Select Committee on Health Sixth Report

4  Autonomy and regulation

96.  One of the main concerns expressed by witnesses to the Health Committee's 2003 inquiry into Foundation Trusts (FTs) was that promised management freedoms would not translate into real autonomy and that FTs would be more encumbered by regulation than their predecessors.



97.  How real the autonomy FTs have is, and how far they have managed to use it to improve services in ways that would not be possible to non-foundation trusts is difficult to measure. According to Mark Exworthy, FTs autonomy will be key to their success, but has not yet been demonstrated:

The willingness and ability of FTs to exercise their autonomy will determine the impact they have both within their organisations and the wider NHS. Currently, the evidence suggests that they have yet to exercise fully this autonomy but have the potential to do (given their current evolutionary path and supporting policy developments).[69]

98.  Dr Exworthy considers that the reasons for this may include the attitudes of the DH and of SHAs, as well as FTs' risk aversion given their greater degree of financial exposure:

The DH and SHA also require a change in attitude and behaviour to reflect the changed landscape of FTs and their activities.

The willingness and ability of FTs to exercise their autonomy is debatable. Generally, they are able to exercise autonomy (under their new status as public benefit corporations) although FT status demands that senior staff change their skills and attitudes. Equally, FTs appear less willing to exercise autonomy to a great extent, as they are still acquiring legitimacy as organizations in their LHE and internally. This unwillingness might reflect their view of risk (aversion to it) given their greater degree of financial exposure, the uncertainty associated with the new policy environment (including on-going features of centralisation) the impact that their decisions might have upon other local organizations.

99.  Autonomy seems to have been good for staff morale, and helped FTs secure good Non-Executive Directors:

A study undertaken in the early days of the FT process, reported that when asked about autonomy, managers were highly motivated by the thought of having increased discretion in order to provide high quality and responsive services.[70]

FTs in our study welcomed the autonomy that they had to attract and appoint more experienced and able non-xecutive directors to the board. This gave trusts' management greater challenge, although the Appointments Commission is seeking to secure similar high calibre non-xecutives to NHS trusts.[71]

100.  When we asked our witnesses to give practical examples of how they have used their autonomy, their answers related to greater speed and freedom to make decisions:

Mr Palmer: I think it is difficult to pick something out. The behaviour of the board of directors at Guys and St Thomas's has been different in the sense that they have felt free to take certain decisions which otherwise they would have been directed when they were an NHS Trust. Things like how to conclude negotiations with the commissioners, how to engage with the sector about the changing models of care, there is a sense of empowerment that there is a right to carry on those discussions which simply was not there before. I am absolutely sure in my mind, having been both an NHS trust and a foundation trust, it feels very, very different on the board of an NHS Trust—which is where I am back again—because you really have to ask permission all the time. It is a different dynamic and it is quite difficult for me to give you a particular instance, but it is tangible and real.[72]

Mr Gregory: I think, as I said earlier, the ability to try to shape your own future, to prioritise and the speed of decision making … When I joined back in 2006 one of the first major items on the board agenda was the business plan for the new children's development that we are building in Chesterfield, bringing services that are currently delivered in rather dilapidated buildings in the town centre onto the site of the Royal (which is a large site) and having an integrated set of services and an improvement to those services. We had the board meeting and I noticed after we gave the business plan approval the chief executive and the financial director and a few others were smiling at each other. I asked what I was missing and they said, "You don't realise, Richard, but what we have just done in two months would have taken at least two years to achieve before".

Dr Naysmith: What was it specifically about the foundation trust that enabled that to happen?

Mr Gregory: We could make the decisions. We did not need to bid into a central pot. We had the resource, we put forward a proper analysis on clinical and financial criteria and we debated it rigorously and we decided to approve it. We did that within our own boardroom; it took as long as the process took which was probably less than two months actually. Apparently these things took an awful lot longer before.[73]


101.  However, it appears that the boundaries of FTs' autonomy are still under negotiation. In February of this year the Health Service Journal reported a disagreement between Bill Moyes and NHS Chief Executive David Nicholson, after the former sent a letter to FTs outlining policy on infection control, deep cleaning and matrons following the infection control scandal at Tunbridge Wells. Bill Moyes expressed his discomfort over the "directive" and "instructive" tone of letters from the Department of Health to FTs, which he said were in contravention of legislation. He said that the circulars "could only be interpreted as issuing instructions" and that the circulars implied FTs were "in a line management accountability relationship with the DH".[74] When we asked Dr Moyes if these discussions had been resolved, he told us that the challenge of moving away from central control should not be underestimated:

I am not going to say that it will never happen again in the sense that the issue will never come up again. We underestimate the scale of change moving to foundation trusts. The Department, for 60 years, has seen itself in essence as corporate headquarters of a corporate hospital system and with foundation trusts they are no longer in that position, whereas they are the headquarters of a commissioning system. The issue that David and I were debating—I think it is a debate amongst people who are trying to make this happen rather than a personal difficulty between us—was: how can the Government express absolutely legitimate points of view from ministers saying that they are worried about cleanliness in hospitals and what is being done about it? But how can ministers convey the desire to see something done through commissioning rather than through issuing operational instructions to hospitals?[75]

102.  While FTs do not appear to have yet exploited the full potential of their autonomy, witnesses from FTs told us they were free to make decisions more quickly, and that there was a 'tangible' difference to the dynamic of their organisations, which we welcome. FTs' use of their autonomy should be included in the evaluation of FTs' progress which we have recommended that the Government commissions.

103.  The recent disagreement between Monitor and the Department of Health suggests that boundaries are still being negotiated between the Department of Health and Monitor about what level of government intervention in FTs' affairs is legitimate. The Government should take steps to clarify this.


