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Baroness Finlay of Llandaff: In designing a research project, one should have a research question and then ask whether, in an equipoise situation, one way or another way of providing care delivers a better or worse outcome. Many questions have been raised about how the management structure will work. However, we have heard no evidence based on discussions outside this Chamber regarding real, powerful and proven evidence that one system will provide a better outcome than another system. No one would introduce a clinical treatment without sufficient supporting evidence. I am worried that we are considering new arrangements for governance that may have a very adverse effect on how hospitals function managerially. We may be facing huge pressures on managers to skew the delivery of healthcare one way or the other. There are too many unanswered questions to feel confident that we can go forward. The evidence does not seem to be there.

Lord Turnberg: It seems that foundation hospitals do not find favour in a number of quarters around the Committee for a variety of reasons. The proposals in their present form are undoubtedly not perfect. No doubt we will debate ways of improving and changing the way in which foundation hospitals work and the way in which they are governed. We have a long list of amendments to discuss. If we agree at this stage that Clause 1 should not stand part of the Bill, I think that we will be denied the opportunity even to think about the various ways in which the proposals can be put into practice.

It seems rather strange that we are all for the principle of devolving responsibility to the local level. I have not heard anyone speak against the idea that micromanagement, central control and regulation should be reduced; we are all in favour of it. Foundation hospitals seem to be at least the beginning of that process. We should debate all the various ways in which they can be made to work. I think that losing Clause 1 now would be to start at the wrong end.

Lord Walton of Detchant: I may be accused of harking back to the past excessively in debates on this issue. Contrary to the views on this issue expressed by

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certain other noble Lords, I am not absolutely opposed in principle to the idea of foundation hospitals. I hark back to the early days of the National Health Service. In 1970, there was in my own city of Newcastle-upon-Tyne a board of governors who looked after the single teaching hospital that was answerable directly to the Department of Health. All the other hospitals in the city were under a locally based hospital management committee. The decision was taken in 1970 to create a single university hospital management committee to manage all the hospitals in Newcastle-upon-Tyne with one-quarter university representation, half representation from the local community and one-quarter representation from the professionals—doctors, nurses and others.

For four years that organisation worked like a dream. It was the halcyon time of the National Health Service. Then along came the Keith Joseph reorganisation of 1974 based upon a report by McKinseys with consensus management being the order of the day with district health authorities, area health authorities and regional health authorities. The entire decision-making machinery congealed. It took 14 local, national and regional committees to determine whether it was possible to appoint a new registrar. At the end of the day one committee out of the 14 objected and the whole thing stopped working.

Having said that, I must say that the idea of a foundation hospital based upon the present star system has certain defects. I am talking again about Newcastle. I cannot conceive of the reasons why the splendid Newcastle group of hospitals, which had three stars last year, has now been reduced on the basis of a minor statistical quirk to two stars and will therefore lose the opportunity of becoming foundation hospitals. That is very, very inequitable.

I appreciate the problems which have been highlighted by the BMA. I do not often disagree with my former colleagues and friends at the BMA. I appreciate that the problem of inequity is significant. But surely that can be overcome. The problem with foundation hospitals lies in the devil of the detail. The devil of the detail is as yet improperly and unsatisfactorily set out in the Bill. Very many important safeguards need to be introduced. There needs to be a considerable rethink of the governance and of the committee structure—the board of governors and the directors—before this particular proposal would win general support. The germ of an idea is there; the principle is good but a lot of work needs to be done before this can be properly launched.

Lord Rea: I did not speak on Second Reading because I knew full well that everything I might say would be better said by others. However, there is one point which I do not think came up among the many and various criticisms of foundation hospitals that were made, and this debate gives me a chance to air it.

As my noble friend knows, primary care trusts (PCTs) are a very recent creation and they are still bedding down. I and many other health workers in the National Health Service felt that the concept of the PCT being the commissioning body—the paymaster,

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if you like—for the hospital services for their population was a fair and intelligent approach. However, large budgets and the urgent historically based needs of NHS trusts have made it difficult for PCTs to tailor their commissioning to the real needs of their population in the way that they would ideally wish. The creation of a new wave of independent powerful foundation hospitals will surely only exacerbate that problem. They will have greater clout and make the commissioning balancing act which faces PCTs more difficult than it already is. Perhaps my noble friend will say how that potential problem will be overcome.

6.15 p.m.

