Clause 39 - NHS trusts in England

Health and Care Bill – in a Public Bill Committee at 3:45 pm on 21st September 2021.

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

Photo of Steve McCabe Steve McCabe Labour, Birmingham, Selly Oak

With this it will be convenient to discuss the following:

Clauses 40 and 41 stand part.

That schedule 7 be the Seventh schedule to the Bill.

Clause 42 stand part.

Clauses 44 to 50 stand part.

Photo of Edward Argar Edward Argar Minister of State (Department of Health and Social Care)

With your indulgence, Mr McCabe, and that of the Committee, I will start with clause 39, followed by clauses 40 and 41 and schedule 7, and then go through the remaining clauses in the group.

Clause 39 amends the Health and Social Care Act 2012 by repealing section 179, which abolishes NHS trusts in England. It is an uncommenced provision. The policy intention at the time was that all NHS trusts would become foundation trusts. However, since then the provider landscape has settled at around one third NHS trusts and two thirds NHS foundation trusts, and, as far as I am aware, no applications for change to a foundation trust are currently in flight. There is no intention to alter this landscape significantly and, as such, section 179 of the 2012 Act should be repealed. Doing so provides absolute legal clarity that the Secretary of State can create new NHS trusts under section 25 of the National Health Service Act 2006.

Given the ongoing pandemic, and with the NHS having to deal with the broader challenge of treating an ageing population with ever more complex needs, we seek to ensure flexibility by allowing the Secretary of State to set up new trusts for any purpose, to ensure alignment within an integrated system. The ability to create new trusts, where they are requested by a local area, enables the NHS to be structured to deliver the best outcomes for population health and to respond to emerging priorities. Our aim is to ensure that the system is flexible and adaptable in the future, and wherever possible to avoid the need for complex workarounds to deliver system priorities. Although section 179 was never commenced, we want to remove any potential legal uncertainty over the Secretary of State’s ability to create new NHS trusts. Clause 39 removes the lack of clarity around the Secretary of State’s ability to do so.

Clause 40 repeals paragraph 10 of schedule 4 to the 2006 Act. This paragraph allows the Secretary of State to appoint trustees for an NHS trust to hold property on trust. The clause removes the Secretary of State’s powers to appoint such trustees. In practice, these powers have only ever been used to appoint trustees to NHS charities. Historically, NHS charities were charities regulated under charity law provisions but were also linked to NHS bodies and bound by NHS legislation. This means that they were charitable trusts established under the 2006 Act and had as their trustee an NHS body, such as an NHS trust or foundation trust. The 2006 Act also allowed the Secretary of State to appoint trustees to NHS foundation trusts and NHS trusts, and to transfer property.

Since the publication of the Government’s response to the review of regulation and governance of NHS charities in 2014, it has been our policy for all NHS charities to move to independent status. Since then, all NHS charities have moved to independent status, including the 21 larger charities that had trustees appointed by the Secretary of State. Therefore, there are no NHS charities with trustees appointed by the Secretary of State, and all NHS charities are solely regulated by the Charity Commission. In light of the above, and as there is no further need for the Secretary of State for Health and Social Care to appoint trustees, clause 40 will remove such powers.

Clause 41 introduces schedule 7, which makes minor and consequential amendments relating to clauses 39 and 40 of the Bill. Clause 39 repeals section 179 of the Health and Social Care Act 2012, and clause 40 repeals paragraph 10 of schedule 4 to the National Health Service Act 2006 and removes the Secretary of State’s powers to appoint trustees. In order to implement the changes as a result of these clauses, schedule 7 makes consequential amendments to various other pieces of legislation, such as the Local Audit and Accountability Act 2014 and the NHS (Charitable Trusts Etc) Act 2016. This ensures that the changes made by the Bill in relation to clauses 39 and 40 are consistently represented throughout other pieces of legislation. These minor and consequential amendments are necessary to clarify the Secretary of State’s ability to create new NHS trusts and to remove the Secretary of State’s powers to appoint NHS trustees.

Clause 42 makes changes to the licensing regime for NHS trusts. The clause removes the exemption in the licensing regime for NHS trusts, meaning that all NHS trusts will require a licence from NHS England to operate. This reflects the intention that NHS England should manage both NHS trusts and foundation trusts, which already have to have licences, in similar ways. This has been NHS Improvement’s de facto practice for some time, and this amendment brings trusts within the scope of NHS England’s licensing and regulatory powers.

NHS England intends to use this as a means to manage all NHS providers more effectively and coherently, to ensure they are fulfilling their statutory duties and delivering high-quality, financially sustainable healthcare.

