noble Lord, Lord Hunt, speaks later we can hear whether he has something similar in mind.
The Minister also made great play of the fact that our current company law, and indeed the law appertaining to companies limited by guarantee, was not appropriate. The one thing that companies limited by guarantee do—and quite often those companies consist of 10 or 15 members—is to pay #1 for form's sake. That derives from a very 19th century concept. Becoming a subscriber to the memorandum of association of a company limited by guarantee is purely for form's sake. There is absolutely no need to do that. If we are talking about new forms of organisation—bright, shiny, new forms of organisation, about which the Minister was so eloquent in our earlier sitting—it seems to me that the requirement to pay #1 is completely superfluous. That is the very first thing that he should perhaps relinquish. Perhaps he was foreshadowing that in his previous speech. I beg to move.
I should like to speak to my Amendment No. 28. I come at the issue from a rather different viewpoint from that of the noble Lord, Lord Clement-Jones. While I readily accept that the governance arrangements are by no means perfect, I do not take as pessimistic a view as the noble Lord or the noble Earl about how they will be implemented in practice. Clearly, we all want a large number of people to be interested in the work of their local National Health Service. I believe that having a strong membership based around each foundation trust is one very effective way of doing that.
As for the #1 issue, when it was first proposed one could see the logic of asking people to show a visible sign of commitment to that organisation. Other organisations have a similar requirement; the noble Lord, Lord Clement-Jones, referred to some of them. I am a member of the Midlands Co-operative Society. Some years ago I had to pay over #1 to become a member, and I receive a calendar every year as a reward for having made that commitment. However, I am not really sure whether paying over that #1 has made me any more committed to the Midlands Co-operative Society than if I had simply signed an application form to join.
I have been persuaded by discussions with a number of the chairs and chief executives of the first tranche of applicants for the first wave of foundation trust status who believe that the #1 qualification requirement on the application form for those wishing to join might inhibit some from joining. As I should have thought that we all want as many people as possible to join these foundation trusts, I think that it would be wise, as the noble Lord, Lord Clement-Jones, said, to remove the #1 qualification.
I should like to speak to Amendments Nos. 26 and 29 standing in my name. The public constituency works on the basis of members nominating themselves for membership and the hospital accepting the nomination, or not, as the case may be. Providing that they are accepted, all they then have to do to become members is undertake to pay #1 if called upon to do so at some time in the future. I differ slightly from the interpretation put on this part of the Bill by the noble Lord, Lord Clement-Jones—and, I think, from the noble Lord, Lord Hunt—in that what it says is that one has to undertake to pay #1, not actually pay it. I cannot imagine that the #1 will be collected by anyone; surely it is just a token contingent liability. While the noble Lord, Lord Hunt, speaks in terms of needing to have a visible sign of commitment, I think that this provision is not that. It is not a sign of commitment; it is only a token. I think that the Minister really does have to explain what on earth the point of it is.
We see from paragraph 5(2) that members can be disqualified. However, I should like to ask the Minister how and in what circumstances that could happen. It is not clear. It would be helpful if the Minister could bring us in on the Government's thinking. Surely it cannot mean that a hospital could exclude someone simply by virtue of the opinions they might hold on a moral issue such as abortion or stem cell research or the opinions they might hold on prioritising the care of patients afflicted with a particular condition. What are the implications of having different exclusion rules for different foundation trusts? I am troubled by that thought.
If the system underpinning the entitlement to vote is to be genuinely fair, this might be an area where there ought at least to be guidance from the Government—if not anything on the face of the Bill—to indicate what kind of exclusions a trust should countenance.
Those Members of the Committee who are not with me on the pessimistic side of these governance arrangements say that there is tremendous enthusiasm out there to join these trusts. Therefore, it seems to me rather curious that some of them are now worried that the possibility of having to pay #1 will stop people participating. That is not a lot to pay to indulge one's enthusiasm.
I am sure that the Committee will be pleased to hear from a sinner repenting. The Government have listened to concerns raised in the other place and by NHS foundation trust applicants. The requirement to make a nominal payment has been seen by some as a barrier to encouraging a large and representative membership which is, as I said earlier, our aim. I notice that the noble Lord, Lord Peyton, is not present but I should make it clear that I was not arguing that there should be more committees but that there should not be a limit on the membership, which was what his amendment was about. We do not wish to place a limit on the size of membership but in the light of the concerns that have been expressed the Government are willing to remove the requirement that members commit to pay up to #1.
However, the Bill still needs to make provision on how a member is to indicate that he or she is signing up to be a member. As I said, we are trying to achieve active participation. In return for making a commitment to their NHS foundation trust, local people, patients and staff receive a real opportunity to influence its governance and stewardship through the board of governors. I realise that not all Members of the Committee are as enthusiastic as we are about achieving that objective, but that is the Government's objective and that is what the Bill seeks to do.
The provisions and structure of Schedule 1 reflect that approach in requiring prospective members actively to sign up for membership. In removing the nominal sum, that commitment will instead be signified by actively applying to become a member. We propose to accept Amendment No. 28 in the name of the noble Lord, Lord Hunt, rather than the other amendments on the #1 payment as it replaces the requirement to commit a nominal sum with a requirement to make an application to the NHS foundation trust. Because the trust is able to set out additional detail in its constitution under paragraph 1(2) of Schedule 1 to the Bill, we expect that each trust will specify in that document the application process for becoming a member. That deals with our response to Amendments Nos. 26, 27 and 28.
On the subject of limits to eligibility for membership—I refer to Amendments Nos. 29 and 27—it is important that NHS foundation trusts have a safety net so they can ensure that their membership is appropriate to local circumstances. However, we believe that there needs to be our old friend, flexibility, here. That means that foundation trusts must have a way to deal with circumstances where membership would be inappropriate. For example, an NHS foundation trust might need to exclude persons who have persistently harassed or assaulted staff and exclude persistently vexatious individuals. Sadly, we all know people who behave in that manner. I assure the noble Earl that we are not trying to be thought police but we feel that it is important to give trusts that flexibility where particularly difficult local circumstances exist; for example, if members of a children's trust had concerns about an individual on the sex offenders' register being a member of that trust.
We are not clever enough to prescribe all that in primary legislation; we should leave that to the judgment of individual foundation trusts taking account of guidance in this area provided by the regulator. We do not object to guidance. We are not arguing that there should not be guidance in this area but we do not think that it is right to prescribe these matters in primary legislation.
I thank my noble friend for his generosity in indicating that the Government welcome my amendment. I say to the noble Earl, Lord Howe, that I did not envisage #1 having to be paid over. I believe it was made clear in another place that that would not happen. I do not know whether it is proposed that one would have to tick a box on an application form and whether that box would state: "In the event of future failure, you may have to pay #1". That is not necessarily an attractive way of getting members. Although I am delighted that there is enthusiasm for foundation trust status among the public, we should do everything we can to make it easy for staff to join a foundation trust.
Will my noble friend reflect further on the matter of exclusions? I appreciate that it is perfectly appropriate to consider excluding from membership the people he mentioned. However, what about local people who campaigned against a mental health facility or a secure hospital being established in their area? Those people might try to take over the relevant mental health foundation trust. Would it be acceptable for that foundation trust to exclude people on that basis? Presumably, it could be argued that they were campaigning against a core aim of that trust. Or is it fair game for local people to be able to join a foundation trust on that basis?
