Schedule 1 - Constitution of public benefit corporations

Health and Social Care(Community Health and Standards) Bill – in a Public Bill Committee at 8:55 am on 20th May 2003.

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Photo of Evan Harris Evan Harris Liberal Democrat, Oxford West and Abingdon 8:55 am, 20th May 2003

I beg to move amendment No. 181, in

schedule 1, page 95, line 22, at end insert 'and their interests,'.

Photo of Mr Win Griffiths Mr Win Griffiths Labour, Bridgend

With this it will be convenient to discuss the following amendments:

No. 182, in

schedule 1, page 95, line 23, after 'directors', insert 'and their interests'.

No. 132, in

schedule 1, page 95, line 25, at end insert—

'17A (1) The public benefit corporation is to establish a register of interest for those service on the board of governors as directors.

(2) The information to be registered shall include relevant financial interests and any political affiliations within the previous five years.'.

Photo of Evan Harris Evan Harris Liberal Democrat, Oxford West and Abingdon

I understand that there is an even greater urgency for us press on, so I shall be very quick.

Photo of Evan Harris Evan Harris Liberal Democrat, Oxford West and Abingdon

I do not know whether the hon. Gentleman will be happy with one minute, but that is how long I shall give to this matter.

Amendment No. 181 is a very obvious one, as is amendment No. 182. They ensure that a register of interests is set up for directors of, or those who sit on the board of governors of, a foundation trust. That is in line with good practice generally where budgets involving public money are being wielded, or where any large organisation requires transparent accountability. I hope that the Government will not have a problem with it.

It is not appropriate for political affiliations to be registered. If this is supposed to be a genuine quasi-democracy of which people seek to be members, we should not discourage those who are interested in local politics; rather, we should do the opposite. The need to declare such interests seems to imply that there is something wrong with them, and that that might be a factor in the poor or inappropriate performance of a governing body or a board of directors. I am not sure that that is the case. I cannot see how political affiliation would be relevant in the running of a governing body. However, I look forward to the hon. Member for Epsom and Ewell (Chris Grayling) setting out why he and his colleagues think that it is necessary, and we will keep an open mind. We did not include that in our amendments because we did not feel that it was necessary. I hope that the Government will see

that this is a reasonable and necessary step to take, and I commend the amendment to the Committee.

Photo of Chris Grayling Chris Grayling Shadow Minister (Education)

Good morning, Mr. Griffiths. I will also keep my remarks brief on these amendments. The hon. Member for Oxford, West and Abingdon (Dr. Harris) has already indicated broad agreement from the Opposition Benches that some form of register of interests is appropriate. Indeed, in tabling amendment No. 132, we anticipated the Liberal Democrats' amendments and have set out what we believe is the right way to do things.

It is essential and, indeed, common practice, that those serving in an elected public office in today's world register their interests. Sometimes that requirement goes a little bit too far. As the Under-Secretary will know, in some areas of public life, such as county councils, we have had our doubts about whether that is appropriate. That cannot be the case in this circumstance. We are looking at substantial public bodies with significant turnover of anything up to £100 million or more and at people who will have a role in the governance of those organisations.

It seems entirely appropriate that there should be some requirement to register relevant financial interests. That could include directorships of companies that sell services to that organisation or that could, in some circumstances, sell services to a foundation trust, or a directorship or financial interest in another health care organisation. Those are the classic forms of registration that we would go through, and it is entirely appropriate that those people should go through them.

I shall touch briefly on the question of political affiliation, which is connected to the points that have been made by Government Members and me about entryism. In using the word ''political'', we are not referring simply to a political party. We did not use the words ''political party'', because, in today's world, the words ''political affiliation'' can have a broader meaning. If someone is a director of a substantial pressure group, is a member of a political party, has held political office or has been appointed to a position by a political party because of specific interests, it is right and proper that those interests should be registered. That is appropriate.