Clause 42 allows NHS trusts already established under section 25 of the National Health Service Act 2006 to be treated as having met the necessary criteria for holding a licence. That ensures that there is a smooth transition and no disruption caused by this new requirement from day one. The clause will allow NHS England to take a single, joined-up approach to licensing providers.

As the Committee will know, the Bill, as we discussed this morning, formally merges NHS England and NHS Improvement. Clause 44 delivers part of that objective. It places in statute a general function on NHS England to provide oversight of and support to NHS trusts. In effect, it transfers to NHS England the NHS trust oversight and support duty currently delegated to the NHS Trust Development Authority by the Secretary of State through directions. The clause is in addition to the power to assist and support providers in clause 6, which goes wider than NHS trusts.

The clause will transition the existing functions of the NHS Trust Development Authority to NHS England in relation to oversight and support of NHS trusts established under section 25 of the 2006 Act. It will give NHS England a basis to provide fundamental advice and guidance to NHS trusts in the exercise of their functions. It will, for example, continue to ensure that compliance with NHS trusts’ general duty, set out under section 26 of the 2006 Act, to act effectively, efficiently, and economically, is met. It will ensure that standards and the statutory duties placed upon NHS trusts are met.

The oversight duty will allow NHS England to monitor the performance of NHS trusts, allowing it to take steps to intervene where necessary. Intervention may take the form of advice and support, but may also involve NHS England requesting the trust take action to remedy emerging issues.

The clause also makes two small changes as a consequence of transitioning the provider-based functions of Monitor and the NHS Trust Development Authority to NHS England. Subsection (3) requires NHS trusts to send their annual reports to NHS England rather than the Secretary of State, and gives NHS England formal power, alongside the Secretary of State, to request information from NHS trusts.

Clause 44 is fundamental to the merger of NHS England, the NHS Trust Development Authority and Monitor. Without it, NHS England would simply be unable to fulfil its role in overseeing and supporting the health system or to discharge its responsibilities to any effect.

Clause 45 is another key provision to the merger of NHS England and NHS Improvement. It inserts proposed new section 27B into the 2006 Act and provides NHS England with the power to give directions to English NHS trusts about the exercise of any of their functions.

The Secretary of State currently delegates his general power to direct to the NHS Trust Development Authority through directions. Therefore, as part of the merger of NHS England and NHS Improvement, it is important that this function is passed on to the merged NHS England. The clause also clarifies that, as currently with the Secretary of State, NHS England can exercise that power in relation to NHS trusts’ powers to employ and pay staff and to generate additional income.

The clause will grant an overarching power to NHS England to provide direction to NHS trusts, which is equivalent to that of the Secretary of State’s power of direction under section 8 of the 2006 Act. The power of direction is intended to be used in circumstances NHS England deem appropriate. Without the clause, NHS England would not have the ability to direct NHS trusts, a fundamental mechanism within the system as it takes on the role of NHS Improvement.

Any direction made by the Secretary of State must and will take precedence over a direction made by NHS England. That is made clear in proposed new section 27B(2), which provides that any direction issued by NHS England under it will have no effect to the extent it conflicts with a direction issued by the Secretary of State under section 8 of the 2006 Act. Where the responsibility previously sat with the NHS TDA, the clause provides NHS England with the necessary ability to direct NHS trusts.

Clause 46 inserts proposed new section 27C into the 2006 Act. It provides that NHS England can make recommendations to NHS trusts in relation to restructuring and can take appropriate steps to aid applications made with respect to restructuring. Restructuring includes the merger of an NHS trust with a foundation trust; cases where an NHS trust is acquired by an NHS foundation trust; the transfer of property between NHS bodies, including NHS trusts; and the dissolution of an NHS trust.

Previously the ability to make recommendations sat with the TDA via directions given by the Secretary of State. The clause therefore allows NHS England to make recommendations on transactional processes associated with the restructuring of an English NHS trust in its newly merged form, continuing the function that previously sat with the NHS TDA. This clause will provide continuity for NHS trusts, maintaining an existing relationship that has proved valuable in the assessment of an NHS trust’s ability to proceed with transactions. It is an established practice, whereby NHS England can ensure clarity about the intended benefits of any such transaction. By accepting the clause, the transition of the power within the existing practices of the NHS Trust Development Authority to NHS England would not be compromised. These processes are fundamental to ensure that the NHS provides patients with consistently safe, high-quality, compassionate care, within local health systems that are financially sustainable.

