Health and Social Care (Community Health and Standards) Bill

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Chris Grayling: I am grateful to the Minister for his assurances. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 4 ordered to stand part of the Bill.

Clause 5

Other applications

Mr. Burns: I beg to move amendment No. 219, in

    clause 5, page 2, line 30, after 'persons', insert

    ', corporate bodies, charity and voluntary organisations'.

The Chairman: With this it will be convenient to discuss the following:

Amendment No. 171, in

    clause 5, page 2, line 32, leave out from 'trust' to end of line 33 and insert

    'provided those persons do not continue to undertake commissioning work on behalf of NHS patients'.

Amendment No. 137, in

    clause 5, page 3, line 2, at end insert—

    '(d) the applicant has demonstrated the ability to meet quality thresholds consistent with standards demanded by the official inspectorate,'.

Amendment No. 136, in

    clause 5, page 3, line 3, leave out 'may' and insert 'shall'.

Mr. Burns: Amendment No. 219 is a probing amendment, whose purpose is to tease out of the Minister more background detail about the Government's thinking on the subsection and exactly what their intentions are.

Amendment No. 137 is more substantial; it would add another criterion that the applicant must meet before the regulator can issue a certificate of registration to become a foundation trust. It ensures that each applicant meets the minimum standards demanded by any other inspectorates, such as the CHAI, before a certificate can be issued. The Minister might tell me that that amendment is redundant because what it addresses is already covered in the legislation. However, it is important to have that criterion in the Bill.

Amendment No. 136 tightens up the wording of the Bill to guarantee freedom and appropriate power to the independent regulator. At present, if the regulator finds the application to be in good order he ''may'' issue a certificate. However, ''may'' is ambiguous; he ''may'' just as easily not issue a certificate, if the Secretary of State intervenes, for example. ''Shall'' is a

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far less ambiguous and more appropriate word; if the independent regulator finds that the application is in good order, he ''shall'' have to issue the certificate.

Mrs. Calton: I rise to comment on amendment No. 171. The Minister has given the answer that hon. Members were attempting to elicit. We were seeking to ensure that applicants for foundation trust status are not also commissioning bodies—for example, PCTs—and the Minister has dealt with that adequately.

Dr. Murrison: Which bodies does the Minister envisage would want to apply to him and the independent regulator to become public benefit corporations? The only organisations that will wish to put the necessary strictures on themselves are those that are already failing and require some sort of umbrella to survive.

It is difficult for any organisation to aspire to become a public benefit corporation. This is my question to the Minister: what sort of organisations does he think will be interested in applying for this status and under what circumstances?

Mr. Hutton: Amendment No. 219 is essentially a probing amendment. A number of specific legal persons have been identified; the amendment is a device to have a discussion about whom we envisage might apply. To some extent, that is the same point that the hon. Member for Westbury raised.

We have tried to set out our thinking on that subject on page 11 of the explanatory notes and in the application process itself, which we published before Christmas in the previously referred to guide. We refer there to a number of entities—charities and voluntary organisations, and maybe hospices as well. In the Bill, we have tried to cast the net as widely as possible: as all of those organisations are legal persons, all of them are able to apply. If we had taken the preferred approach of the hon. Member for West Chelmsford (Mr. Burns), which is to identify who can apply, we would exclude some people, perhaps arbitrarily. We have chosen the route that offers organisations of different legal shapes and sizes the opportunity to consider becoming a part of the national health service. That is essentially what clause 5 allows those entities to do. I think that that is an exciting opportunity.

I genuinely do not share the pessimism of the hon. Member for Westbury about the organisations that might consider clause 5 as an option, and I particularly dispute the idea that the clause is only about failing organisations. On capital, to which I am sure that we will come on Thursday, of course it would not be in the best interests of the national health service to take on as NHS foundation trusts organisations with large debts, for example, because that might score against the Department's capital budgets. We would not want that. The clause is not a route by which failing organisations can get a bung from the taxpayer, as the hon. Gentleman was suggesting; far from it.

I hope that a variety of organisations will seriously consider becoming NHS foundation trusts. We would welcome them into the NHS family. Let me clear up a myth surrounding the clause; it formed an undercurrent to some of the hon. Gentleman's comments and he raised it earlier when BUPA was

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mentioned. Under the clause, an organisation that is not part of the NHS can become part of it. That is not privatisation, or a route to privatisation, as some people have suggested. In fact, it is exactly the reverse. Organisations that are not part of the NHS will become NHS trusts.

Chris Grayling: Has the Minister considered the fact that there are some smart minds dealing with corporate structures and their interrelationships in this country? Has he considered that an outside organisation might seek to establish an NHS foundation trust as a parent company for a joint venture? That would allow the organisation to lock itself into the supply of services to the NHS. There have been many ingenious ways of structuring corporate relationships over the years, and it is certainly possible that that type of arrangement will be a result of the clause.

Mr. Hutton: It would not be a desirable result. We have two safeguards in the process. The first is the requirement for the Secretary of State to give his approval. The hon. Gentleman spent the last half hour saying that it would not be appropriate for the Secretary of State to give his approval, and that that stage should be removed from the process. He has now provided a perfect example of why the Secretary of State's approval is a necessary precondition for the process. I am grateful to him for doing so. Secondly, there is the regulator's decision-making process. If the application is a sham and is clearly a device for something else, that will become transparent in the application process. I hope that the problem will not arise.