For all NHS appointments, it is expected that candidates' political affiliations will be registered and made available to the public. It is not unreasonable that a member of a foundation hospital's board of governors should be required to make the same kind of declaration, particularly given the fact that those boards could be the targets of pressure groups that may want to influence unduly the management of hospitals. It is right and proper that there should be some form of political registration.

Photo of Evan Harris Evan Harris Liberal Democrat, Oxford West and Abingdon

I have listened carefully to what the hon. Gentleman has said. First, would membership of an organisation such as the Society for the Protection of the Unborn Child come into that category? SPUC is often cited as an example in such cases. The hon. Gentleman's explanation suggests that it would not. Secondly, my understanding is that one reason why appointments to bodies such as NHS trusts must

declare affiliations is for the purpose of transparency; they are appointed positions. There may also be other reasons. That rationale would not apply to members of a board of governors, because those members are elected.

Photo of Chris Grayling Chris Grayling Shadow Minister (Education)

In the case of SPUC, let me give the hon. Gentleman a specific example. In recent years, the ProLife Alliance has nominated candidates for election. Candidates have also been nominated for election by other single-issue pressure groups. Surely it is right and proper that someone who stands for election in such a capacity to the board of governors of a local hospital should be required to make such information available, in the same way that a person must declare that he or she is a Liberal Democrat MP, a councillor, or whatever. It is entirely appropriate to do that. It simply means that people declare that they have a political involvement. That information should be in the public domain.

I can see no reason for any objections to including that amendment in the Bill. It is a simple process; it would mean no more than ticking a box, in the same way as financial interests are declared. In a spirit of openness and in an effort to provide full information about the people who run or steward hospitals, there is no reason why people should not be asked to make such a declaration. We endorse the requirement for some form of registration, a practice that is common in public life.

I am sure that the non-inclusion of such information is simply an omission by the Government in the Bill's drafting. I hope that if the Under-Secretary cannot accept the amendments that have been tabled, she will at least give an assurance that she will return with Government amendments that will fill an unnecessary gap in their proposals.

Photo of Hazel Blears Hazel Blears Parliamentary Under-Secretary (Department of Health)

The declaration of interests from people who may have a role in NHS foundation trusts is an important issue. ''A Guide to NHS Foundation Trusts'', paragraph 2.24, clearly states:

''The Independent Regulator for NHS Foundation Trusts will publish guidance on eligibility for members to sit as governors on the Board of Governors covering such matters as terms of office, conflict of interest and payment of expenses.''

We are concentrating on those important matters of probity to ensure that there are no conflicts of interests when decisions are made. Potential conflicts of interest are particularly serious for members of boards of governors and boards of directors who would have decision-making powers in the organisation.

However, in accordance with the thrust of schedule 1, we have tried to outline the minimum requirements and have indicated that NHS foundation trusts must make provisions in consultation with local communities. The Bill contains three safeguards. First, there must be consultation and agreement with local communities. Secondly, the Secretary of State must support the application and examine the constitution. Thirdly, the independent regulator must also support the constitution. We expect all NHS foundation trusts to tackle the potential for conflicts of interests in the

provisions of their constitutions. That is the proper place in which to include those provisions. I am happy to confirm that, when the Secretary of State considers constitutions, he will be looking for provisions that deal with conflicts of interests and declarations.

Clause 23, subsections (4) and (5), contain powers for the independent regulator to intervene if there are any problems. If governors or directors abuse their positions, strong powers are available in the Bill. For that reason, I do not believe that the amendments are necessary, and I ask the Committee to reject them.

Photo of Evan Harris Evan Harris Liberal Democrat, Oxford West and Abingdon

The Under-Secretary's reply is disappointing. It is representative of a general difficulty, which is that when something is suggested by Opposition Members, and perhaps even by Government members of the Committee, for inclusion in the schedule in respect of foundation trusts, the Under-Secretary always says that it should be left to the trusts to solve the problem without including appropriate provision in the schedule. She talks about the need to consult locally and introduce a constitution that must be triply approved.

