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Lord Hunt of Kings Heath: My noble friend has shown already that he can be extremely flexible in his approach to the Bill, but I hope that he will not provide comfort to the noble Lord on this occasion. It is eminently justifiable for the Secretary of State to have a role in the processing of applications for foundation trust status. I do not have a problem with the architecture of the Bill because, as the noble Earl, Lord Howe, suggested, the Secretary of State, at this stage, has a lot of information on which to make a judgment and to enable applications to be passed to the regulator. I do not have a problem with the Bill as it is constructed.

I would find it helpful if my noble friend could give the Committee some idea of the timetable for the processing of the first wave of foundation trust applications. There is an assumption among a number of the applicant foundation trusts that the regulator will not take much time to turn around the applications once received from the Secretary of State. It will be helpful to know whether the incoming regulator has agreed to a timetable or whether that

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regulator intends to go through each application in great detail. That is highly relevant to the timetable for those foundation trusts.

Lord Peyton of Yeovil: I cannot resist the temptation to intervene. The noble Lord, whom I greatly respected when he was answering for the department, is obviously suffering from rather too long a sojourn there and has come away with its habits of mind indelibly stamped on his own. I am so sorry. I do sympathise with him.

Lord Hunt of Kings Heath: It is true that when I entered the Department of Health I went through a process of re-education, but I am fully recovered and I am speaking from my own mind in saying that the Secretary of State has a role to play in going through the applications to inform the process for the regulator. That should be supported.

Baroness Carnegy of Lour: The noble Lord, Lord Hunt, obviously thinks—and he is probably right because he probably knows—that the process will be that the Secretary of State goes through all the facts and then says to the regulator, "This is okay". In that case, I would like to hear from the Minister on what grounds the regulator might then say, "No, Secretary of State, you are wrong".

My noble friend Lord Howe made a very good point. He asked whether the facts would be gone over twice—first by the Secretary of State and then by the regulator—and whether that would not be duplication. He had a good solution, which was that the regulator would do the work and then ask the Secretary of State, "Is this okay?" If the Secretary of State were to object, it would not be okay. That is what the amendments of my noble friend—Amendments Nos. 118 and 130—amount to. We need to know whether it is the Secretary of State who is doing all the work, as the noble Lord, Lord Hunt, suggests, with the regulator endorsing it—I hope the Minister will explain why she objects to that—or whether it is the other way round. Whichever it is, either the Bill is all right or my noble friend is all right, but we do not want duplication of work. The question of whether it becomes a foundation trust is extremely important to a trust and very important to the public. We need to know precisely how that will be decided. I hope the Minister will provide a precise answer.

Baroness Howarth of Breckland: I wish to add just a few words and to seek clarification. When hospital trusts are making their application, the transparency of the process will be extremely important. In our discussion, the issues have sounded almost like boundaries of governance. Who has the responsibility and in whose job description is included the right to have the final say? I agree with the noble Lord, Lord Hunt, that the Secretary of State may ultimately need to have defined responsibilities, but it would be extremely helpful if we had some kind of diagram or picture in our heads which sets out a clear process and

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a clear set of accountabilities and responsibilities, so that all of those involved would know where they could turn.

Baroness Andrews: I shall attempt to be precise; I shall attempt to offer candour; I shall attempt to offer simplicity. Unfortunately, I cannot provide a diagram, but I shall do my best to answer the questions that have been raised, which range from the general to the specific. The combination of the noble Earl, Lord Howe, and the noble Lord, Lord Peyton, is quite formidable. I reassure them that we take seriously the issues that have been raised, but I must disappoint them in rejecting the amendment for reasons which I hope will become clear. Perhaps I may spend a little time explaining the difference in the roles between the Secretary of State and the regulator. I hope that I can also reassure the noble Baroness, Lady Carnegy, about the process. I am grateful to my noble friend Lord Hunt for having anticipated what I wanted to say about the Secretary of State and his role, because we have come to the part of the Bill which addresses the process and the distribution of roles within it. It is therefore important to be clear.

Perhaps I may first make the case for the role of Secretary of State as gatekeeper. We must have a process for determining the preparedness of the trusts that want to go forward to become foundation trusts. I do not think that anybody would quibble with that. We must have a process that makes sure that they have done their homework, have presented their case properly and are ready to take on that additional responsibility.

During the past nine months, the Department of Health has issued a whole series of advisory documents to help trusts prepare their case. That started with guidance on the application process in December last year. It was followed in July with notes on the determination of criteria, setting out what would be required under six headings. We have since produced material which describes the process of governance, and further documents are in preparation which address the financial health-checks and what is necessary.

