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Clause 6 - Authorisation of NHS foundation trusts

Health and Social Care (Community Health and Standards) Bill – in a Public Bill Committee at 12:00 pm on 20th May 2003.

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Photo of Andrew Lansley Andrew Lansley Conservative, South Cambridgeshire 12:00 pm, 20th May 2003

I beg to move amendment No. 225, in

clause 6, page 3, line 32, at end insert

', but shall not impose restrictions on the financial terms and conditions under which an NHS foundation trust shall contract to provide goods and services to Primary Care Trusts'.

The purpose of the amendment is to insert into clause 6 a limitation on the independent regulator being given the power to authorise an application on any terms he considers appropriate. That is a sweeping generalisation.

If circumstances had been otherwise, I might have taken the opportunity to have a rather fuller discussion of the subject. The amendment would introduce the concept that the freedoms that are available to an NHS foundation trust in financial terms should not be confined to the freedoms relating to borrowing and capital that are set out later in detail. If one is trying to manage effectively a business organisation, among the financial considerations is the question of price. I know, of course, that an NHS foundation trust is not strictly a business organisation. It is transparent from the Government's management of the commissioning process that price will not be a consideration. Commissioning will be conducted on a cost and volume basis. I have a problem with that. If commissioning is based simply on cost and volume, there will be some misallocation of resources, because the point of a price system is to align the cost to commissioners—the primary care trusts—with the costs generated within the trusts.

At the moment, a primary care trust pays a certain amount to Addenbrooke's hospital for various

treatments. Under the introduction of the new national standard tariffs, the amount that the primary care trust will pay Addenbrooke's will be slightly increased. There will therefore be a surplus generated within Addenbrooke's. I have no problem about that, because I know that in practice its management will devote that towards the generation of additional capacity.

We are designing a system that is not just for the present, where there is a deficiency of capacity. The purpose of our efforts is always to increase capacity, and those surpluses will be given to capacity. We are designing a system where the providers—who may be NHS foundation trusts—are not confined to existing NHS trusts, but may include others. We are in a situation where NHS foundation trusts may be offering competing volumes to the same commissioners. Under those circumstances, there should be a price adjusting mechanism. Otherwise, what can a higher quality trust like Addenbrooke's do to reflect the quality that it offers to its commissioners?

If the commissioners want to buy quality services, how do they go about that other than by adjusting price, thus securing additional quality over and above the specifications of national standards? That is moving away from the idea of operational freedom inside an NHS foundation trust. It is creating a high degree of standardisation inside the NHS. The Government admit that in their document that reflects the new structural reforming NHS financial flows. In the discussion about service level agreements it is stated that there should be ''greater standardisation'' of service level agreements. Tariffs will be standardised. There will be nationally determined regional cost adjustments which may, or may not, reflect the costs as they arise in places such as Cambridge.

At some point, the Government will determine issues relating to the tariff, such as critical care costs or the extent to which critical units are going to have that reflected in their prices. Time does not allow me to look at all of those, but they all have a significant impact on the long-term financial status of NHS foundation trusts. All of those will be determined on the basis of the decisions taken by central NHS bureaucracy rather than foundation trusts and PCTs in negotiation. They will be effectively imposed on the primary care trusts, and by extension imposed on the foundation trusts.

The financial freedoms that are offered to NHS foundation trusts are not all-encompassing. The most important financial freedoms that apply in general economic activity are not going to be available to NHS foundation trusts, unless there is some mechanism. I confess that the amendment explores that issue, but it is designed to disapply the standard tariff, which will otherwise be imposed by central NHS bureaucracy through primary care trusts on an NHS foundation trust. I am disappointed that, if we are in the business of creating freedom, we are not in the business of creating sufficient freedoms for NHS foundation trusts

to manage volume, quality and price in order to allocate resources more effectively in the longer term.

Photo of John Hutton John Hutton Minister of State, Department of Health, Minister of State (Department of Health) (Health)

Briefly, the hon. Gentleman puts forward an interesting proposition. I have not heard any reciprocal response from his Front Bench spokesman. This is a very pertinent issue. He is arguing for something that I did not discern in his amendment. I thought that he wanted to exclude the regulator from interfering with the PCT commissioning process. He is indeed arguing for that, but the reason why is specifically to introduce price competition into the national health service; he was candid about that. The fascinating insight that the hon. Gentleman has given the Committee is that he wants a genuine market. Is that the Opposition's official policy?