My noble friend is, as ever, perceptive in identifying some of the problems that might arise. My personal view is that it would be unsatisfactory for people to be discriminated against for expressing certain views about a policy. However, I do not believe that we can prescribe these matters in primary legislation. I shall reflect further on the points that my noble friend made to determine whether I can give him further reassurance at a later stage.
I thank the Minister for his response. This is only a very small crack in the edifice but nevertheless it shows that the Government are actively thinking about the shape of the governance structure. It was a rococo piece of the architecture which is no longer usefully required. However, I say to the noble Lord, Lord Lipsey, that it certainly is not the make or break of this particular set of provisions and I remain just as pessimistic as before. But, in the mean time, I beg leave to withdraw Amendment No. 27.
On our first Committee day my noble friend Lady Hanham repeatedly asked the Minister to define what the board of governors was supposed to do. The Minister did not answer the question and indeed said:
"We thought that the role of the boards of governors was clear from the Bill".—[Official Report, 7/10/03; col. 216.]
Let me say to the Minister that the Bill is as clear as mud on the role of the board of governors. Amendment No. 31 seeks to provide that clarity.
The noble Baroness, Lady Barker, pointed out forcefully on the Committee's first day that the Government positively chose to turn their back on the various corporate models that already exist for non-profits. We do not agree with that approach but believe that, if the Government are set on it, it is incumbent on them to be absolutely clear about how the model is supposed to work and, specifically, who does what.
When the Government issued their guide to foundation trusts last December, they said in paragraph 2.33:
"Legislation will set out the minimum functions that the Board of Governors must be responsible for".
Those functions were described in paragraph 2.32 as,
"to work with the Management Board to ensure that the NHS Foundation Trust acts in a way that is consistent with its objects and with the conditions under which it is licensed to operate . . . and to help set the strategic direction".
The paragraph went on to state:
"The Board of Governors will not be involved in . . . day to day management".
I have searched very hard in Schedule 1 to see how those aims have been realised in the draft legislation. Various tasks are identified for the board of governors, including being consulted on forward planning under paragraph 25(2). However, there is no comprehensive statement of its functions, nor is any guiding principle set out, which is what our amendment seeks to do.
There are very real fears among the NHS trusts thinking of becoming foundation trusts that the board of governors will try to interfere in day-to-day issues. My noble friend Lady Hanham spoke on that from her considerable experience earlier this week. The NHS Confederation, which knows a thing or two about how organisations work in the NHS, supports the amendment and believes that clarity is essential.
The types of people who come forward for election as governors are more likely to have a detailed interest in how a foundation trust will operate than in its strategy. That is the nature of the world; strategic thinkers are few and far between. However, life would rapidly become impossible for a foundation trust if the board of governors, for example, tried to second guess the board of directors. Our amendment defines the governors' role as advisory.
I shall not claim perfection for the wording, but I believe that it is right in principle that the respective roles of the boards of governors and directors are clear from the outset. That is necessary if misunderstandings are to be avoided later. It is all the more important because of the quasi-democracy that drives the composition of the board of governors.
There is reasonable clarity about how the boards of NHS trusts currently operate. It is not perfect, as many with experience in the area will say. For example, new non-executive directors often take a while to learn about their non-executive functions. Now, foundation trusts will have an overlay of a largely untried and untested governing body, with no clear role specified for them. It would be hugely damaging to the NHS if boards of governors were to be created without clarity at the outset for their role. I beg to move.
I support the amendment. I seek greater clarity about the boards of governors and directors and their relationship with the strategic health authorities. I understand that those authorities do not have a performance management role in the new set-up for foundation hospitals. We all know that the health service is very intricate. However, increasingly, we have seen clinical networks established that are proving to be a great move forward in improving clinical results.
Nevertheless, I am very anxious. There is a great danger that the progress already made will be lost without an overview from someone similar to a strategic health authority, and I want to know who undertakes that role and what the relationship is if we are to ensure that national standards are maintained. I appreciate that the Committee will later debate the role of the regulator and the Commission for Healthcare Audit and Inspection, which have a part in monitoring success or failure, but they will come in a retrospective sense. They will see when something has gone wrong. Surely we need to ensure the prevention of things going wrong. I would welcome the Minister's views on that.
I do not agree with the terms of the amendment, but the noble Baroness, Lady Noakes, has started an important debate that will permeate much of our discussion of Schedule 1. I am sorry that the noble Baroness, Lady Hanham, is not in her place, because she reflected the views of almost all the chairs of the first-wave applicant foundation trusts in expressing concern about some aspects of the governance structure. The problem is that, in drafting the Bill, a new governing body has been placed alongside the current governance structure for NHS trusts. That does not quite work.
I disagree with the noble Baroness, Lady Noakes, in thinking that sovereignty should reside in the board of governors, whereas clearly she thinks that it should reside in the board of directors. I suspect that her view is shared by rather more foundation trust applicants than mine; indeed, I do not think that I have come across one foundation trust applicant that shares my view, which is why I have not tabled any amendment on it. I think it important that the governing body be seen as the sovereign body because the provisions are about transferring accountability of Ministers to Parliament for the running of health services to the local community. Unless the local community has a way to exercise that accountability, the provisions will not work. That is why I think it important that the governing body—the body that will have a majority of elected members—should be seen as the prime decision-making body in a foundation trust.
The Explanatory Notes describe the board of directors as being responsible for day-to-day management, but the Bill does not produce that. The Bill makes it clear that the corporate responsibility for foundation trusts resides in the board of directors. So far as I can see, the only power that the board of governors has is the nuclear option of being able to appoint and replace the non-execs, and to approve or not approve recommendations made by the chief executive in relation to the appointment of executive directors.
People will put their names forward for election to the governing body, and will presumably have to write, argue their case in a manifesto and go on the hustings. I assume that public meetings will be organised. When they get to their first meeting of the governing body, they will expect to govern—that is what governing bodies do. However, they will find that there is nothing to govern because they have no power whatever, except the power to deal with the appointment of non-execs and with the approval or not of recommendations made by the chief executive in relation to executive directors. That is a recipe for trouble, because there is a real risk that the good people elected to the governing body will walk away after a few weeks when they realise that there is no role for them to undertake. People who want to make trouble will make trouble.
We have gone too far down the line to change the architecture of the Bill as I suggest. For me, it is quite clear that we should have a governing body and a management board, and that the management board should comprise solely executive directors and should work under a scheme of delegation. That would be a very straightforward governance arrangement. However, I suspect that it is too difficult to make that change at present. We will have to depend on the skill of the chairs of the new foundation trusts to ensure that the governing bodies, notwithstanding that they have hardly any power, are given useful work to do so that their members feel that they are worth while.
It is significant that a large number of foundation trust applicants, in their consultation documents, do not describe the governing body as a governing body. They refer to it as a members' council. I am sure that statutorily that is just about all right, but it is a curious way of going about things when the Bill before us refers to a governing body.
In the course of this Committee stage we need to be absolutely clear about the role of the governing body and its relationship to the board of directors. I disagree with the noble Baroness because I believe she is wrong in trying to constrain power within the board of directors. That would be a recipe for great trouble ahead.
