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Lord Clement-Jones: I believe that the noble Earl, Lord Howe, expressed the matter absolutely correctly, quite apart from clearly having done his literary homework over the weekend. Our debate on this clause reflects very much the concerns expressed thus far in the amendments to Clause 2. Further concerns

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about the regulator will arise as we debate the remainder of Part 1, but I shall take a sample of some of the points that have been discussed.

First, there is the question of whether the regulator should be yet another one on top of the 40 or so who are entitled to inspect NHS hospitals or whether he should be part of CHAI. That point was put strongly from these Benches. Secondly, should there be a duty on foundation hospitals to report to the regulator or should the regulator himself report on the impact of a foundation trust on the local health economy? That issue was also debated, with a number of extremely important interventions.

There is the key question of whether the regulator should concern himself with the impact on the local health economy of foundation trusts and whether he really will act to prevent practices such as staff poaching. Such practices are the fear of both staff representatives and many of the existing non-foundation applicants.

Then there is the question of the appointment of the regulator by the Secretary of State being carried out by the appointments board, although that is not set out explicitly in the Bill. In Committee on 9th October, the Minister stated that it was the intention of the Secretary of State to appoint the regulator. The only ray of sunshine was the fact that there may be more than one regulator. Indeed, the Minister seemed to give that proposition a reasonably favourable wind.

Then we have the whole question of the duties of the regulator and whether he must act in a manner that is,

    "consistent with the performance by the Secretary of State of the duties".

By the admission of the Department of Health, the words "consistent with" mean only "takes account of". Those are not directly imposed duties on the regulator, and, again, that makes people worry about what precisely the regulator will do and what he will enforce and implement, and so on.

The noble Earl, Lord Howe, was very eloquent on the subject of the relationships of the regulator. One question is: what relationship will bodies such as the workforce development confederations have with the regulator? That is not explicit. What about the planning functions of strategic health authorities? Clearly they will not performance-manage foundation trusts, but what relationship will the regulator have with them? Indeed, as the noble Earl, Lord Howe, asked, what relationship will the regulator have with primary care trusts?

All that adds up to a lack of accountability on the part of the regulator, and, indeed, the relationship with Parliament is by no means clear. Therefore, I believe we must conclude that the regulator idea may be superficially attractive in the sense that foundation trusts may need a regulatory body to oversee them, but scratching the concept brings to the surface a large number of contradictions. I very much hope that the Minister will respond to this debate.

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3.15 p.m.

Baroness Carnegy of Lour: From the Liberal Democrat Benches, the noble Lord has just said that foundation trusts may need to be overseen by a regulatory body. I wonder whether that is the case. At Second Reading, the Minister stated what the Government see as the key difference between foundation trust hospitals and existing hospitals. He said:

    "The key difference between NHS foundation trusts and other types of trust is that though both will be required to meet national standards, the new trusts will be free to decide how they achieve them".—[Official Report, 8/9/03; col. 12.]

Surely, in order to do that, one needs a system which establishes standards across all hospitals, puts in place an independent system of inspection to ensure that those standards are maintained, and sets up an independent audit system to ensure that the finance is properly managed. That is what one needs.

This regulator has been inserted into the system for whatever reason—presumably with the hope that freedom will stay with the trust. But, as my noble friend Lord Howe said, from the foundation trust's point of view, the regulator is the Secretary of State's representative on earth. He is appointed by the Secretary of State; his staff and set-up are settled by the Government through the Minister responsible for the Civil Service; and, as we shall see as we go through the Bill, he has numerous roles. One such role, as set out right at the beginning of the Bill, is that he will decide which hospitals can become foundation trusts and whether a trust is not adhering sufficiently to the Secretary of State's rules and must therefore stop being a foundation trust. He has enormous power, and his answerability is such that he is a creature of the Secretary of State.

The Minister must justify to us how the sentence that I quoted from col. 12 of Hansard fits with the existence of the regulator. If the new trusts are to be free to decide how they achieve standards, I question whether the regulator is necessary at all.

Lord Warner: Noble Lords may detect the odd weary note in my voice as I go over some of the arguments that we have already put to the Committee. It is clear that the independent regulator is just that: independent. We shall debate that in detail later and I shall deploy some of the arguments to show that this independent regulator is more independent than some of the regulators used in other parts of the public service. I do not want to anticipate that debate at this stage.

The regulator is clearly accountable. I thought that the noble Earl, Lord Howe, put it quite well. As with other public bodies, the regulator has to behave proportionately and reasonably in his actions and is vulnerable to judicial review if he does not do so. The noble Earl and his noble friends cannot have it both ways. From time to time we are attacked because the regulator is not deemed to be independent enough and when we do not wrap around him a whole lot of

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accountabilities which would damage his independence we are told that we are failing in our duties in that respect.

We have set up a system which, rightly in my view, requires the regulator to satisfy himself that the applicants for NHS foundation trusts have made the case for the authorisations which he is able to give under the Bill. He has responsibilities if there are gross failures of those authorisations to take appropriate action under the Bill. He will take that action unfettered by the Secretary of State in accordance with the provisions in the Bill. We do not think there is a need to go further. We believe that the checks and balances as set out in the Bill are appropriate.

However, we have listened to the arguments put forward about whether there should be a board structure around the regulator and I have agreed to come back to the Committee with possible changes in the light of the report into regulators shortly to be published by the Better Regulation Task Force. So, we shall consider those issues in that context.

The noble Lord, Lord Clement-Jones, referred to concerns about poaching staff and so forth. We shall have another discussion on that at some stage. However, let me make one point crystal clear. It is not the job of the regulator to force himself or herself into the relationship between employers and employees. If the noble Lord considers the roles of regulators in other fields he will see that they do not get into the detail of industrial relations and negotiations between employers and employees and in our view it would be inappropriate for this regulator to do so.

We have debated whether CHI should be merged with the regulator and we simply do not agree with the noble Lord. As I tried to summarise the arguments, CHI is essentially an inspector; the regulator is essentially a referee. We do not think that those roles can be combined in a single office but believe that it is appropriate to keep those roles separate. As it stands, the Bill makes a good fist of setting up the regulator as an independent body. In all probability we shall again consider the issue of whether there should be a board structure around the regulator. However, at present we believe that Clause 2 is appropriately drafted and should stand part of the Bill.

Earl Howe: This has been a useful short debate and I am grateful to all noble Lords who have taken part, including the Minister for his reply. However, to come back as he did to judicial review as a remedy for the regulator's action is an unsatisfactory position to take. There is provision in the Bill for the regulator to submit annual reports to Parliament. I do not belittle that requirement in the least. Certainly, it is better than nothing. However, I cannot believe that that kind of retrospective arm's-length process amounts to accountability for the man or woman in the street who believes, for example, that the licence issued to their hospital has omitted something important, nor indeed, is it a remedy for the foundation trust which believes it is being unfairly dealt with.

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There are ways of delivering accountability that would address those day-to-day issues. Later we shall debate amendments which deal with the NHS complaints system, for example, and others which deal with patients forums. I believe that the themes raised in this debate will return as we progress through the rest of Part 1. I hope that we shall be particularly mindful of the key issues of independence and accountability.

Clause 2 agreed to.

Schedule 2 [Independent Regulator of NHS Foundation Trusts]:

[Amendments Nos. 90 to 95 not moved.]

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