Clause 16 - Protection of property

Health and Social Care (Community Health and Standards) Bill – in a Public Bill Committee at 12:15 pm on 3rd June 2003.

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Photo of Chris Grayling Chris Grayling Shadow Minister (Education) 12:15 pm, 3rd June 2003

I beg to move amendment No. 12, in

clause 16, page 7, line 25, at end insert

'but does not include property acquired subsequent to the date of its establishment as an NHS foundation trust.'.

Photo of Mr Win Griffiths Mr Win Griffiths Labour, Bridgend

With this it will be convenient to discuss the following:

Amendment No. 14, in

clause 16, page 7, line 30, leave out 'may' and insert 'shall'.

Amendment No. 15, in

clause 16, page 7, line 30, leave out

'on any terms he considers appropriate'

and insert

'unless he believes the disposal of the protected property will render it impossible to deliver a comparable level of service to that provided on the date of the trust's formation.'.

Photo of Chris Grayling Chris Grayling Shadow Minister (Education)

The amendments are designed to address specific elements of the provisions that the Government are aiming to put in place for the protection of property. We do not want foundation hospitals to dispose of their core assets. Many are in city centres, and most are in prime locations where

they have a large real estate value. We do not want trusts to take advantage of that asset base to raise revenue for whatever purpose they choose.

Equally, we do not want to see them in a straitjacket that would make it impossible for them to modify their asset base to reflect the reconfiguration of services, to change the nature of their asset base or to dispose of any spare property that they do not need. It is their duty to continue to be able to deliver the basic core hospital services. The amendments are designed to address elements of the management of their property portfolio.

Amendment No. 12 relates to later acquisitions of land that might be acquired through the rights that will come up in clause 17 to make further investments. The amendment would add

''but does not include property acquired subsequent to the date of its establishment as an NHS foundation trust.''

That allows a trust to modify its investment portfolio. Let us say that a trust acquired a clinic and chose subsequently to dispose of part of the land; perhaps it chose to close that clinic down on a separate site and to move its facilities to its core site. It is then left with an asset that has been providing a core service to the trust.

I gave an example earlier of a trust using a cataract clinic that it had acquired; if it had been able to do so under the restrictions we discussed earlier. The trust might subsequently choose to move the cataract service to its own site. Arguably, under the definition of protected property, that cataract clinic would be a protected site, because it is a core part of the service that the trust is using to provide basic health care services to its patients. Our argument is that where the trust subsequently invests in a property and chooses to reconfigure its services, it should have the freedom to dispose of that property if it chooses to do so.

I hope that the Minister can either explain that he does not envisage the protection measures applying to property acquired subsequently or say that he is prepared to offer some flexibilities so that when trusts make subsequent investments and acquisitions, those acquisitions are not automatically pulled into the core straitjacket afforded by the provisions under protective property.

Amendment No. 14 concerns the power of the regulator. Clause 16(4) states:

''The regulator may give approval under subsection (1) on any terms he considers appropriate.''

Imagine a situation in which a trust comes forward with a proposal to the regulator to make a property disposal as part of a reconfiguration of its services. It has met all the criteria for doing so, it is proposing changes in a way that will not affect its core services and it is meeting all the requirements expected of it by the regulator.

However, the Bill still only gives the regulator a general sense of the direction his decision must take; it is not an obligation. The regulator ''may'' give approval even if all the criteria have been met. We want to be able to say that if an NHS foundation trust has done its homework, put together a credible proposal for a reconfiguration of services that involves

changes to its property portfolio and met all the sensible criteria that it should be expected to meet, the regulator should, at that point, be obliged to accept it. The word ''shall'' should replace the word ''may''. It is simply a matter of finding where the balance of power lies.

Our view is that foundation hospitals are about local freedom and not centralised freedom, subject to reasonable safeguards in a number of areas. The balance of decision-making and the balance of power should reside with the trust rather than with the regulator. If a trust does its job properly, the regulator should not be able to turn around and say that he does not want it to go ahead anyway. That is the purpose of amendment No. 14.

Amendment No. 15 further addresses the issue of the circumstances of disposal of property. We tabled it because of the nature of our national health service at the moment. If the Government pursue their current strategies, it is inevitable that the NHS will see a significant reconfiguration of services over the next few years. The document ''Keeping the NHS Local—A New Direction of Travel'' sets out a vision of a number of services that are currently carried out in hospitals, and will be carried out in foundation hospitals once they are established, moving into the community.

In a number of areas, including mine, primary care trusts are setting out a clear strategy to change purchasing patterns; to buy more services for community hospitals; to devote more resources to the primary care sector and to community hospitals; and to reduce the workload and the capacity problems in major hospitals. In some areas, that is likely to lead to the closure of hospital sites. In my constituency, we are debating the future structure, location and provision of hospital services at Epsom General hospital, St. Helier hospital and a theoretical future third site.