It is a pleasure to agree with the noble Lord, Lord Hunt. I have similar concerns with regard to the amendment, and whatever the rights or wrongs of it, it is vital to define the powers of the individual bodies. While accepting that it is the role of the board of governors to set strategic direction, it is also its role to act in a representative capacity, to undertake overall governance of the trust and so forth. However, I doubt whether use of the word "sovereignty" is correct. There is a division of powers between the two bodies involved.
We have little experience of two-tier boards in this country, but here we have the Government picking random things off the shelf and not even defining what the two bodies are meant to do. It is a complex matter. Our company law on the matter runs to many pages—and that deals merely with a single board.
As regards company law, I am in favour of one of the European models of two-tier boards and can well envisage how they could operate successfully in NHS hospital trusts. But a lack of definition and power for the top tier will not work to the benefit of foundation hospitals.
I do not know where the "nuclear" option comes from. I agree with the noble Lord, Lord Hunt, that the only real option for the board of governors seems to be whether to sack the non-executives. Strangely enough, the nearest model I can think of is the European Parliament, which has the power to sack Commissioners if it does not like them. I do not believe that that has been a beneficial way of operating and it has had to change its constitution to give itself more power, as have successive IGCs.
Although not agreeing precisely with the terms of the amendment, I believe that the Minister needs to take back the whole of Schedule 1 and look again at the definition of powers. Of course there is plenty of time to do this.
I agree with the amendment put forward by the noble Baroness, Lady Noakes, for precisely the reasons that my noble friend Lord Hunt disagrees with it. I understand the attraction of the view of foundation hospitals as some sort of Periclean Athens of the health service where the local community—a phrase I have always had difficulty in getting around because I have seen what operations it has carried out—make the decisions. I understand the attractions and I do not want to mock it too far, but for the reasons I stated in our debate on Tuesday I believe that the proposal goes much too far.
It seems to me that there are two ways in which that problem can be defused. One is along the lines put forward in the amendment; namely, to specify that the board of governors (perhaps that name should be changed) is advisory. The second way is to stop it being able to exercise the same options as the people of California in recalling non-executives each time a plausible film star presents himself as the person best equipped to run a local hospital.
I am grateful to my noble friend for giving way. Would he not accept that if one constrains the board of governors to the recall vote and noting else, one can hardly be said to have transferred accountability for the running of local health services from Parliament to the local community? The proposal will not work unless accountability is transferred and it will not work unless the elected board is seen to be the corporate body that ultimately is responsible.
The problem we have at present is that the board of directors is being made solely responsible for the activities of that organisation.
I am grateful to my noble friend, who has led me to my next comment. Accountability is a diffuse concept. In reality, it is rare that one can say that " is totally accountable. There are various levels and forms of accountability and it is right that there should be some accountability to the governing body. However, it should not have a monopoly on accountability, particularly on issues with which it is not, in my view, well equipped to deal.
This time, I am on the optimistic side and my noble friend Lord Hunt is on the pessimistic side. He said that the good people will not stay on unless they have the powers he put forward. I do not believe that. The fact that someone has an advisory function does not mean that they have a nil function. Perhaps I may give as examples Bills recently passed by this House. The consumer panel that exists in the Financial Services Authority does not have the power to compel anything, but it has jolly important advisory functions. On the Ofcom Bill that we passed in the previous Session, the consumer panel cannot direct the board of Ofcom to do anything—and thank God for that—but it has an extremely important advisory function.
The idea that, if these bodies have the vitality that my noble friend Lord Hunt believes they have and attract people to them, the board of directors will then ignore them seems to be pessimism run amok. They do not need to have a guillotine in their hands in order to have an appropriate measure of effect on the policies of the hospital and provide an appropriate degree of local accountability to local people.
For that reason, I strongly support the amendment. It starts to pave the way to defusing the bomb that will otherwise blow this whole attractive notion of foundation hospitals apart. I hope that it will be pursued at subsequent stages by the noble Baroness, Lady Noakes.
I support the principle behind the amendment. I have a wider concern than the local accountability of the foundation trusts to their governors; that is, their role in relation to other services within the concept of the clinical network. If a service goes down in one part of the network as a result, for example, of sudden staff illness, the board of directors of the foundation trusts may have to act quickly in order to maintain continuity of service. That may result in some rapid reconfiguration.
I am concerned that unless the hospitals know what the boards of governors are able to do, and know that they are providing advice on an overall strategic direction, a great deal of confusion may arise. At present, the definition of roles is not clear in the Bill. In that regard, I am anxious for those who are running the clinical services.
I hesitate to rise and to spoil the fun of my noble friends behind me in bringing their discussion to a conclusion. It is a well established principle of public governance that checks and balances are the key to success and the Bill provides many checks and balances, as I shall try to outline. The amendment, while well intentioned—I can see where the noble Baroness is coming from—is too narrow, as several Members have indicated.
The approach taken in the Bill is to set minimum requirements and to allow individual foundation trusts to develop arrangements locally that best suit their needs. While we have deliberately avoided prescribing the whole range of functions that the board might cover, we have made some things clear. It is worth reminding Members of the Committee that paragraph 14 provides that all the powers of the corporation are to be exercised by the directors. In addition, paragraph 1 provides that the powers cannot be exercised by anyone else. The governors, therefore, cannot have a direct role in the operation of the trust. That is crystal clear in the Bill as it is presently drafted. Governors have influence. They do not, for the most part, have executive decision-making powers, although they have an ability to ratify and be involved in particular appointments. That is already set out in the Bill.
The other day, the noble Baroness, Lady Hanham, challenged me to give a tutorial, so to speak, on governance arrangements and on the role of the board of governors. On Tuesday, I shirked that challenge but, if noble Lords will bear with me, I believe it would probably help the Committee if I set out clearly the Government's position. However, before doing so, I need to make it clear that I do not believe we should be diverted to having long debates about what goes into primary legislation, about who is formally accountable to whom and whether boards of governors can or should not exercise powers of veto. I believe that that would be to miss the point of the new arrangements.
The primary purpose of establishing boards of governors is to provide a voice and influence for local communities in defining the culture and strategic development of NHS foundation trusts. They will represent the interests of the members and partner organisations of the NHS foundation trust working with, and providing a source of information and guidance to, the board of directors.
However, information cannot just flow in one direction: it does not go only from the governors to the board of directors. The board of governors is also a mechanism for disseminating information to members and partner organisations about the NHS foundation trusts and their development and how their role fits into the workings of the local health economy. I shall say a little more about those relationships because concerns about them were clearly expressed in the previous debate.
That adds up to a radical shift in the relationship between NHS hospitals and the communities they serve. I believe that that radical shift is causing some of the nervousness among your Lordships. The board of governors will empower NHS foundation trusts to become far more responsive to the needs of NHS patients and local communities. And the boards will give the people who care most about what NHS hospitals do—the patients who use them, the staff who work in them and the partner organisations who work with them—a real voice in how they deliver the services that PCTs commission them to provide. That does not change the commissioning pattern but it does change the framework by which advice is given to the executive directors. To define this in legislation as,
"advising the National Health Service foundation trust on development of the forward business plan", would only partly cover, and inappropriately circumscribe, what this shift in culture will mean in practice. I hope that I have made that absolutely clear.
