Clause 113 - Imposition of licence conditions on designated NHS foundation trusts

Health and Social Care (Re-Committed) Bill – in a Public Bill Committee at 7:30 pm on 12th July 2011.

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Photo of Owen Smith Owen Smith Shadow Minister (Wales) 7:30 pm, 12th July 2011

I beg to move amendment 47, in clause 113, page 111, line 42, leave out subsection (12).

Photo of Owen Smith Owen Smith Shadow Minister (Wales)

The Minister saddens me by groaning, but I shall try to cheer him up by being quick.

Amendment 47, very straightforwardly, seeks to omit subsection (12) of clause 113. That in turn omits section 52 of the National Health Service Act 2006, which makes provision for failure of NHS foundation trusts. We suggest that reverting to the situation that pertained under the 2006 Act is a good idea, because the Government have failed to bring forward any proposals in respect of the failure regime. We do not know what the Government propose to do in the event of failure and, as we have heard from my hon. Friend the Member for Islington South and Finsbury, there are at least 20 trusts teetering on the brink, as we speak. This provision allows for directors to be removed and for interim directors to be appointed. The lack of a failure regime is a big hole in the middle of the Bill, which is why we suggest, as belt and braces, that the Government return to 2006 and the Act that we put on the statute book.

Photo of Grahame Morris Grahame Morris Labour, Easington

As my hon. Friend has indicated, clause 113 would remove some of the existing safeguards in respect of the failure regime, as set out in sections 53 to 55 of the 2006 Act. It requires the Secretary of State to implement secondary legislation as soon as possible to apply existing corporate insolvency procedures to foundation trusts. The explanatory notes issued with the Bill say that clause 113 should ensure

“a level playing field between foundation trusts and other providers, and the procedures could facilitate the rescue of a failed foundation trust (for example, through administration or a voluntary arrangement with creditors)”.

It could also allow a speedy wind-up when a foundation trust has failed.

However—this is an interesting point, on which I would appreciate a response from the Minister—we learned yesterday through a Guardian article arising from confidential Government documents revealed through a freedom of information request that Ministers, although I am not certain from which Department, had been privately advised to allow schools and hospitals to fail if the Government’s public service reforms were to succeed. That is directly relevant to what we are discussing in the clause. The documents obtained by The Guardian revealed that civil servants have warned Ministers that

“markets are susceptible to ‘failure’ and costs could in fact rise unless a true market is created by allowing public services to collapse if they are unsuccessful.”

That seems, on the face of it, to contradict directly the assurances that we have received in this Committee from Members and Ministers.

The Minister of State, the right hon. Member for Chelmsford, explained the purpose of the clause when we debated it previously:

“The clause provides for the Secretary of State to make regulations to apply relevant parts of insolvency and company legislation to foundation trusts for the purposes of rescuing an insolvent foundation trust as a going concern or ensuring an orderly winding-up of its affairs in the best interests of creditors as a whole.”

The Opposition oppose the measures set out in the insolvency arrangements, but I would be interested to hear from the Minister an explanation of how the insolvency regime that he has described fits in with the Prime Minister’s public service reform agenda as set out in a statement to the House of Commons yesterday.

We must wait for regulations concerning much of the Bill. We have heard that not all the Future Forum recommendations are reflected in the Bill; some will be introduced in another place, and some will be implemented through secondary legislation. However, it is important, if we are effectively to scrutinise the Bill, that we have information about the failure regime. We need to know how it will apply to the NHS and whether it will conflict with the statement given to the House of Commons yesterday.

All Committee members, not just Opposition Members, must consider the proposals in the Bill, many of which are unclear. We are being asked to make a judgment without all the information. It seems bizarre to me that failure is a sign of success if we follow Tory principles. I have heard of the concept in fashion—not that I am much of a fashion victim—that brown is the new black, but when failure is a sign of success, it is difficult. It is said that failure is a sign that the free market is working. That might be all right if we are dealing with white goods or lesser issues, but an issue of such critical importance to everybody in this country cannot be left to free market disciplines. Labour Members reading the Prime Minister’s comments yesterday and the clauses on insolvency today can only assume that the introduction of insolvency provisions is intended to make it easier, not harder, to close hospitals. Is that the new Tory ethos for our public services?

