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Dr. Liam Fox (Woodspring): I am grateful to the Secretary of State for his statement and for his courtesy in making it available beforehand to the Opposition. It is really two different statements rolled into one, so I hope that the House will understand if I deal with it in two parts. [Interruption.] As usual, the Chief Whip has had her diet of Trill this morning. She might wait to hear what the Opposition have to say.

I must begin by welcoming the move to three-year funding. That is a sensible and overdue move if it is matched by a genuine willingness not to hold money back so that there is a genuine increase in autonomy. However, I have a number of reservations about what the Secretary of State said in the first part of the statement, not least when he said that PCTs will now control 75 per cent. of the total NHS budget. It would be more accurate to say that they will handle 75 per cent. of the NHS budget, because they certainly will not control it given the number of Whitehall interventions that are still in place. Perhaps the Secretary of State can tell us today what working assumptions he has made in the allocation of funding to PCTs about the cost of the GP contract should that contract be accepted in the coming months.

One or two other matters will certainly be welcomed. When the statement says:

XWe look . . . to achieve a better balance between services in the community and those in hospitals",

that is something that all parts of the Opposition have been asking for for some time, because those who take those decisions on the ground could not make a worse

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job of understanding the relationship between the acute sector and what happens in the community. Perhaps the person who best expresses the problem is the Prime Minister when he says that it is about schools and hospitals. The majority of care is not about hospitals but about what happens in the community, and the Government have not understood that.

What is most worrying about this part of the statement is the Secretary of State's assertion that the formula being used to allocate resources is now fairer than it was before, yet we are not told exactly what the formula is. We need to know the basis of any change to the formula so that we can judge for ourselves. There has been no public discussion about this, just a working group reporting in secret to Ministers. It lacks transparency and I hope that we will have a full publication of the reasons and the mechanisms of this particular formula.

As the Minister of State, the right hon. Member for Barrow and Furness (Mr. Hutton), said at Health questions last week, it can never just be about money.Perhaps what is very troubling for many health service workers is the fact that in the past two years the Government have increased NHS funding by 21.5 per cent. Nobody doubts that that increase has been made; yet the figures that the Government produced last night showed that the increase in activity measured by finished consultant episodes was only 1.6 per cent. over the same period and that, in the past two years, admissions to hospital had fallen by half a per cent.

The question to which we want an answer is: where has all the money gone? Those who work in cancer services say that it has not gone there. There is a GP shortage, and GPs say that they have less time to spend with their patients. There are now more closed lists than ever before, 80,000 fewer people are receiving domiciliary care and waiting times in accident and emergency have increased. There are more cancelled operations and readmissions, and 60,000 care home beds have closed. There is a genuine desire to know where those beds have gone and where all that money has been used in the health service, as it is certainly not getting through to those on the front line. The Government need to address that issue.

On the second part of the statement and foundation hospitals, I understand why the Secretary of State feels the need to use as much left-wing rhetoric as possible, given the splits on his own Back Benches—the hon. Member for Wakefield (Mr. Hinchliffe) laughs at that—and he certainly did a good job in using the right words. The Opposition entirely welcome the principle of foundation hospitals, which lays the groundwork for the model that a future Conservative Government would like to see, with greater diversity in provision. As Bill Morris rightly said this week, it is a more market-oriented approach. I know that some Labour Members do not like that concept, but I think it is a good one and that Mr. Morris was right to say that. Such an approach also breaks up the NHS monopoly of supply, which again is a good thing and will ultimately benefit patients. However, it must not be about rhetoric, but about genuine substance. When the legislation is introduced, we will want to ensure that it delivers exactly what the Secretary of State and the Prime Minister claim to want and not what the Chancellor of the Exchequer seems to want for it—an early death.

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We have a number of questions for the Secretary of State. On the autonomy of foundation hospitals, how exactly will borrowing limits be set? How will they be monitored, and by whom? What freedom will there be to vary pay and conditions for clinical staff outside the XAgenda for Change" agreement? What will be the freedom to change the configuration of services? For example, will foundation hospitals be able to drop any particular type of clinical service and decide that they do not want a dermatology department or an ENT department, or will such issues be determined centrally on the basis of core services defined by the Government in the legislation?

I find rather odd the concept that the foundations will be locally owned. If I were looking to measure whether I owned something, I would want to know whether I had a financial stake in it and whether it could be taken from me against my will, but it seems that there will be no financial stake and that foundation trust status can be taken away by the Secretary of State.

On accountability, on which the Secretary of State laid so much stress, which councillors will be involved in setting up the running of foundation hospitals? What electors will be involved? What will be the constituencies for elections to the boards that will be playing that role? What powers will the boards have over the configuration of local services?

The statement contained a number of contradictions that are worth looking at. The Secretary of State said:

XNHS foundation trusts will be guaranteed in law"

and referred to

Xfreedom from Whitehall direction and control",

but he also said that the trusts would still be subject to the star rating system. In other words, as the star rating system is dependent on the Government's central targets, foundation hospitals will therefore be subject to those targets. That is saying one thing and doing quite another. He said that the trusts

Xwill operate on a not-for-profit basis"

and went on to say:

XThey will earn their income from legally binding agreements with PCTs based on a national tariff. They will not be able to undercut other NHS hospitals."

In that case, what is the point of giving them the freedom to be more efficient, which would allow the same amount of resources to be used to treat a greater number of patients? Why give them the freedom, but not allow them to use it? The right hon. Gentleman said that trusts would not be allowed to undercut other NHS hospitals. What is the point of the reform if not to achieve greater efficiency?

The Secretary of State said:

XThey will be able to retain any surpluses and any proceeds from the more efficient use of their assets, where this is for the benefit of NHS patients."

However, he also said that they are not allowed to use the efficiency to undercut other hospitals. What exactly does he mean?

The right hon. Gentleman said that foundation hospitals

Xwill operate . . . in a way that does not undermine other local NHS organisations—for example, by poaching their staff."

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Who will define that? How is the measure to be policed? It is unworkable. A clinician in a hospital who likes the way in which a foundation hospital is being run and its freedoms might choose to work for it. He would not be allowed to do so because somebody—the identity is unclear—defines that as poaching, which is nonsense. Such a provision would have to be clearly defined in legislation.

I was amused when the Secretary of State said:

XThe presumption will be light-touch regulation".

I presume that that is a tacit apology for the sort of regulation that has occurred under the Secretary of State so far. As for the idea that there will be a legal lock on assets to prevent demutualisation, all hon. Members know how meaningless that rhetoric is. Any future Government could change the law. The claim was included simply to give the Secretary of State a little peace from his Back Benchers. It is clearly meaningless in law.

We support the principle of foundation hospitals. Why will only a few hospitals be chosen? Is that a purely practical consideration? Do the Government want all hospitals ultimately to become foundation hospitals? Conservative Members would like that to happen. Is that the destination for the plans?

We will want to study the regulations that are associated with any legislation. That applies not least to the powers for the Secretary of State to expand and strengthen the foundation hospital project, without discussing them with the House of Commons.

When we believe that the principle is right, we will support it. The Secretary of State does not need to worry about problems on his Back Benches when introducing the foundation hospital principle in legislation because he will have the support of Conservative Members.

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