Schedule 1 is not a dog's breakfast. It sets out clear minimum requirements in paragraphs 6 and 8 on the composition of the board of governors to ensure that there is representation of the key stakeholders by guaranteeing that patients, staff, the public, PCTs, local authorities and, where relevant, universities have seats on the board. The schedule also includes minimum requirements in paragraphs 25(2) and 26 of Schedule 1, ensuring that governors are consulted on the forward plans and that they receive information on the trusts' activities.
Governors also exercise significant influence through their powers to appoint the chair and non-executive directors of the foundation trust and to approve the appointment of the chief executive and other executive directors, as set out in paragraph 16 of Schedule 1. They also decide the terms of office and remuneration of the non-executive directors and appoint the auditor of the NHS foundation trust. Both those tasks benefit from being carried out by a body which is independent of the board of directors. We shall reach that issue at later stages in our consideration of the Bill.
The legislation sets out only minimum requirements for the duties of the board of governors, and it will be for individual trusts to include other provisions in their constitution concerning the role and duties of the board of governors, consistent with the requirements of Schedule 1. Therefore, we are not limiting their ability to give more authority to the boards of governors, subject to the requirements in the legislation that I have already mentioned. They may, for example, want to include governors on sub-committees established to advise the board of directors on development of the strategy and forward business plan. Pace the noble Lord, Lord Peyton, we do occasionally need the odd committee to bring people together to consider the future direction and pace of change.
The trusts may also want to establish a formal structure for liaison between the governors, members and partnership organisations that they are elected or appointed to represent so that there is a clear route for stakeholder views to feed into the organisation. We do not want to preclude development of that kind.
Some Peers have raised concerns that applicants may seek to sideline the board of governors and that the minimum legislative requirements would not necessarily prevent that. If I am honest, I was not totally reassured by one or two of the remarks of my noble friend Lord Hunt on that aspect. But perhaps I may say to those who are thinking of moving down that path—I shall try to reassure my noble friend Lord Hunt in particular—that the Secretary of State would not support applications that sought to bypass the board of governors, and the independent regulator will not issue an authorisation or agree any changes to the constitution if the trust does not abide by the spirit, as well as the letter, of the law. I am trying to set out this issue very clearly so that the Government's position on the board of governors is placed on the record.
The legislation is clear that the board of directors and not the board of governors will be responsible for the day-to-day running of the trust. Each board will have its own defined role, but they are all part of one organisation and, as such, will need to work together for the benefit of that organisation. They will be chaired—quite deliberately, despite the later amendment which deals with this matter—by the same person to help to facilitate working together. In the same way that members of a board need to resolve disagreements, these two boards will need to work through their differences. I would expect the skills of those chairs, with practical and experienced people such as the noble Baroness, Lady Hanham, who, sadly, is not in her place today, to enable some of the possible disputes to be avoided or resolved. The chair's skill will keep the two bodies in effective relationships with each other.
Governors do not have a right of veto unless an NHS foundation trust makes specific provision in its constitution for particular matters to be referred to the board of governors; for example, the ratification of the chief executive and executive director appointments. However, as I have already said, governors have significant influence over the board of directors—and rightly so—because of their role in the appointment and removal of directors. The appointment of non-executive members to the board of directors should ensure that prudence and good management are adhered to. As I said, I believe that a failure to resolve disagreements, which is always a risk in any human organisation, would be indicative of wider failure in the organisation, and the independent regulator may wish to investigate that if it leads to the non-functioning of a trust.
Perhaps I may deal with the issue of relationships with others. As we have said previously and shall no doubt say again in our debates, the NHS foundation trust is not an island; it is a part of the local health economy. The noble Baroness, Lady Cumberlege, mentioned the strategic health authorities. The SHA sets the strategic direction for its territory, and any foundation trust will have to take account of that and, under the provisions of the Bill, work in co-operation with the other partners in the local health economy.
The other day I said—I shall elaborate on it a little because it may be of comfort to some Members of the Committee—that we are prepared to consider the issues raised by the noble Earl, Lord Howe, in his amendment on the review mechanism. Certainly I can say today that the Government are prepared to encourage the regulator to carry out a review of governance after the first wave. We shall look at some of the wider issues on governance that the noble Earl put in his amendment. We accept that it would be sensible after the first wave to review the experience of governance arrangements. We are not being rigid on this matter, but we do not believe that now is the time to make major changes to the detail of those arrangements that are already set out in the Bill.
I have been enormously comforted by a more detailed description of the Government's thinking. I was shivering a little when I listened to the noble Lord, Lord Hunt, who I believe said that the whole point of the Bill was to move the running of the health service from central government to local communities. The noble Lord is nodding so I think that was the gist of what he said. We all know that central government should never have run the health service—that was the trouble—and to give it to local communities to run would be absolutely lethal. Anyone who has been in local government knows what would happen if that were the case. I do not believe that the aspirations of the noble Lord, Lord Hunt, in relation to this democratic element are sensible.
Nothing that the noble Lord said contradicts Amendment No. 31. It may be sensible to point out that the main role of the governors will be advisory. When the governors stand for election they will realise that that will be their role. I agree with the Minister that people are prepared to be elected to act in an advisory role. I do not know whether, in this case, it will be a satisfying job, but people do not mind being elected to advise.
It seems to me that this clarification is helpful. Those who understand the system very well believe that there is still some confusion in the Bill. I hope that the Government will find a way to clarify that. The word "governors" is peculiar for an advisory body. I believe that if there is to be a politicised body, it would be far better for it to be advisory rather than for it to have an executive role.
I thank all noble Lords who have taken part in this interesting and important debate on our understanding of how foundation trusts are expected to work. All noble Lords, with the exception of the Minister, recognise that there was a problem with the lack of clarity about the respective roles of the different parts of the foundation trust structure. I am grateful to the noble Lord, Lord Hunt, for exposing the very conflicts that trouble so many people who consider this matter in detail. While I was grateful for the detailed explanation given by the Minister, at the end of it I am still not clear that the Bill could survive without alteration. I shall certainly read carefully what he has said. Although the Minister has stated how he sees the matter, my instinct is that we have not satisfactorily resolved the issues.
The noble Lord, Lord Hunt, said that it would be a recipe for trouble if governors do not govern, but I believe that there will be a recipe for trouble if governors try to interfere in management. That is the tension at the heart of the matter and it has to be resolved. I do not believe that this is a matter that can be left to local flexibility, although I know that we shall hear that said about almost every debate in relation to Schedule 1.
The matter is far too important to be left to local flexibility. I believe that there is a fatal flaw in the way in which Schedule 1 has been constructed. There may be different views around the Committee on how it should be reconstructed, but I earnestly hope that the Minister will take away from this debate the fact that Schedule 1, with its lack of clarity and ambiguity about the respective roles of the board of governors and the board of directors, cannot be allowed to stand in the Bill. I shall carefully read what the Minister has said, but I would not like him to be left with anything but the impression that we on these Benches are firmly resolved to see the issue dealt with satisfactorily in the Bill. I beg leave to withdraw the amendment.
One of the many subjects on which the Bill is silent is the issue of the appropriate electoral system for the election of governors. If one goes around the country asking people what system of election they consider is best or fairest, one will encounter sharply differing views. Some may favour the first-past-the-post system, others the single transferable vote and others a different form of proportional representation altogether. Each of those systems has its merits.