The same argument, however, could be applied to anything in schedule 1. It could be applied to the series of measures that the Government have seen fit to include in the schedule concerning foundation trusts and their constitutions. What makes a matter important enough to be included in schedule 1 and not merely to be subject to guidance or the good fortune of trusts getting it right first time and reinventing the wheel? The trusts would face potential problems with the way in which they do that, given that they have to be analysed by the regulator, as we would have it, and the Secretary of State, as the Government would have it. To answer that question, fundamental points must be taken into account in the constitutions, and some of those are laid out in schedule 1. Provision for an appropriate declaration of interests by members of the board of governors should be an essential part of a constitution, perhaps more important than some of the provisions that the Government have seen fit to include in schedule 1.

As regards the Government's general answer to amendments that seek to include provisions in the schedule, the Under-Secretary's response is not satisfactory. It would not be appropriate—given the critical role that the Government see the trusts playing—to take chances with the need for trusts to recognise that a register of interests is important. Appropriate provision would bring about proper governance, and there would be seen to be proper governance.

I am very disappointed, therefore, with the Under-Secretary's response, but I do not intend to seek to divide the Committee on the matter now because we may return to it either later in the House or in the House of Lords. On that basis, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Photo of Hazel Blears Hazel Blears Parliamentary Under-Secretary (Department of Health)

I beg to move amendment No. 155, in

schedule 1, page 95, line 37, leave out 'or 24'.

Photo of Mr Win Griffiths Mr Win Griffiths Labour, Bridgend

With this it will be convenient to discuss Government amendments Nos. 147 and 150.

Photo of Hazel Blears Hazel Blears Parliamentary Under-Secretary (Department of Health)

Clearly a key part of the policy on NHS foundation trusts is to ensure that the new freedoms that they will have will be underpinned by safeguards to protect the public interest. That is why we will provide for a special failure regime with the primary aim of protecting both the staff and assets required to deliver essential NHS services.

In the event that a trust is unable to meet its financial commitments, the independent regulator may require it to take steps to obtain a moratorium or to make a proposal for a voluntary arrangement. The provisions relating to the failure regime are set out in detail in clauses 23 to 25. For the insolvency arrangements to operate properly, it is important that creditors are not able to step in in anticipation to recover their debts before the moratorium is properly in place.

The amendments therefore ensure that notices to be issued by the independent regulator under clause 24 do not become publicly available, thus alerting creditors and enabling them to take precipitative action. In the particular instance in which a notice requiring a moratorium or voluntary arrangement proposes to limit public access to information about the trust's affairs, it is important that the public have fully spotted the information. However, in these prescribed circumstances it is essential that the notice does not become publicly available until the moratorium is in place. It would then become a matter of public record that that would be kept in place rather than the NHS foundation trust aspect.

Photo of Simon Burns Simon Burns Shadow Spokesperson (Health)

Are these simply drafting amendments to tidy and improve the Bill that were tabled on reflection after the Bill was published?

Photo of Evan Harris Evan Harris Liberal Democrat, Oxford West and Abingdon

I beg to move amendment No. 183, in

schedule 1, page 95, line 41, after first 'corporation', insert

'the patients' forum of the trust or a patients' forum of a local primary care trust, or a member of the local Overview and Scrutiny Committee'.

Photo of Mr Win Griffiths Mr Win Griffiths Labour, Bridgend

With this it will be convenient to discuss the following:

Amendment No. 160, in

clause 8, page 4, line 17, at end add

'to patient forums in the trust and in surrounding primary care trusts, to overview and scrutiny committees in the local area, and to members of the NHS foundation trust'.

Photo of Evan Harris Evan Harris Liberal Democrat, Oxford West and Abingdon

I am pleased that we are making such rapid progress on these groups of amendments. The discussion on patient forums will come up more appropriately under another clause, so it is not my intention to detain the Committee. In fact, I do not wish to pre-empt that debate. However, it is difficult to speak to this group of amendments without saying something about the importance of wider consultation. I will speak briefly to this amendment, and I will accept if the Under-Secretary wishes to save

some of her arguments for a later group of amendments.

