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Lord Warner: Amendment No. 53 is not appropriate. It is not for the board of governors to make the appointment in the way proposed.

Amendment No. 55 is also unacceptable. It would provide for the board of directors to appoint the executive directors on the recommendation of the chief executive. That would not be appropriate and would mean that the executive directors would be involved in their own appointment. Earlier in the day, the Government were accused of circularity; the amendment seems to have a certain circularity itself.

Amendment No. 54, tabled by the noble Lord, Lord Hunt of Kings Heath, provides a better answer to some of the concerns that have been expressed. It is not as impractical as was suggested by the noble Baroness, Lady Noakes. In this day and age, we have the fax and the telephone, and it is possible for people to communicate with each other without necessarily always having to assemble, even if they are part of a committee.

We have listened to the concerns that the noble Lord, Lord Hunt of Kings Heath, has tried to address with his amendment. As we said, we are always willing to listen to reasonable arguments. The noble Lord's argument that the appointment of the executive directors would benefit, if the chair and non-executive directors were also involved is a good one. That arrangement provides greater independent involvement in the process but does so in a way that is consistent with the structure devised for NHS foundation trusts. We therefore propose to accept Amendment No. 54.

Lord Clement-Jones: I was hoping that the noble Lord, Lord Hunt of Kings Heath, would again stand up and thank the Minister. Clearly, there is no gratitude in politics.

The ability of the noble Lord, Lord Hunt of Kings Heath, to read the mind of the Department of Health continues to astonish me. The Minister has been magnanimous in his flexibility. I am sorry that my model did not find favour with the assembled company, but the Minister has, at least, shown that he understands that there are problems with parts of the schedule, so we continue to make some progress. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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Lord Hunt of Kings Heath moved Amendment No. 54:

    Page 110, line 43, leave out sub-paragraph (3) and insert—

"(3) It is for a committee consisting of the chairman, the chief executive and the other non-executive directors to appoint or remove the executive directors."

On Question, amendment agreed to.

The Deputy Chairman of Committees (Baroness Pitkeathley): As Amendment No. 54 has been agreed to, I cannot call Amendment No. 55, for reasons of pre-emption.

[Amendments Nos. 56 and 57 not moved.]

Lord Hunt of Kings Heath moved Amendment No. 58:

    Page 111, line 8, at end insert "but the constitution may make provision for those matters to be decided pending the establishment of such a committee"

The noble Lord said: I am on a roll, so I hope that I will have equal luck with this set of amendments.

I am concerned about the transitional arrangements relating to the board of directors when a trust moves from NHS trust status to NHS foundation trust status. I know that some noble Lords do not necessarily share my view of the role of the board of governors, but, whatever one's view of the role of the board, we would, I think, agree that, when an NHS organisation changes its status, it is vital that there be stability in its leadership.

My reading of the Bill is that, in essence, the arrangements for the appointment of the executive directors and the non-executive directors, including the chair and the chief executive, kick in during the transition between the current status and foundation trust status. In theory, therefore, there could, with a new board of governors, be a complete change in the non-executive directors on the board of directors, who, in turn, might decide to appoint a whole new team of executive directors, including the chief executive. That would be risky.

The reason why the first-wave foundation trusts are in the first wave is that they are the best led NHS organisations. I know that the noble Lord, Lord Clement-Jones, for one, has some concerns about the way in which one qualifies to be at the forefront of the movement. He is not particularly keen on performance ratings and the like. However, anyone considering the characters who lead the first-wave foundation trust applicants would surely conclude that some of our best people lead those organisations. It would be foolish to ask them to subject themselves to a process in which they had to be reappointed subject to the consideration of the new board of governors.

I propose that there should be transitional arrangements in which, essentially, the non-executive directors on the current NHS trust will, if they so wish, go forward to serve as the first non-executive directors on the foundation trust. They should serve out their term of office. For example, if their term of office was due to end less than 12 months after the foundation trust came into being, they would be able to serve that period.

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The beauty of the arrangement is that, first, it ensures stability. It also means that the non-executive directors will retire over time, rather than in one fell swoop. That will allow the board of governors to get to grips with the appointments process and will mean that it would not be an "all in, all out" situation.

The same thing must apply with regard to the chief executive. Again, we are talking about some of our best chief executives, so it must make sense for them to go forward again, if they so wish, to lead the new organisations. The amendments would ensure that that happened.

In the fullness of time, the governing bodies will be able to take up the responsibilities. However, given all the work involved in transferring from an NHS trust to an NHS foundation trust, stability in the leadership of the organisations is essential. I beg to move.

Baroness Noakes: The purpose of Amendment No. 137 is much the same as that of the amendment proposed by the noble Lord, Lord Hunt, but it takes a slightly different route involving the regulator before he authorises a foundation trust. Like the noble Lord, Lord Hunt, we have been made aware of significant concerns among potential applicants for NHS foundation trust status. If my noble friend Lady Hanham were able to be here she would express that point extremely forcefully. We have no problems with the amendments tabled by the noble Lord, Lord Hunt, and support them. It is called backing a favourite. The important point is that the issue is properly addressed in the Bill.

Lord Clement-Jones: I agree with the sentiments expressed, which have also been expressed to me and my colleagues by applicants. It is a crazy situation which, privately, is admitted by many members of the Government party. In theory, potentially it would be possible for there to be a complete clean-out from some of the most successful hospital trusts in the country. Potentially, chief executives and non-executives could be vulnerable immediately after achieving the aim of becoming foundation trust hospitals. This is a matter that needs to be addressed. The amendments tabled by the noble Lord, Lord Hunt, are elegant and should be carefully considered.

Lord Warner: We recognise the importance of ensuring operational continuity during the transition to NHS foundation trust status. The senior management teams of trusts that are eligible to apply for foundation status have delivered high-performing organisations by definition. We have listened to the concerns expressed about the need to ensure organisational stability among those applying for foundation trust status during the transition to the new governance arrangements. That is why we propose to accept Amendments Nos. 58, 61, 120 and 121, tabled by my noble friend Lord Hunt.

I share the description made the noble Lord, Lord Clement-Jones. The amendments are elegant and they will facilitate the transition from NHS trust

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to NHS foundation trust status by allowing time for the board of governors to properly get to grips with its role before being required to make or approve appointments to the management board. They will also provide for the continuity of the executive component of the board. That is the best way forward to ensure organisational stability and to ensure that NHS foundation trusts benefit from the proven ability of the current board of these high-performing organisations.

Lord Hunt of Kings Heath: I thank my noble friend and other noble Lords for their backing. This will bring a great deal of support to first-wave applicants, which I hope will give them confidence to take forward their applications with a great deal of enthusiasm.

On Question, amendment agreed to.

[Amendment No. 59 not moved.]

Baroness Noakes moved Amendment No. 60:

    Page 111, line 8, at end insert—

"The chief executive shall be the Accounting Officer of the corporation."

The noble Baroness said: Amendment No. 60, which inserts a new paragraph after paragraph 17 of Schedule 1, is a probing amendment designed to ascertain the accountability arrangements for NHS foundation trusts. As I understand the current position, chief executives of NHS trusts are accountable officers for their trusts, reporting to the permanent secretary of the Department of Health, who is the department's accounting officer. That means that trust chief executives are accountable, alongside the department's accounting officer, directly to Parliament for their use of public money.

I hope that the Minister will explain the accountability arrangements for foundation trusts and, in particular, explain how they will be accountable to Parliament. My amendment to make them an accounting officer is to probe that accountability. If the Minister believes that our amendment is not necessary, I hope that he will explain what underpins the accountability arrangements for foundation trusts. I beg to move.

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