Lord Warner: We do not accept that the governance proposals are a dog's breakfast. I am grateful to my noble friend Lord Turnberg for reminding us that if Clause 1 is not accepted we shall not have the chance to improve the governance arrangements as so many people would like to do.

We have already tried to respond to some of the criticisms in another place. We accept that the governance arrangements need proper scrutiny. We shall listen to good arguments. One or two Members of the Committee may be surprised how responsive we shall be when we discuss some of the later amendments. That does not mean that we think that the whole organisation of the governance arrangements is anything like as bad as one or two Members of the Committee have suggested. However, I do not want to go into the detail of governance arrangements as I hope that we shall have ample time to discuss them at a later stage.

I accept that the intention to oppose the Question that Clause 1 stand part of the Bill is probing in nature. However, if we removed Clause 1 we would deny a large swathe of the population of England the opportunity to have locally controlled NHS foundation trusts by the end of 2004. All those in favour of devolution and speedy devolution should bear that in mind. Twenty-five NHS trusts are already consulting on proposals to apply for NHS foundation trust status from next April. I have already been approached in that regard by Guy's and King's, my two local hospitals. Therefore, a consultation process is going on in that area. I can now announce that a further 32 NHS trusts have applied to be considered in the next wave. We are now working with over 50 NHS trusts moving towards NHS foundation trust status. If all those applications were successful, well over 25 per cent of the population of England would have access to NHS foundation trusts by the end of 2004. Many of these 50 or so NHS trusts cover deprived areas such as Gateshead, Rotherham, Tyneside, Sheffield and many of the poorer parts of London, Birmingham and some other cities. They are not all trusts in the leafy suburbs. Following those two waves there will be many more applications to come on stream in 2005, including many mental health trusts which at present are not eligible but many of which have three star status. I say in passing that it is not correct to suggest that having

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three star status will be the only criterion for approval for foundation trust status; wider considerations will apply.

The suggestion has been made from time to time, and this afternoon, that, if I may quote Harold Wilson, this is a scheme cooked up by a tightly knit group of politically motivated men. The response by many people at local level such as front-line staff, communities and people who are concerned about their local health services coming forward with applications suggests that there is a groundswell of support for the changes and an appetite for more devolution. I am rather impressed that one or two Members of the Committee think that the Government are sufficiently persuasive to be able to drum up that trade quickly without support at local level.

Some say that we have not gone far enough in terms of local freedoms. However, that is no reason to prevent altogether the considerable package of devolved autonomy that the Bill represents. I say to those concerned about NHS trusts that are not in the first waves that the momentum behind these changes will bring many more communities into NHS foundation trust status in 2005 and 2006 as people work to secure these local freedoms. The incentives are there. We certainly do not want to impose the kind of planning blight and local disappointment that would occur if we said that the first wave of applications had to be pilots and that no one else could move to NHS foundation trust status until their experience had been fully evaluated.

There is no doubt in my mind that NHS foundation trust status is seen as offering real opportunities to improve services for NHS patients through more local autonomy. It is clear that the Government are right to proceed with legislation and that those who have expressed doubts are out of step with the many local people and services who now want to move towards that status.

We have not sprung devolution on the NHS or the world. In the NHS Plan and Delivering the NHS Plan, we set out our proposals to give greater operational freedoms to NHS organisations. NHS foundation trusts are a clear example of and way of doing that. Of course we are starting with our best-managed hospitals, but there are mechanisms in place to raise the performance of all NHS trusts, through the #200 million Raising Standards—Improving Performance in the NHS investment programme. We are taking active steps to help people at local level who have not been able to achieve the performances required to raise their game. There will be plenty of scope for all to apply for NHS foundation status over the next four to five years. As I said, that applies to mental health as well as acute and specialist trusts.

The trusts will be set up as new public benefit organisations, with a primary purpose of providing NHS services to NHS patients. They are not opting out of the NHS. The care that they provide to NHS patients will be delivered on the same basis of need rather than ability to pay, and they will continue to be

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free at the point of use. The trusts will be legally required to use the assets that they hold in ways that promote their primary purpose of providing NHS services, therefore locking them into public ownership. As I said, they remain fully part of the NHS, but with much greater freedoms.

That is the very local autonomy and devolution for which many Members of the Committee argued earlier. We do not think that local communities should be denied those changes, and we strongly suggest that we move on, get the Bill right, and get the changes introduced as quickly as many local people want.

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