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The noble Baroness said: We come to the zero-sum game, or dog-eat-dog. Amendment No. 156 requires the regulator, in drawing up the prudential code under Clause 12, to have regard to the impact of private borrowing by foundation trusts on the access of NHS trusts to capital. This zero-sum game caused concern to a number of noble Lords at Second Reading.
We on these Benches favour freedom for foundation trusts to borrow, but not if the price is to starve the remainder of the NHS of capital. But that is the effect of the shabby compromise reached between the Chancellor and the Secretary of State for Health, when the Chancellor got his way and removed one of the most attractive aspects of foundation trust status.
The department's expenditure limits will have a real impact on the NHS if foundation trust capital takes pound for pound away from the remainder of the NHS. That is why it is so important that the regulator takes that into account when determining the prudential borrowing code. I beg to move.
Lord Clement-Jones: I entirely echo what the noble Baroness said. We on these Benches have put our names to the amendment because we believe that, as the foundation hospitals are currently written into the Bill, this issue will be one of the real problems facing them. We are concerned about its impact on the remainder of the NHS and this "beggar my neighbour" approach could have a widespread effect.
As the noble Baroness said, the problem arises from the unwillingness of the Treasury genuinely to allow foundation hospitals a degree of freedom over their capital borrowing. In this context, capital is of course of huge importance in terms of development of services. I believe that this will be one of the major stumbling blocks in future, both in the way in which non-foundation trusts view foundation trusts and the way in which foundation trusts will be able to develop their own services when they are constrained in this way. There is no reason why they should be because whether foundation trusts will be able to borrow will depend on whether lenders believe they are a good risk. That is the crux of the matter. This set of provisions does not take enough account of that. They are hedged around with all kinds of artificial restrictions.
NHS foundation trusts will be given the opportunity to access capital from both the public and private sectors and to use a wider range of financing options than is currently available to existing NHS trusts. Because accessing capital will in future be tied more closely to individual financial performance, it will enable each NHS foundation trust to better tailor capital planning to its individual circumstances, offering the opportunity to finance a wider range of healthcare delivery focus projects than it can at present. Examples of such projects might include new diagnostic centres, patient information systems or environmental improvements.
The independent regulator must, by virtue of Clause 3, exercise the functions in a manner that is consistent with the performance by the Secretary of State of the duties under Sections 1, 3 and 5 of the National Health Service Act 1977. This includes the duty to provide a comprehensive health service that is free at the point of use. So there are constraints on the regulator as well by requiring him or her to act in accordance with the Secretary of State's duties.
In drawing up the prudential borrowing code, the independent regulator will have to take account of the impact of any borrowing on the wider NHS as part of his Clause 3 duty. NHS foundation trusts will not be robbing Peter to pay Paul, and we think Amendment No. 247 is unnecessary.
The noble Baroness drew attention to the remarks I made at Second Reading. But we cannot just sweep away the fact that the Government are changing the agenda in terms of both the revenue and capital that is available to the NHS. While I do not want to make narrow political points, I suggest to the Benches opposite that their thinking may be a bit conditioned by their own experience in government. I shall give a couple of statistics rather than a long line of them.
In the six years from 199798 to the end of 200203, NHS capital increased by 42.3 per cent in real terms. In the last five financial years of the Conservative government, it went down by 22.9 per cent in real terms. I am using those figures not just to make a narrow political point but to suggest that one's view about whether the other parts of the NHS may be "robbed" by NHS foundation trusts must, to some extent, be influenced by one's knowledge and experience of how much capital is in total available to the NHS. I am trying to say that the experience under this Government is different from that which Ministers will have had under a Conservative government.
If we look at the growth of capital that is envisaged over the next five yearsand there is no reason for thinking that this will not take placeand at the 11 years from 199798 to 200708, the period covered by NHS foundation trust changes, capital will increase by 246.1 per cent in real terms, more than doubling in a decade. So the total volume of capital that is available to both NHS foundation trusts and NHS trusts is far, far greater than has been the case in the past. The revenue allocations are going up by around 7.5 per cent in real terms.
Baroness Noakes: I accept that there is more capital going into the NHS now than there was during the early 1990s, but despite the increases the Minister referred to, there is still a very significant backlog in the NHS. The backlog maintenance must be something like #2.5 billion or #3 billion, even without considering the demands on the NHS for new medical technology or replacing existing technology, such as scannersfor which, again, there is a significant backlog.
Although increasing sums have gone in, we should not regard ourselves as being in some kind of seventh heaven so far as capital is concerned, because the capital needs in the NHS are very large. Our concern has always been that the foundation trust sector would have the ability to take resources away from the rest of the NHS because of the way in which the pound for pound calculation works on the departmental expenditure limit. The Minister has not really answered that point, which we see as a major problem.
I am not sure whether the amendment that we tabled is the right way to deal with the problem; we may need something even more direct. I shall reflect on that and read Hansard again, and doubtless we shall discuss the issue further. I beg leave to withdraw the amendment.
First, when will the draft prudential code be available? I understand that a draft is available. The noble Baroness, Lady Andrews, told me recently in a Written Answer that something called metrics and ratios will be published shortly. "Shortly" is one of the most flexible words in the Government's vocabulary, so will the Minister tell us when that will be? He indicated a few moments ago that he would include that in one of the many letters that he will have to write after today's sitting. Perhaps he would confirm that.
Secondly, will he say why the Secretary of State should be consulted by the regulator on the prudential code? What information could the Secretary of State give the regulator to which the regulator did not already have access? On the other hand, is this another backdoor way for the Secretary of State to give the regulator directions and, perhaps, tell the regulator how the Secretary of State sees the performance of his duties, in effect making that binding on the regulator?
Thirdly, to reinforce a point discussed by the noble Lord, Lord Clement-Jones, under one of his amendments, who will be consulted on these matters? There is a provision for it to be whoever the regulator believes to be appropriate. The noble Lord tabled one suggestion for discussion, but I am still in the dark
I am inclined to think that the prudential code is a mere flourish. At best, it will add nothing to individual decisions that must be made about borrowing limits for individual tasks under Clause 17, to which we will come in due course. At worst, it will tie up a simple process in financial sector gobbledegook, with the result that the wrong decisions will be made. We shall need a lot of convincing that the clause should stand part.
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