The amendments in this group comply with clause 8, which refers to amendments of constitution. Clause 8(2) states that

''An NHS foundation trust must send a copy of its constitution, and any amendment of it, to the registrar of companies'',

which includes patient forums and the local overview and scrutiny committee. We will debate the Government's plans to disallow patient forums in NHS foundation trusts.

We must remind ourselves that these are patient forums, which—after many arguments and a massive amount of promotion by the Under-Secretary—were introduced in the NHS. Following that, it was proposed that NHS foundation trusts would not have patient forums. It then became apparent that all trusts would soon become foundation trusts, meaning that no trusts would have patient forums.

Having spent so much time and energy on a fantastic campaign—it failed to win me over but it clearly impressed Labour MPs—to abolish community health councils, it must be galling for the Under-Secretary to find that the campaign has all been in vain because all trusts will be foundation trusts, meaning that there will be no standard patient forums. Of course, we can leave that argument for a later stage.

Does the Under-Secretary think it reasonable that local patient groups that are founded in statute—such as the patient forums of the primary care trusts, which have a significant role in supervising the provision of local services, including the examination of the roles of foundation trusts and members of the overview and scrutiny committee, which in turn have an even more important role in examining the work of foundation trusts—should be charged, as if they were external to the NHS and the basic governance of the trusts, for copies of the documents set out in paragraph 18?

Many documents are listed, and there could be a significant cost involved. In the interests of transparency and accountability, it is reasonable that those documents be available free of charge to those organisations that are listed. Similarly, under clause 8, in deference to those organisations, amendments to the constitution must be made clear before they are made.

I was unable to resist the temptation of getting into the issue of patient forums, and I apologise to the Under-Secretary for doing so after inviting her not to get into that matter now. However, will she say whether there is merit, as I believe there is, in distinguishing between those people with a statutory duty to look at the governance of a trust—and who, therefore, have unimpeded access to these documents—and other organisations and individuals whom she may feel it is appropriate to charge? It is the Government's policy to levy charges in the NHS where they can, so it would not be a surprise if there were charges for this provision. However, there is a distinction to be made, and I invite the Under-Secretary to look kindly on at least part of the amendment.

Photo of Chris Grayling Chris Grayling Shadow Minister (Education) 9:15 am, 20th May 2003

In my judgment, both of the amendments are wrong. I accept the hon. Gentleman's desire to ensure that information is provided to those who have a professional or official reason for requiring it. However, it seems to me that in this day and age—particularly taking the example set in the House of Commons, Mr. Griffiths—it should be possible for the register to be put online to make it accessible and free of charge to everyone. Therefore, it is my hope that while making this provision in the Bill, Ministers do not really intend for it to be used.

I see no reason for not making constitutional changes and not making information from registers available online. The majority of the population have access to online information, and the cost of providing information to those who do not have internet access is quite small. Therefore, I hope that trusts will not feel the need to make such a charge. On that basis, I do not agree with the hon. Member for Oxford, West and Abingdon, who was trying to make a distinction. All members of the public should have access to that information. It can be provided free and easily, and so it should be.

Photo of Evan Harris Evan Harris Liberal Democrat, Oxford West and Abingdon

Will the hon. Gentleman address those people who have a legitimate interest, or any interest, but who are not online? We are not in the paradise that he suggests where everyone is online, and I do not think that we can force people to go online. Many people are not able, for good reason, to access information electronically. I hope that the hon. Gentleman will at least concede that there is a problem for those people who choose not to, cannot afford to or cannot access the information in the way that he suggests.

Photo of Chris Grayling Chris Grayling Shadow Minister (Education)

The hon. Gentleman clearly was not listening to what I said. I said that foundation hospitals should make the information available without charge to people who do not have access to online information. However, my experience shows that the majority of people involved in local public bodies in today's world have access to e-mail and online services. Allowances must be made for those who do not but, as time goes by, those people will be a small minority.

