Health and Social Care (Community Health and Standards) Bill

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Mr. Hutton: The amendment led me to look again at the provisions to ensure that they were operating in the way that we intended. They do, and I shall explain why. The hon. Gentleman has misunderstood the distinction between an NHS trust that is applying to be established as a foundation trust and an application from a non-NHS trust. He is right in that once an NHS trust has made an application to the regulator for foundation trust status under clause 4(4), it is given powers to set up shadow governance arrangements and to do anything necessary to prepare for NHS foundation trust status. However, that is all that it is allowed to do.

The regime for non-NHS trusts applying for foundation trust status is necessarily different. Clause 5(7)(a), to which the hon. Gentleman referred, allows an exception to the constitution in relation to a public benefit corporation. That is necessary, as the new organisation—the application from the non-NHS body to be established as a public benefit corporation—would not be able to exercise any function at all until its new governance arrangements were in place, unless it had the dispensation in clause 5(7)(a). That would be inappropriate. It would mean paralysis for the organisation and it would not be able to take any further steps in preparing for foundation trust status.

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We do not need that exception in relation to NHS trust applicants. They already have statutory functions; they are statutory bodies. All that they require are powers to set up shadow governance arrangements. It is not appropriate that an NHS trust should have all the functions of a public benefit corporation before it has been approved and authorised by the regulator and before the constitutional and governance arrangements are in place.

I am sure that the amendment is well intentioned. The hon. Gentleman felt that he had spotted a gap or lacuna in the Bill. However, the exception in clause 5(7)(a) is strictly necessary because, without it, the non-NHS application would be in limbo. It would have been approved as a public benefit corporation, but it would not be authorised to take any action or decisions. That would not be advisable.

Chris Grayling: I am grateful to the Minister for that clarification. It may be that the wording of clause 5(7)(a) is not appropriate for what we are trying to achieve. However, will he accept that clause 4(4)(a), as currently worded, would mean that on the date on which the Secretary of State stuck a stamp on the document and said, ''Go ahead,'' an NHS foundation trust, or would-be NHS foundation trust, would have to advertise for members in order to elect a shadow governing body? If, subsequently, the regulator turned round and said, ''Sorry, you ain't got it right. You are not up to the job, go back to the drawing board,'' the whole process would be fundamentally undermined.

Mr. Hutton: If the process was fundamentally undermined and the independent regulator did not approve the application, it would have to come to a stop. However, how do we want things to proceed? It makes sense for there to be a shadow period ahead of the final organisation during which the NHS trust can get on with establishing its constitution and membership base, and choosing its board of governors. If and when the authorisation comes through from the regulator, the trust can immediately begin to function. If things were done any other way, there would be a delay at the end of the process.

The hon. Gentleman is right that there is a theoretical risk that even though the shadow governance arrangements have been established and the exercise has been completed, the foundation trust application might fail at the end of the day. However, that is almost inevitable if the process is to be as smooth as it can be. The governance arrangements for a trust must at some point be established and it is better that that be done at the beginning rather than at the end. Otherwise, there will be another period during which the foundation trusts will not be able to operate in which we envisage. Let us get that arrangement over with at the beginning of the process by establishing the shadow governance arrangements.

The only reason for the exception to that principle in clause 5(7)(a) is because unless we allow an application from a non-NHS body to function effectively as a public benefit corporation ahead of the establishment of governance arrangements it would not be able to take any decisions at all. There

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would then be the ludicrous situation whereby there that body would have been approved, but unable to take any decisions. Having had its establishment authorised by the regulator, that public benefit corporation would not be able to make progress and would be stuck in a legal minefield. That is the explanation for the difference between subsection (4)(a) and clause 5(7)(a). I hope that the hon. Gentleman appreciates that. I am happy to write to him further if he has a particular concern, but I also hope that we can make progress.

6.30 pm

Chris Grayling: I accept the Minister's explanation, but the provisions create an anomalous situation. Let the Minister think through what he said in the context of the Epsom and St. Helier NHS trust, which is my local trust. If that trust decides to become a foundation hospital, it will put forward an application to the Secretary of State and there will be various stages of deliberation in the Department as to whether it is eligible. Let us suppose that the Secretary of State then says, ''Fine, it can go forward.'' The trust then has to advertise in the community for members. There will be a big recruitment push, quite a lot of expenditure on advertising and a lot community-based, because that will be when the real drive for recruitment and involvement in that local hospital will take place. There will be a big push to secure members, who will then be invited to vote in an election for the shadow governing body of the hospital. That will again require considerable expense, a high profile campaign and a lot of visibility in the local community, especially in the earlier stages if that trust is one of the first to apply. There will be an election for positions on the governing body of the trust. That election will be completed and those people will take office on the shadow governing body. Theoretically, the regulator can then turn round and say, ''We don't accept your application. It's not up to scratch and the financial side doesn't add up. Other aspects of the proposals don't add up either, so we don't accept your application. Go back to being a normal NHS trust.'' What message would that send to the community in my area or any other area affected by such a situation?

The proposals are absurd. I understand the Minister's rationale, but the risks are enormous. The process of setting up foundation hospitals would be undermined in an entire region of the country because such a failure as I have described would undoubtedly be enormously newsworthy. The existing, appointed board takes the strategic decision to apply for foundation status and does much of the work to push forward to foundation status. Why is it not then possible for that board to see through the process of establishing foundation status and then have a window in which to complete a full election to the governing body of the trust? Surely that would be more sensible than for there to be the possibility of holding a high-profile local election with lots of candidates and lots people signed up to be participants in their local hospital yet then seeing the whole thing collapse like a pack of cards. Surely the Minister can see that our proposals are a smarter way of doing things and would

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remove of a major embarrassment to the Government's programme.

Mr. Hutton: Even if we did accept that that would be a major risk and embarrassment to the programme, the hon. Gentleman's amendment would not have the effect he describes. If he wants to do what he has suggested, he needs another amendment to give effect to that.

There is another element to the hon. Gentleman's argument that he has not thought through. He needs to take a look at clause 4(3), because he has misunderstood the process of application. He sees it as a series of big bang moments, but clause 4(3) is an iterative process. Having got the Secretary of State's approval, it is envisaged in the Bill—this rather undermines the hon. Gentleman's case for other amendments—that the application by the applicant can be varied. If the regulator has concerns about the application, it can be varied where there is disagreement. In other words, problems can be overcome by a process of discussion. The scenarios that the hon. Gentleman painted are extremely unlikely.

At the end of the day, a balance must be struck, and a judgment made. We should like the process to begin where it is stated in the Bill it should start—the point at which the application has gone through—so that arrangements can be put in place for the shadow board to be chosen. It is unlikely that the hon. Gentleman's scenario would ever come to pass, first because of the robustness of the process, and secondly because of the way that we have considered and put together the process. There is no once-and-for-all judgment at the beginning. The regulator has ample opportunity in discussions with the applicant to resolve difficulties.

The hon. Gentleman made a good point but spoilt it with exaggeration towards the end of his remarks. We have considered the process very carefully in light of his amendment, but I am satisfied that the process under the Bill is sensible. It is not, as the hon. Gentleman has effectively described it, a Mickey Mouse process.

Dr. Murrison: For my clarity of mind, is the Minister saying that a hospital, having been approved by the Secretary of State, will invariably or almost always be approved by the independent regulator? If that is the case, why have the two authorities?

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