TUESDAY 11 FEBRUARY 2003

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Members present:

Mr David Hinchliffe, in the Chair
Mr David Amess
John Austin
Andy Burnham
Mr Simon Burns
Jim Dowd
Julia Drown
Dr Doug Naysmith
Dr Richard Taylor

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MR DOUGLAS PATTISSON, Chief Executive, Hinchingbrooke Hospitals NHS Trust, Huntingdon, MS KAREN BELL, Chief Executive, Huntingdonshire Primary Care Trust, MR MALCOLM STAMP, Chief Executive, Addenbrookes Hospital NHS Trust, Cambridge, and MR CHRIS BANKS, Chief Executive, Peterborough Hospitals NHS Trust, examined.

Chairman

Could I welcome you to this session of the Committee? Could I express our gratitude to you for being willing to come before the Committee today to cooperate with our inquiry? Perhaps we could ask you to introduce yourselves to the Committee and say a bit about your organisation.

(Mr Stamp) Malcolm Stamp, chief executive of Addenbrookes NHS Trust, a 1,300 bed teaching hospital linked with Cambridge University through the medical school there. We are a three star organisation in accordance with the performance ratings issued by the Department of Health and a five star research institution linked through the medical school. We employ about 6,000 people. We treat about 350,000 outpatients, about 60,000 inpatients and day cases and we see about 56,000 accident and emergency cases per annum.

(Mr Pattisson) Douglas Pattisson, chief executive, Hinchingbrooke Health Care NHS Trust. It is a district general hospital serving about 170,000 population. We deliver 2,300 babies a year, 40,000 A&E attendances a year. We see about 125,000 people through our outpatient clinics. We employ 2,000 staff, well linked with our local community, and we have good connections with local primary care trusts and a number of acute hospitals.

(Ms Bell) Karen Bell, chief executive of Huntingdonshire Primary Care Trust and its predecessor, the Primary Care Group, which was established in 1999. We have a population of around 150,000 people and that is growing, and a budget of around 100 million. We employ just over 700 staff. We provide around 85 per cent of the income for the Hinchingbrooke Trust and about ten per cent of our income goes to Addenbrookes.

(Mr Banks) Chris Banks, chief executive of Peterborough Hospitals NHS Trust. We are an 800 bed district general hospital in North Cambridgshire. We employ about 3,000 staff and we also manage a community hospital in Stamford in Lincolnshire. We have an annual budget of about £110 million. We are a three star trust. We serve a population of about 285,000. We have about 56,000 attendances in A&E. We do about 18,000 elective operations a year, 28,000 emergencies and about 185,000 attendances in outpatients.

Dr Naysmith: I am a member of at least two cooperative societies and I am a member of the Cooperative Party.

John Austin: I am a member of a cooperative society and a member of the Cooperative Party. I am a former chairman of the Association of Community Health Councils, which is giving evidence today. I was a member of Greenwich Council at the time that Greenwich Leisure was established, but I have no pecuniary interest.

Andy Burnham: I am a member of the Cooperative Party and chair of a government backed initiative to promote cooperative principles in football and rugby league.

Julia Drown: I am a member of a cooperative society and I am a member of one coop.

Chairman

I was a founder member of the West Riding and Addenbrooke Cooperative. Ms Bell, there are a number of different perspectives on the concept of foundation trusts. One of the concerns that a number of us have is the way in which it appears to be an odd direction for the government to have taken, bearing in mind that the emphasis in recent times in government policy has been in the direction of PCGs and PCTs. Would you have felt it to be more appropriate for this foundation concept to have been initiated relating to PCTs as opposed to the acute centre?

(Ms Bell) Having worked in an NHS provider trust as a deputy chief executive, we found it very difficult to engage with the general public, despite our best efforts. We had non-executive directors but they were appointed, not elected. Having previously worked in local government and having to work in local government increasingly now with social services, the rest of the public sector perceived that there was a democratic deficit in NHS provider trusts. It may well be that you would want to see foundation status applied to the whole of the system rather than just to hospital trusts, but I do absolutely support the concept of foundation trusts for acute providers.

From your answer, do I gather you would have preferred the concept to have been initially spread across primary care and acute care as opposed to concentrating, as it is at the present time, on just the acute sector?

(Ms Bell) Not necessarily because PCTs have only recently been established and we have had significant organisational changes so I would not like to see any more organisational change at the moment. The concept of establishing three star trusts as foundation trusts to pilot this is a very good way of managing it and we will learn from that. Maybe eventually, when things are more stable in organisational terms, it could be extended or not.

You are probably aware that this Committee did pay a visit to Peterborough not long ago. I believe it was in the context of delayed discharges. We were very impressed by some of the practices that we saw where you were able to integrate health and social care in a very practical way. The hospital at home scheme I believe we saw in your area which impressed us greatly. Do you feel that this idea of foundation status will or could impact in a negative way on some of the very positive developments that you have made in integrating health and social care, because that is one worry that has been put to us.

(Mr Banks) I would be very disappointed if that happened. In Peterborough we have demonstrable improvements in services because we are working together. We have perhaps an advantage over some parts of the country because Peterborough's PCTs are a little more mature. They were first wave and that has helped. I suspect also the fact that we have had quite stable management within the trust and within the PCTs or whatever other guises so the relationships are there. In Peterborough we have been working on a hospital development plan and it is rather more than that; it is what we would regard as a capital investment in the whole health system. We are working very closely with our partners. Out of that we have quite an interesting model for the future for the delivery of health care in our area, which is more about trying to move services to the places where it is most appropriate to deliver them, which means taking things more into the community. It would be a shame if we were to lose that. I do not see that that should be the case. If we went that route, there are positive upsides to it in terms of our relationship with the community that we are working in. The hospital does have strong identity with the community.

You have on your own admission established over a long period good relationships locally. That is not the case throughout the country. Do you see difficulties that may arise in areas with less positive relationships where a foundation trust application is made?

(Mr Banks) It would be difficult to comment on that.

Julia Drown

The idea of the trust is that the governors who are elected, their duty will be to that organisation. I wondered if you felt there might be potential problems with that given that there are primary care trusts wanting to have cross-institutional working and perhaps a flexibility in the different services from one to the other. Might it not be a problem if the whole focus is on acute trusts and on individuals there having their responsibility and duty only being to that organisation and not to the wider NHS? Do you think their duty should be to the wider public services rather than that individual institution?

(Ms Bell) When you talk about the people there ----?

The governors.

(Ms Bell) I do not know if you have seen my evidence but what I say is that our board who have discussed this would support foundation trust status for Addenbrookes and Peterborough because we can see considerable benefits. Our one issue that we would like to clarify are the governance arrangements because we would like to see local PCTs, not just lead PCTs, involved in the governance arrangements. That will be particularly important for us in terms of Addenbrookes because we work really closely together in the two trusts and we have clinical networks that go across the two trusts. There is going to be more of that in the future, not just in Cambridgeshire but across the country. I think it would be really important that that connection is made and maintained so that local people in Huntingdonshire feel that we have influence with Addenbrookes.

What counts as influence? Two members on a board of ten or a majority?

(Ms Bell) At the moment, if I think about Hinchingbrooke, most of our influence is not exerted at board level. It is through the management process and the commissioning. Going back to your earlier point about would it affect the integration around primary and secondary care, we are mutually dependent upon each other for that success. If we are not able to do that and we are not able to work on the delayed transfer of care it stops the acute trusts doing their elective work which foundation trusts will still need to do. I think you could overstate that as an issue.

Dr Taylor

Mr Banks, I cannot help noticing that in the performance ratings you only scored one out of five on delayed discharges. I am not meaning to be confrontational. I do not quite how that squares with your being the leader in hospital at home schemes and the sorts of things that should avoid delayed discharges.

(Mr Banks) This is one of the areas we are struggling to deliver at the moment. We had a review recently by the Change Agency from the Department of Health and Social Care that reviewed our systems and found that the systems and processes and the relationships between secondary care, primary care and social services were very good. There was not too much that they say we could improve on. There are other issues around delayed discharges in Cambridgeshire, partly capacity to take patients and partly funding.

Andy Burnham

The government has stated its intention to try to alter the balance of spend within the service so that less in future is spent on the secondary sector and we front load spending much more at community level with preventative spending. Do you see a potential difficulty from the PCT point of view in that the incentive will be there for the foundation trusts to make savings on how it handles its health care and that funding is then retained within the secondary sector. Therefore, it makes it more difficult for you to pull funding where efficiencies are made in the system.

(Ms Bell) To be parochial, within Cambridgeshire, we are a capacity constrained system. I understand within the NHS that is true as well. We have huge capacity constraints in terms of our ability to do the elective works that needs to happen. Thinking about Addenbrookes it has insufficient capacity at the moment. That is true of Hinchingbrooke and Peterborough and that is why they all have outline business cases for extra capacity diagnostic and treatment centres. One of the ways that we will achieve the targets set out in the ten year plan is to increase the capacity in primary care as you said. We are working very closely with the acute trusts in doing that. They are training GP specialists and in some cases the nurse specialists to ----

Do you think it might increase the potential of the acute trusts to devour the NHS cake?

(Ms Bell) No, because it may well be that more specialist work will end up in some of the foundation hospitals and that there will be therefore more potential to find other ways of doing this mainstreatm district general hospital work, especially with Addenbrookes because it is a specialist centre.

Mr Burns

I thought I heard Dr Taylor say that you only had one star on delayed discharge. If I heard your answer correctly, you said that you thought there was nothing structurally wrong with your work in social services; there were other areas where you had to look at how to improve the problem.

(Mr Banks) I said that the Change Agency reviewed the process and the way we work with social services in primary care and did not feel that they could fault that terribly much. I suggested that there might be structural issues around the growth in the population of Cambridgeshire, the availability of residential and nursing homes, that were not helping the situation.

If you were to seek foundation status, do you think that part of your performance record would hinder you?

(Mr Banks) That remains to be seen because in order to become foundation trusts we have to get three stars next year.

Or do you think that you would be able to enhance your opportunities to get three stars so as to enhance your opportunities to seek foundation status if social services were fined for the delayed discharge problem?

(Mr Banks) I understood the inquiry was about foundation trusts.

It is.

(Mr Banks) We have gone on record as saying that we tend to work very closely with social services anyway.

What about seeking foundation status and your record? Do you think it will be enhanced by your record on delayed discharge improving if social services were to be fined?

(Mr Banks) I am not sure that it would be.

That is basically a no, is it not?