It is important that it is the Secretary of State's task to ensure that those preparations have been made, that the information has been provided and that the trusts which go forward are proceeding in the appropriate way in providing all the information that it is necessary for that judgment to made. Why the Secretary of State? First and quite simply, we would all surely agree that he is responsible for ensuring that the whole of the NHS thrives in all its parts. The primary purpose of the foundation trusts is to play a key role in delivering NHS services to the highest standards. Those foundations trusts are NHS trusts; they are part of the family; they are working to the highest standards. They will be given the extra challenge of being innovative and of being at the leading edge, but they are firmly within the firmament of the NHS. Therefore, the Secretary of State has a legitimate and appropriate role in deciding, not at the end of the process, but at the beginning, at the formative stage,

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the broad direction in which those applications are going. As the person responsible for the funding of the NHS, he must have a role in advising on the development and the number of foundation trusts, particularly as foundation trust borrowing is scored against the Department of Health's expenditure limit. Indeed, my noble friend recently anticipated that by October next year 25 per cent of people in the country may be covered by foundation trusts. This is a large element of the NHS.

A second and equally powerful reason is that the existing performance framework means that the Secretary of State, as the responsible Minister, is evidently well informed and well placed to consider the performance and potential of NHS trusts and whether they are ready to go forward. That is well in line with the principle of earned autonomy. Yes, we are starting with our best-managed hospitals and it makes sense to do that. In the first wave of foundation trusts, the acute and specialist trusts will have won three stars in the performance rating. However, I reluctantly dispute with the noble Earl that that is a political judgment. It is not. These judgments are based on merit. The merit has been obtained by CHAI standard-setting and the award of those criteria. We know from the various processes that applicants have satisfied the key criteria in terms of the three-star rating.

However, nothing in that process compromises the independence of the regulator. I say to the noble Lord, Lord Peyton, that the Secretary of State will not suppress the regulator—far from it. The regulator will make the final decision. The regulator will determine the success or failure of an application and, yes, I can envisage him turning down an application. He is not compelled to accept any application that comes forward: he can ask for extra information. That will not be duplication, to reassure the noble Baroness, Lady Carnegy, because he can ask for more information if he does not feel satisfied. That is the case in respect of any aspect of the application: on governance; on the process of consultation; and on financial management. If the regulator is not satisfied, he can go back to ask for more information. That is independence and we have every confidence that that will happen.

Amendment No. 130 introduces another confusion of roles. It would allow the Secretary of State to prevent an applicant from being authorised as an NHS foundation trust by objecting to the application. It extends the Secretary of State's role well beyond the gate-keeping function and in an unhelpful way. My primary concern is practical in relation to the impact it will have on applicants. They will have to prepare full applications, spend time and money and, in doing so, put in management effort. That is even before the independent regulator considers granting them an authorisation. If the Secretary of State objected at this stage, much more time and effort would have been wasted. Furthermore, applicants who have gone to great efforts would feel extremely demoralised if the Secretary of State could veto the application at that point. The amendment parachutes the Secretary of

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State in at the wrong point. We must have a gate-keeping function. He should be involved at the beginning and not the end.

I turn to Amendment No. 122 tabled by the noble Lord, Lord Clement-Jones. Of course CHAI is involved in the process. It will have been involved in the determination of star ratings, but we do not want CHAI to act as another barrier at this stage of the process. These amendments seek both in respect of NHS trusts and potential non-NHS trusts to give the power of approval to CHAI. I do not want to go over our debates, but it confuses the role of inspection and audit with the regulator's role of independent arbiter and referee.

Applicants for NHS foundation trust status will have to undergo rigorous checks. They will have to meet a number of stringent criteria before they can be authorised. They obviously include high attainment in the NHS performance ratings. Although CHAI's views on performance will inevitably be considered as part of the application process, we do not believe that it should be the appropriate judge of whether the preparatory steps taken by an applicant are sufficient or necessary for achieving that status.

I turn to the specific questions the noble Lord asked about Clauses 4(4)(b) and 5(7)(b). They are intended to allow prospective NHS foundation trusts to prepare for that. They are simply enabling provisions; for example, to discuss the terms of authorisation with the regulator or to discuss contracts with the PCTs. I hope that that will satisfy the noble Lord. They are not a carte blanche provision; they will be able to do only that which is necessary and related to becoming foundation trusts. They offer an enabling power.

My noble friend Lord Hunt asked about the timetable. We are at the mid point of the consultation process and good progress is being made. However, we will ensure that the independent regulator has the time he needs to give full and proper scrutiny when he is considering the applications.

5.30 p.m.

Baroness Cumberlege: I thank the Minister for the sincerity of her response. I understand what she is saying in terms of the Secretary of State, who is the guardian of the NHS in its widest terms. However, I fail to understand one aspect of the Government's proposals; that two people have the right of veto or the right to accede to the request.

The Minister said it would be demoralising if the Secretary of State had a veto once people have gone through the process with the regulator. But in the system laid out before us, the regulator has the right of veto. That is equally demoralising for applicants because here is another body. Perhaps we can look at some of the other processes and laws which govern the way in which we behave in this country. Under the Town and Country Planning Acts, for instance, the inspector, or the regulator, has the first call and the right of appeal is to the Secretary of State. That is a more logical way. However, if the Minister is so anxious to try to define the

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different roles and responsibilities of the Secretary of State and the regulator, would it not be clearer and easier for applicants if the regulator were not involved and we knew that the Secretary of State would agree or disagree with the applications? That would prevent many fears which will arise in respect of the present system.

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