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Lord Warner: I assure the noble Earl that an NHS trust—let us forget NHS foundation trusts for the moment— has a pretty good idea of and access to data on the demography and socio-economic nature of the area for which it is responsible. This is not rocket science—these data are available to many people in the way they conduct their day-to-day affairs.

Earl Howe: Perhaps PCTs might have that kind of demographic information—I am not sure that I accept that every trust has it. Nevertheless, if the Minister tells me that that is so, I must take it on board.

Placing this requirement on the face of the Bill will lead to serious practical problems. We can all sign up to the general wish that there should be representative membership, but I think it is an unnecessary straitjacket to have it as a legal requirement.

Once again, we must be mindful of the time, and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 132 had been withdrawn from the Marshalled List.]

Earl Howe moved Amendment No. 133:

"( ) the applicant has met quality thresholds set by the regulator and reported on by the Commission for Healthcare Audit and Inspection,"

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The noble Earl said: We see in Clause 6 the matters on which the regulator will need to be satisfied before he issues an authorisation for a new foundation trust. "Earned autonomy" is a phrase we have heard rather a lot of in the context of foundation trusts. I have always taken it to mean that a hospital which managed to reach certain targets and quality standards laid down by the Government would be allowed greater freedom to manage its own affairs in its own way. It is quite surprising, therefore, that quality standards are nowhere mentioned in the list of prior criteria on which the regulator will need to be satisfied. The list of matters in subsection (2) is largely administrative.

However, if a trust's performance is to have a bearing on whether its application receives approval—and we understand that it will have a major bearing—we need to be certain that the basis on which it is assessed really reflects its degree of overall competence. I do not intend to have a long debate on star ratings, but we need to recognise that the current assessment system simply does not do that.

If one looks, for example, at out-patient appointment times, a hospital may appear to do very well. But the criteria relate only to first appointments, not follow-up appointments. There are 3 million first appointments and more than 7 million follow-up appointments, which suggests that if there is to be a target at all, the target is too narrow. Similarly, the target for cancelled operations relates only to operations cancelled on the day, whereas operations can often be cancelled several times in succession before the day of surgery. These cancellations are left out of the reckoning altogether.

Star ratings are therefore not necessarily reliable guides to underlying performance. Even if they were, they are unstable. Recently, four trusts which had been invited to apply for foundation status lost a star and had to withdraw. What would happen if they had lost the star after they had been authorised?

It is not clear what would happen if there were an even more precipitate fall. Two trusts recently moved from three stars to zero stars in the space of 12 months. A hospital's record can be quite variable, depending on the time of year—for example, on the four-hour A&E target. Eight of the foundation trust applicants failed the four-hour A&E target in the first quarter of this financial year.

We need to hear from the Minister whether there will indeed be quality standards and what measures of quality the regulator will be using. I beg to move.

7.15 p.m.

Baroness Finlay of Llandaff: I hesitate slightly to speak to this amendment because I completely agree with the spirit of it and have been very impressed with all the contributions from the noble Earl, Lord Howe, to date. Therefore, I feel almost churlish in questioning part of the amendment's wording.

Not enough quality standards are stipulated within the process of approval as it is, and they are set through the national service frameworks and the National Institute for Clinical Excellence. I am concerned that

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the amendment's wording could make the regulator feel that he could override these. I seek a little reassurance from the noble Earl on that aspect.

I also seek reassurance from the Minister that the quality standards laid out by the National Institute for Clinical Excellence and in the national service frameworks, and those that the Government have so successfully driven through their national clinical directive and the national service frameworks, will be the basis on which applications for foundation trust status will in future be judged. That is preferable to the very crude targets encapsulated in the star rating system, with all the criticisms that we have received. We have seen an excellent raising of quality standards over the last few years, and not to embody that in the process of developing foundation trusts would be to throw out the baby with the bathwater.

Baroness Andrews: It is tempting to have a debate on the star rating system, but I shall resist it, as it would tie up the evening.

One can hardly be against the amendment, but it is not necessary. Let me take forward the argument of the noble Baroness, Lady Finlay. This is the first time in the history of the NHS that a government have, over the past few years, established national standards and comparative measures. These are being refined and improved as time goes on.

I agree that the system is not perfect, but it is improving and will continue to improve. The fact that the way in which the ratings are calculated is published and revised in the light of previous findings means that it is an iterative process. It does not stand alone—it is part of the whole range of clinical judgments being made, as the noble Baroness said. It demonstrates our continued commitment to reform all elements of health service provision. This is a very important means of informing the public about how their local hospitals are performing. We need to be sure that that assessment is independent and robust.

It is very important that all NHS care meets the very highest standards. That is why the same quality standards, backed up by monitoring and inspection by CHAI, will apply to all NHS care, regardless of the nature of the organisation providing it.

With this guarantee, there is no need to include a specific reference to quality in the criteria for authorisation as an NHSFT. Applicants must seek the approval of the Secretary of State, as we have discussed this evening. He will have to be satisfied that the care would be of an appropriate quality. The current NHS applicants must come within the category of three-star performance ratings. These are the best indications we have of a track record of good performance.

To take the noble Earl's point, this can be an unstable method, as the performance of some trusts changes year on year. When that occurs, the regulator will have to consider why the ratings have dropped, taking other information into account. He will have to exercise his discretion in determining whether the

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change was indicative of a breach of terms of authorisation. That will depend on how serious the change was. Clearly, a range of factors will be taken into account, and one has to be prepared sometimes to look at serious failure. We have built in that provision.

I should stress that the standard is, of course, a minimum. Under Clause 6(2)(e), the regulator must also be satisfied that,

    "the applicant will be able to provide the . . . services",

protected under its authorisation. That clearly means being able to provide services to an appropriate standard.

We have common concern that quality thresholds are met. We believe that the three-star rating offers us the best and most appropriate position to start from. I hope that with those assurances the noble Earl will feel able to withdraw his amendment.

Earl Howe: I am grateful to both noble Baronesses who contributed to the debate, including the Minister for her reply.

I should explain to the noble Baroness, Lady Finlay, that the wording of my amendment was meant to reflect the fact that it is for the regulator to authorise foundation trust status. Therefore, if he is the referee or adjudicator, CHAI acts as the inspector. That is why both bodies are mentioned in my amendment; the one is not supposed to second guess the other.

I take note of the Minister's comments, and there may be little to separate us. Would she mind if I asked her a specific question? What is the precise linkage between the star rating system and foundation trust applications? I understood the star rating system to be proportional to the total number of hospitals, so that three-star status was intended to represent only a certain percentage of hospitals. By definition, it would be impossible for all trusts to achieve three stars, because there was an element of relativity in the assessment process. I may have misunderstood the system but, if that is so, and if all acute trusts become foundation trusts within a five-year span, how will that happen? It will be impossible for all trusts to achieve three-star status. I can only conclude that the star rating system will have to be modified so that the relative ingredient that I mentioned is removed.

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