(Mr Banks) It is a do not know. We are working very closely with our colleagues in other sectors and fining is something that may or may not be introduced next year. It does not change the ethos that we are working under as partners in our local community. The object is to try and reduce delayed discharge because that is, in effect, a patient who is in the wrong place and not necessarily getting the right care. That is important.

Julia Drown

On the wider health issues, we have had evidence from others saying that they feel the new model will enable people to feel like they own their hospital more and that it could lead to people having more responsibility for their own health because they feel they might get more involved in terms of taking responsibility for their diet and exercise or self-diagnosis, for example. Do you feel that local people do not feel like they have any ownership of your trusts at the moment and that this might be a way of getting patients that come to you to take more responsibility for their diet or exercise and issues like self-diagnosis? Do you think that is a possible advantage of foundation trust status?

(Mr Pattisson) The hospital I am responsible for has a very strong bond with its local community. Many of the people who work there also live locally. Most of the residents who live locally look to Hinchingbrooke Hospital for their treatment, whether it is to have a baby or through the A&E department. One of the advantages of having a board of governors in a foundation trust would be to strengthen that link and make it more structured, to put people who have an interest in the hospital on the board as part of the overseeing and decision making processes at a high level. For the staff it would for the first time put the staff very much in a position where they had some direct influence and a role. Extending that to whether people will improve their diet may be a bit of a long hop but the more the community and its staff come together to take an interest in health matters and their local hospital the better. There would undoubtedly be some spin-offs. Whether it will be in how many pieces of fruit people eat a day, I do not know.

Mr Amess

My questions are directed towards morale and the star rating system. I have strong views about the star rating system but unfortunately I am not sitting where you are this afternoon. Last week's witnesses felt very much that the idea of foundation trust status would be a real incentive for improvement. One of the witnesses also described how morale at his trust had dramatically improved when they were given three stars so, as you can imagine, Mr Pattisson, I would like you to share with the Committee what morale is like in terms of your particular hospital.

(Mr Pattisson) As the Committee I am sure will be aware Hinchingbrooke Hospital was given zero stars last year in the NHS performance ratings on the back of a critical CHAI report. That was the first time that the Commission for Health Improvement's reviews had been weighed in the star ratings process. The Commission for Health Improvement were asked to bring forward the trust's clinical governance review by the trust's board because the board had concerns about issues around quality and governance. I do not think it was altogether a surprise to the board that the trust ended up with a zero star rating, although we were not clear how the CHAI report would be weighed in the star ratings. That is the background. Plainly when the trust was awarded zero stars, that was not something that was warmly welcomed by the staff. Many people took it as a description of the hospital that they did not feel fitted with their day to day working experience. Having talked to the staff -- we have done a great deal of work developing an action plan and addressing all the issues which are all around improving patient care, which is absolutely a fundamental part of our strategy and what we are there to do -- people now acknowledge and recognise that the criticisms that were levelled were justified and needed to be dealt with. Whilst we had a bit of a dip last July, the morale in the hospital now is much better. Plainly it will be much improved if next July we improve our star ratings which we are fundamentally committed to. In terms of a general comment on the star ratings, my personal belief is it is a good system. For sure there are refinements that could be made and the system is being reviewed as we speak but it says very clearly to the staff and people who live locally and others in the NHS community how our hospital rates against other local hospitals. It sets out a challenge for us to improve our star ratings and to be up alongside others who have better star ratings.

I do not want to put you in a difficult position. I want you to pretend that there is no one else in the room. When you were given zero star rating -- and we all know how staff talk, particularly consultants -- did any of the consultants share with you their surprise that they worked at other hospitals and they had a view about the other hospital and they said, "For goodness' sake; our hospital is better than theirs and yet they have a higher star rating because their chief executive knows how to contrive things to meet the criteria"? Pretending that there is no one else in the room, was there any of that?

(Mr Pattisson) I do not recall a conversation along those lines, even in the sanctity of this room. Some consultants did have views about it and over half our consultants work in other hospitals, so we are very well connected with other hospitals. When the ins and outs of the star ratings were made clear, how the judgments were made, the scores which we achieved on all the various headings -- and there are five in total -- it became clear to people that we had not achieved where we should have achieved on the CHAI report. We had done extremely well on our waiting time targets and on our patient focus indicators, on our clinical indicators, on our capacity and capability indicators. There is a lot to be very proud of. It was the CHAI report that was the key issue. I have spent a lot of my time explaining that to people and getting people to buy into the issues that we needed to address. I think people were anxious about it. Nobody wants to be labelled as zero stars, do they? The challenge for us is to get out of zero stars and improve our performance.

Your hospital is clearly one where they do not gossip a lot with your good self. Mr Stamp, our analysis shows us that nearly two-thirds of three star trusts had a lower star rating in the previous year and the majority of trusts had a different rating in 2001 and 2000. What are your views on the appropriateness of using this system as a means of achieving foundation status?

(Mr Stamp) The star rating system is generally well received in the health service. There was a recognition that some form of measurement, given the amount of performance measurement that was starting to take place and has continued since, would be useful as a bench mark within the service. In terms of the star rating system being used as an entry into the first wave of foundation trusts, I think it is perfectly reasonable given that it has been said that the best performing should be allowed to see what additional freedoms can be built on to provide even further excellence. That is well supported.

I can understand you saying that because for two years you had three star rating but how general do you think your view is? You must talk to other colleagues at other hospitals.

(Mr Stamp) Occasionally. If you take Hinchingbrooke and Peterborough and ourselves and West Suffolk as well, when we first received the documentation in November about foundation trusts, we got everybody together including community health councils, the trade unions, the local authorities, county councils and so on and talked through our potential interest in making a preliminary application. We did that, I hope, with some support from the room and after the meeting as well. We do complement each other. We have established clinical networks with neurology and radiology. We are looking at pathology. We work closely on accident and emergency and so forth. We do not see that the relationship with a no star, a one star or a two star is any less important than dealing with other three stars, but I think it is a reasonable policy issue to say that the three stars should be allowed to go forward in the first wave. As we have heard more recently, this is the way in which the NHS is going to go in total so that it is a first step.

I can understand everything you are saying but say suddenly next year you got a zero star rating. I just wonder if you would be making the same points. I can see why you are an advocate and an enthusiast, but I wondered if, in the reverse situation, you would be quite so keen.

(Mr Stamp) I think I would. As an NHS family, we know what we have to deal with. We know that the future is about working together, whatever label we might have. It is about clinical networks that I have already started to describe. We have similar arrangements with Peterborough as well. We know that is the pattern for the future so whether I have none, one or three tomorrow I would be sitting here saying the same thing.

Dr Naysmith

You are a major teaching hospital?

(Mr Stamp) Yes.

I think you said something like 6,000 staff versus Mr Pattisson's 2,000. Is it fair to judge an institution by the original star measurement that is doing such a different job with so many different stakeholders and many other things?

(Mr Stamp) In terms of the measures that are laid down in terms of the key nine followed up by the other 26 or whatever it is, they are fairly consistent measures. We will always have the argument about case mix complexity and so on but the measures that are there, in terms of those key nine, are reasonable as proxies across different sorts of trusts. What is not to be lost within that is that we work very keenly together and, at the end of the day, we may well be a major teaching hospital with a fantastic research record and reputation but we are also a very important district general hospital for the people of Cambridge and we never forget that either.

That is a very important point. I come across people at Bristol Medical School who say that they do not recognise their hospital as being a zero star hospital because of all the terrific things that go on in the medical school, associated with high technology medicine.

(Mr Stamp) We have good engagement with our staff and good communication for which we have been recognised, both in terms of awards and as a general feeling within our staff and trade unions. That is why we can confidently have such open, proactive discussions with them and others in our community about preliminary applications for foundation trusts. I think there is a sense that Addenbrookes is a very close community, despite being a very big teaching hospital, and it does have a very good engagement with its staff and with the people it serves. They do see the relevance of a four hour trolley wait and having a brain research centre on the scale that we have. That connection, which is nothing to do with three stars, has been going for decades and I think it is very important.

I realise you are a three star trust. Part of my question should have been directed towards Mr Pattisson. Being a zero star trust is a very difficult position to be in, especially if you have had more stars than that not very long before. How do you deal with that with your staff?

(Mr Pattisson) It requires a great deal of communication and we put a great deal of effort into explaining how the system works.

How do you communicate that to 2,000 people?

(Mr Pattisson) With a variety of messages. We did a huge amount of face to face briefing. We used normal instruments of communication, e-mail and news letters, open session taking in night staff as well as day staff, and we have run a series of workshops. We have had good support from the Modernisation Agency to help us deliver the plans that we have developed to get back on track. The key point in all of this is some objective assessment of performance, whether it is on the quality of the care or the quantity of the care you provide. There are some basic minimum standards and within the NHS locally and within the NHS nationally I think there is a great desire to improve standards and to do better for patients. There are huge commitments to make sure that patients with cancer get seen within two weeks, that no one waits more than four hours on a trolley and that patients get into an outpatient clinic as soon as they can.

It has been said that having CHAI involved would improve matters. People who criticise the star ratings system have said, "If only we had a better measure, we would do better in the system." With you, it worked the other way round. Is that because you think the star ratings are concentrating on the wrong things and you have taken your eye off the ball? CHAI was concentrating on the star ratings and the other things were carrying on without too much interest being taken in them.

(Mr Pattisson) The star rating system includes CHAI wherever a report has been conducted so that is weighed in the balance in everybody's CHAI report.

It has not been up to now.

(Mr Pattisson) No; it has been up to now.

The first time it happened you went down.

(Mr Pattisson) That is correct. The reason why the board invited CHAI to bring forward the government review within a programme of four to five years is because the board had concerns about some aspects of the quality of care and the quality of service that were being provided. The board was justified in its view. The report that came through was critical. We have addressed those issues. We are confident that we will improve our star rating and improve the confidence in the locality in our hospital and our position within the NHS in general.

Has it had any impact that you can measure on staff turnover? Have you lost any staff because of what has been happening?

(Mr Pattisson) No. Our staff turnover is very consistent with what it was a year ago. In many ways, it has had a galvanising effect on staff. The view has been, "We will jolly well show people what we can do" and that has been very healthy and very positive.

Dr Taylor

Mr Stamp, I am delighted you got three stars and the good CHAI report but how is that consistent with scoring only one out of five on both emergency readmission to hospital for adults and children when that is regarded as a pretty good measure of quality of care? Could it not be argued that you were getting people out too quickly to meet the key targets?