Clause 47 inserts a proposed new section, 27D, into the 2006 Act, requiring that NHS England make recommendations to the Secretary of State to make an intervention or default order against an English NHS trust, where it considers it appropriate to do so. This function also previously sat with the NHS TDA, as provided for by directions from the Secretary of State. This clause will again provide continuity within the system, retaining the key role performed by the TDA under the new system in identifying underperforming trusts and ensuring that failings within trusts are recognised and escalated, as appropriate, so that the correct reparative action can be taken.

NHS England will continue to provide the Secretary of State with the information considered necessary for him to exercise his intervention and default powers under sections 66 or 68 of the 2006 Act. This maintains both the existing relationship, which has proved valuable in the assessment of an NHS trust’s performance, and the ability for them to carry out their functions.

Accepting this clause will provide continuity of the intervention role carried out by the TDA as it moves to NHS England and will allow NHS England to carry out its role as a system leader and to identify and escalate system failings early. Again, those processes will all help to ensure that the NHS provides patients with consistently safe, high-quality and compassionate care within local healthcare systems.

I now turn to clause 48. I reassure you, Mr McCabe, and the Committee that I am—hopefully—drawing to a conclusion. I am grateful for the Committee’s perseverance with this, given the number clauses we are debating at once. Clause 48 amends provisions in the 2006 Act relating to the conversion of NHS trusts to NHS foundation trusts. It removes the requirement in section 33 of the Act for an application by an NHS trust to become an NHS foundation trust to be supported by the Secretary of State. The Secretary of State will instead be involved in the authorisation stage. That is in keeping with the policy intention that the Secretary of State should have a strengthened role over NHS foundation trusts in the light of NHS England’s new regulatory role. The clause also amends section 35 of the Act so that NHS England must grant the authorisation, provided that it is satisfied of certain matters, set out in section 35, and that the Secretary of State approves the authorisation.

Mr McCabe, you will recall that a key element of the Health and Social Care Act 2012 and, indeed, a function given in directions to the NHS Trust Development Authority, was for the TDA to support the remaining NHS trusts to become NHS foundation trusts. As we have alluded to in discussions of previous clauses today, since 2012, the landscape within the system has changed and there is a need for a diverse provider landscape, with greater emphasis on the role of integrated care systems.

Through the oversight and support development functions placed upon NHS England with respect to NHS trusts, it will continue the NHS TDA’s role in assessing and assisting NHS trusts to become NHS foundation trusts—should they be queuing up to do so. Through this Bill, NHS trusts will remain a feature of the landscape, although the ability to become an NHS foundation trust, subject to approval from NHS England, will also be retained.

The clause also amends schedule 4 to the 2006 Act, so that, with the approval of the Secretary of State, NHS England has the power to dissolve an NHS trust, and to transfer property and liabilities on dissolution. NHS England and the Secretary of State are permitted to make the order for dissolution on the application of the NHS trust concerned, or if they consider it appropriate in the interests of the health service. The requirement that a dissolution order can be made only following the completion of a prescribed consultation, unless it is needed as a matter of urgency or following the final report from a trust special administrator, continues to apply to the Secretary of State and also now applies to NHS England.

Clause 49 gives NHS England the power to appoint the chair of the board of directors for an NHS trust, replacing the Secretary of State’s power to appoint the chair, which he currently delegates to the NHS TDA. Alongside other powers and duties given to NHS England in clauses 44 and 46, clause 49 ensures that the responsibility for oversight—and, where required, the restructuring—of NHS trusts sits with it. The clause reflects the role that NHS England will play in the management of NHS trusts. It will enable greater strategic alignment between NHS England and NHS trusts, while affording appropriate oversight of performance and delivery at a local level. Without that power, NHS England would be curtailed in its ability to provide the strategic guidance and oversight needed to deliver effective system-level leadership.

Finally, clause 50 allows NHS England to set financial objectives for NHS trusts, and requires NHS trusts to meet those financial objectives. The objectives could be set for all NHS trusts, for one particular trust, or for specific types of trust, such as mental health or community care trusts. The Bill provides that NHS England will have oversight of financial objectives across the system. To do that, NHS England has been given, elsewhere in the Bill, certain powers over ICBs and their management of financial resources. The clause allows NHS England to ensure that NHS trusts operate within clear financial objectives, which is vital for the system as a whole, ensuring that public money is spent in the most effective way for the benefit of patients and the public.

I commend the clauses to the Committee.

Photo of Alex Norris Alex Norris Shadow Minister (Health and Social Care) 4:00 pm, 21st September 2021

It is a pleasure to follow the Minister’s admirably comprehensive coverage of the clauses, which I will try to meet in similar terms.