Neither of the amendments is necessary. I do not want to strike the provision off the Bill, but I hope that the guidance notes that go out from Departments will make clear what avenues to avoid wherever possible.

Photo of Hazel Blears Hazel Blears Parliamentary Under-Secretary (Department of Health)

Again, the schedule sets out the minimum requirements, and in that context I cannot support either of the amendments. It is vital that people have access to information, and that is set out in the Bill. They need to be able to look at the constitution, the forward business plans and the general reports, all of which will drive the process forward. The Bill already secures that in paragraph 18(1) to schedule 1 and in clauses 8 and 10. There is nothing in the Bill that will prevent foundation trusts from putting all their information online if that is what they want to do. The foundation trusts may also decide to issue information and make it more accessible by way of newsletters. I do not think

that the receipt by every member of an indigestible copy of a fairly complex constitution is the way in which to draw people into the organisation.

These days, there are much more innovative ways to provide information that is easily understood and accessible. Foundation trusts should not be required to make copies available to every member of all these organisations without having the power to pass on a reasonable charge. We must not confuse that issue with access to the information. The organisations have the right to access that information; in fact, they could not do their job properly without it. Like the hon. Member for Oxford, West and Abingdon, I look forward to further discussion about patient forums and patient involvement in clauses 28 to 30, and the widening and deepening of democracy in the NHS. However, those provisions are overly burdensome, and I ask the Committee to reject them.

Photo of Evan Harris Evan Harris Liberal Democrat, Oxford West and Abingdon

Why is paragraph 18(3) necessary at all? Why must the Under-Secretary defend the resisting of amendments with regard to individuals on whom a reasonable charge may be imposed? Surely that depends on local circumstances. The rules and regulations governing the foundation trusts will be deliberated locally, in consultation with the community, and in a genuine democracy—my tone of voice may not come across in Hansard—and the approach that the trust takes will have to be approved by the regulator, the consultees and the Secretary of State. I am surprised that the Under-Secretary even thinks it necessary to ''talk'' about something so trivial as whether the local corporation will impose a reasonable charge. That might, in parlance, be considered a statement of the bleedin' obvious.

Photo of Hazel Blears Hazel Blears Parliamentary Under-Secretary (Department of Health)

I should draw the hon. Gentleman's attention to paragraph 18(3), which states that

''the corporation may impose a reasonable charge''.

That is a matter for the corporation to decide.

Photo of Evan Harris Evan Harris Liberal Democrat, Oxford West and Abingdon

The point I was making was that the corporation might impose a reasonable charge without paragraph 18(3). That provision is not needed in the legislation. The inclusion of this sub-paragraph demonstrates that the Under-Secretary's arguments in resisting reasonable amendments so that as little as possible is put in the schedule are spurious. Without that measure, it would still be possible for the corporation to impose a reasonable charge for doing all sorts of things. I should be grateful if the Under-Secretary clarified that a statutory provision was necessary for the trust to impose a charge for releasing information or documents to individuals who are not members.

It is clear that the Under-Secretary is determined to ensure that for those people who rely on paper copies, and those who serve on patient forums, primary care trusts and scrutiny committees—perhaps those who serve on patient forums of the trust itself, who may not be members—an extra barrier is put in place. It is regrettable that if the Under-Secretary considered it worthwhile to include sub-paragraph (3), she did not

feel it worthwhile to exempt in the same sub-paragraph groups of people who need ready access to such documents. I do not seek to divide the Committee at this point, and so I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Photo of Hazel Blears Hazel Blears Parliamentary Under-Secretary (Department of Health)

I beg to move amendment No. 156, in

schedule 1, page 96, line 2, at end insert—

'( ) But a person may not be appointed as auditor unless he (or, in the case of a firm, each of its members) is a member of one or more of the following bodies—

(a) the bodies mentioned in section 3(7)(a) to (e) of the Audit Commission Act 1998 (c.18),

(b) any other body of accountants established in the United Kingdom and for the time being approved by the regulator for the purposes of this paragraph.'.