We are going into a period in which NHS services will be under major review. Purchasers may ask trusts to reconfigure services, to do less and to allow services to be bought in through community hospitals. We must not place a protective straitjacket around those trusts that would make it difficult for them to respond to the changing requests of their purchasers. That is why we fear the scale of the straitjacket being proposed in clause 16.

The purpose of amendment No. 15 is to change the balance of power and to make the regulator a watchdog rather than a decision-maker. The purpose of the amendment is to show that we accept that trusts will make decisions in the next few years that will involve changing their sites, changing the configuration of services on their sites and changing the way in which they work.

We must ensure that the foundation hospital status that this Bill would afford those trusts is not abused in a way that would remove assets from the health service that could no longer be used for patients. We must not tie foundation trusts up and create a situation in which they cannot respond to a national strategy, through directions like that in ''Keeping the NHS Local—A New Direction of Travel''. Equally, we must ensure

that they can respond to the pressures that will come from primary care trusts to change the way in which they operate.

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

The hon. Gentleman is talking a lot of sense on this mater. However, there is a further pressure; not just from primary care trusts and Government policy, but from quality watchdogs. Watchdogs might say that it was no longer safe to provide a certain level of service—such as high-risk maternity services—in a certain building or a certain trust and that those services must be provided in another area. I hope that that does not happen too often, but I hope that it happens when appropriate.

However, the wording of amendment No. 15 might prevent that quality from being introduced and safeguarded, because of the words ''comparable level of service''. There might be no such service, and the wording of the amendment might tie hands too tightly.

Photo of Chris Grayling Chris Grayling Shadow Minister (Education)

The hon. Gentleman has made an interesting point, which I will be happy to consider and which, I hope, Ministers will consider. If the Minister accepts the general direction in which the amendment is trying to take the Bill, we will be perfectly happy to see a different draft that takes into account the circumstances that the hon. Gentleman has described.

This amendment is not intended to change the protections that the Government have afforded NHS patients through the Bill. It attempts to reflect the practical nature of the job of today's NHS managers. The amendment accepts that foundation trusts will have to evolve and change the services that they offer, and the amendment will ensure that they have the flexibility to do so.

The regulator should be there as a watchdog to ensure that, in changing services, managers do not remove from patients the resources, the property, the assets or the means of delivering those services. The amendment gives managers the freedom to make the decisions that they need to make in response to a changing world.

Photo of Evan Harris Evan Harris Liberal Democrat, Oxford West and Abingdon 12:30 pm, 3rd June 2003

The amendments address the important tension that exists between wanting both freedom for foundation trusts and a strategic oversight of the best use of property assets in the NHS. I understand the point that the hon. Member for Epsom and Ewell made. He wants to see the maximum amount of freedom with a predisposition—a default situation—wherein foundation trusts are free to make changes to their estates in order to keep pace with their plans, as well as with the modern NHS. All hospitals need to do that.

The problem is that hospitals are not isolated islands and ought not to be seen as such. They work within a community, and there is some concern about two-tierism. The risk of giving too much freedom to foundation trusts to dispose of property in the context that the Government are setting up is that it will not

necessarily be done in the context of the whole NHS. There must be some strategic oversight, which at a regional level must be democratically accountable.

Although that debate is for another clause and another day, I should like the Government to specify the criteria that the regulator is expected to use. Obviously, they cannot be prescriptive at this point, but I want reassurance from the Government, when we discuss the amendments, that there will be close co-ordination between the regulator and the strategic health authority—or whatever the Government are likely to change that to in the near future—to ensure that things are done holistically in each area.

Being too prescriptive presents a difficulty, because the regulator will be required to be alert to issues that may not appear to be particularly commercial or even that popular with local users, but which may be fundamental issues of quality. The one advantage of the Government's wording is that it is less prescriptive of the regulator in those respects. There is the issue of the transparency of any decision that the regulator makes, but that would be the case whatever the wording. I hope that the Minister will be clear on what consultation the regulator will carry out when making decisions about which properties to designate and which disposals to approve under clause 16(4).

The debate is interesting, but the fundamental questions cannot necessarily be dealt with by the amendments tabled. We are still failing to address the question of what forms the basis of strategic planning in a health service in which there are greater freedoms for one than for others and there is no democratically accountable way of controlling how those freedoms are used. I hope that we will have a chance to continue the debate on those wider issues another time.

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

I agree with the hon. Member for Epsom and Ewell that clause 16 must not create a straitjacket. He is correct that, by definition, the NHS is an organisation that will always be subject to change and reconfiguration. That is so, rightly, because it is a science-based service. Science changes, and therefore the provision of services must change to reflect that. We do not think that we are proposing a formulation in the Bill that will, in his language, create a stranglehold on the ability of NHS foundation trusts to properly manage the property with which they are entrusted on their establishment.