I am of the view that the first-past-the-post system has the most to recommend it in the context of this debate. I believe that is a much surer guarantee against entryism than the single transferable vote—we can debate that. However, the point is whether we want different foundation trusts to decide to adopt different electoral systems. That kind of DIY approach sits oddly with the rest of these provisions, which seek to set the basic ground rules within which foundation trusts must work. We are looking at a mutual model. In imposing such a model on the health service, it seems extremely odd that the Government disclaim all interest in having a consistent voting system around the NHS as a whole. I believe that the consequences of having different voting systems around the country, as may happen, will cause immense resentment and a huge amount of argument and controversy. I believe that that energy could be better spent. I beg to move.
As many Members of the Committee know, I speak as a member of the Jenkins commission and, as such, I have spent some time considering electoral systems. I have not thought in depth about the electoral system for this instance, save that this is an incredibly important matter. The noble Earl, Lord Howe, says that he fancies the first-past-the-post system. If this scheme goes ahead, it would be perfectly possible for there to be a large number of candidates for the posts on the governing body and under a first-past-the-post system there would be nothing to say that people could not be elected with just 25 per cent of the vote in a constituency—that happened in the 1992 election in Inverness—or with 15, 10 or 5 per cent of the vote. I applaud the vision that the optimists put forward about how this will all work out in that it will be part of local communities, but can any noble Lord explain how it can be right for hospitals to be responsible to people whose sole claim to legitimacy is that they have the support of 5 per cent of the vote?
I could go through all the options. I hope that proportionality is a red herring. Proportionality is a concept that applies only if one conducts elections on a party system—if people stand on a party ticket—although STD avoids that problem. If this scheme goes ahead we cannot stay silent on such matters. Given the nature of expertise required, it would be ridiculous to leave the matter to individual trusts to sort out.
I spent 12 months under the chairmanship of Lord Jenkins thinking day and night about appropriate electoral systems. There were things that I did not understand even by the end. To ask people who are supposed to be in charge of running hospitals to work out the best electoral system seems to be a bizarre diversion of effort. Therefore, we clearly need a change to the Bill—possibly along the lines proposed by the noble Earl, Lord Howe—and consultation on appropriate electoral systems, which can produce the least undesirable system.
As the Minister will no doubt understand, these Benches have very strong views about electoral systems, both historically and currently. I thought that the noble Lord, Lord Lipsey, put his finger on the issue, but I want to retrace our steps. Having no specification of electoral systems demonstrates the lack of sense involved in this whole public constituency aspect of the Bill.
However, the situation is worse than stated by the noble Lord, Lord Lipsey. He said that one needs a proportional system—I recognise that the noble Earl, Lord Howe, is in favour of a different system—only if there is a party system. Actually, with a ticket system one needs a proportional system. So, for instance, groups of council tax payers or groups of individuals can gather together under a particular banner and seek election. In those circumstances a proportional system would be extremely important. Indeed, one could have entryism on a massive scale. I know how much that frightens the Government with respect to these particular proposals. Therefore, I cannot understand why they do not scrap them and start again.
However, unless an electoral system is specified, all kinds of recipes for disaster will ensue. For instance, there is the clean sweep. If one has a first-past-the-post system and different groups of tickets, one ticket can sweep the board. We have seen that happen in local councils. In those circumstances, what kind of representative nature for that public constituency will the board of governors have?
One can see all kinds of problems involved in this issue and I hope the Minister will consider it very carefully.
This has been a very interesting debate. It is not a subject to which I have really put my mind. What advice has been taken by the Minister's colleagues on this issue? We have the Electoral Commission, which I think does an extremely good job. As the noble Lord, Lord Lipsey, said, we have other bodies within this country with expertise in the matter. If we are to go down this road, which I do not support in any way, then at least we should try to ensure that the provision is as good as possible.
I should have great concerns if the amendment were pressed, either today or on Report. If one were to go down the route of Secretary of State regulations and prescription on how elections are to be conducted, either those regulations will be so vague as to be virtually meaningless regarding the individual foundation trusts, or, as I suspect, they will create a straitjacket, which simply will not suit the individual circumstances of each foundation trust.
We have 400 NHS trusts in England. They have very different circumstances. Some are local district general hospitals, some are specialist hospitals serving the rest of the country and some are university teaching hospitals. It would be difficult for the Department of Health to produce meaningful regulations without either severely constraining and therefore producing an inappropriate electoral system, or probably, as we have seen from the guidance that has already been given on governance, it will produce wishy-washy sentiments which will be of no help whatever.
Furthermore, if, as this Chamber has now discovered, the role of the governing body is advisory, why on earth should we be so worried about the electoral system? If the governing body is indeed a governing body, then I would understand the need for rigour in the process.
Some warm words have come from behind me. I am grateful for them. Before I get down to the detail of this issue, I must say that, from memory, securing agreement with Liberal Democrats on electoral systems in the past proved to be a rather difficult task. So it would be quite remarkable for me to achieve success on that point today.
I do not want to go through the flexibility issue too much. My noble friend Lord Hunt made the point very well. I should like to elaborate on some of the arguments. The legislation deliberately allows NHS foundation trusts the flexibility they need to ensure that their membership and boards of governors are genuinely representative. There are, as my noble friend said, a wide variety of trusts. I indicated some of that breadth earlier, and we shall no doubt return to the issue.
Some NHS foundation trusts will want, in particular, to take steps to ensure that minority interests, such as deprived wards, are genuinely represented on their boards of governors. Flexibility of the electoral system will allow for local circumstances to be taken into account.
I am not sure why we are getting so hyped up about this issue. We have accepted very different electoral systems for different levels of governance—for example, building societies, mutual organisations and others. Why are we taking such a rigid view about NHS foundation trusts? The principle that seems to be increasingly established as we look at the needs of particular organisations, whether it is a tier of government or otherwise, is whether the electoral system is fit for its purpose? That should be what we are concerned about.
Looking at the range of electoral systems, we could, as the noble Earl said, have a first-past-the-post system. That is a very straightforward system. The Labour Party is very attracted to it; and it may be suitable for NHS foundation trusts with simple demographics.
Full membership voting is another alternative. Here people would stand for particular posts. We shall turn to some of the issues around that at a later stage, and there may be a need for technical amendments. But with this system one can actually have a degree of separation within, for example, a community group of the territory or groups which would be voting.
One could have a single transferable vote if that was thought beneficial. That system can help minority candidates achieve election, so there are some cases for that. Noble Lords are concerned that at the local level we are turning loose without any help these poor characters who are trying to invent electoral systems. That is a little wide of the mark.
Let me try to give some reassurance about the support available to applicants. NHS foundation trusts will be encouraged to draw on advice from organisations recognised as being expert in managing election processes. They will be able to draw on best practice in mutual and other organisations. It is perhaps worth mentioning the New Deal for Communities policy which enables the community to determine its own structure and election methods. Most new deal elections have achieved an electoral turnout double that of local government elections. It is worth bearing in mind that kind of consideration.
The Guide to Governance Arrangements will be supplemented with the learning from the experience of the first wave applicants. I repeat a point I made earlier: we are very willing to encourage the regulator to have a review of the governance arrangements and experience of the first wave applications. So I do not believe that this amendment is helpful or that the NHS foundation trust applicants are being turned loose in quite such an unsupported role as some noble Lords seem to think.