In a previous sitting, the Minister, the right hon. Member for Chelmsford, said that

“the whole purpose of the Bill and the clause is to protect, not close, essential services”,––[Official Report, Health and Social Care Public Bill Committee, 24 March 2011; c. 1012,1034.]

but we know that that is not the direction of travel of this Government’s policies on public service reform. We heard yesterday that for nurseries and schools and so on a failure regime was essential in order to encourage new entrants into the market. Well, if it applies in those sectors, is it not reasonable to assume or suspect that there is an intent that it should apply in the NHS?

Has the Minister discussed with No. 10 the fact that a reformed health market will look to prevent service closures, if what he is telling us it true, and will therefore not represent the free market with real competition at all? The insolvency clauses are about putting competition above the interests of patients, directly against what all the evidence suggests. It is an attack on in-house NHS provision of service, which has been described by Government as monolithic, and it is about opening up the structure of the NHS to private providers, creating a fluid market. The clause is about making the NHS work for profit and commercial interests and has nothing to do with improving the quality of care.

In conclusion, it is about how the market functions and how the NHS will be broken down and sold off. That is in complete opposition to what the 2006 Act did, which was to put in place a strong early intervention regime to pinpoint those areas where trusts were failing and to put the problem right.

Photo of Paul Burstow Paul Burstow The Minister of State, Department of Health

It was a delight to have that peroration just now and to hear the powerful points that were made. It is perhaps worth sharing some thoughts with the Committee about some of the other powerful points that have been made by the hon. Gentleman’s hon. Friends—and former hon. Friends. The former Secretary of State for Health, Patricia Hewitt, said:

“new providers help us to all the things we want to do: improve the quality of care; increase capacity; support patient choice; drive value for money and promote greater equality...We are working with Ed Miliband, minister for the third sector to help ensure a truly level playing field.”

The then Prime Minister, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), also told us:

“The role of the private sector in the areas that you are suggesting”— such as treatment centres—

“is expanding, will continue to expand and will be a lot bigger in the next few years”.

The Labour manifesto of just last year stated:

“Patients requiring elective care will have the right, in law, to choose from any provider who meets NHS standards of quality at NHS costs.”

The hon. Member for Easington stood on that manifesto and has spent the past many months running away from the position he had at the election.

Photo of Paul Burstow Paul Burstow The Minister of State, Department of Health

On the contrary, we stood on a manifesto where any willing provider was an essential part of reforms that we would make to the NHS. I will just share with the hon. Member for Easington one more  quote. It might interest him to know that his right hon. Friend the Member for Exeter (Mr Bradshaw), and the then Minister of State, said:

PCTs need to see it as their role not to commission services in order to prop up a local underperforming or failing provider, but to the get the best services and best value possible for their public.”—[Official Report, 24 February 2009; Vol. 488, c. 66WH.]

I wonder whether the hon. Gentleman would rather prop up organisations and waste taxpayers’ money. It does seem to me that that is the proposition that the hon. Gentleman has been advancing.

Amendment 47, which is at the heart of the debate that we are having now, seeks to maintain Monitor’s statutory power to intervene formally in an NHS foundation trust by retaining section 52 of the 2006 Act. We agree that it is essential that, in the event of a provider failing, Monitor can intervene. In such circumstances, the overriding priority will be to protect patient interest by ensuring continued access to essential services for patients. It needs to be able to intervene in this way whenever a commissioner asks for its help to protect continuity of services. Under the provisions currently in the Bill, Monitor would operate a distress regime and will be able to require specific actions to address the situation before an organisation actually fails.

Our goal remains clear. It is to avoid failure. Failure is the last resort, not as the hon. Member for Easington suggested, some sort of desired outcome. When Opposition Members lecture this side of the Committee about failure regimes, it is worth remembering that the idea of a failure regime was first floated in 2003 by the then Labour Government when they introduced foundation trusts in the first place. It took six years for the Labour Government to come up with any details of what that failure regime looked like.

We have listened to issues that people have raised about the detail of our original proposals, and we have heard worries about the practicality of our current proposal for an up-front system of designating services for additional regulation. We propose to table amendments to the Bill, taking those concerns into account and are therefore developing a regime in which providers who experience difficulties receive early intervention to help them to improve.

