My Lords, this has been a good and constructive debate on NHS foundation trusts. It is right that we should focus on the removal of the private patient income cap, as I am acutely aware that that is where the majority of noble Lords' concerns lie.
We need to focus on one core point at the outset. Fears have been expressed that removal of the cap could see foundation trusts increasing private income at the expense of NHS patients-in other words, that it could create a two-tier NHS, with those who can afford to pay going to the front of the queue. That is wrong and, I believe, alarmist. There are robust safeguards in place to prevent that kind of outcome.
Allowing a foundation trust to generate more private income does not release it from its prime duty to its NHS patients. Foundation trusts will still have to meet their legally binding contractual obligations on waiting times and provide the highest standards of care for NHS patients. Foundation trusts themselves are very clear about that. Removing the private patient income cap would allow them to bring extra investment in infrastructure and leading-edge technology to benefit NHS patients. Today, foundation trusts can be prevented by the cap from treating private patients who wish to be treated at the trust even when the income that the trust would earn would support its NHS services. The point made by the noble Baroness, Lady Finlay, was absolutely spot on. The cap leads to the ridiculous situation where NHS consultants are forced to get into their cars to drive to independent providers to perform private patient work in their non-contracted hours. Removing the cap would improve clinical safety for all patients in NHS hospitals, because doctors would be more likely to remain on site for longer.
It may well be, as the noble Baroness, Lady Murphy, pointed out, that most foundation trusts will not be affected at all by the removal of the cap. Many of them are earning below their caps at the moment. It is worth noting that NHS trusts, as distinct from NHS foundation trusts, which are not subject to a cap at all, are not earning proportionately more than corresponding foundation trusts. The point is that removing the cap gives the most innovative organisations the opportunity to boost income for NHS services.
I can also assure the House that we have put in place substantial safeguards to protect NHS patients. NHS foundation trusts will remain first and foremost NHS providers. Their principal legal purpose, to treat NHS patients, has been in legislation since 2003. I tabled an amendment in Committee to clarify its legal meaning. A foundation trust's principal purpose requires it to earn the majority of its income from the NHS. That is very different from saying that 49 per cent of the work of foundation trusts will be with private patients, as some have misinterpreted it. The Bill does not mention 49 per cent, as I hope the noble Baroness is aware. Amendment 220A would remove the clause. That would be most unfortunate, because its effect would be to leave governors and local communities unclear that foundation trusts must remain predominately NHS providers.
There have been worries that the internal governance of foundation trusts will not be strong enough to exercise the requisite control in that area. I hope that I can provide reassurance on that point. As the local community's representatives, it is the responsibility of the governors to hold the board to account for its management of the trust. The governors should also consider whether the level of private activity is in the best interests of their organisation. The Bill will ensure that governors are better able to do that. It strengthens their arm by giving them new powers to hold directors to account and, if necessary, to remove the chair and non-executives of the board of directors. It would be entirely appropriate for the governors to use these powers if they felt that non-NHS activity was not operating in the interests of NHS patients.
At this stage, I should like to thank my noble friend Lord Clement-Jones for setting out a very persuasive case for adding to governors' powers to oversee a foundation trust's private income. I have tabled an amendment, which I hope will address his concerns, requiring directors to detail in the trust's annual plan-that is, the forward look-any proposals to earn private income and the income that they expect to receive. By law, directors already have to take into account governors' views in preparing this plan, but this amendment would place an explicit duty on governors to consider the plan and be satisfied that any proposals to increase private income would not significantly interfere with their foundation trust's principal legal purpose to treat NHS patients.
With regard to the point raised by the noble Lord, Lord Campbell-Savours, a plan to increase private income substantially-that is, to increase by 5 percentage points or more the proportion of total income earned from non-NHS activity-must secure agreement by a majority of governors in a vote. For example, governors would be required to vote where a foundation trust planned an increase in non-NHS income from 2 per cent to 7 per cent or more of its total income, or from 3 per cent to 8 per cent or more. To make it quite clear, the vote would be triggered by plans for large increases in non-NHS income. Other matters, such as significant transactions, are for foundation trusts to decide. These proposals would complement the amendment that we introduced in Committee to require directors to explain in a foundation trust's annual report how private income had benefited NHS patients.