I am grateful to the hon. Member for Cheadle for truncating our discussion on amendment No. 171. We do not need to go there; we dealt with that earlier. On amendment No. 137, I genuinely think that the hon. Member for West Chelmsford made a fair point on the need to demonstrate achievement of quality standards. To a large extent, amendment No. 137 is based on a tautology, because the same quality standards will apply to all parts of the NHS regardless of the nature of the organisation involved. Therefore, as soon as an applicant for NHS foundation trust status starts providing health care, those standards will apply. As part of the process of becoming an NHS foundation trust, the Secretary of State, who gives his approval, and subsequently the regulator, will want to be satisfied about the quality of the health care being provided.

I accept the spirit in which the hon. Gentleman made his points. I share his concern that high quality standards should be maintained by NHS foundation trusts, both once they have been approved and authorised and before the application process. That is why we have taken the measures outwith the Bill to focus on raising quality standards in the national health service.

6.58 pm

Sitting suspended for a Division in the House.

7.6 pm

On resuming—

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The Chairman: Order. If it is the wish of the Committee, we can resume.

Mr. Hutton: I think I had come to the end of my remarks, other than to say that I am pleased to welcome the first ''may to ''shall'' amendment to clause 136. That is always a favourite milestone in all the Standing Committees on which I have sat.

Mr. Burns: Accept it.

Mr. Hutton: I should very much like to but I will not, for one simple reason. We have set out in clause 5(3)(a) to (c) various issues about which the regulator would have to be satisfied before he issues the certificate. He may want to take others into account, using information that comes to his attention other than that covered in clause 5(3)(a) to (c). He must, for that reason, have a residual discretion. That is not a device for denying the applicant a certificate it feels it deserves; it is simply to ensure that the regulator has fully taken into account all the necessary factors before the certificate of incorporation is granted. That is a defining moment—there is certainly no going back on it.

Mr. Burns: In light of the Minister's comments I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 5 ordered to stand part of the Bill.

Clause 6

Authorisation of NHS foundation trusts

Mr. Lansley: I beg to move amendment No. 225, in

    clause 6, page 3, line 32, at end insert

    ', but shall not impose restrictions on the financial terms and conditions under which an NHS foundation trust shall contract to provide goods and services to Primary Care Trusts'.

The purpose of the amendment is to insert into clause 6 a limitation on the independent regulator being given the power to authorise an application on any terms he considers appropriate. That is a sweeping generalisation.

If circumstances had been otherwise, I might have taken the opportunity to have a rather fuller discussion of the subject. The amendment would introduce the concept that the freedoms that are available to an NHS foundation trust in financial terms should not be confined to the freedoms relating to borrowing and capital that are set out later in detail. If one is trying to manage effectively a business organisation, among the financial considerations is the question of price. I know, of course, that an NHS foundation trust is not strictly a business organisation. It is transparent from the Government's management of the commissioning process that price will not be a consideration. Commissioning will be conducted on a cost and volume basis. I have a problem with that. If commissioning is based simply on cost and volume, there will be some misallocation of resources, because the point of a price system is to align the cost to commissioners—the primary care trusts—with the costs generated within the trusts.

At the moment, a primary care trust pays a certain amount to Addenbrooke's hospital for various

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treatments. Under the introduction of the new national standard tariffs, the amount that the primary care trust will pay Addenbrooke's will be slightly increased. There will therefore be a surplus generated within Addenbrooke's. I have no problem about that, because I know that in practice its management will devote that towards the generation of additional capacity.

We are designing a system that is not just for the present, where there is a deficiency of capacity. The purpose of our efforts is always to increase capacity, and those surpluses will be given to capacity. We are designing a system where the providers—who may be NHS foundation trusts—are not confined to existing NHS trusts, but may include others. We are in a situation where NHS foundation trusts may be offering competing volumes to the same commissioners. Under those circumstances, there should be a price adjusting mechanism. Otherwise, what can a higher quality trust like Addenbrooke's do to reflect the quality that it offers to its commissioners?

If the commissioners want to buy quality services, how do they go about that other than by adjusting price, thus securing additional quality over and above the specifications of national standards? That is moving away from the idea of operational freedom inside an NHS foundation trust. It is creating a high degree of standardisation inside the NHS. The Government admit that in their document that reflects the new structural reforming NHS financial flows. In the discussion about service level agreements it is stated that there should be ''greater standardisation'' of service level agreements. Tariffs will be standardised. There will be nationally determined regional cost adjustments which may, or may not, reflect the costs as they arise in places such as Cambridge.

At some point, the Government will determine issues relating to the tariff, such as critical care costs or the extent to which critical units are going to have that reflected in their prices. Time does not allow me to look at all of those, but they all have a significant impact on the long-term financial status of NHS foundation trusts. All of those will be determined on the basis of the decisions taken by central NHS bureaucracy rather than foundation trusts and PCTs in negotiation. They will be effectively imposed on the primary care trusts, and by extension imposed on the foundation trusts.

The financial freedoms that are offered to NHS foundation trusts are not all-encompassing. The most important financial freedoms that apply in general economic activity are not going to be available to NHS foundation trusts, unless there is some mechanism. I confess that the amendment explores that issue, but it is designed to disapply the standard tariff, which will otherwise be imposed by central NHS bureaucracy through primary care trusts on an NHS foundation trust. I am disappointed that, if we are in the business of creating freedom, we are not in the business of creating sufficient freedoms for NHS foundation trusts

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to manage volume, quality and price in order to allocate resources more effectively in the longer term.

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