Photo of Mr Win Griffiths Mr Win Griffiths Labour, Bridgend

With this it will be convenient to discuss the following:

Amendment No. 72, in

schedule 1, page 96, line 7, leave out

'with the approval of the Treasury'.

Government amendment No. 157.

Amendment No. 99, in

schedule 1, page 96, line 39, at end insert

'such periods to be coterminous with those in paragraph 21(5)'.

Amendment No. 133, in

schedule 1, page 97, line 6, at end insert—

'(2) Members of the corporation shall have the right to move votes of approval of the annual accounts, annual reports and appointment of the auditor at an annual general meeting and all members present shall have the right to vote on such motions.'.

Photo of Hazel Blears Hazel Blears Parliamentary Under-Secretary (Department of Health)

I shall first speak to Government amendments Nos. 156 and 157.

The additional freedoms of NHS foundation trusts will be balanced by the following framework of safeguards: the independent regulator overseeing NHS foundation trusts; accountability to the local community; the legally binding agreements that will exist with PCTs; and inspection by the Commission for Healthcare Audit and Inspection.

In line with that light-touch regime, we want to ensure that the independent regulator's intervention is triggered only when there are problems. In normal circumstances, the independent regulator will rely on the information that he receives both directly from the trust and from the CHAI reports. Inspections of NHS foundation trusts' annual financial reports will be additional important elements of the monitoring process and will be a key means of ensuring that public funds, for which the trusts are responsible, are properly accounted for. It is vital that the accounts are accurate and that they give a true and fair view of the trust to which they refer.

That is why we are improving provision for the independent regulator, why we are concerned with accounting requirements, and why we are presenting amendments that allow the regulator to set audit requirements and ensure that NHS foundation trust auditors are properly qualified. Those are the proper safeguards to impose.

NHS foundation trusts are also concerned with transferring control from Whitehall to local communities. They will remain part of the NHS, so we must ensure that there is proper accountability and probity for public funds. I reject amendment No. 72, because it is important that the accounts of NHS foundation trusts also accord with general Government accounting standards.

Every year, Her Majesty's Treasury prepares whole Government accounts, which include information on public bodies and bodies that are wholly or substantially funded by public money. Those accounts form an important source of information about how public money is used, and, since the principal purpose of NHS foundation trusts is to provide NHS services, most NHS foundation trust funding will come from the public purse. Therefore it is right that the Treasury may choose to include them in the whole Government accounts.

It is important that the form and contents of the NHS foundation trust accounts, as directed by the independent regulator, are consistent with Treasury requirements. Even if the Treasury decides not to include NHS foundation trust accounts in the whole Government accounts, it seems eminently sensible for NHS foundation trust accounts to be prepared in a format that is consistent with those of other public bodies so that they can be properly analysed and assessed.

Photo of Evan Harris Evan Harris Liberal Democrat, Oxford West and Abingdon

Will the hon. Lady set out which other co-operatives or mutuals are included in the Treasury accounting scheme? I appreciate that she may not be able to do that now. Are the accounts of housing associations—forms of providers that are taken on a mutual, or at least on a public benefit, basis—included in the Treasury accounting scheme that she set out earlier?

Photo of Hazel Blears Hazel Blears Parliamentary Under-Secretary (Department of Health)

Yes. As I said, that information relates to public bodies or to bodies that are wholly or substantially funded by public money. I am not aware of any external mutuals that come under that definition; I doubt that there are any. I am not sure about the accounting provisions for housing associations. I will undertake to provide the hon. Gentleman with that information.

Amendment No. 99 is unnecessary. If it is sensible for the reports to be prepared over the financial year, the regulators have discretion to ensure that that is the case. That is set out in paragraph 22(3)(c) of schedule 1.

With regard to amendment No. 133, paragraph 7(1) of schedule 1 states:

''More than half of the members of the board of governors are to be elected by the public constituency.''