(Mr Stamp) We do not have any form of formal or informal policy to discharge people to meet targets. What it probably is a reflection of, on the adult side, is the particularly bad times that we have during emergency medical periods like the winter. We are a capacity constrained system and therefore the pressures are quite acute not just for Addenbrookes but also for Peterborough, Hinchingbrooke and West Suffolk. We have done a great deal with our colleagues in primary care and social services over recent times to improve that and it is a goal to make sure that we improve on those figures. The former East Anglia is probably one of the lowest investments in secondary care in England so when we talk about capacity constraints we have to take the case historically as well as currently.

You are running at a very high bed occupancy?

(Mr Stamp) Yes, we are.

Over 90 per cent?

(Mr Stamp) Well over.

Dr Naysmith

Do you think that forming a foundation hospital in an area, Mr Pattisson and Mr Stamp, will take pressure off hospitals which are performing less well? Will that be helpful to the other hospitals in the area who presumably will be losing some of that work?

(Mr Pattisson) It is hard to give you an accurate answer because it is speculative. The capacity constraints within Cambridgeshire are at every stage where you look. Addenbrookes have capacity constraints; Peterborough have capacity constraints and Hinchingbrooke have capacity constraints. That is why we are planning to open a diagnostic and treatment centre in January 2005 which will significantly increase our capacity to ensure that we can treat more patients locally and reduce the waiting times. There will not be a shift of work towards the foundation trust as I see it. The thing that will start to encourage people to think about where they go for treatment is if patients are able to have more choice in the hospital that they choose. I know there is an announcement being made later on today about the choice initiative. The headlines, as I understand them, are that patients should have a choice of up to four hospitals. The patients living in Huntingdon, for example, would come to Huntingdon but they could go to Peterborough, Addenbrookes, Bedford or Kettering. There are good links and people can choose where they go for treatment. I do not see foundation trusts as providing an opportunity for patients lock, stock and barrel to move their allegiance from their local hospital to a foundation hospital. I think most people want to be treated close to home or as quickly as possible and close to home.

Mr Stamp, do you accept that people will be trying to come to your hospital rather than Mr Pattisson's?

(Mr Stamp) No. Most of us support what we know about the patient choice initiative. I understand that it has shown quite good success in London and that sort of diversity social inclusion is also welcome. We are not planning as part of our consideration of our application to attract more patients. We are very much linked to our colleagues, particularly at Hinchingbrooke and West Suffolk and indeed to Papworth Hospital, who are not here today and less so but nonetheless just as important on the cancer network with Peterborough. We see that that is the most robust plan for our locality rather than having any form of competition between us. That is not our approach. Our approach is one of networking and complementarity that we have been working on for a few years and will continue with.

Yet, if you get more access to capital and so on you will be using that to increase capacity. That is normally what happens.

(Mr Stamp) Yes, that is perfectly true but we have some capacity to address. We do not want to be operating at the bed occupancy levels we are now with the constituency that is coming to our front door. We have some investment to do there. We have investment in diagnostics both in terms of the hospital but hopefully outside as well in partnership with our primary care colleagues, specialist GPs and the other trusts. Yes, one of the freedoms we understand may well be freedom of capital and if it is I am quite sure it will be well spent addressing some of the problems we have now.

Ms Bell, what will you be seeking to do with your commissioning process?

(Ms Bell) In the main, I agree with what has been said. Local people in Huntingdonshire want to go to Hinchingbrooke. It is only really for specialist stuff which does not happen in Hinchingbrooke anyway that they would want to go to Addenbrookes. With the new diagnostic and treatment centres at Hinchingbrooke that we will be establishing, we are planning to do some state of the art working there, where maybe you will get your knee replaced and only be in hospital for 24 hours. If people can be seen quickly, which is the main criterion, and get that planned, elective work done in an area where they are doing a lot of that work and there is a lot of expertise, I am sure our local GPs, of which we have 85, will want to refer patients to Hinchingbrooke. I guess you are always going to get some people who will for different reasons exercise choice to go to either Addenbrookes, Peterborough or whatever but in a sense that happens anyway. A particular GP knows a particular consultant who he or she rates or they have been doing it for years and they continue to do it. What we find is that where procedures are available and fast that is when you see a shift in referral patterns.

John Austin

At the moment, whether you are zero, one, two or three star is a headline in the local paper for a brief moment. Once foundation hospitals come into being, let us assume -- hopefully it does not happen -- that you remain zero star. Do you not think that there will be a demand for patients to say, "No, I want to go to the foundation hospital"? Is that a sensible way to plan services?

(Mr Pattisson) The aspiration of every zero star hospital is to improve its star rating as quickly as possible. For my own patch, I am absolutely confident that we will do that. That is helpful to us in terms of the confidence that people have in us locally and within the NHS family. If a hospital were to be branded as a hospital that seemingly was not able to improve its performance and there were consistent, longstanding concerns about its service, if that were allowed to continue, I suppose people might want to think about where they went for treatment. In the well regulated service that we live in, that simply would not be tolerated. There are very tough inspection regimes; there is very vigorous performance management, very helpful support from the Modernisation Agency in improving standards and performance and it is clear that if the management team is not delivering what is required the management will be changed. In terms of a hospital consistently failing to improve its star ratings, I personally find it hard to see how that could happen, given the regime and the environment we live in now.

The experience in education would seem to suggest that once a school is labelled as a failing school it is very difficult to turn it around either in terms of the community perception or in terms of attracting staff.

(Mr Pattisson) I would not adopt that term at all for the hospital I am responsible for. Yes, we are a zero star hospital; no, we are not a failing hospital. We are a perfectly safe hospital and we are a very good hospital where 2,000 people give of their best every day of the week, every week of the year. There are areas where our performance is not up to the standards that are recognised and judged to be appropriate and that needs to be addressed. We have seen no fall in demand for our service. The numbers of patients coming through our A&E department or referred to outpatients are very consistent with what they have been before. Our staff turnover has not reduced or increased and we still manage to attract some of the scarcest people to come to our hospital. This year we have recruited a histopathologist. We have just recruited a general surgeon. We are advertising for an orthopaedic surgeon and we have every confidence that we will get them. I do not think the sort of dilemma that perhaps has affected some schools is appropriate or applicable to the trust I work in.

Can I put the converse argument of patients choosing hospitals to hospitals choosing patients? That is something which we have seen in education and other areas as well. We saw it in the two tier market in the health service. Is there not a possibility that those foundation hospitals might begin to select patients or the procedures that they carry out in such a way that they continue to ensure that they maintain their three star status and make it more difficult for the Hinchingbrookes to achieve theirs?

(Mr Pattisson) We work in a very sophisticated way now in terms of the pathway of care that patients follow and the network arrangements that we have with the clinical services.

We have a National Health Service. You do not have a competitive environment between hospitals.

(Mr Pattisson) No. We have a very collaborative approach to providing care. In the part of the world where we all work we have a very well established cancer network. Patients who have a suspected cancer are referred to their GP and can be seen at Hinchingbrooke Hospital, their local hospital, if they require a particular type of surgery, which is managed by a team of clinicians across the two hospitals. The surgery may well be conducted at Addenbrookes Hospital. If they require chemotherapy they can be transferred back to Hinchingbrooke Hospital. If they require radiotherapy, they would be seen at Addenbrookes. There is a seamless pathway of care between the two organisations which is managed by a team of clinicians who work in both organisations. That is very much the pattern for the future.

Do you think it could be sustained by Mr Stamp desperately trying to maintain his foundation status and you desperately trying to achieve it?

(Mr Pattisson) I see no sign of Addenbrookes trying to pinch patients. What we try to do very carefully between us is organise the care to meet the clinical needs of patients and to work out which bits of the service are best provided in which hospital. We are doing that work, for example, on urology where we are establishing a team of urologists to work in both centres. The complicated and the cancer cases will be done at Addenbrookes and the short stay, high throughput, elective work backed up by the diagnostics will be backed up by the Hinchingbrooke Hospital. That is because we take the view between us at a trust board level, at a clinical level, at a managerial level, that we should organise the services to meet the patients' needs in the best way possible. This is a highly collaborative approach using quite sophisticated clinical networks to organise the care provision.

You have every confidence that, given the potential conflict between the foundation and non foundation, that will continue?

(Mr Pattisson) We have a very well rooted understanding between the two hospitals. It exists at every level. We have taken a lot of interest in Addenbrookes's interest in becoming foundation status. We have had joint board meetings, attended their stakeholder workshop to discuss it and we have invited Malcolm and his chairman to come and visit us and talk about that specifically. We do not feel threatened by it at all. We see it as an opportunity to drive up standards within the local health system and to help the two hospitals work together.

If this new status is going to drive up standards, do you not think it could apply to those who are zero and one star?

(Mr Pattisson) Indeed.

Why should you not become a foundation hospital?

(Mr Pattisson) We have a very clear aspiration to improve our star ratings.

The foundation status is supposed to improve standards.

(Mr Pattisson) I am sure it will. If we can get to foundation status, so be it, but we are a way away from that at the moment. The entry gate is at three stars. We have to get at least one star next July.

Why should it not drive up standards for you too?

(Mr Pattisson) Because of the way we work, because of the collaboration that exists between us, because of the information that we share. For example, we are at the moment recruiting midwives together. Our directorate teams in obstetrics and gynaecology sit down on a local basis and talk about the work that we do. We work together in terms of where high risk babies are born and cared for. We think all the time about how we organise care between the two hospitals, making the best of the skills and expertise that we have at both ends.

Julia Drown

How will being a foundation status improve standards?

(Mr Pattisson) I guess that is a question Malcolm is best placed to answer.

You said earlier you thought it would.

(Mr Pattisson) I think it will because it will connect the trusts very much more structurally with their local community. We do get feedback and we look very hard to helping patients in the way we organise and plan the care. For the first time this would put patients in a structural sense within the body of the organisation and I think that will be very strong in informing the decisions that are made by the foundation trusts in planning the strategic direction, in thinking about the way the services are organised to meet the needs of the local community.

It is the governing arrangements rather than the financial changes?

(Mr Pattisson) The governing arrangements are very powerful in putting patients in charge on a seat round the table in their local surgery.

Chairman

Presumably you would agree that, regardless of foundation status, doing that process of engaging with patients, bringing in a different form of governance and accountability assists you with your current no star status?

