Health and Social Care (Community Health and Standards) Bill

Part of the debate – in the House of Lords at 11:00 am on 6th November 2003.

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Photo of Earl Howe Earl Howe Conservative 11:00 am, 6th November 2003

My Lords, in moving Amendment No. 2, I wish to speak also to Amendment No. 97.

From the very start of our debates at Second Reading I have made clear not only my doubt about the supposed benefits of foundation trusts as envisaged in this Bill but also, and more importantly, my deep disquiet about their adverse consequences—consequences which I believe are inevitable. If our disagreement with the Government amounted just to a difference of opinion on whether or not the freedoms on offer to foundation trusts are really as significant as Ministers maintain they will be, frankly we on these Benches would feel that we had done our duty simply by explaining our point of view, but because we believe that these proposals carry profound dangers for the NHS itself we are into a much more serious realm of disagreement.

One of the main advantages of all those marathon sessions in Committee was that, by taking our time in examining the minutiae of the Bill, we were able to tease out its underlying implications quite successfully. Certainly one or two spectres were banished and that was helpful, but on the whole our exploration of Part 1 served only to confirm the worries that we entertained previously, and, I may say, to add a few more to the list.

We do not argue with the core case for foundation trusts. The case for foundation status is that by being freed up from the dead hand of central control hospitals will become more entrepreneurial and creative and thus more responsive to the needs of patients. The problem with that simple concept is that since it started out on its journey various people in high places have thought twice about it and the plan for its implementation has been successively diluted and devalued.

If as a chief executive you are subject to a legal lock on your hospital's assets and a cap on the amount of private income you can earn and a regulator who tells you how much you are allowed or not allowed to borrow, it does not seem to me that you have much scope in which to be creative and entrepreneurial. If on top of that you are subject to national pay agreements and unable to develop your own IT systems in the way that suits your own hospital's needs, you will start to wonder what managerial flexibility is really available to you. If you are then told by the regulator what clinical services you have to provide in your hospital, what services you may not provide and what programmes of research you have to conduct, you might be forgiven for questioning whether the entire game is worth the candle.

If freedoms are being granted to a publicly funded system of healthcare, I for one do not have a problem with the idea of an independent regulator. Where I do have a problem is with a regulator who is constrained in almost every move he makes by his relationship with the Secretary of State. He owes his appointment to the Secretary of State; he is financially dependent on him; and in a very real legal sense, he must walk in the Secretary of State's shoes.

I described the duties in Clause 3 as a back-door power of direction over foundation trusts by the Secretary of State. Although the Minister took issue with that description, I do not think that it is very wide of the mark. Not even the business of authorising new foundation trusts is in the regulator's sole gift. We have what my noble friend Lord Peyton so aptly refers to as the double banking arrangement whereby all applications for foundation status first have to meet with the approval of the Secretary of State. The Secretary of State's presence runs through this part of the Bill like the message in a stick of rock. For foundation trusts the main problem with this arrangement is not just its scope for prescriptiveness from the centre but its lack of equity. If they look around for a route of appeal against the regulator's pronouncements, they will find that there is not one.

That lack of equity extends a lot further. Insolvency provisions may not be everyone's idea of an absorbing read at bedtime, but I do not exaggerate if I say that the proposals that the Government have published for the insolvency of foundation trusts are truly outrageous. My noble friend Lady Noakes will speak on this issue later. Let me simply say that as the implications of these provisions dawn on the business community, I shall be interested to see how many banks or businesses will believe that foundation trusts represent an acceptable trade risk.

I need to move on to what I consider to be the most serious consequences of this part of the Bill. The first is its effect on the NHS as a whole. There is to my mind one pre-eminently damaging feature of the Government's proposals and that is the ability of foundation trusts to gain privileged access to capital at the expense of the rest of the health service. It is what my noble friend Lady Noakes referred to as the zero-sum game. The issue can be described very simply. We know from the Treasury that the total pot of capital available to the NHS, including money borrowed from the private sector, is a strictly limited one. If foundation trusts are allowed readier and freer access to that pot of money than are other NHS bodies, then as night follows day every pound of foundation trust borrowing means a pound less for the rest of the NHS. The trusts that really need more capital and that are trying desperately to raise their standards and improve their services will actually find that with the advent of foundation trusts it is more difficult for them to do so. Patients will be the losers from the proposal. As I said at Second Reading, it amounts to a dog-eat-dog culture, and it is one that we should not countenance.

The Minister's reply to my noble friend in Committee was completely unconvincing. He said that the limited amount of available capital was not in practice an issue, because the pot of money was very much bigger now than it ever had been in the past. Anyone who knows how tight the finances of the NHS currently are—that is anyone who has spoken recently to managers of trusts—will realise that the Minister's argument is bogus. Record sums of money are indeed flowing into the NHS, but the vast bulk of it is already spoken for, not least in pay and pension rises, but also in funding past deficits.

It will take several years for every trust to become a foundation trust—five years at the very least. During that time, the increases in the health budget will be nothing like those that we are now experiencing. That means that NHS trusts will need to compete as hard as ever for capital. Those trusts that are not foundation trusts will find that they are competing on a decidedly unlevel playing field.

This part of the Bill stands or falls on its detailed provisions. That brings me to the other area of profound difficulty for us. The governance arrangements for foundation trusts carry very serious risks for the health service. Set aside the obvious fact that running elections and maintaining membership lists are a cumbersome and expensive distraction for the NHS from its core task, which is looking after patients. Set aside that democracy of such a kind and on such a scale has never been attempted in the NHS before; look instead at its implications for the care of patients.

In the words of the noble Lord, Lord Lipsey, the system will embed politics in the management of our hospitals. He spoke of governing boards consisting of party-slate politicians, single-issue campaigners and, at worst, extremists. The influence of the elected board of governors on how a hospital is run will be enough to ensure that its board of directors has its hands tied in ways that may run completely counter to its professional judgment.

We debated the phenomenon of entryism. I have yet to hear a convincing argument from the Minister that demonstrates that the risk can be eliminated. A small group of agitators on a board will wreak havoc, and there will be no remedy for it, because of the lack of accountability that lies at the heart of the arrangements. Those whose interests really need to be represented—the inarticulate, the disabled, the mentally ill—will be excluded. Again, the Bill provides no remedy for that. It substitutes one kind of politicisation for another, in a potentially much more dangerous form. As my noble friend Lady Hanham emphasised, how a hospital is run is not just a detail, but very important. Innovation, change, well motivated management and rapid decision-making are being put seriously at risk.

It is no small thing to ask the House to reject a major part of an important Bill. However, I feel justified in doing so on this occasion. The proposals are either ill-thought through or, to the extent that they have been thought through, misconceived and wrong. Grave concerns were expressed on the issues when the Bill was in another place. The slim majority secured by the Government was testament to that. I do not therefore believe that it would be inappropriate to ask the other place to think again on whether foundation trusts, as conceived in the Bill, are the right way forward for the NHS. I beg to move.