I am grateful to all Members of the Committee who have taken part in the debate. I was particularly drawn to what the noble Lord, Lord Lipsey, said about holding some sort of consultation process on electoral systems. That is a huge question for each trust to decide and I cannot be quite as flippant as was the noble Lord, Lord Hunt of Kings Heath, in dismissing it as a minor element of their constitution. I must say that the noble Lord, Lord Clement-Jones, made some powerful points and I am prepared to be persuaded by him of the merits of PR if we have a conversation a little later, but the point is that hospitals should not be left to take what are immense decisions on the future shape of their democratic underpinning.
The noble Lord, Lord Hunt, said that there was a choice if we went down the regulatory route: we would end up either with something wishy-washy and vague; or with a straitjacket. I entirely take the point that different trusts have different circumstances, but it is not impossible for those differences to be catered for in regulations. For the Government to say, "Foundation trusts will have access to all sorts of advice if they want it", is to place too big a responsibility on those hospitals—whose business, after all, is not constructing a democratic system in Periclean fashion; it is looking after patients. That is an unfair burden to place on them; the work should be done by Parliament. I should like to test the opinion of the Committee.
Amendment No. 36 would delete paragraph 7(2) of Schedule 1, which allows the constitution to make provision for the circumstances in which a person may not become, or continue to be, a member of the board of governors. It is very similar to paragraph 5(2), which my noble friend Lord Howe queried moments ago. I shall not go through all the argumentation again.
When we talked about the issue in relation to paragraph 5(2), the Minister mentioned getting rid of vexatious individuals. The noble Lord, Lord Hunt, then raised the important issue of special interest groups. That is at the heart of what we are trying to find out. There is a real fear that various special interest groups will develop, whether comprising people who wish to stop a particular development, as suggested by the noble Lord, Lord Hunt, such as a mental health development, people who wish to keep open a particular building against the strategic needs of the local health economy or individuals with political—with a small "p"—views on issues such as stem cell research.
Those are quite big issues. The Government are saying that there are loose provisions in the schedule that allow persons not to become members, or members not to become governors. The Government should deal with the issues in the schedule; it should not be left to local flexibility. Overall guidance, as a minimum, must be set out by the Government.
On Monday, my noble friend Lady Hanham asked the Minister direct questions about what happens if a staff constituency member leaves, or if a person moves away from a local area. The Minister said that her questions were rather detailed. The Committee stage is when we should thrash out detailed questions. The fact that someone has ceased to be a member of staff may well affect whether he can remain a member of the board of governors. It is important that we understand the parameters for membership. I beg to move.
I support the amendment very strongly. Members of the Committee do not need to be told what passions are aroused by local hospital arrangements in certain areas. Issues such as lobbying by the friends of hospitals that are to be demolished, or that should be demolished on economic grounds, need to be settled in advance by guidelines. I can imagine enormous local hostility being caused by comparisons with neighbouring foundation hospitals, and great agitation in the local, if not national, press. That difficult area needs to be mapped out carefully in advance.
A fundamental point is that we need to ensure probity and suitability of governors because of the responsibilities that they hold in a crucial public service. Paragraph 7(1) of Schedule 1 provides the standard exclusion criteria used in several different Acts, including Section 80 of the Local Government Act 1972, to disqualify involvement in public bodies. It deals with what one might call "the usual suspects" in this area.
It is important that NHS foundation trusts have flexibility to decide on other circumstances where membership of the board of governors would be inappropriate. Again I give the example of a children's hospital, which should be able to exclude people, subject to notification, under the Sex Offenders Act. A trust might want to exclude persistent vexatious complainants or those who have committed acts of violence against NHS trusts. A foundation trust might wish to exclude a person who is a governor or non-executive director of another foundation trust. The legislation cannot deal with every specific example and allow sufficient flexibility to take account of different circumstances.
It is one thing to suggest, as the noble Baroness started to, that there should be guidance. But the amendment would actually reduce flexibility. It is quite inappropriate, because it makes it more difficult, even if we had guidance, to deal with some of the circumstances that I have just described.
The noble Lord, Lord Chan, talked about the issues of minority groups, with which I have every sympathy. Sadly, the amendment could restrict our ability to have flexible voting systems, more like the single transferable vote, that could ensure the inclusion of more minority groups on foundation trusts. There is still a requirement on foundation trust applicants to ensure that their boards of governors are representative of the constituencies served. It would be a very strange application that did not ensure that membership of boards of governors was fairly representative of the community served. If there was a very large ethnic minority community in the area, it would be expected that the membership would be reflected in the applications.
I do not disagree with the idea of guidance on the matter. If that is the noble Baroness's concern, I am happy to consider it further. However, we strongly disagree with limiting the ability of foundation trusts in the future to take sensible decisions to exclude a particular person or group. I do not mean someone who has deeply held philosophical beliefs or a group protesting about a proposed development, because those are the things that we hold dear in a democratic society. The examples I gave do not fit into those categories. However, I am happy to look again at the issue of guidance.
I thank the other noble Lords who have taken part in this debate and I am particularly grateful for the support of the noble Baroness, Lady Warnock. I should have stressed at the outset that this was a probing amendment and we have no intention of dividing the Committee. I accept that the amendment makes it more difficult to deal with the issue.
The Minister spoke about getting rid of individuals as if that were an easy thing to do. However, I think that the Government should look again at the kinds of processes that should be in place if individuals who may have already been elected to the governing body are to be excluded. Simply to allow the NHS foundation trust to devise its own arrangements to get rid of individuals that it deems inappropriate is not good enough. The Government should also deal with the issue of members of particular interest groups. The noble Baroness, Lady Warnock, reminded us of the trouble that can be caused by such groups.
I am grateful to the Minister for saying that he will go away and look at the guidance, but I suspect that the schedule itself needs some amendment in order to make any additional guidance valid. In the mean time, I beg leave to withdraw the amendment.
The provenance of this amendment is from one section of staff interest—the Royal College of Midwives. It is a probing amendment. The Minister has made it clear that he sees the nature of the board of governors as more like a council of members than anything else. As he pointed out, the schedule itself refers to the board of directors having the essential power to run a foundation trust. On that basis, it is extremely important that the board of governors is representative of a broad range of interests.
The language of paragraph 8 is interesting. In some cases it is numerical and in others, for example in the case of a public constituency, representation on the board of governors is expressed as a proportion of the board. As the Minister is aware, there are shortages and problems with morale in the medical profession and those allied to medicine. It seems sensible that there is adequate representation on the board of governors in these newly-formed foundation trusts.
The Royal College of Midwives believes that one way of tackling shortages is to build a greater sense of professional standing among staff. That must be right. One way of achieving that would be to give them an adequate voice on the board of governors. As it stands—of course we do not know what the normal size of a board of governors will be—the only provision is that one member of the board must be elected by the staff constituency. Many staff and those who represent them believe that that number should be higher. We have suggested one fifth, although I am interested to hear whether the Minister has any other figure in mind or whether there is a usual limit on that number. If there are large numbers of people on a board of governors and it is like a council of members, there should be more than one person from the staff side. I beg to move.
We do not disagree with the sentiments behind the amendment, but we disagree with the precision with which it is executed. The legislation deliberately sets out only minimum eligibility requirements for membership of foundation trusts to allow those trusts flexibility to tailor their own arrangements to reflect local circumstances. I have tried to explain the safeguards that are in place to ensure that that flexibility is not used inappropriately.