(Mr Pattisson) We are working very hard to involve patients in what we are doing in our hospital, for example, with our planning and diagnostic and treatment centre. We have several patients involved in working with us on the plans, thinking through the designs, how it is going to work. We are very well connected with our community health council. We link very strongly with the primary care trust and the 90-odd GPs working alongside the primary care trust.

To be specific, if this Committee was to argue that we believe the governance arrangements and the board of governors' proposals for foundation trusts ought to be extended to organisations such as your own, to your own trust, regardless of foundation status, you would welcome that?

(Mr Pattisson) I would very much welcome that.

Dr Taylor

One very good thing we heard last week from the north east and again from you is that it is networking rather than competition. The other good thing was this: we have seen that primary care trust chief executives and acute trust chief executives sitting side by side are obviously used to talking. Are you confident that you will be able to influence what the trusts do? Karen, what measures do you need to see in place to strengthen your input in controlling what they do?

(Ms Bell) I am confident partly because we communicate more now than we have ever done and our professional executive committee have more confidence in GPs' ability to influence acute trusts, but particularly because of the clinical networks and in some cases one clinical department crosses the two hospitals in the future, it would be very important to make sure that our PCT is represented on the board of governors. That is just one means of having influence. We also have very close partnerships with the county council through the strategic partnerships. The fact that local authorities will be represented will be another way in which we can exert influence because, for example, with our own local council, we have a shared director of public health post.

Mr Stamp, PCTs will not ensure that you keep up your five star research work. Who will ensure that you as a foundation trust will keep going with that?

(Mr Stamp) We have a lot of interesting constituents to make sure that we keep up with that. The guidance quite clearly marks out that there will be a requirement that, where there is recognised research, NHS teaching commitment etc., that will be protected within the contractual arrangements that we make with PCTs, with workforce development confederations and I guess with the further empowerment of strategic health authorities we will see an increased role there. We were concerned prior to the publication of the guidance but once the guidance came out we were less concerned.

Andy Burnham

Can I take you on to the issue of competition for staff and pay structures for staff. I am conscious we have not heard from Mr Banks, perhaps I will start by addressing this question to you, if that is okay? We have heard concerns from certain quarters that may be divisive in terms of conditions for staff and, let us say, that foundation trusts may more aggressively poach better staff and offer them better terms and conditions. Do you see that as being a danger?

(Mr Banks) In the discussions we have had so far our early conclusion was that we did not want to start destabilising the market. It comes back to this ethos of collaboration, I can take you back a bit further, if you look at Hinchingbrooke, that is sandwiched between us and Addenbrookes with a population of about 150,000, it is not in either of our interests to destabilise that function.

Is there a lot of competition at the moment between the three trusts, possibly competition is the wrong word, presumably there is a limited pool of staff you can draw from?

(Mr Banks) You have to look at the geography, we are 20 odd miles north of the Hinchingbrooke and about 20 miles north of Cambridge, although people can travel there is a limit to it so most of the people that work in our hospital live in and round the Peterborough area.

Would you be concerned about the scenario if Addenbrookes were to get foundation status, where they were able to offer improved terms and conditions on top of the basic changes that are coming in? Would you be concerned about a scenario like that where it possibly would give incentives, the playing field would not be even any more?

(Mr Banks) To some extent there is a degree of flexibility in the system anyway. I think if you look nationally we know in the south east the pay is different from else where. There are, in our view, a number of different ways of attracting staff to Peterborough. Peterborough has a lower cost of living than Cambridge, there is a different environment, there is a different group of people coming to us. Also, and I hope we are conveying it today, there is a kind of maturity round the system we are working in, in that we are speaking to each other, and I think it is unlikely we will be trying to diverge.

That does come out. Mr Pattison, it might be more of a concern to you where staff may feel they get more if they work in a different trust, it is not an exciting place to work when it has this label on it. Is that a concern of yours when you look at your neighbours that might go down the foundation route?

(Mr Banks) Every hospital has something to offer, some people like working in large teaching environments, others like working in a small district hospitals, it is horses for courses really. Inevitably there is some competition for staff, to use your word. We employ one million people across the country in the NHS, so one in 50 people work in the NHS, and people do have choices.

Is it a common part of the health ecology that people start in your trust, develop skills and then move on, is there that kind of hierarchy?

(Mr Banks) It depends on people's training. People train in different hospitals and then decide when they want a promotion to go to a different hospital for different experience. I think there is a maturity within the system. We do think very carefully before varying our wage rates, we have some flexibilities at the moment, to make sure that we are not going to cause difficulties in other places. It serves all of us to behave in that way, otherwise you get leap-frogging.

Do you genuinely think your colleagues are not going to put you in that difficulty? Do you hope you can work out a situation where they are collaborative?

(Mr Banks) I have real confidence in that. Our human resource departments talk to each other, they look at jobs that are advertised, for example we have had an issue around what we pay our medical secretaries, who are a very scarce and very important group of people, and we checked very carefully with Peterborough, Papworth and Addenbrookes to make sure what the rates of pay were and we would not be causing any difficulties in the community.

Andy Burnham: Can I ask one final point, what people associated with, and I do not necessarily think they are that comparable, with trust status was an explosion of executive pay within the Health Service. I would just like to ask you about that given we have 4 chief executives in front of us.

Chairman: This is a bonus question.

Andy Burnham

I gather there are some figures out today that show that chief executives pay is rising between 9 per cent and 15 per cent in the Health Service, do you think with more freedoms to attract the best managers to the best trusts that there may be a more competitive market at the top end of the management trust? If so, might that then undermine public confidence in the foundation trusts concept? Clearly there is pretty strong wage inflation amongst senior management, might this accelerate it?

(Mr Stamp) What I would say is that I do not see that moving to foundation trust status or moving from one star to three star or no star is any reason for a boom in executive pay at all.

Why do you think it is increasing so quickly?

(Mr Stamp) I have not seen the figures. I am staggered by what you said, 9 per cent to 15 per cent. I would like to see the source of them. It does not feel like that where I come from.

I think they are right.

(Mr Stamp) I have not seen the figures, I am sorry, I honestly have not. I do not know the source of them.

Julia Drown

Just going back to Andy's original point, the evidence we had from Hinchingbrooke said that you believe in terms of work force issues there would quickly become an imbalance as some NHS organisations have greater agreements than others. You have been talking to the Committee about those feelings, that you will be able to co-operate and that it will all be all right, do you stand by that evidence? You are implying that one lot of the NHS organisations should not have greater freedoms than others and I wonder if Mr Banks or Mr Stamp might agree with that?

(Mr Pattison) The point I made in the evidence was there would become an imbalance if one NHS trust started to upset the labour market and paid significant rates above.

Do you think that some NHS organisations should have greater freedoms than others or not?

(Mr Pattison) Freedoms come with responsibilities. My impression is that the responsibilities that are taken locally are very well understood and well communicated and there would not be an issue of locality where I come from. I could not comment on other localities.

(Ms Bell) I was just going to say that the agenda for change is not just about pay, it is about transformation.

This is beyond agenda for change.

(Ms Bell) I understand that. The foundation trusts are going to have the option of being early implementors around the agenda for change.

I would like to restrict my questions to the freedom beyond agenda for change.

(Ms Bell) I am not sure what you are talking about then, sorry.

It has been suggested that the Government would give additional freedoms beyond those in the agenda for change to trusts.

(Mr Banks) There is an economic argument here as well, we are going to get paid the national price rate per operation and that is going to cap the amount we can earn. There is a limit to the amount of income we can get in.

It depends if you are under or below that tariff to start with.

(Mr Banks) Sure, but that is happening irrespective of whether there is a limit or not. There is a limit to what one can do anyway. I think, hopefully, we will demonstrate that we are not engaged on that sort of pathway.

Mr Burns

Do you think that foundation hospitals would have the power with senior managers if they screw up badly to actually sack them? Given what you do for a living you will be acutely aware that anybody who fouls up at your level in the NHS gets shunted to another position in another trust area on the same salary and pension rights. Whatever you do there is no way of getting rid of you and severing your connection in the Health Service. Do you think you would see more of that?

(Mr Stamp) I think the Board of Governors can do it and also the proposed regulator, from what the guidance says, can also do it. I think it would appear there is no problem in getting rid of managers.

Do you think the culture will do it? In most other areas in the country if you muck up spectacularly or you do not perform properly you pay the ultimate price. The Health Service seems immune to that sort of procedure.

(Mr Stamp) I do not think the Health Service is immune from that procedure.

Have you come across anybody who has been sacked and left the Health Service?

(Mr Stamp) I have come across people that have been sacked. I do not think it is true to suggest that being moved side ways does not happen in other large organisations, because it does, Shell BP, ICI, we can go on and on with the names. It is not true to suggest that you get sacked if you foul up somewhere else, that is not the case.

Is it a reasonable thing in modern day NHS for people to be sacked and leave the NHS?

(Mr Stamp) Yes.

Mr Burns: Really!

John Austin

We do not know yet whether the argument between Alan Milburn and Gordon Brown will settle but one of the attractions of becoming a foundation trust is the financial freedom that will be available to it. We had a very good example in evidence last week from a two star trust of a very innovative scheme that they brought in and it was highly successful,despite all of the odds, and it was at two star trust. It is not really a question for Mr Pattison, it is a question for the others, if there is an ability of one star, two star or no star trust to be in a position is there any reason to deny Mr Patterson the right to become a foundation hospital and have these freedoms too?

(Ms Bell) I was just saying earlier that I think that if I was going to develop a new model of management in the NHS and introduce it gradually and pilot it to see if it would work I suspect that I would start with the higher performance organisations because the risk would be less and the potential earning more. I would be in favour of let us suck it and see and no doubt, as with NHS trusts, it will be rolled out, I think that is the policy intention, across the rest of the providers in the NHS. I think that is a good place to start.

(Mr Stamp) I would agree with Karen. As I said earlier the level of entry for the first wave, because it seems this is now the direction nationally, that all trusts will ultimately become a foundation trust, should start with ones being recognised as the high performing trusts and whatever follows after that follows. I think that is a reasonable opportunity. I think Douglas would be the first to admit that he has had to undertake a great deal of work and I think we are all confident that we will see Hinchingbrooke climb the star ladder anyway.

Dr Naysmith

We were talking a few moments ago about being able to pay some staff a little bit more than others, we are not very clear but you do not think that will happen very much in the NHS anyway? Also, in the proposals there are restrictions on the amount of private patient income you are going to have, restrictions on borrowing and restrictions on disposable assets, how much scope do you actually think there will be with all of these restrictions? How much scope will there be for entrepreneurialism? Do you think there will be room for the kind of competition some people are suggesting ought to be there?