However, that is the nicest that I can be to the hon. Gentleman about his amendments. He says that he accepts in principle the need for some safeguards because of the importance of those assets. However, his amendment would effectively remove those safeguards for any assets that NHS foundation trusts subsequently acquired. Under his proposals, those could never be designated as protected assets. Therefore, the regulator would not at any time be asked to consider whether to approve the sale or disposal of those assets. The hon. Gentleman cannot argue that there is a need for a safeguard on one hand and then comprehensively ride a coach and horses through the safeguard.

I understand the point that there needs to be flexibility in the way in which those assets are used, although I genuinely believe that the Bill will provide that flexibility. However, important safeguards must be built into the legislation so that crucial assets that are fundamental to the delivery of NHS services in a locality cannot simply be asset-stripped in the way that the hon. Gentleman described. We will not allow that to happen, and clause 16 is the mechanism that will ensure that it does not.

There is a slight problem with amendments Nos. 14 and 15 in relation to clause 16(4), which relates to whether the regulator can attach conditions to the sale of the protected asset, rather than whether he must approve the sale of the protected asset itself. The amendment tabled by the hon. Member for Epsom and Ewell turns that around and requires the independent regulator to approve the sale, subject to that one condition added in the amendment. That is neither sensible nor useful.

The hon. Gentleman has asked the hon. Member for Oxford, West and Abingdon (Dr. Harris) and myself to reflect on the criteria that the independent regulator would be likely to use to come to a view on which assets should be protected. First, the independent regulator will look at clause 14(6) in relation to those services that the NHS trust is, or may be, required to deliver. Clause 16(3) and the general duty under clause 3 must also be considered by the independent regulator to make sure that the NHS foundation trust provides comprehensive health care that is free at the point of use. Through a combination of devices and routes, the criteria to be applied by the independent regulator in deciding whether to dispose of protected assets are already contained in the Bill.

I agree with the hon. Member for Epsom and Ewell that there is often a time when protected assets—fundamental assets—must be disposed of; a classic example is when they are being re-provided elsewhere, and we have been given examples of that today. None of us, in our right minds, would want to stop an NHS foundation trust disposing of an asset in that way, because the disposal would facilitate and almost certainly help to finance, through the private finance initiative, the provision of that alternative service.

We must be clear that the Bill will not stop those disposals. I understand where the hon. Member for Epsom and Ewell is coming from, but I advise him that the Bill, as currently constructed, is not a straitjacket; nor does it form a stranglehold by NHS foundation trusts on proper asset management. His proposal that any future assets could never be designated as protected would run the risk of accomplishing what he argued we should not do, which is to make sure that proper safeguards are built in to these arrangements. Clause 16 seeks to do that and although I have ended up on a sour note, which I did not intend to do, I could not in a month of Sundays recommend acceptance of the amendment. However, we share common ground that a series of protections must be built into the Bill. Our proposals strike the right balance between freedoms and essential protections.

Chris Grayling: I failed to clarify to the Minister the situation that I was attempting to address. One example relates to investment and assets above and beyond the initial asset base of the trust. If the trust wishes to purchase an asset, it might look to secure future investment on that property, and it might need to take on a mortgage to buy that property in the first place. For example, if a trust bought a plot of land and took out a mortgage to buy it, the trust would be borrowing against the security of that site in order to expand its services. However, if that site automatically became a protected site because of the nature of the services carried out on it, it could not have a mortgage.

That is the kind of constraint that the straitjacket would place upon trusts. I accept and understand that, and I do not want to debate the rights and wrongs of the Government's rationale of saying, ''We set up the foundation trust with an asset base and we want to judge the core assets of that asset base in relation to the provision of a health care service.'' The trust cannot asset-strip. There will be bits of peripheral property that no one would have a problem with the trusts hiving off. However, if a trust decides to invest in the way that I have described, the straitjacket may take effect, and a mortgage may not be taken out, because of the provisions of the Bill.

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

The hon. Gentleman is right. We do not want protected assets to be the subject of mortgages in the way that he has described. That would drive another coach and horses through the failure regime, which I hope we will discuss later this afternoon. If there is an existing range of financial creditors who have a prior claim on those protected assets, the failure regime that we have constructed will be redundant. We will not allow that to happen either.

There are several ways around the problem that avoid that restriction. I agree that if that were the only way to raise capital and to finance the new provision of assets, there would be a difficulty. We are providing additional financial resources through the new financing facility, which we discussed early on. Crucially, and most importantly, the borrowing security described by the hon. Gentleman that is most likely to be available will be security on revenue flows, which will be dependent on the volume of activity that the trust generates.

There will also be an opportunity to raise capital on the strength of security provided by non-protected assets that the NHS trust might own. It would be unusual for that to be the only route through which the financing of such a new asset would have to take place. We should remember that—as we discussed earlier—the Secretary of State also has the ability to make loans and grants available to foundation trusts. Therefore, there are several ways around that particular problem.

