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Earl Howe: The reason that other regulators are able to act in a much more independent fashion is that they do not have the Secretary of State round their necks in precisely the way that the Bill will lead to with the regulator of foundation trusts. If, to be worth his salt, the regulator wants to assert his independence, he can do that by disagreeing with the Secretary of State. He would not do that flippantly or without cause, but it is not clear what scope he has to do that. Once the Secretary of State has examined the proposal in detail, presumably the process will have been gone through in a thorough and effective way and the regulator will be left standing there saying, "I agree".

Baroness Andrews: In simple terms, the regulator sets the terms of the authorisation as well as deciding whether to authorise. That is his critical role and the Secretary of State has no role in that.

Earl Howe: That is helpful. I thank the noble Baroness and shall reflect on that distinction. It is quite a nice distinction, but the noble Baroness is a very nice lady and that is an illuminating point to have made. In view of the progress we need to make today, I do not think that we should spend longer on the point. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

The Deputy Chairman of Committees (Lord Tordoff): Before calling Amendment No. 119, I must inform the Committee that if that amendment is

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agreed to, I cannot call Amendments Nos. 120 and 121, which stand in the name of the noble Lord, Lord Hunt of Kings Heath.

Earl Howe moved Amendment No. 119:

    Page 2, line 21, leave out paragraph (a).

The noble Earl said: Amendment No. 119 raises a concern prompted by Clause 4(4)(a), which relates to the actions that an NHS trust may take once it has submitted its application for foundation status. It seems to me that an applicant for foundation status is likely to take its cue from this clause to rush ahead and set up membership lists, run elections and establish boards of governors. In doing so, clearly it will anticipate approval of the application by the regulator. But what if the application is not approved? In that event the trust will have gone to enormous trouble and expense for no benefit. In the process it will have raised public expectations only then to have to dash them.

I am concerned that the Bill gives explicit permission to trusts to jump the gun in that sense. Perhaps the Minister can explain what lies behind this provision and how he believes, if he does, that it will not lead to a waste of public money in those cases where applications are turned down. I beg to move.

Lord Warner: I apologise to noble Lords in advance for the fact that the nice, amiable, infallible noble Baroness, Lady Andrews, is not going to respond to this amendment.

Amendment No. 119 would prevent NHS applicants from effectively setting up shadow governance arrangements in preparation for authorisation as NHS foundation trusts. However, it is clear that they will need to do that in order to be ready for NHS foundation trust status. In our view it would not be acceptable for there to be a gap between the removal of the powers of the Secretary of State over the trust and the setting up of the local accountability mechanisms which replace them.

Furthermore, the regulator will need to see an applicant's proposed governance arrangements before he issues an authorisation in order that he can satisfy himself that they are in accordance with Schedule 1 and are otherwise appropriate.

I understand that the noble Earl may be concerned about wasted effort. However, I reassure him that he should be aware that there is nothing to prevent an NHS trust resubmitting an application. So, if a trust has done the work and the application fails, the work is not wasted because it can be taken forward in a resubmission.

We have discussed issues concerning the cost of governance and I see no need to repeat the arguments and assurances I have given. Amendment No. 119 could create a hiatus in those trusts which are ready to move forward to foundation trust status and we think that it should not be proceeded with.

Earl Howe: Once again the Minister has given me food for thought. This situation is all rather chicken and egg. However, I see the force of his point. To add

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to what the Minister said, I believe it is the Government's intention that all NHS acute trusts should achieve foundation status within five years, so presumably no work would be wholly wasted. However, it would be more than just a disappointment if a trust fails to achieve foundation status at the first attempt, because all the effort and the publicity will have been expended. The eager public would be waiting to cast their votes for real, to elect the board of governors and to have their say and suddenly they would not be able to do that. Nevertheless, what is stated in the Bill may be the lesser of two evils. I shall reflect on that. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Hunt of Kings Heath moved Amendment No. 120:

    Page 2, line 22, leave out "17" and insert "17A"

On Question, amendment agreed to.

Lord Hunt of Kings Heath moved Amendment No. 121:

    Page 2, line 23, leave out from first "of" to end of line 24 and insert "establishing the initial membership of the NHS foundation trust and of the board of governors, and the initial directors, and enabling the board of governors and board of directors to make preparations for the performance of their functions"

On Question, amendment agreed to.

[Amendment No. 122 not moved.]

Clause 4, as amended, agreed to.

Clause 5 [Other applications]:

[Amendment No. 123 not moved.]

Lord Clement-Jones moved Amendment No. 124:

    Page 2, line 33, leave out from "trust" to end of line 34 and insert "provided those persons do not continue to undertake commissioning work on behalf of NHS patients"

The noble Lord said: The wind has been somewhat taken out of the sails of Amendment No. 124 by Amendment No. 9 tabled by the noble Lord, Lord Blackwell, on which we had an interesting debate. We on these Benches agreed with the response but it was probably not quite to the taste of the noble Lord, Lord Blackwell.

Amendment No. 124 concerns the issue of whether the status of foundation trusts is accordable under this legislation to bodies other than acute hospital trusts. It has been clearly indicated that in future mental health trusts will be able to benefit from this legislation. However, from the response given by the noble Lord, Lord Warner, on the first day of Committee at col. 188 of Hansard, it seems clear, although there does not appear to be a bar under the Bill, that it is not the intention of the Government to accord foundation status to primary care trusts at this stage under this legislation. Indeed, the noble Lord went as far as to say that he did not think this model was appropriate for primary care trusts.

Be that as it may, the Bill as drafted does not appear to prevent primary care trusts achieving that status. It is in the discretion of the Secretary of State and the

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regulator. On these Benches we believe that there should be a bar. If the Government are genuine about saying that they do not intend to give foundation status to primary care trusts, we believe that words to that effect should remain on the face of the Bill. I do not intend to debate the issue of the Secretary of State's approval, as we have already had a considerable debate on that relating to applications by NHS trusts, but Clause 5, "Other applications", currently leaves the possibility of a loophole that would allow primary care trusts to attain foundation status.

Not only is the model set out inappropriate for acute hospital trusts, as is well known and as we have made clear throughout discussion of the Bill, it would be even worse when applied to commissioning bodies—primary care trusts. We seek reassurance from the Government; indeed we want them to agree to such a bar in the Bill. I beg to move.

6 p.m.

Baroness Andrews: I am grateful for that explanation of the amendment, which I initially found rather puzzling. It would, first, remove the requirement for applicants other than NHS trusts to obtain the Secretary of State's support. On previous amendments, we discussed why it is appropriate for the Secretary of State's support to be sought before any body—whether an NHS organisation or otherwise—applies for NHS foundation trust status. Although such organisations do not yet exist, as a later amendment will allow me to say in a little more detail they should be treated exactly the same and subject to the same criteria.

We had a good debate on Amendment No. 117 on the position of PCTs, which I do not want to rehearse. We have designed the model—I cannot think of a better word—in the Bill with provider organisations in mind. We are not opposed in principle to applying democratic or foundation principles to PCTs, but the time is simply not right.

I know that the noble Lord has been exercised during the past 18 months about capacity issues in PCTs and will agree that they are embryonic organisations. They are in development and have a way to go before they are doing the job that we want them to do. They are simply too new at present to be able to cope with another set of demands and requirements. So we cannot accept the amendment, and I hope that the noble Lord will agree that there are reasonable grounds for our not doing so.

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