(Mr Stamp) I can understand the reasons why there is the restriction on the assets, I think that lock-in is an important message if we are serious about getting local ownership through the board of governors. We accept what was said about private patients in the guidance but I am less clear why that has been particularly picked on in the sense that the operating licence could quite strictly control through the Regulator the private patient income was not to the detriment of NHS care within the licence but for the NHS to give up the prospect of private patient incomes to the level available in the open market I am not too sure is wise. In terms of the other innovations that are available I think that one of the answers about lock-in of the local community to the board of governors it is so that we can in simple terms spread our interests and knowledge and learning to wider corners of the communities we serve. We are very good with our vertical hierarchies and our non-executive directors who do bring different skills and knowledge and we do have links with patient forums through community health care, and so on, but here we have buy-in from the local community. We employ 6,000 people, we are a major economic force.

Are you suggesting that you would like more freedoms than are contained?

(Mr Stamp) There are a lot of opportunities where we can support local community initiatives round training.

You would like the freedom to do that?

(Mr Stamp) Yes, we would.

Last week we had a very interesting series of answers from the chairmen of two or three trusts, a couple of them said they would go for it if there was no increase in income. One of them, a London teaching hospital, said very honestly, give us the money that is all that we are interested in. Would you be on that side?

(Mr Stamp) No. If there was the non-regulated side, as it is described, we would be still be interested in it. What I am saying is, answering the earlier points, the expansion of income and the controls round that I can understand. The lock-in round assets, I am less clear about and probably philosophical about private patients because that is money that we can direct into the National Health Service, that must be good money given and we do it everyday anyway providing it is not at the detriment of NHS care, and the Regulator should be able to take care of that. The other side of the equation where you can generate income I think is by taking this wider, social integrated role that the new board of governors offers up without buy-in from the local communities, and that is something that we have to learn in terms of our external management for the future.

Julia Drown

Limiting your private patient income at this year's level basically will restrict what you might be able to do for NHS patients in the future?

(Mr Stamp) I said the opportunity is there, we do not do it a great deal to be honest. We had no plans to expand it before this rule so please take it from the spirit that it is being said, it is not about we want to do lots and lots of private patients, that is not where we are coming from. What I am saying is this is our stock in trade, this is what we do every day and to put a cap on that as an income opportunity for the NHS, providing the Regulator was strictly controlling it was not to the detriment of the NHS care, feels a bit like philosophical overdrive.

Can I move on to general freedoms, we know that foundation trusts are still going to be subject to national data collection systems and CHAI inspections as well as your own two year licensing reviews, from your point of view how much do you think the bureaucratic burden really is going to be eased on foundation trusts, what is your understanding of what these extra freedoms are? We know about the financial freedoms, we discussed those, Karen Bell you wrote in your evidence about the freedoms that could help foundation trusts, what do you think these extra freedoms are? Do you think they are a bureaucratic burden and will be eased?

(Mr Stamp) We believe it because it is promised in the guide.

There is nothing specific, you do not need to have patient forums.

(Mr Stamp) The bureaucratic burden that we talk about is the level of separate regulations that we have. I think that the independent regulator and CHAI are two very powerful external regulators to any NHS establishment.

Who do you think is not going to be regulating it?

(Mr Stamp) I am not sure. I hope there would be a different performance management approach. Hopefully we could have less national targets but keep ones that are applicable to the whole of the NHS. I would like to see more locally driven targets to engage what I was talking about before, if we are going to get buy-in at a board of governors level it would be good to have relevant targets emanating from that engagement rather than just follow the national targets.

Do you think it would be right if you might have less national targets, even though I have not heard anything, if you had your way on that, had less national targets, would it be right that you had less national targets that your next door trust?

(Mr Stamp) No. I think there has to be a standard core. I think there is general acceptance that there is probably too many now anyway. I notice there is an article by the new chairman of CHAI on the Secretary of State's dimension, the problem with too many targets. What I am getting at is there should be a hard core of national targets that are applicable to every NHS establishment, everyone accepts that and that links to the discussion, as we already said, about star rating. Other than that there are certain things that feed the measures of those, beyond that it would be nice to have some expectation that there are locally driven targets as well to embellish that local input.

Andy Burnham

I just want to talk about the membership, the government structures and the idea of a cooperative society, a mutual society where people can opt to become a member and therefore have a stake and control in the organisation. Bradford Hospital's NHS Trust told us last week that out of a local population of 400,000 and 4,000 staff they would expect roughly 10,000 people to opt in to become members of the Bradford Hospital's Society or whatever the organisation is that may emerge from the foundation application. Could I just ask, I know you all represent very different kinds of trusts and serve different communities, would you be prepared to put a figure on how many people you might think would opt in to join your trust? If you were able to do that do you have concerns that that might be predominantly one section of the community rather than a broad sweep of local opinion?

(Mr Stamp) I can say that we have not done any calculations or guesses on that at all I cannot answer that question.

(Mr Banks) We have no sense of what the sign up would be. The issue of whether you are getting it across the community is an interesting one, that is something that if we take it out we have to make sure we are covering that area.

Yes. Generally on the point about a self-selecting constituency, do you have concerns about that? I am thinking about Cambridge, you might get a very transient population with students and you might have a strange, odd constituency and also being a teaching hospital you would have a wide range of groups, would you have concerns about managing those interests?

(Mr Stamp) No, I think we would do it in the spirit of the guidance we receive and we would try and make sure that we use your proper postal reference so that, picking up your point about what has already been mentioned, we can make sure there is some spread. We have to be mindful of that, you are quite right.

Do you believe, like I do, there has been a democratic deficit in the NHS, that it has not been good at listening to and responding to local opinion.

(Ms Bell) I do believe that, not only do I believe that but I know that colleagues in the rest of the public sector, local authorities, often quote that and now that we are working as strategic partnerships it is mentioned more frequently. I think that over time to have an increase in local representation can only be helpful. Certainly what we are getting much better at because of these partnerships is listening to local representatives who are elected and they are having greater influence through scrutiny on what we are doing.

I have heard some scepticism in certain quarters, people saying it is a token gesture, do you think - for a second let us suggest that it is not a very real exercise in democracy - some of your colleagues, not only in your organisation but across the NHS generally, are ready to open up the doors and let the great and the washed in and let them have a view on how health care should be delivered. They may come up with different priorities than the people who run the Health Service generally.

(Ms Bell) I think it is difficult to engage with the public, as I said earlier. We are all being encouraged to include local people, users and carers in influencing the commissioning of services and services development generally, people are expected to do that and they are expected to do that in a way that feels inclusive so you are not just getting middle-class people in Cambridge but you are including ethnic minorities. We are working very hard at that and will continue to do so. Frankly that has significant influence over people's experience of services perhaps in a way that is more real than representation on trust boards. It would be good to see it there.

Do you think there really needs to be a culture shift in the NHS to deal these new accountabilities?

(Ms Bell) I am saying that it is already happening.

It might be at your level.

(Ms Bell) I cannot speak for colleagues.

Dr Naysmith

Can I ask the question that was asked last week, Douglas Pattison has already answered it, if all that was on offer was to have an elected board of governors would you still be interested in foundation status?

(Mr Stamp) I am very keen about the concept of once the board of governors presents and represents and therefore I think that we would be interested in having an application and if that is all that it was we would be interested in that. Like I say, I think it is about partnership and shared work. I think, as my colleague said, even the greater washed.

I was using that ironically because that is the way that the Health Service has viewed the public some times.

(Mr Stamp) Hopefully we do not. It is about shared learning and I think the proposed board of governors opens that and spreads its horizontal rather than vertical accountability and brings in this new democracy in the Health Service that we find quite exciting and welcoming. I think that if it is this sort of change we do want the other things because we have got to three star status and we have retained three star status and no doubt we will continue to strive to do that but we want the rest now. We want to go on. We want to have more innovation. We want that. We want that for the people that we serve and we want to share that good practice with the rest of the NHS and hopefully we can do that through the new local accountability as well.

(Mr Banks) I suspect that if you dismantle the various freedoms that we have talked about in one way or another you can probably achieve them, and your colleague was saying about the two star trust, we have a good capital scheme going about that. Perhaps the three star trusts more than some of the others have managed to demonstrate that already. I think the thing that we are principally interested in is about community ownership, at the moment that does resinate. You can talk about the cultural shift and where the NHS is better at being more accountable locally and more consultative locally, and we have had some very good experience of that over the last few years, and it becomes a kind of virtuous circle. I agree with Malcolm if it was the only thing on offer I suspect that we would still want to understand it and work out the ramifications of different regimes. I think presented as a package with some caps on freedoms, some caps, we entirely understand some, we would be interested to see how they go in the future. That is all about learning and acting responsibly, and that is what we are interested in.

Have your staff welcomed it?

(Mr Banks) We have not done a major consultation, we have done some quiet canvassing and I think it depends which group you are talking to, some people are fairly bullish about. Freedom whatever it means sounds good. Some are a little agnostic, that is because of where we are in the process, we have to understand more about it.

(Mr Stamp) Ours have been pragmatic they said, ""it sounds interesting, let us see some more"". I think it is just about adding this thing, let us not arbitrary cap it as a three star, give us the excitement, let us excel, if we can let us go there. We need that opportunity. The NHS is a fantastic organisation, I still believe it is the best in the world no matter whatever anybody else says. We have not seen the best of it yet, this is another step. Local democracy is an exciting opportunity, but we should have additional freedoms as well, let us go forward and see what we can do, it is only going to be for the benefit of our patient care and the communities we serve, and that is what he want.

Julia Drown

Sometimes people say keep party politics out of the NHS, would you be comfortable if when there were elections this became a sort of ding-dong between the major political parties at a local level and would you be equally comfortable if the electoral roll of your elections was not those people who filled in a form to say that they wanted to be members but was your local electoral roll only who had the chance to vote?

(Mr Stamp) We have not debated that. My personal view is that I would be comfortable with either. I have been a district general manager with political representatives, etc, etc but I am not so sure each major general elections are representative of all those general communities we serve in terms of health. This step is more democratic in the way of trying to get health engagement. Again there is horizontal involvement which we have found quite promising and, to be honest, quite exciting.

(Mr Banks) As an observation party politics does seem to work rather differently locally than it does nationally because there are different agendas. I think recognising that is a very key part of the local community and it has its place. I would have to take our chances on that. I think locally we do not get quite such a more extreme view or are so black and white about things as one tends to see nationally, I do not mean that as a criticism.