We need the discipline in the national health service of greater efficiency, greater productivity and more responsive services. We can achieve that with the new freedoms and the efforts that we are making to improve performance across the NHS, including CHAI and the extra investment in wider reforms.

The hon. Gentleman's prescription is based on classic free market theory. He is applying all the disciplines of what we would call the general activity in the economy to the NHS, including competition on the basis of price. He thinks that that will improve the performance of the NHS, but it will not. If he believes that, he has learned nothing from the experience of the internal market in the 1980s and early 1990s. We will not go down that path. Now that it is clear what the amendment is about, I have absolute confidence that my hon. Friends and I will give it the greatest cold shoulder that collectively we can give.

Photo of Andrew Lansley Andrew Lansley Conservative, South Cambridgeshire 7:15 pm, 20th May 2003

I am grateful for the Minister's encouraging response—[Laughter.] We have indeed learned lessons from the internal market. The principal lesson was that an internal market that is conducted by bureaucrats is not an internal market at all. An internal market that rests upon patient choice is a real method for allocating resources in response to patients' needs—the equivalent to consumers' needs in general economic activity—and leads to the proper allocation of resources and incentives to reduce cost. That is what we have learned. We have not reached that stage yet, and might not do until we are in a position to design a proper mechanism to give effective realisation to patient choice. We would not be recreating the internal market of the early 1990s.

That is my view, and my hon. Friends will have an opportunity to set out their policies in due course; they do not have to do so during debates on my amendments. I am allowed to say what I like, and they are allowed to say what they like. That is not remotely inconsistent. I am telling the Minister nothing that he would not have known had he read my speech of 7 January on foundation hospital trusts. I have not been inconsistent about the idea of an NHS that is free of charge and available to all regardless of their personal resources. This is about how NHS resources buy high standards of care on an equitable

basis. The amendment does not undermine the values and principles of the NHS one jot.

I shall not pursue my argument any further because I do not discern that there is the time to do so, or the inclination on the part of Committee members.

Photo of Andrew Lansley Andrew Lansley Conservative, South Cambridgeshire

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Photo of Simon Burns Simon Burns Shadow Spokesperson (Health)

I beg to move amendment No. 138, in

clause 6, page 3, line 32, at end insert—

'(3A) The applicant may at any stage make written representations to the regulator about the terms of its authorisation.'.

Photo of Peter Atkinson Peter Atkinson Conservative, Hexham

With this it will be convenient to discuss the following amendments: No. 223, in

clause 9, page 4, line 19, at end insert—

'(1A) The regulator shall secure that a substantial change in services provided by an NHS foundation trust will require a variation in the authorisation.'.

No. 77, in

clause 9, page 4, line 21, at end insert—

'( ) any written representation made to the regulator by an NHS foundation trust,'.

No. 220, in

clause 9, page 4, line 28, at end insert—

'(c) any report or recommendation made to him by a Patient Forum.'.

No. 224, in

clause 9, page 4, line 28, at end insert—

'(c) the expressions of opinion of the public or staff constituencies, including, if appropriate, as expressed in a referendum or otherwise,

(d) views expressed by the board of governors of the NHS foundation trust,

(e) views expressed by other NHS foundation trusts, Primary Care Trusts or NHS trusts, and

(f) views expressed by the Independent Reconfiguration Panel.'.

Photo of Simon Burns Simon Burns Shadow Spokesperson (Health)

Amendments Nos. 138 and 77 are broadly designed to accomplish the same thing in different parts of the Bill. As hon. Members know, foundation trusts can be given their powers and functions only by statute. If there is no specific power or function in statute, that trust will not have it. In the Library's useful research paper on the Bill, it makes that point and gives critical examples of powers that have not been included, such as the power to appeal by a foundation trust against a decision of a regulator.

The two amendments address the authorisation procedures for trusts and the variation of authorisations. They would instil in the Bill, not a full-blown appeals procedure as everyone understands that, but an opportunity for trusts to make representations of their points of view to the regulator during the procedures, if they have a concern about what they think is going to happen. I hope that the Minister thinks that that is a sensible and improving measure.

Clause 9(2) states:

''In deciding whether or not to vary an authorisation the regulator is to have regard . . . to—

(a) any report or recommendations made to him by virtue of . . . the Local Government Act 2000

(b) any report . . . by the Commission for Patient and Public Involvement in Health.''

Amendment No. 220 would ensure that the regulator must have regard to

''any report or recommendation made to him by a Patient Forum.''