104.  While FTs have autonomy from the Department of Health, they are still subject to strict regulation. Marini et al comment that:

Although central regulation of FTs has been loosened in some areas, they are still subject to a great deal of central control in a rather crowded regulatory environment, covering economic regulation, quality and public safety.[76]


105.  Monitor demands both strong finances and governance from successful applicants. The FT application process was described by one Trust director as a 'huge effort', although the costs of the FT application process are difficult to quantify:

There is a very structured process that Monitor runs; there are very high standards in terms of compliance with their requirements and I would say at Guys and St Thomas's it caused us at least 12 months to take our eye off the ball; not take our eye off the ball because actually you cannot do that because you cannot become a foundation trust if you slip from meeting all the targets. People had to work much, much harder simply to get through an additional major agenda which is the foundation trust application process …The front end cost is really measured in the time and energy that staff have to put in; the actual cash on the table is not that great.[77]

106.  According to the Healthcare Commission and Audit Commission, the FT authorisation process is of itself a useful exercise for trusts to scrutinise their internal processes:

Our research identified that undergoing the FT application process has made a significant difference to the internal processes of both successful and unsuccessful applicants. The health economies felt that FT application has led to a better understanding of both the current trust business and how the organisation would function in the future. Legally binding contracts, which cannot be broken by either side, force NHS organisations to operate in a more business-like way.[78]


107.  Following authorisation, FTs are subject to monitoring of finance and performance by Monitor:

Monthly and quarterly returns on finance and performance are rigorously scrutinised and deviation from plan can lead to changes in the "traffic light" performance indicators. Deterioration in performance leads to increased scrutiny, visits and enforcement to ensure plans are created and implemented to correct deviations from plans.[79]

108.  In addition to this, FTs must also report data to the Healthcare Commission's Annual Healthcheck in the same was as other NHS trusts. According to Alan Maynard, Monitor seems well regarded, and "is generally more visible to hospitals than the Healthcare Commission."[80] Monitor recognises the importance of good relations with the HCC and now discussing how it will work with the CQC. However, questions remain about whether it is necessary for FTs to be subject to quality monitoring by two separate regulators. A further layer of complexity will be added by the proposed establishment of a further regulator, the Competition and Collaboration Commission, which will act as an 'OFT' equivalent for the NHS. With Monitor alone costing around £13m per annum[81], not taking account of the costs of regulation to NHS trusts, whether these regulatory bodies are providing the necessary regulatory support to the NHS as efficiently as possible requires close scrutiny.

109.  A further concern about the way in which FTs are regulated is that less information is centrally collected under current system, and so less information on FTs may be available for the purposes of public scrutiny and research. Marini et al report difficulties in their research on the impact of FTs. Professor Goddard informed us that :

In trying to undertake independent evaluation of the impact of FTs, we encountered some problems in the availability of data from FTs. In the past, all NHS trusts have been required to submit financial returns to the Dept of Health in a common format (known as TFRs—Trust Financial Returns) and these are available in the public domain. However, as part of the freedoms given to FTs they are no longer required to submit this data … Monitor said that some of their returns would contain information we were seeking but that they were unable to let us have this data because it was confidential. Their suggestion was that we seek permission from every FT in order that the data could be released… that is rather time consuming and not conducive to the conduct of independent evaluation. Ultimately we were able to get the Foundation Trust Network to assist us in getting permission but it was made clear that if we wished to update the analysis with more recent financial data we would be required to approach each FT directly.

The increasing mis-match between the format and nature of the data provided by the FTs and non-FTs makes proper comparisons impossible …CIPFA[82] has cut down the data series they have usefully produced on Trusts over many years. Our own rich series of data on NHS Trusts which we have assembled in the Centre for Health Economics over many years (covering input, output and process variables), which has facilitated a range of useful research projects, has also fallen down because of the lack of FT data held in the public domain. As more Trusts become FTs, less and less information will be available for research purposes. As FTs remain public sector organisations spending public funds, it is worrying that independent scrutiny of some fundamental issues is made difficult, or even impossible, by rules that seem to protect them as commercial concerns.[83]

110.  When we put the researchers' concerns to Dr Moyes, he replied that data was still accessible, but conceded that it was more difficult for researchers to put together than previously.[84]

111.  The FT application process and regulatory regime seems to be well regarded, but concerns have been expressed about the availability of information on FTs for the purposes of public scrutiny and research. There also seems to be potential duplication between Monitor and the Healthcare Commission in terms of regulating quality, and the regulatory landscape will soon be further complicated with the addition of a new body, the Competition and Collaboration Commission.

69   FTM 03, Mark Exworthy Back

70   'Foundation Trusts in the NHS: does more freedom make a difference?' Marini et al, Health Policy, University of York, 2007 Back

71   Healthcare Commission and Audit Commission, Is the Treatment Working?, May 2008 Back

72   Q10 Back

73   Qq89-91 Back

74   'Monitor challenges DH on freedoms', Health Service Journal, 22 February 2008 Back

75   Q95 Back

76   'Foundation Trusts in the NHS: does more freedom make a difference?' Marini et al, Health Policy, University of York, 2007 Back

77   Q53 Back

78   Healthcare Commission and Audit Commission, Is the Treatment Working?, May 2008 Back

79   FTM 02, Alan Maynard Back

80   FTM 02, Alan Maynard Back

81  Back

82   The Chartered Institute of Public Finance and Accountability Back

83   FTM 08, Professor Goddard Back

84   Q123 Back

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Prepared 17 October 2008