Chairman: There are no extreme views on this Committee. Can I thank our witnesses for a very useful session. We are most grateful to you, sorry we have taken longer than we anticipated and delayed your next appointment. We are grateful to you. Thank you very much.

DAME PAULINE GREEN, Chief Executive and General Secretary, Co-operative Union, PETER HUNT, Director, Mutuo, CLIFF MILLS, Senior Partner, Cobbetts Solicitors, MR MARK SESNAN, Managing Director, Greenwich Leisure Limited, MS FIONA CAMPBELL, Co-ordinator, Democratic Health Network and MR DONALD ROY, Association of Community Health Councils for England and Wales, examined.

Chairman

Can I welcome the second group of witnesses and say that we are rather late in starting this session. Can I thank you for being willing to come to the Committee and thank those who have submitted evidence, which has been very interesting and useful. Can I begin by asking each of you to briefly introduce yourselves to the Committee and say who you represent.

(Ms Campbell) I am Fiona Campbell, I represent the Democratic Health Network, which was set up by the Local Government Information Unit in 1990 to provide policy advice and information specifically to local government but also to health organisations about closer partnership work between health and local government and also to promote the democratic role of local government in health. I think it may be a particular interest to this Committee that we have been working with the Department of Health and with local authority on developing the new local authority role in scrutinising health and health services, that is relevant to what you are talking about today.

Mr Roy, a veteran of this Committee.

(Mr Roy) Indeed, Chairman. I was reading the minutes of a previous meeting and what you said to me at the end where I think you indicated that you were not entirely clear whether I would still be round in 2002. Though no doubt it would be presumptuous to speculate as to how much longer I am going to be round I am very glad to be here again now, it being 2003. I am Donald Roy, I am one of the two vice chairs of the Association of Community Health Councils for England and Wales. In light of some of the declarations of interest made about an hour ago I should mention I also happen to be a paid up member of the Cooperative Party, although I do not think it will necessarily affect any of the evidence that I give on behalf of the Association for Community Health Councils for England and Wales. The general background is that we are a national, unincorporated association and we are directed by CHCs, which I probably do not, in the light of the great knowledge and experience of your Committee, really need to say much more.

(Mr Sesnan) I am Mark Sesnan, I am the Chief Officer of Greenwich Leisure Limited, we are a trust that operates thirty-two public leisure centres in partnership with 5 London boroughs. We are a not-for-profit social enterprise and we were established in 1993. Prior to that we worked for Greenwich Council and were established under the Industrial, Public Society for the Benefit of Community Rules. We have stakeholders involved, which is lead by staff working alongside councillors, customers and trade union representatives.

(Dame Pauline Green) My name is Pauline Green:, I am the Chief Executive of the Apex Organisation for Co-operatives in the United Kingdom. A week ago the Co-operative Union changed its name to become Co-operatives UK, which reflects the fact that it is now much more inclusive of all sorts of co-operatives, we represent consumer co-ops, worker co-ops, housing co-ops, credit unions, employer businesses, and so forth. We provide a range of services to our members, constitutional, performance monitoring, both commercial and social and indeed good governance. We are also the body charged with seeking innovation in the co-operative sector, we are looking for new models of co-operation and have been engaged in what we call a whole range of second generation or new-wave co-operatives.

(Mr Hunt) My name is Peter Hunt and I the Director of a relatively new think tank called Mutuo, it has been established by the recognised mutual sector in the United Kingdom, co-operative societies, friendly societies, building societies and mutual insurers. Its purpose is to promote the value of mutual ownership and in particular to look at a range of new applications for mutuality relevant to this session today in terms of public services in particular. I should also I am the General Secretary of the Co-operative Party and this is probably the best attended party meeting I have been to in some time!

(Mr Mills) I am Cliff Mills, I am a partner of Cobbetts Solicitors in Manchester and Leeds. I think we have established some preeminence in providing legal services to co-operatives and mutual organisations. I have a background working with and for company, both plcs and private companies and I have spent most of the last 10 years working with mutual and co-operative organisations. I am not a member of the Co-operative Society but I advise a number of the leading societies on constitutional matters. As well as acting for societies, including Co-operatives United Kingdom, I work with the wider mutual sector, particularly through Mutuo, developing new alternative structures for community ownership and mutual ownership, particularly in public services, social housing, child care and we have also worked in the utility sector as a design constitution for supporter direct.

Thank you very much. Can I begin by asking you a question about the governance element of foundation trusts. I think there is a feeling among a number of parliamentary colleagues who have reservations about the wider impact of the freedoms being offered to foundation trusts. The governance element was introduced, in a sense, as an afterthought, and some would say as a sweetener, in respect of opponents of the wider principles. I was interested to see from this week's Co-op News, which I read avidly, an article by the previous Secretary of State for Health in which he says, "Supporters of the co-operative principle should be aware of being used as a human shield for a bad, unpopular idea". Dame Pauline, are you being used as a human shield?

(Dame Pauline Green) Certainly not. There is no greater treasure for the co-operative movement than to be party to and help to support community engagement in public services. Community engagement is where we come from, it is our genesis and we think that if this is the Government's proposal, and it is, and if they are going to go forward with this, and it appears they are, then we have 160 years of cumulated experience and in-depth knowledge, particularly on governance issues, and my organisation, as I have already says, looks after good governance across the co-operative movement, then we think we have something to add and to give and to offer to this debate. Governance and membership participation and the empowerment of people and engagement with people is a critical part of this proposal. Listening to your earlier witnesses I can tell you that we have some very good researched evidence from the co-operative movement in Italy and Japan that where you have that community engagement in the health care provision it actually leads to a better, healthy locality and to lower morbidity rates. We think there is very good evidence and experience within the co-op movement.

With the greatest respect to your aims and objectives I am sure many of you round this table feel that you are effectively being used in the context of the foundation trusts?

(Dame Pauline Green) I think clearly we need to see that if this is going to be a mutual foundation trust then it needs to encapsulate and incorporate all of the best elements of mutuality. Clearly that is an issue that we have a strong, vested interest in. If it does not work properly and work as we believe mutual should and indeed according to the principles for us of international co-operation it is very clear in terms of democracy and participation and open and voluntary membership if it does not work on that basis there would be concerns and we have a vested interest in making sure that it does because if there is a problem with it then we would feel that cold draught as part of a mutual sector. We can recognise the concerns that we believe that we have something to offer to make sure that those can be mitigated.

Do you not think there is something a little divisive between on the one hand the freedoms, which certainly for some of us smack very much of the internal market and competition, and on the other the mutuality co-operation ethos that is being put forward on the governance side? Divisive is the wrong word, contradictory.

(Dame Pauline Green) I do not think so. The essence of the proposal and where we would see our contribution is to engage with the community to make sure their priorities and their concerns are taken into account in establishing priorities for a particular institution. That is clearly an extension of their rights, their involvement and their engagement in it. For us that goes for staff, users, community groups, local authorities, across the range. I think that it is that balance of community interest that is critical to getting the priorities for the institution right. I can understand where you are coming from but we think that that is a non-sequitur, it does not follow that will be the issue.

Julia Drown

The proposals at the moment are both together and the worry is that allowing just some trusts to have a different call on capital gives them a first call on capital. In the co-operative movement you might feel, fine, if you were just responsible for the people and the health care round that trust but is there not an issue there that it is not a co-operative thought, policy or principle to allow one section of a population to have access to financial resources that another does not? Is that not where you could be being pulled in to support a proposal that is not a co-operative proposal?

(Dame Pauline Green) Well, once again if it is going to be extended, if it is going to be that sort, we would hope that it is going to spread across the piece, as it were, but obviously you have to start somewhere.

And you are happy starting with the three-star trusts?

(Dame Pauline Green) Well, I think we recognise, I certainly do, the comments made by the earlier witnesses that you do have to start somewhere and it is probably as wise to start with those that are performing well and which have the capacity, therefore, to perhaps develop the innovation that is needed and to deal with the in-depth participation. If you are going to bring community groups into active participation and engagement with the hospital and with the structure of the trust, what you have to do is spend a lot of time and a lot of energy in working with local people, in developing the community structures that empower all sections of the community, and that is a question which was raised earlier. That is a big effort and if you have a hospital that is still working on its care standards, and they always all have to, but if they obviously have been perceived to have some weaknesses, I think it is probably appropriate to start with the ones that are perceived to be working the best. I accept as you do that it is not ideal, but I gather it is the intention to move to all of them in time.

That is still not clear. Would you prefer for it to be looked at on a geographical basis?

(Dame Pauline Green) I think it is right that the best-performing hospitals actually act, if you like, as a pilot for the remainder.

So you think there is the potential that this might not work, that the mutual model will only work with those sort of similar, successful trusts?

(Dame Pauline Green) Not at all. I think what is happening actually is that if it is going to go with a group to start with, that is actually probably quite sensible because, as we know, things develop and good practice is always a matter of progression and evolution and I think we would want to see that happening. Once again I think it is best if those hospitals which are performing best are enabled and empowered to begin the process with the others still working on their healthcare facilities, working on that with the intention of moving along that line later.

The issue of more patient involvement, more community empowerment is a bit like freedom in that it sounds great and nobody would oppose it, but how would this link to the ownership issue and do you really believe that people do not feel like they own their local hospital and will this filling a form really mean they will somehow get to feel more involved than, for example, if the patient forms are developed across the country?

(Dame Pauline Green) Well, I think the fact is that people now feel they have paid for their hospitals, but I do not know that they feel that they own them. I think what is being suggested and where we come into this debate is that we have long experience of active engagement with people in sometimes very, very major organisations.

And do people need to own that? They need the piece of paper saying, "I have got my £1 liability" if it goes over? Do they need that in order to be engaged?

(Dame Pauline Green) Well, it is not just having a bit of paper that says you are the owner, but it is actually engaging. It is actually having the facilities -----

Can you not engage if you do not have ownership?

(Dame Pauline Green) Well, at the present moment I think it is very limited and we are not just talking about putting people on the board of governors. As far as I am concerned and as far as the co-operative movement would be concerned, it is actually about working up the active participation on the ground. That is quite different from anything else.

And you only work up that active participation on the ground if you own it?

(Dame Pauline Green) I think ownership is a very important issue and I think people do not feel a sense of ownership. I think they feel a sense that they are paying for the service, but they are not actually having a real say in how it is run and how it works.