Amendment No. 37A would restrict an NHS foundation trust's flexibility to set up arrangements that best suit its local circumstances. Specifying that a fifth of the governors must be elected by staff members would require trusts to have multiples of five governors on the board, which could be a considerable restriction. Perhaps the noble Lord intended to specify that at least a fifth of governors should be staff governors, but even that could cause troubles. For some trusts that may be the right approach, but to mandate a fixed proportion in legislation would seriously restrict the flexibility on board configurations, particularly for those trusts that are not intending to have very large boards.
Concern has been expressed in the House about the size of boards. I cite the example of a teaching hospital. Under this provision it would have to have a minimum of 13 governors to satisfy all of the number requirements in the Bill—and that is without provision for a partnership governor. It would have to have seven members elected by the public to outnumber the rest, at least one local authority member, at least one PCT member, a university member and then, by the noble Lord's formula, three elected by staff, not including a partnership governor. As drafted, the amendment could be an escalator to much larger boards, so I ask the noble Lord to consider that carefully.
The Minister's reply is extremely interesting. It almost makes my case for me because, as we have decided, this is a representative not an executive board. Actually, 13 for a representative board—lucky or not—is about the right sort of size for this kind of body. People would be rather disturbed if the board of governors—or board of council members, as the noble Lord, Lord Hunt, called it—was rather less than 10.
When we are talking about representative capacity we should have the ability to cover a wide range of communities. I can think of many teaching hospitals, especially in London, that have a very diverse set of communities in their area. If we are to go down this track—and I should say that every time I move an amendment—seven public constituency members seems to be entirely sensible, and three elected by staff is not disproportionate in those circumstances.
I hear what the Minister says, but Ministers tend to adopt mantras as they go through Bills. The mantra of this Bill is flexibility. The noble Lord, Lord Hunt, will recall other mantras, I have no doubt. However, flexibility is clearly the watchword in this Bill. Sometimes, it is rather useful to deliver clear signposts and not give too much flexibility. The circumstances for staff representation in most foundation hospitals seem to be fairly common. Therefore, the wish to represent staff seems to be an entirely laudable one and one fifth seems to be modest. I will ponder what the Minister has said, but the Government should reconsider the guidance, even if the information does not appear in primary legislation. I beg leave to withdraw the amendment.
The board of governors of a foundation trust is a bit of an Irish stew. It has members elected by the public, at least one member elected by staff and members appointed from various quarters of what one might term its professional and governmental constituency. Paragraph 8(3), which provides for at least one member of the board to be appointed by a PCT begs several questions.
The first and most obvious question is: what is implied by the provision, where more than one PCT has a contract with the foundation trust? It would be unwieldy and unworkable, if every PCT that had a contract with the foundation trust were automatically able to nominate a governor to the board. Many teaching hospitals have a couple of dozen or more PCTs from which they accept patients. Moorfields Eye Hospital represents, I believe, 50 PCTs. Other hospitals have many more even than that.
We can see that the situation must be kept flexible, which is what the schedule, in effect, does. It leaves it up to the constitution of each trust to determine what arrangements to put in place. However, there is a difference between keeping the situation flexible and casting foundation trusts adrift without a rudder. If several PCTs have contracts with a hospital, who is to decide which of them should have the right to nominate a board member and on what basis that decision should be made? The Bill is silent on that issue. It might easily happen that no natural PCT suggests itself as the lead PCT, and, because referral patterns and service contracts change over time, it may well be that some foundation trusts will find that their constituency of PCTs also changes over time. Without some sort of steer, such as the one that I suggest in my amendment, one can envisage a great deal of argument taking place for little net benefit.
How do the Government see that part of their blueprint for boards of governors being implemented in practice? The Minister will probably tell me that "blueprint" is entirely the wrong word, but what I am trying to get at is: what are the Government trying to achieve through the provision? For many foundation trusts that go through the rigmarole of deciding how many PCT representatives to include on the board and where those representatives should come from, there may still be considerable dissatisfaction among the commissioning PCTs that they serve. Where there are a lot of them, there is bound to be a majority that feels that its interests are not being represented. That is inevitable.
One then has to ask what meaning the PCT board appointment has. How meaningful is it for a PCT governor to be appointed on the basis that he or she represents 2 per cent of a hospital's activity? No one will want to be a token presence around a board table, but that is what is bound to happen unless there is something truly representational about that person's appointment. If we imagine such representation, we presuppose that three dozen PCTs are prepared to get together to find a way through their competing interests. It is by no means obvious to me how or why they would be prepared to do that. Each will feel that it has if not the legal right then certainly the moral right to have its views represented at foundation trust level.
I hope that the Minister will steer us through those issues. I beg to move.
The noble Earl, Lord Howe, has made an enlightening contribution. The more one thinks about the provision, the more difficult it gets, not only on the question of numbers. After all, we know that there are major hospitals from which many PCTs commission. Determining which PCT should be represented on the board of governors will be difficult, unless there is a proper mechanism for that.
The last part of the noble Earl's contribution was even more interesting. Should PCTs be represented in the first place? How will that work? Will it be a token representation? I would take it a step further: is there not a potential conflict of interest? After all, the PCT—especially if it is the major commissioning PCT—will have a conflict of interest with the trust. It must be in a position to commission without fear or favour. What happens if, suddenly, that PCT decides to withdraw a range of services that it had previously commissioned from a trust?
The more I thought about it, as the noble Earl, Lord Howe, made his speech, the more conflicting the situation seemed to become. I am sure that it is being done for the right reasons, such as ensuring that there is broad representation, but the relationship between commissioner and provider is an important one. I wonder whether the PCT should be represented on the board of governors in the first place.
I am not sure that there is a conflict of interest. I want to put the amendment and some of the remarks that have been made in their proper context.
If a PCT commissions a particular range of services from a foundation trust, it will have a relationship with the trust that is totally outside any involvement through the board of governors. If it is doing its job properly, it will want to ensure, through the normal processes of "contractual arrangements", that the foundation trust or any other NHS trust delivers the required services. That relationship will not be governed by membership of a board of governors. An individual PCT will not discuss its concerns about the delivery of particular services, which may be relatively small issues in comparison with the other things that are discussed by the board of governors. Such discussions will be held directly with the providing body, as part of the PCT's day-to-day relationship with that body.
We are trying to ensure that the commissioning perspective is taken account of in the activities and deliberations of the board of governors. I shall not repeat the debate that we had about the role of the board of governors. It must be seen in the context that the board of governors is not an executive, decision-making body as regards the contractual relationship between a PCT and a provider. We must start from that position.
The amendment raises the issue of who is best fitted to be the PCT representation on the board of governors. The noble Earl cited the case of Moorfields, but the range is enormous. Rotherham and Stockport each have service level agreements with a single PCT. I shall run through just a few first-wave trusts. City Hospitals Sunderland NHS Trust and Sheffield Teaching Hospitals NHS Trust, both of which provide district general hospital services, have in the range of three to five service agreements with PCTs. The Nuffield Orthopaedic Centre NHS Trust and the Marsden—specialist trusts—have, respectively, 25 and 34 service level agreements with PCTs. Services commissioned from Moorfields represent more than 1 per cent of activity for 9 PCTs and between 0.1 and 1 per cent of activity for a further 50. Some services are provided for 133 PCTs.