We recognise that the clauses address a number of technical changes to the status of NHS trusts and NHS foundation trusts in this country. We do not oppose them as we think they are consistent with the broader aims of the Bill: moving us from a world of competition to one of collaboration. I recognise that there is a great deal of transposition in the clauses, so very little will be different in substance, and that is why I will probe the Minister, who may well have pulled his punches with them. Why did he not go further?

In reality, the clauses, which are a significant part of the Bill, tidy up previous Acts but do not change enough of their substance. Nothing in the clauses—as with far too much in the Bill—will make anybody better, shorten waiting times, ensure safer staffing levels, address crumbling facilities, or do anything about the other myriad issues faced by the health service and Ministers. The Bill is in danger of creating the illusion of acting without really acting, like repainting a building and pretending it is a new hospital.

On clause 39, I listened carefully to what the Minister said about there being no plans to unsettle or change the provider landscape, meaning it is necessary to end the assumption that all NHS trusts will become foundation trusts. I agree with that basic principle because the debate has moved on significantly from that. It is less about a competition-based system and more about a system of collaboration. Indeed, as the Minister said, notably, there is a greater focus on the ICS as the unit of understanding in the community rather than the acute hospital.

As a result of that, however—this is not in the Bill —we will have two tiers, or two different sets of trusts, littering the landscape. We will entrench a system of trusts that are simultaneously autonomous and not, competitive and not, responsible for their own bottom lines and not, and free to spend their accumulated capital and not. That is a mess. If we tried to explain to a dispassionate observer why different trusts could do different things, we would not be able to. Were we designing a system from scratch, we would never design it like that. I would argue that the Bill is the closest we will come to designing a system from scratch, so I am surprised that that two-tier system has not been addressed in a more meaningful way. That would send a strong signal that NHS trusts and NHS foundation trusts are fully part—not semi-detached parts—of the NHS. They are public bodies and we expect them to act like public bodies.

On clause 40, I do not think I had anything to ask the Minister beyond the points that he made. Clause 41 deals with consequential amendments.

On clause 42, and at the risk of asking a daft question, although I do not think it is, but we will find out, what is the point of licensing trusts? Is this not just creating a bogus sense of distance from the centre, when actually the rest of the Bill is designed to consolidate NHS England as the regulator, the funder and the powerful operator? Why create this licensed distance between NHS England and its providers, other than the fact that it has been custom and practice for the past 10 to 20 years to do so? Is the licence really going to be worth the bother of printing out, or is it not just a legacy of a model of independence and composition that successive Acts have featured, but from which there is now a universal keenness to move on?

I feel that we have missed the opportunity to tidy up and that in future proceedings on the Bill we will introduce an amendment to restore the private patient cap. Paradoxically, it never applied to ordinary trusts. Is that not another sign of the jumble of a system that we are choosing not to resolve? My hon. Friend the Member for Bristol South has done so much campaigning on this. What about the ability to set up sub codes, which promote tax avoidance and the undermining of NHS terms and conditions? They are a legacy of the old ways that do not fit the new ways. Do the Government really think that they still have a place in the system? Should we not have addressed that at this point?

On clause 44 on oversight, or “oversight and support” as it is in Bill, I hope that the Minister can explain how they are different in practice. Does he envisage oversight and support being different in the new world after the legislation has been passed, because we now have a different actor in the system—the integrated care boards? Where do they fit in with oversight and support? Do they stand next to the trusts that might need some extra support and extra oversight because of concern from the centre, or do they stand with the centre, sharing those concerns and providing the oversight and support, too?

The same applies to clause 47 regarding intervention in NHS trusts. Will that be any different from how it is conducted now? Where will integrated care boards fit in that? I do not want to use the word “size” but it is the easiest way to categorise it. In an intervention, we have the body that needs that intervention, presumably because it is failing, and the intervener, the responsible body that seeks for the former to improve. Where does the integrated care board sit? I do not think there is enough clarity about that.

Clause 45 allows for directions to trusts. Will there be guidance on the use of that power to ensure that relevant ICBs are involved? What if it is a foundation trust? Will the treatment be different? Is that not another undesirable symptom of a two-tier system? Similarly, what involvement or say, if any, will ICBs have on the restructuring changes set out in clause 46? Could a trust working with the Secretary of State work around that? Again, I do not get anything from the Minister’s remarks to suggest that he intended for things to be any different the day after the provision was enacted from what they were the day before. But it is different, because we have a really significant new actor, which the Minister himself said will be the unit by which we will understand the health service in a local area. Where does that actor fit into that?