The elected governors are responsible for representing the interests of the membership. Therefore it is appropriate that the board of governors exercises powers on behalf of the members whom it represents. We have set up a clear structure in which the membership elects the board of governors, which then appoints the directors. Therefore there is a representative democratic element in the system.

In line with their responsibility, the board of governors receives at a general meeting copies of NHS foundation trusts' annual reports, their annual accounts and any auditor's report on them so that it can give its views. If something is seriously amiss, it can notify the regulator that intervention is required.

The board of governors also appoints the auditors. There is a clear framework for responsibility and power to rest with the governors, and the role of the members is to elect the governors to represent their views in the organisation.

As a matter of principle, it would be wrong for the members of NHS foundation trusts to vote to approve the accounts and the reports, or indeed the appointment of the auditor. They will not be close enough to the decisions that are being taken to enable them to carry out that role properly. The Bill establishes a clear system of electoral representation so that the material presented at the meeting can be considered on behalf of the members. The governors have a responsibility to report to their constituencies so that the decisions that are taken are proper and robust.

Photo of Simon Burns Simon Burns Shadow Spokesperson (Health) 9:30 am, 20th May 2003

I wish to speak to amendments Nos. 72 and 133.

Amendment No. 72 is a straightforward probing amendment, the purpose of which will become apparent in future debates that I do not wish to pre-empt. The so-called independent regulator is not as independent as the Government claim. On the question of Treasury approval, is the Minister saying that the Bill's drafting simply follows precedent and that, given that all Government Departments are subject to Treasury disciplines, rules and regulations, this is a purely straightforward insertion into the Bill to make it fluent and consistent with normal practice?

Amendment No. 133 is less probing because we seek to ensure that an annual general meeting must be held every year and that all members of the corporation must be invited. All members present must have the right to vote on the approval of the annual reports and accounts and the appointment of the auditor. That will ensure full accountability of the board to its members so that the members will own the corporation rather as shareholders own a private company. That is a positive and welcome step towards general decentralisation and the devolution of powers away from the heavy hand of the centre and, in particular, of the Secretary of State.

Photo of Gary Streeter Gary Streeter Conservative, South West Devon

I rise briefly and humbly to speak to amendment No. 99 in the name of my right hon. Friend the Member for North-West Hampshire (Sir George Young).

The point may seem trivial, but it is important. The Minister responded to the debate before the arguments were actually made on the amendments. However, I invite her to think again. She will know that under paragraph 21 of schedule 1, foundation hospital trusts must prepare and produce accounts that run to the end

of a financial year, which is defined as 31 March in every case. That is straightforward and sensible. Schedule 2, paragraph 6 tells us that the regulator must report to the Secretary of State on his activities during a year, which also ends on 31 March, and that is also sensible and straightforward. However, schedule 1, paragraph 22(3)(c) states that the reports—rather than the accounts—that are to be produced by each foundation hospital trust can run to whichever period the regulator decides on. I find that an unusual provision because it does not seem to be consistent with usual practice nor does it tie in with the filing of the accounts by hospital trusts or with the report that the regulator must make.

The point is that in almost every case in almost every organisation that I have ever dealt with, whether in the private or in the public sector, the accounts and the report come together. Indeed, often the report is the introduction to the accounts. However, here we seem to have the possibility of foundation hospital trusts producing accounts up to 31 March, with their reports following later if the regulator so decides or gives them that discretion. Why is that provision in the Bill, as it seems very odd?

Secondly, the regulator may find that he has given permission to a hospital trust to file a report for one period, but that he must report to Parliament and to the Secretary of State for the period ending 31 March. His report may, therefore, be incomplete because the foundation hospital trust for which he is responsible has not yet filed its report for that period.

That would not be the end of the world, but if the provision remains as it is and if the regulator were to give permission to a foundation trust to file its report for a different date, what would happen? That could create confusion; it could also create the risk of increased costs to produce reports for different periods. That is probably an oversight in the drafting of the Bill, and this is an opportunity to tidy it up.