Dr Naysmith

It is an interesting point there that people, even if they are not members of the group that is running the hospital, they still own it because they are still paying taxes and they are still citizens, so how does that work out? Why should one group of citizens get more benefit than another group just because they sign a form?

(Dame Pauline Green) Well, you know as a good co-operator the principles of co-operation, open and voluntary membership, and I do not think you force people to take part, but you encourage them and you actively try to work up the participation and that is certainly where our experience takes us. We have got through in over 160 years the ups and downs, so we know how to do it and how not to do it because obviously in 160 years you have cycles in your success and dynamism and clearly we have gone through that, so I think there are ways, very clear ways in which we have got experience and evidence of what works in activating local participation and what does not.

(Mr Mills) The comment was made that we already own it, which is true in the sense that as citizens and taxpayers it belongs to the state, but the ownership is somewhat remote if our only ability to have any influence is via a general election. If we have an ability to take part on a much more local basis, if we can attend meetings locally, receive information about our own organisation, express our views, nominate people and elect people, all these things can help to create a greater participation and involvement. Certainly working in other sectors which I have been involved with, the idea of the need to own a share and feel that it is an organisation in which you are included is important psychologically. The obvious example is in social housing where tenants who are in houses which are owned by a remote housing association do not feel that they own them or that they are their houses, but that they are somebody else's. By moving to an organisation in which they can be a member, a shareholder, it is closer and they can have a direct participation.

Jim Dowd

But where mutuals and co-operatives are most effective is clearly where they have got people engaged in active membership and there is a direct link between the benefits of the co-operative and mutuality and those involved in it. That will not be the case in foundation hospitals. A layer of people, I suspect wholly unrepresentative, will occupy the position you have outlined, but the vast majority of people will not and yet the vast majority of the rest of the population will still have an interest in the services provided by that hospital.

(Mr Mills) I think the answer to that comes down to how you design the structure and the constitution of the organisation. If you simply rely on a self-selecting system, then yes. The models we have designed do not do that. They positively impose an obligation on the board or the governors, in this case, actively to develop the membership to engage people, to identify the relevant geographic communities or particular groups of people that are important and may be excluded or left out and to develop ways of engaging them and establishing their aspirations and needs and then working out how to meet those aspirations and needs and positively writing into the constitution a requirement that at the annual meeting the board must report back to the membership at large what they have done in identifying those groups, in identifying their aspirations and seeing if they can meet them. I think that the modern models which are being developed are precisely aimed at meeting what would otherwise be a problem, I would agree.

Is that not the role of the PCT because they are there to provide a comprehensive range of services for the whole population in their area. The acute sector is still further. Why should it just apply to hospitals and not any other activity across the healthcare field other than the fact that simply you are reinforcing an institution?

(Mr Mills) I am of the general view that has been expressed by a number of people that this is an approach which could be adopted much more widely and that if you set out with the idea of doing it altogether, that would be great, but there are certain practical problems with that. Although I agree that in a way foundation hospitals are, if you like, more like secondary providers or federal organisations which are supplying services to primary care trusts, as we know from the earlier witnesses, a number of them or all of them are significantly involved with their local communities and if there is an accident and emergency unit or a labour ward, if there are services which are being used directly by the communities, then I would not go so far as to say that it is inappropriate for them to go into direct community ownership because there are a lot of people working there and there are a lot of people using that facility.

Chairman

I do not know who will want to answer this, but I am still mystified as to why we have got a hugely painful process here of abolishing Mr Roy and his colleagues, re-inventing local authority scrutiny, setting up a commission for patient/public involvement, patients forums, and now we start talking about co-operation and mutuality. Why were we not talking about this a little earlier when we were looking at this and other ideas? Where did it all arise from? Why has this suddenly come on to the scene at this late stage when it perhaps ought to have been floated earlier?

(Mr Roy) Perhaps I could answer, or I will try anyway. I can remember, wearing yet another hat, being in a meeting addressed by the current Secretary of State just across Parliament Square on 15 January 2002 where he suddenly mentioned foundation trusts almost as an after-thought and in fact as an idea which I think he had actually said had come from some of the large three-star trusts and at that stage he was only interested, he only committed himself to actually having a look at. Now, I think more generally what has happened is that there has been a debate quite properly about what form the patient and public involvement should take place. Some of us did think that around about May or June of last year a reasonably sensible compromise had been reached which could form the basis of a system which would deliver the kind of level of patient /public involvement which would be satisfactory, arguably better than under reformed CHCs, perhaps not quite as good as reformed CHCs out in Wales, but that is not a debate that is worth pursuing. We are now in a rather odd situation where not only has this come up, but also various statements which have been made in the last fortnight do in fact throw into question how much of the May/June settlement is actually now going to be implemented and how much it is up for grabs. That, I think, does create real difficulties in looking at the way forward. If I could talk about governance arrangements, I was scribbling fairly furiously. First of all, I do not know whether the boards of foundation trusts will meet in public. I have been told that they will not be covered by the 1960 access to public bodies legislation and that it would in fact require special amendments to any legislation setting them up to have that kind of right, so that level of public engagement we now have, and I go to a trust board meeting where quite a lot of members of the public actually do attend, that will go. Second, I think there is a real issue about how much power stakeholder groups will have in terms of working for continuous improvement, in terms of scrutiny and visiting as against patient forums.

Dr Naysmith

The question was where did this come from and I wonder if Dame Pauline Green or Peter Hunt would agree with me, and I would be surprised if they did not, that there has been a kind of re-incandescence of the new mutuality, that the whole mutual thing has just started in the last two or three years and it has been pushed on to the agenda. I wonder whether either of those two would agree with me that there has been a rebirth, if you like, of mutuals.

(Dame Pauline Green) I think we would probably want to agree that there is a renaissance in co-operative innovation across all business sectors and we welcome that and are of course engaged in it, but it is almost, Chairman, a question to throw back to you because why it did not come up before, we do not know, or government perhaps, because here is the proposal and we are responding to and wanting to engage in it. We think that co-ops actually offer an opportunity for us to prove its worth.

(Mr Hunt) The theory I would put forward is that there is basically a collision here between two things, which are the needs of the Health Service and the things that other witnesses have already described and there is this new way of looking at the ownership issue of our public services and it is not just in the Health Service. It is interesting, perhaps it is surprising, that it is the Health Service which has been the pioneer in this respect and the Secretary of State for Health has, I think it is fair to say, stuck his neck out a fairly long way in proposing these changes. However, behind the scenes, particularly looking at a whole range of local government services, there has been a great deal of discussion around this over the last few years and the whole state of mind of many people who have come to the debate is starting to change. I think we are having a fairly mature debate now about the relative value of different types of ownership and I would very much agree with Doug's comment.

Andy Burnham

As you know, I have been involved in some of the new mutuals, as was said before, and I take the point exactly that it engages participation, and certainly participation in a way which really is astonishing, particularly in the field I am involved with, young men, some of whom obviously take very little interest in anything and yet they go to public meetings, 600 or 700 of them, where these trusts are set up, so that is partly where I want to come to. Football clubs are obviously a motive, as are hospitals, and also the new mutuals in football tend to have been borne out of crisis where you have a galvanising effect where the community comes together and has to do something. Now, there was a similar situation in Greenwich with the sense of crisis around the future of the leisure service there. By definition, what we are dealing with here is actually already highly successful organisations and the third wave to go are going to be the three-star trusts. I think we are into a very different exercise than perhaps the traditional route to a model where there is a gap in the market or there is a threat of closure of the service. What we are doing here is kind of uncharted territory because it is introducing the principles of mutuals and co-operatives into a state-run service already. I do not know how many parallels there are to this, so I wonder if you could comment on that, and particularly on whether there are examples anywhere of the mutual sector running complicated services such as the Health Service.

(Mr Sesnan) I would just like to come back on the crisis because I think you are absolutely right, that to make change happen in local government, and I am sure it is the same in the Health Service and central government, you need a catalyst of things to force it, otherwise the force of the management, the bureaucracy and trade unions will prevent these things happening. The issue with Greenwich is that Greenwich did what it had to do in 1993, and in 2003 there are now 80 such organisations around the UK on a similar model. Many of them now are elected, if you like because they realise it is a much better way of empowering the organisation than just keeping themselves in-house. They can see that they can build up, create a future, even free up the intellectual capacity.

Your argument is: "Don't wait for the crisis. This model works, so just get on and do it anyway"?

(Mr Sesnan) I am sure that in the Health Service everyday when people go to their jobs they realise that they could do better if they had the opportunity to be freer in the way they act. I think that in public services across the piece, they recruit very good people, but then they create an environment in which it is very, very difficult to achieve and the one-size-fits-all National Health Service straitjacket can be no different from one-size-fits-all in all the other parts of the public sector. When you bring them outside it, you begin to see new things flourish and activities, empowerment and involvement, et cetera, and it is not just about mutuality of the structure, but it is about the people who work in the service, it is about engaging the customers and quality. The answer is that no, we have not done it in something as complex yet and to say that possibly we should be saying, "Why don't we just do it in one or two hospitals?". Indeed in this process we may end up with only one or two. You should pilot these things because it is very dangerous to go launching off until you understand what you are doing.

(Ms Campbell) I wanted to pick up on a couple of questions which were asked earlier by you. I must say, I do share what I sense is a certain cynicism behind some of your questions about why these governance arrangements are linked to these foundation trusts, and I think it is very important to point out that foundation trusts are neither necessary nor sufficient for greater democracy, involvement, participation or better governance of the NHS, and that those things could all be brought about without introducing foundation trusts. The introduction of foundation trusts does not necessarily mean that those things will happen. I think unfortunately what is clear from the way that my fellow members have been talking to you is that people who rightly support the co-operative model and feel that the history of the co-operative movement has an awful lot to offer in relation to citizen empowerment and engagement are finding themselves having to defend the foundation trust model in order to promote that. That would be my answer to why these two things have come together. I think also just to address something Ms Drown said, I think it is very important to distinguish, as she was rightly doing, between ownership, democracy and engagement. Again those three things may be closely related to each other, but they are not the same thing and they are not necessarily mutually interdependent. You could, I am sure, have greater democracy in the NHS without introducing the co-operative model of ownership, which I think is problematic because it suggests a kind of two tier form of ownership of the NHS. We all own the NHS already. It is not as though we are the people of Greenwich who did own the leisure services because we own the NHS and we own it as a national service. The model that is being proposed I think is in real danger of losing sight of the national character of the NHS which is very, very important for tackling the huge health inequalities which exist between different parts of the country and for redistributing health as well as wealth.