The hon. Gentleman is right in one respect; the basic architecture of clause 16—we will come up against this matter in later provisions of the Bill—is to avoid any suggestion that protected assets could be subject to mortgages in the way that he has described. It clearly would not be in the long-term interests of the NHS if such a creditor were able to claim preference or priority over that asset in the event of failure of NHS

foundation trusts. That would clearly jeopardise the provision of NHS services. We have always made our priority clear on that.

Photo of Chris Grayling Chris Grayling Shadow Minister (Education)

I do not intend to press these amendments to a vote. This is another bit of the jigsaw puzzle of constraints on the freedom of NHS foundation trusts to operate. It is one area of potential development that they will not be allowed to pursue and one element of the straitjacket that might be applied to them across the whole range of their services and the ways they operate, which ultimately reinforces the view that the Bill is all talk and very little substance. That said, I do not intend to press the issue to a division, and I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

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

In order to move things along, I tried earlier to bring up an issue that I now want to raise. However, the Minister omitted to deal with it. I am sure that he has an answer prepared, but he was just keen to press on with some of the direct issues around the amendment.

The issue is the consultation on some of these matters. The regulator, rightly, must consult with bodies over amendments to authorisation, and the Minister has also put on record the general requirements to consult when authorising an application. I should be grateful if the Minister clarified the requirements for consultation on the designation of property, as there are none in the Bill.

I am not so much concerned about locally loved buildings, although that is an important factor. It is not necessarily the role of the regulator to always protect bricks and mortar. However, I am interested in the consultation outside the foundation trust about the best use of that NHS property, even if it is not necessary for the trust to use it for health services. What fate would be best in the context of the local NHS and the regional NHS as a whole?

I cannot see that there is any requirement on the regulator to consult, and I am not even sure that this is a particularly transparent process. If foundation trusts and the regulator are not going to run into problems as soon as this starts, it might be best that it be made much clearer both that there will be a transparent process and that local people—other than the public constituency of the trust—and other local stakeholders, such as non-foundation hospitals locally, the strategic health authority and others, will have a say in deciding whether the sale of the asset as proposed is necessary.

Photo of John Hutton John Hutton Minister of State, Department of Health, Minister of State (Department of Health) (Health) 12:45 pm, 3rd June 2003

I am sorry that I did not respond to that point earlier. We dealt with some of those issues in the consultation process that considered the establishment of NHS foundation trusts. We shall later discuss the application to NHS foundation trusts of the general obligation to consult local communities about any

substantial change to the pattern of services. In both of those areas, the hon. Gentleman will find an answer to his question about what consultation process would normally be attached to any agreement that the regulator has made to dispose of protected assets in clause 16.

Those assets are fundamental to the provision of core NHS services, and it would be difficult to imagine any disposal of those assets not triggering the normal requirement to consult with the local community about the provision of NHS services. In reaching his decision to approve or otherwise a disposal of a protected asset, the regulator should have regard to the outcome of that consultation process. There is no specific provision in clause 16 that deals with consultation, but the pathways on which the issues would be addressed are dealt with in other parts of the Bill or in other legislation attached to it.

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

I am grateful to the Minister for his explanation. However, he did not address the point that I made, which is not that the regulator must be sure that it is not a core service—I accept that the regulator has a duty to ensure that—but that there may not be a necessary core service for that NHS trust. The best option may be to use that property for another part of the NHS in the local area. That is not the part of the equation that the foundation trusts have to think about; they have to judge whether it is a core service for them. It is not part of the regulator's thinking, because he has to look at it solely in terms of the services provided by the NHS foundation trusts. I should like some reassurance that the needs of the NHS generally will be considered and that the regulator will have regard to that, because the NHS foundation trust may not have regard do likewise.

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

I can give the hon. Gentleman that assurance, because that takes us back to our discussion on clause 3. In discharging his duties under the Bill, the regulator must take into account the fundamental duties that apply to the Secretary of State in ensuring the provision of a comprehensive and free at the point of use national health service. He must take into account those wide elements to any decision to change the configuration of services locally, which the disposal of protected assets might trigger. I hope that the hon. Gentleman is reassured by my affirmative reply.

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

I am reassured, but I should like clarification that under clause 16(4) the regulator, under one of the conditions that the Minister described, could say that it was applicable to allow disposal of this property. However, if the regulator felt that it was necessary, he would be entitled to say, ''As long as it is offered for use by the rest of the NHS first''.

Mr. Hutton: The current wording provides a very wide discretionary power to the regulator to attach whatever conditions he thinks appropriate, and it might well cover the point that the hon. Gentleman has raised.

Question put and agreed to.

Clause 16 ordered to stand part of the Bill.