Because of the time scale, that problem will not arise. The first wave of foundation hospitals will not be rolling forward properly until spring 2004. Therefore, the Government have got off the hook for the muddle and broken promises that arose from the fact that there was going to be a seamless move from community health councils to patient forums, when those health councils were abolished. We now know that they will be abolished on 1 September 2003. We also know that many of the patient forums will not come into being until the end of the year. Therefore, there will be a three-month hiatus.

To include the patient forums by means of this amendment is a sensible move forward. I hope that the Government will give sympathetic and serious consideration to the amendment, unless there is a deep flaw in it that has not caught my eye. If that is the case, I have no doubt that the Minister will briefly enlighten Committee members about it.

Photo of Andrew Lansley Andrew Lansley Conservative, South Cambridgeshire

I tabled amendments Nos. 223 and 224, and I wish briefly to say why they have merit. They address clause 9, and they are about the process of varying an authorisation where there is a substantial change in services. They are being considered here because if the job of the regulator is to secure that a substantial change in services in an NHS foundation trust would require a variation in the authorisation, that would have to be determined in the course of making the authorisation in the first place.

I shall explain the purpose of the amendments. We have had a discussion about reconfigurations to ensure that the process by which reconfiguration of services is considered locally is not only tied in explicitly with the process of variation for an authorisation, but that when the independent regulator comes to consider them, he does the things that we understand ought to happen in relation to such a reconfiguration. He should formally consider the representations of the overview and scrutiny committee or the Commission for Patient and Public Involvement in Health, and the views of the following bodies, which I will not go on about at length as they are listed in amendment No. 224: the public and staff constituencies, the board of governors of the trust, other bodies and NHS foundation trusts locally, and the independent reconfiguration panel, which may have an advisory role.

The amendment takes what I understand to be the practice and ensures that it is reflected in the legislation, rather than excluded from it.

Photo of John Hutton John Hutton Minister of State, Department of Health, Minister of State (Department of Health) (Health)

The amendments are designed to require the regulator to act in a certain way if there are any proposals to change substantially the services

provided by foundation trusts. The measure is not a full-blown appeal process, as the hon. Member for West Chelmsford said, but it is something akin to that. It gives the NHS foundation trust certain statutory rights to make representations to the regulator. The amendment tabled by the hon. Member for South Cambridgeshire deals with the process of automatically authorising a change in services.

Hon. Members are right to say that we need to give the regulator specific statutory authority; otherwise, he will not have it. However, that is not true of the regulator's general public law duty—attaching to the discharge of functions—to act proportionately and reasonably. To some extent, the amendments have lost sight of that basic reality. The regulator has that duty to act reasonably and proportionately. Discussions with the NHS foundation trusts would always form a natural part of the review process in the terms of authorisation and amendments Nos. 138 and 77 are clearly unnecessary. The concerns that they address are already covered by the general duty on the regulator to act reasonably and fairly.

To put that another way, NHS foundation trusts do not need a specific clause in the Bill to allow them to write to the independent regulator. They are free to do so whenever they like. They certainly do not need an amendment to the Bill to allow them to do that.

NHS foundation trusts' terms of authorisation are to be set out clearly at the beginning. They will specify what services the foundation trust will be expected to provide. Any proposed change that substantially

affects the services that an NHS foundation trust provides will automatically require a variation in the terms of its authorisation. That is how we envisage the procedures working. The regulator must approve that variation, so amendment No. 223, proposed by the hon. Member for South Cambridgeshire, would not be necessary either.

Given the independent regulator's general duty to behave reasonably to which I alluded, he would have to take regard of the views of any of the persons named in amendment No. 224, whether they were specified in the Bill or not, about a particular NHS foundation trust. For that reason, amendments Nos. 220 and 224 are unnecessary.

I understand where Opposition Members are coming from. They have entirely reasonable concerns about the process. I hope that I have been able to deal with them and to assure the hon. Gentlemen that, because of the nature of the functions of the regulator, any concerns about the probity of the process are fully addressed and will be taken into account by the regulator.

Photo of Simon Burns Simon Burns Shadow Spokesperson (Health)

In light of the Minister's comments, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 6 ordered to stand part of the Bill.

Further consideration adjourned.—[Jim Fitzpatrick.]

Adjourned accordingly at twenty-eight minutes past Seven o'clock till Thursday 22 May at five minutes to Nine o'clock.