With that range and given that the value of the contracts—the service level agreements—is likely, if history is any indicator, to change over time, we should not lay down rules on the basis of value. It would put us into boxes that are inappropriate and for which many PCTs would not thank us.
Although there will be a need to have a discussion among the PCTs, they will want a manageable number of relationships with boards of governors. If they are working with a great number of foundation trusts, that will impose obligations on PCTs which must not be too onerous for them to discharge. Being prescriptive will not help. I urge the noble Earl to reconsider his amendment.
I tabled the amendment because I felt that it was right to have the debate; I am glad that I did. I am grateful to the Minister for what he said, but this is yet another example of the Government's arrangements for foundation trusts being half-baked. Unless there is greater clarity for trusts and PCTs, there will be a good deal of frustration and also, probably, misunderstanding when these provisions come into force. The essential question is: what is the PCT representative there to do? What is his or her function? I am not sure that we are any closer to that.
The noble Lord, Lord Clement-Jones, put it well. Possibly there is not a conflict of interests, but there could be. I need to understand better the Government's thinking in inserting this provision. Nevertheless, we have some thinking time left. I am sure that we shall reflect carefully on what the Minister said. I beg leave to withdraw the amendment.
Amendment No. 39, which deletes sub-paragraph (6) of paragraph 8 in Schedule 1, is a probing amendment. Sub-paragraph (6) provides that an organisation may be specified in a foundation trust constitution as,
"a partnership organisation which may appoint a member of the board".
My amendment removes that. I invite the Minister to explain what is meant by this provision and to explain what types of organisation might be covered. As the Minister will be aware, this provision was introduced by the Government on Report in another place and was not debated. As with so much of this Bill, the Explanatory Notes explain nothing.
Will the Minister say what a partnership organisation is? How does one recognise a partnership organisation if one meets one in the street? The Minister will be aware that one of the most over-used words in the new Labour lexicon is partnership. It certainly does not mean partnership in any legal sense. As far as I am aware, there is no authoritative government definition. Will the Minister give a definition for the purposes of the Bill?
I have some further questions. Who will judge whether an organisation is a partnership organisation? What happens if the quality of partnership disappears from a relationship with an organisation? Who will decide that? Can these partnership organisations be from the private sector or must they be from the public or voluntary sector? Can trade unions be partnership organisations? If so, how will that affect the staff constituency? How many partnership organisations with a seat on the board of governors can a foundation hospital have?
This is another area that the Government are making up as they go along. As regards the governance of foundation trusts, David Hinchliffe, chairman of the Health Select Committee in another place, said:
"The policy is part of a growing trend of policy making on the hoof". (Official Report, Commons, 8/7/03; col 937.)
I invite the Minister to prove him wrong and to give a coherent account of this piece of the jigsaw. I beg to move.
As I recall, when I was a director of social services, partnership used to be in the lexicon of the Conservative Party too. It has been set out in the guide to NHS foundation trusts, published in December 2002, that foundation trusts may decide to extend representation of local partnership organisations on boards of governors beyond the minimum legislative requirements; that is, to PCTs, local authorities and universities, if relevant.
The noble Baroness asked me to give examples, which could include other NHS and social care bodies in a particular local health economy, such as an ambulance trust; or voluntary sector providers and charities, such as palliative care providers and patient support groups. As a former chairman of the National Council for Voluntary Organisations, I must declare a personal interest in ensuring that voluntary organisations, which may be important providers in a particular local area, should be able to participate in this way.
There could be other organisations that have a particularly important responsibility for the education and training of non-medical staff. This is a labour-intensive organisation and there are increasingly new and interesting models for training staff. These organisations have close links with health service providers because of their important role in ensuring a competent, trained workforce.
Those are the types of organisations that would be cut out of the jigsaw by this amendment. We are keen to give—with all due respect to the noble Lord, Lord Clement-Jones, to use the mantra again—flexibility to foundation trusts, when it is appropriate in their particular area, to bring these other bodies into the game. We would not want that flexibility to be lost. I hope that I have explained some of the thinking, which has not been made up on the hoof. These bodies are in the real world providing these services in all parts of the country. Now we want to ensure that they can participate as foundation trusts are set up.
I do not know if this helps the noble Baroness. I have looked at the consultative document issued by my local Birmingham University NHS trust. Out of a board of 35, it is proposing up to 12 partner organisations, including the PCT, the local authority and the University of Birmingham. But it is also consulting with other partnership organisations, including the University of Central England, Birmingham and Solihull Learning and Skills Council, Advantage West Midlands, the Birmingham Chamber of Commerce, the Birmingham Voluntary Service Council, the Royal Centre for Defence Medicine—a large organisation now that the MoD has moved to Birmingham in order to work with the health service there—various high sector groups, business groups, such as the CBI, and hospital volunteer services. It is clear that there can be a huge range of organisations, all of which clearly have an impact on health services. That indicates that foundation trusts can be left to sort this matter out for themselves.
The noble Lord, Lord Hunt has, as ever, raised an interesting point. No doubt he speaks from the peculiar circumstances in Birmingham, although they may be replicated elsewhere. It would be extremely helpful if the Minister had information in the department about the average or actual numbers on the board of governors proposed by applicants for foundation trusts at the moment. He was talking about 13 being a somewhat extravagant number, whereas 35 seems to be an incredible number for a board of governors in those circumstances.
Perhaps I may just clarify my position. I was not saying that 13 was an adequate, too large or too small number. I was using that example to show how the noble Lord's formula would work in a particular set of circumstances. I was not prejudging the right and appropriateness of any foundation trust to have a board of governors appropriate to its circumstances.
Surely the point is this. If it is now decided that this is an advisory body, what is the problem in having a large number of people on it? Clearly, it has no real decisions to make. It is an advisory body; it might as well have as many groups and interests as it can.
I could not agree more. I was not disagreeing with the noble Lord, Lord Hunt, or what the hospital proposes. But it makes 13 representatives, which the Minister said had to be the minimum number if there was to be one-fifth staff representation in those circumstances, look very modest. Therefore, my original amendment looks entirely reasonable and acceptable.
The noble Lord, Lord Hunt, has possibly shone greater illumination on this topic than did the Minister, although I am grateful to him for his response. I was surprised by the number of 35 and by the very long list of so-called partnership organisations which seem collectively to dominate that board of governors. I found that strange.
It may be that my probing amendment to search out the meaning of a "partnership organisation" was the wrong one to bring forward; perhaps we need a harder definition of which partnership organisations should be allowed to take part and what proportions would be appropriate for them.
The Minister did not answer fully the questions that I put to him. I asked him who is to judge whether an organisation is a partnership body. The noble Lord, Lord Hunt, cited a long list of local bodies.
Perhaps I may clarify that point. It was an oversight on my part. Under the present arrangements it is made clear that it is for the foundation trust, in making its application, to decide what is an appropriate group of partnership organisations.
So we shall have yet more flexibility laid on top of an entirely vague set of proposals for the board of governors. The flaw in Schedule 1 dealing with the board of governors is not dealt with by this amendment; it goes much wider. I am sure that we shall return to the matter at a later stage. I beg leave to withdraw the amendment.
This may be a convenient moment for the Committee to adjourn until after Starred Questions. I therefore beg to move that the House do now resume.