Health and Social Care (Community Health and Standards) Bill

Part of the debate – in the House of Lords at 10:00 pm on 13th October 2003.

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Photo of Lord Warner Lord Warner Parliamentary Under-Secretary, Department of Health, Parliamentary Under-Secretary (Department of Health) 10:00 pm, 13th October 2003

I shall respond first to Amendment No. 155. The prudential borrowing code concerns limits on overall borrowing, not the terms and conditions under which loans are issued. These are matters for lenders, not the regulator. We do not think that the PFI system drives a coach and horses through this and, as I said in response to an earlier amendment, the servicing of the PFI arrangements will be taken into account in setting the prudential borrowing limit for each individual NHS foundation trust.

Changes in the terms and conditions of loans which might affect the ability of an NHS foundation trust to service debt are already taken into account in determining the prudential borrowing limit. Any charges paid by foundation trusts would reduce both their free cash flow and the amount of money available to service new debt. Thus, all things being equal, this will reduce a foundation trust's prudential borrowing limit.

I can tell noble Lords that we have consulted widely on the financial matrix that commercial institutions use to assess credit-worthiness and we would be happy to expand on that consultation in a follow-up to the written response that I have already promised to the noble Baroness, Lady Noakes, and other noble Lords.

If an NHS foundation trust took out a loan under inappropriate terms, that would constitute a breach of the duty under Clause 38 to exercise its functions effectively, efficiently and economically, and if necessary the regulator could step in to protect NHS services. That sets out our position on Amendment No. 155; we would not find it acceptable.

I now turn to Amendment No. 157, spoken to by the noble Lord, Lord Clement-Jones. In drawing up the prudential borrowing code, the regulator must consult the Secretary of State, applicant NHS trusts and such persons as he considers appropriate. Nothing in those arrangements prevents him taking account of the views of people such as those listed in the amendment. However, I would suggest that the groups set out in the amendment would not have any particular expertise when it comes to prudential borrowing. In our view, therefore, it would not make sense to set down a requirement for them to be consulted. However, as I have said, there is nothing to stop them being consulted, along with a number of other people whom the regulator may consider it appropriate to consult.