Photo of Paul Burstow Paul Burstow The Minister of State, Department of Health

No. If, despite that, a provider should fail, we will ensure patients’ access to essential services. The intention of the Labour Government in introducing foundation trusts, which is supported by the present Government, was to make NHS providers accountable to their local community, instead of looking to Whitehall. Foundation trusts’ unique governance structure was designed to do exactly that. They recruit members from their local community, which in turn elect governors to represent their views and hold the trust’s board to account. Governors who are elected by the public and staff already have powers to hold foundation trust boards to account, and we are taking steps to clarify and strengthen their role.

In addition and in response to worries about governor readiness and capability to fulfil their role, we are  placing a new requirement on foundation trusts to support governors. We will be tabling amendments to extend the transitional powers of intervention over FTs, which are provided for under the Bill. Our proposals are to support the NHS to be stronger and more accountable, and to help improve care and outcomes for patients. It is for those reasons that I urge members of the Committee to reject the amendment and support the clause as it stands.

I was asked about 20 FTs. Such a line is rehearsed every so often to scare people inappropriately. The figure of 20 relates to NHS trusts that are at risk of not being ready to become foundation trusts. That is different from the failure regime.

Photo of Jeremy Lefroy Jeremy Lefroy Conservative, Stafford

I had such a discussion last week with a hospital that serves my constituents. Does the Minister agree that, in several cases, the cost of PFIs is a real problem? We welcome the fact that PFIs were introduced to bring about changes to the estate of particular hospitals, but there is a problem that the PFI payments go on for the next 20 or 30 years. Will he explain how he is dealing with such matters at the moment?

Photo of Paul Burstow Paul Burstow The Minister of State, Department of Health

The Minister of State, my right hon. Friend the Member for Chelmsford, in answer to a question today at Health questions. identified the fact that the Government are concerned about the issue. They are examining it.

Photo of Paul Burstow Paul Burstow The Minister of State, Department of Health

No, not at this moment. I am trying to respond to a previous intervention. Let me just deal with that. I want the opportunity to do so without quite so much noise, as a result of which we can make some progress. I hope that I can answer the question that the hon. Member for Stafford asked, and that the hon. Lady might ask. [Interruption.]

Photo of Paul Burstow Paul Burstow The Minister of State, Department of Health

I was about to say that we have to deal with the legacy of a desire by the previous Government to move off the balance sheet the financing of capital investment in the NHS. The reality is that those chickens are coming home to roost. They are costing the NHS a fortune, and we must deal with that to make sure that we have a sustainable national health service going forward, and that is what the Government are committed to doing.

Photo of Liz Kendall Liz Kendall Shadow Minister (Health)

David Nicholson, the chief executive of the NHS—not us—has said that about 20 trusts will not be able to make it to foundation trust status because of their financial viability in the future, so the Minister is wrong to say that that is not the case.

Photo of Paul Burstow Paul Burstow The Minister of State, Department of Health

They are organisations that will need additional support and help to succeed. I wanted to make it clear that they are not organisations that are on a list of those subject to the failure regime or that would fall into the failure regime. The hon. Lady might not want to accept that point, but we have a process, and, as I have said, failure is not what this is about. It is about supporting organisations to improve so that they can continue to deliver good-quality results for their patients.

Photo of Jeremy Lefroy Jeremy Lefroy Conservative, Stafford

Does the Minister agree that one of the real pressures is to move people, quite rightly, out of acute beds into the community when possible? We agree that across the board that is good for patients, but it exerts financial pressures on acute hospitals.

Photo of Paul Burstow Paul Burstow The Minister of State, Department of Health

The hon. Gentleman makes an important point about how we have to ensure as we implement the Bill that we avoid such unintended consequences. We are committed to making sure that the failure regime that we introduce is robust. It is about improving services and improving organisations’ chances of succeeding in the future. With that, I urge hon. Members to reject the amendment and support the clause.

Question put, That the amendment be made.

The Committee divided: Ayes 10, Noes 13.

Division number 32 Decision Time — Clause 113 - Imposition of licence conditions on designated NHS foundation trusts

Aye: 10 MPs

No: 13 MPs

Ayes: A-Z by last name

Nos: A-Z by last name

Question accordingly negatived.

Question put forthwith (Standing Orders Nos. 68 and 89), That the clause stand part of the Bill.

Question agreed to.

Clause 113 accordingly ordered to stand part of the Bill.