Dr Naysmith

In your evidence you sort of said that the co-operativism had serious flaws. Is that what you mean, what you have just outlined?

(Ms Campbell) I do not think I actually said that it had serious flaws. I think that in ----

Sorry, not serious, but fundamental.

(Ms Campbell) In terms of the governance model for the NHS, I think that is correct because of what I have just said about the possibility of two-tierism at the governance level, but I think the co-operative movement, as Dame Pauline has already said, has not got an awful lot to offer in terms of good practice in relation to engaging people and involving them. That is not the same as going for having this ownership model, nor is it the same thing as democracy because ----

You could argue that some democratic institutions do not have a lot to offer in terms of engagement if you look at some recent election results, but that would not wipe them out as a model that you would want.

(Ms Campbell) No, it would not, but I think they are not sufficient on their own and I would say that having elections to NHS bodies is not sufficient without, as Dame Pauline has said, that deliberate attempt to be inclusive and to engage people, but I still would say it is a wholly different concept and we need to be very clear about how we want them to relate to each other.

I was going to pick up something that was in the evidence that Peter Hunt and Cliff Mills submitted. You suggested that mutuals could promote a citizenship culture, despite what has just been said by Fiona. What do you mean by that and how do you think this would benefit the National Health Service? Presumably you are suggesting that there would be improvements in the way that health services are delivered and experienced by patients. What would these be and why can they not be delivered under the present system?

(Mr Hunt) I think the difference really is about ownership and starting off as the human shield of foundation hospitals and then moving to be the defender of foundation hospitals. I think the position we are in is that we did not invent this idea, but we are responding to an idea which has been proposed by the Department of Health. Now, in principle, we can see that there could be significant benefits if this is carried out in a proper manner. You have heard from other witnesses today that they feel the great benefit from this being carried out in a proper manner, one of those in particular, and this is based on the long experience of people in our sector, is the fact that engagement builds citizenship. It builds a real sense of involvement, a real sense that the service we are talking about has some sort of resonance, and the individuals who are taking part in democratic structures through the rights that they get from their ownership are able to play a full part as citizens. Now, inevitably you will be talking about proportions of the whole population which potentially could be active, but that is the way it works in anything. It is the way it works in elections and I think we should think in this building itself that the number of people who choose not to participate in the elections for people to get into here also have an interest, but we do not then say that their views are completely discarded and of course they get the choice of taking part or not. That is part of the democratic process and people can choose to take part in these things or not. Now, in terms of the citizenship element of it, there are significant programmes of work which have been taking place within a number of mutual organisations recently which have built up a whole range of different community activities. It is not just like Shell plc or somebody else doing nice things for the communities, but actually engaging those communities and making sure that there is some real give and take, as was already described by one of the previous witnesses, between the institutions and the community itself and it goes through a whole range of different activities.

Sometimes it does not work. You and I both know that sometimes co-operatives fail and I wonder if you have anything to say on why it is that sometimes co-operatives fail and if you have any examples of it.

(Mr Mills) I think I would make the basic point that a legal constitution or a model of itself will not solve any problems. It is not a magic wand, but what it can do is create a framework within which other results can be achieved and which will support the endeavours to achieve those results. Whichever approach one adopts, it has to be based on being properly supported by people with vision who want to make those things work in the ways planned. I think that yes, we have all seen models of legal structures in every field fail, which just goes to show that there is not a model that is the key to success, but I think where one is looking at the objectives that we are looking at here, then one can see how what is proposed in relation to mutual form of ownership could help to deliver some of the results. I was about to add to what Peter was saying that I have certainly seen, and I am sure most of the people in this room who are involved in community organisations within their own communities have seen, people, and Mr Burnham referred to the football clubs, young people particularly getting involved and acquiring a level of maturity and then moving forward and taking part and really influencing. If there is an organisation which we cannot participate in, it is closed to us. If there is an organisation which is open, we can become members and those living in our houses, our children and partners, can become members. Those who wish to take a role have the ability to do so. It is going to be a minority of people, it is not going to be the majority of people who sign up to become members and get involved.

Something you said earlier and in relation to what you have just said strikes me as being very true, that successful co-ops almost always have some people who have got some vision and a really powerful urge to make it work.

(Mr Mills) Yes.

What we are talking about here is taking a big organisation and saying to them, "You are going to move in a mutual direction". How can you ensure that there will be people there who have got vision and who want to make it work?

(Mr Mills) Well, if you take the current approach, hospitals have to apply and somebody with leadership has to say, "I want to do this". Now, my experience of setting up a new mutual organisation is that it is absolutely essential that the desire to set it up comes from the organisation, the people themselves, because if it does not, if it is an imposed solution, it might work for a while, but it is not what that community wants. What we have to develop, and this is one of the reasons why choosing the three-star hospitals is the appropriate way forward, is that there are leaders who want to do these things who potentially can galvanise and inspire their staff and their communities and explain them to them so that there can then be a real test of whether the community wants to take that forward, and in fact if it will, then that will provide a basis for supporting and operating within the structure.

Chairman

Would you agree, and I think this was a point made by the Democratic Health Network, that if we are taking this whole issue of linking the Health Service to local people seriously, then surely before there is a formal application for foundation status, then this local governance ought to come into being and local people could determine whether they wish to go for foundation status? I got an interesting answer from the Minister of State today, which you will not have seen, but I asked him about the context of West Yorkshire where we have a three-star trust in Bradford applying for foundation status and I made the point that surely if we are serious about local governance and connecting the community, my constituency of Wakefield, which is 15 miles away from Bradford, ought to have a say in that and he said that this would happen. I am not quite sure how it would happen, but he says that this would happen. Do you not think that before we move towards this application, then there ought to be soundings and local people should determine whether or not they wish to go for foundation status?

(Mr Mills) I think that not only do we want to make sure that we have got exactly the right sort of model that we are moving towards, but I think that the process of moving towards that model does need to be built around what we are trying to move towards. This is not simply like a corporate reorganisation where the parent company can say, "We want to change the way we're set up today and we'd like it to look like that." That is not what we are talking about here. We are talking about a large number of people involved both as staff and as patients, supporters and volunteers, etcetera, and it is necessary to have their support. I think the process of moving towards community ownership does need to include a mechanism for drawing the community along and getting them to want to take the status that they are offered.

And defining the community presumably, which we may come on to later on?

(Mr Mills) Yes. People tend to think that of that as an insuperable problem. Obviously it can be difficult. In my experience it has not proved particularly difficult in practice, but yes, it has to be done.

Jim Dowd

I am glad that John Austin has returned, because apropos what Andy was saying about football supporters' co-operatives, one of the most effective campaigns was actually run by Charlton Football Club supporters who, if you remember, actually formed their own party. It was co-operative in the sense that they campaigned successfully to get Charlton safely ensconced with ownership back to the Valley. It was not a co-operative model. It was just a community issue that people felt galvanised by. It was still run by the club, there was clearly close collaboration between the club and its supporters, but it was not a co-operative as such. That brings me to Greenwich Leisure which has done pretty well, by all accounts, in the time it has been going, but has this not been at the expense of facilities in neighbouring boroughs, and is that not a model that should not be translated into the NHS?

(Mr Sesnan) Coming from Lewisham, you might think that I could not comment.

I am asking you to comment.

(Mr Sesnan) The issue is that if we took Lewisham versus Greenwich, since we operated the Greenwich centres we invested, innovated, made them popular, and we were beginning to drag in heavily off the boundaries particularly from Lewisham. The response of Lewisham, however, has been to enter into new partnership agreements to operate their centres, and they are now beginning to stabilise the market to provide by improvement. So what we have got is a slight improvement plus capital, not competition. At the end of the day, a leisure centre is like a hospital, it is largely geographical how you deal with it. People do not want to travel in London traffic somewhere else if the right quality is available on the doorstep.

Is not that a general reason for the existence of any commercial market, that it drives up standards through competition? There is nothing particularly co-operative about that, is there?

(Mr Sesnan) No. I am not sure it is competition in that particular case. I think, for instance, as far as the customer is concerned, they just want quality. Leisure centres are like hospitals and geographically located anywhere, so they are not really in competition with each other, but people will migrate where they can get quality, even if it means a longer journey. They would rather it was provided locally. As I repeat, I think that if three-star hospitals can do even better, then that is good news for everybody. What this whole process is about is finding a way to improve the Health Service generally, is it not? It is not whether or not -----

Andy Burnham

Can I follow up on Jim's point. Are you absolutely clear that the structure was crucially linked to the cycle of improvement you began, so that you have a different structure? Say you had been privatised, you would not be where you are now. That is the crucial point, I think. The particular form of governance and ownership that Greenwich Leisure has is linked to the performance it is now achieving for people in South London, is it not?

(Mr Sesnan) Yes. Every borough does a MORI opinion poll. Greenwich comes out top consistently on that poll. In the 32 boroughs in London they have all adopted different delivery mechanisms. In the boroughs where we operate - and we are in the top quartile all the time - the privatisation route has not brought quality, it has just brought a different way of delivering it. When we are in customer-facing services - and the Health Service is the same as the leisure service from that point of view - what people want is to engage with something that they can communicate with, recognise, influence, be empowered by, work for. It is a wide-ranging set of things that you are doing here and it is very complex. If you are in the social enterprise, not-for-profit, co-operative environment then you are able to allocate energies to that kind of engagement. When you are in the private sector your energies are allocated to shareholder value. When you are in the public sector, unfortunately ----- I am a great believer in the public sector. People say to me, "Why couldn't you do what you did when you worked for the council?" You just cannot do it. That is the reality. I am sure in the Health Service they have exactly the same thing. You want the best values of public sector resource, non-profit leakage, state ownership of assets, but you want to free up the people to work within it to have some empowerment, enthusiasm and commitment to what they are doing and reward to some extent.

John Austin

I think you have emphasised the co-operative ethos and the public service ethos that still drives Greenwich Leisure. You contrasted it, and you mentioned also the private sector which might be like that. However, was not one of the key reasons for the success of Greenwich Leisure, apart from the way in which you deliver the service in that excellent way, the fact that you are not constrained by the constraints of local government finance, capital control, and as a free-standing entity you have the ability to attract funding from outside, from charitable and other sources, which would not be available to a local authority and would not be available to a private company that was running a leisure facility, so you have the ability to attract money and you have the