Photo of Patsy Calton Patsy Calton Liberal Democrat, Cheadle

Government amendment No. 156 states that

''a person may not be appointed as auditor unless he (or, in the case of a firm, each of its members) is a member of one or more of the following bodies—

(a) the bodies mentioned in section 3(7)(a) to (e) of the Audit Commission Act 1998''

(b) any other body of accountants established in the United Kingdom and for the time being approved by the regulator for the purposes of this paragraph.''.

Will the Under-Secretary clarify in what circumstances she would envisage sub-paragraph (b) applying to any other body of accountants established in the United Kingdom and, for the time being, approved by the regulator?

Photo of Hazel Blears Hazel Blears Parliamentary Under-Secretary (Department of Health)

In reply to the hon. Member for West Chelmsford (Mr. Burns), the amendment seeks to ensure that where public bodies or bodies holding or searching for funding from the public purse are in this position, they are included, or at least can be included, in the whole Government accounts. I understand that that is usual practice to ensure that there is proper accountability for the expenditure of public money. I am sure that the hon. Gentleman will accept that foundation trusts will be delivering services for the

NHS and spending huge amounts of public money and therefore ought to be properly accountable.

Amendment No. 133 refers to an annual general meeting to be held to account each year, and it would be up to a foundation trust to specify in its constitution that that would be the case. I am concerned that the amendment cuts across the governance structure set out in schedule 1, which seeks to have representative electoral democracy under which members elect their governors who appoint their directors to make decisions. It is very important to maintain the integrity of that approach, whereas the ability to draw the accounts to the membership as a whole would cut across the governance structure set out in schedule 1. Therefore I reject the amendment.

I agree with the hon. Member for South-West Devon (Mr. Streeter) that amendment No. 99 would not spell the end of the world for how we define the periods of accounting and reports. The provision in paragraph 22(3)(c) would allow the regulator some leeway on the periods to which the reports ought to relate; however, if that were to cause difficulty we could have another look at it. It is an attempt to give some discretion to the regulator to consider circumstances.

To answer the question of the hon. Member for Cheadle (Mrs. Calton), the amendment seeks to anticipate any changes that would result in other bodies emerging that would need to be endorsed as proper auditors. I am sure that the hon. Lady will agree that it is vital that the auditors who are appointed are people of standing who have recognised skills and abilities, and the amendment will enable us to utilise other bodies, if such bodies were to emerge.

Photo of Evan Harris Evan Harris Liberal Democrat, Oxford West and Abingdon

Why have the Government moved away from trusts' present position, whereby they are subject to district audit—that is, auditors who have been, in effect, appointed by the Audit Commission? Why has she rejected an approach whereby the Audit Commission will not be responsible for appointing the auditors to these trusts? That system has worked well for existing trusts, and there is no reason why it should not do so for foundation trusts, which, as the Under-Secretary said, will spend a great deal of public funds.

Photo of Hazel Blears Hazel Blears Parliamentary Under-Secretary (Department of Health)

I draw the hon. Gentleman's attention to the position of higher and further education corporations, which spend a substantial amount of public funds and which are in an identical position in that they can appoint their own auditors. Balance-for-money exercises will still be carried out by the Commission for Healthcare Audit and Inspection.

It is perfectly appropriate that since we are creating new public benefit corporations, we should allow flexibility in the audit requirements to ensure the standing and probity of appointees.

Amendment agreed to.

Amendment made: No. 157, in

schedule 1, page 96, line 12, at end insert—

'( ) In auditing the accounts the auditor is to comply with any directions given by the regulator as to the standards, procedures and techniques to be adopted.'.—[Ms Blears.]

The Chairman, being of the opinion that the principle of the schedule and any matters arising thereon had been adequately discussed in the course of debate on the amendments proposed thereto, forthwith put the Question, pursuant to Standing Orders Nos. 68 and 69, That this schedule, as amended, be the First schedule to the Bill.

Question agreed to.

Schedule 1, as amended, agreed to.