That concern also applies to clause 48. We have had a laugh and a joke about NHS trusts wishing to become foundation trusts now—the fact that we have had a laugh and a joke suggests that perhaps we need to get out more—but could an NHS trust reach foundation trust status without the support of and the involvement of an ICB, or even without its engagement? I do not want to get ahead of ourselves, but it fits with this to point out that Government amendments 15 and 16 require respectively a CQC and NHS England to consult relevant integrated care boards before special administration orders are issued. That is important, and it seems perfectly sensible and we will not oppose the amendments, but if it is important to involve an ICB before a special notice is issued for a trust, surely it would be important to involve an ICB before a trust achieved foundation trust status and gained oversight and support provided by the centre, and direct intervention from the centre. I hope that the Minister can resolve that.

I am conscious that that was a rattle through the provisions. I did not wish to add anything to what the Minister said about clauses 49 and 50. However, there is a central theme: the system created by multiple Acts is officially a mess. I understand that Ministers might not be keen to talk about some of the mess relating to the 2012 Act, because it reflects poorly on the decisions taken by their predecessors. However, the mess we are addressing in these clauses involves everybody’s predecessors —there is plenty of blame to go around. I do not think they should be shy about wanting to address that, or see it as an admission of not having got things right. Surely, now is the time to deal with it. We will not get a moment as good as this for another 10 years, when we are back here discussing the next health and care Act—[Interruption.] Yes, perhaps we will discuss it when we return for the integration Bill in due course.

I do not want to divide the Committee on this point, because I do not want hinder the move to a more collaborative system. However, I know that colleagues in the other place will want to return to the theme because, as now constituted, it is very hard to explain why the new status quo that is being established is good. We are always trying to be helpful to the Minister, and there is a golden opportunity here to create a world where co-operation and collaboration replace competition, and where the sharing of data and resources becomes commonplace. If we add that to a much stronger voice for the public, for patients and for staff, things start to look as if they might be different, rather than having clauses that will not improve anybody’s healthcare. I wonder if the Minister might go a little bit further.

Photo of Edward Argar Edward Argar Minister of State (Department of Health and Social Care)

I am grateful to the shadow Minister for his indication of broad support for our proposals. He is right: there is a significant degree of transposition and replication of what was there before, while recognising the new landscape. He asked why we did not go further; when we debated clause 38, he accused me of going too far. I suspect, from his perspective, that the question of balance has yet to be achieved, but I think we have struck the appropriate balance.

In his opening remarks, the shadow Minister said that while this is all useful and neat, it does not address some of the underlying challenges. I would argue that the Government have set out a very clear strategy for that in the NHS Funding Act 2020—I think I stood across from the shadow Minister for that one, which was a rather shorter piece of legislation—and, of course, the recent announcement by the Prime Minister, setting out the record additional funding going into the NHS.

On the specifics, I do not believe that foundation trusts mean a two-tier NHS. There are different models, and we are not proposing to stop the formation of foundation trusts—the hon. Member for Ellesmere Port and Neston has already enjoyed asking me a polite but pointed question in that regard. However, we are not going to compel it; we are not saying that that is the direction, and therefore we do not see the need for section 179. We are not saying that everyone must move in that direction. However, we will retain the ability for them to do so, should they wish.

The hon. Member for Nottingham North raised the issue of intervention, support and similar matters. There are different definitions of those concepts. For example, on the purpose of a default order, when one of those is issued, chairholders must immediately vacate their office. The order must

“provide for the appointment…of new members of the body and…contain such provisions as seem to the Secretary of State expedient for authorising any person to act in the place of the body pending the appointment.”

An intervention order may provide for the suspension or

“removal from office of all the members”

of the board,

“or those specified in the order, and for their replacement”.

An intervention is essentially quite a strong power. I would suggest that support takes a less prescriptive form and refers—as we would all understand the term—to support, advice or guidance. There is a difference in the level and severity of the interventions required.

On equivalent treatment in respect of foundation trusts and NHS trusts, one intention behind the merger of NHS England and NHS Improvement is to bring together the way we support providers, trusts and foundations so that there is a single model of support and one licensing approach. NHS England will—I suspect through guidance—clarify further how that will work in practice.

I take the points made by the shadow Minister. He perhaps sees these provisions as an opportunity to go further and address other issues that he perceives to be challenges for the system. We have deliberately sought to make this a transposition. It is technical, but we think these technical changes are important to ensure that NHS England retains the powers it needs to support, intervene and make sure that the system works. Although I will, as always, continue to reflect on the points he makes, I commend the clauses to the Committee.

Question put and agreed to.

Clause 39 accordingly ordered to stand part of the Bill.

Clauses 40 and 41 ordered to stand part of the Bill.

Schedule 7 agreed to.

Clause 42 ordered to stand part of the Bill.