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Lord Warner: My Lords, I am in some difficulty here. I am being encouraged by the noble Lord to move Amendment No. 248. I am being advised not to move Amendment No. 248 by my advisers on the grounds that, given the vote, we would not move our amendments in this group. We have to look at the amendments moved by the noble Lord, which have

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been carried, to determine whether, technically, they require any tidying up. In the light of that, we will not be moving Amendment No. 248.

Lord Clement-Jones: My Lords, before the Minister sits down, we particularly wish that he would move Amendment No. 249.

[Amendment No. 248 not moved.]

Lord Warner moved Amendment No. 249:

    Page 13, line 32, at end insert—

"( ) In section 19 (supplementary), in subsection (2)—
(a) in paragraph (k), after "an NHS trust," there is inserted "an NHS foundation trust,",
(b) in paragraph (p), after "NHS trusts," there is inserted "NHS foundation trusts,"."

The noble Lord said: My Lords, I have nothing to add. There seems to have been a change of heart in the box since I last spoke to my advisers. They say that I should move Amendment No. 249. I beg to move.

On Question, amendment agreed to.

[Amendments Nos. 250 and 251 not moved.]

Clause 32 [Commission for Patient and Public Involvement in Health]:

Lord Warner moved Amendment No. 252:

    Page 13, line 34, leave out from beginning to "in" in line 36 and insert—

"( ) Section 20 of the National Health Service Reform and Health Care Professions Act 2002 (c. 17) (Commission for Patient and Public Involvement in Health) is amended as follows.
( ) In subsection (10), after "an NHS trust," there is inserted "an NHS foundation trust,".
( ) In subsection (12),"

The noble Lord said: My Lords, there has been a change of heart. We wish to move Amendment No. 252 as well. I beg to move.

On Question, amendment agreed to.

[Amendment No. 253 not moved.]

Clause 33 [Taxation]:

[Amendment No. 254 not moved.]

Clause 34 [Other amendments relating to NHS foundation trusts]:

[Amendment No. 255 not moved.]

Lord Warner moved Amendment No. 256:

    After Clause 34, insert the following new clause—

(1) Regulations may make provision as to the conduct of elections for membership of the board of governors of an NHS foundation trust.
(2) The regulations may in particular provide for—
(a) nomination of candidates and obligations to declare their interests,
(b) systems and methods of voting, and the allocation of places on the board of governors, at contested elections,
(c) filling of vacancies,
(d) supervision of elections,
(e) election expenses and publicity,

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(f) questioning of elections and the consequences of irregularities.
(3) An NHS foundation trust must secure that its constitution is in accordance with regulations under this section.
(4) Pending the coming into force of regulations under this section, elections for membership of the board of governors of an NHS foundation trust, if contested, must be by secret ballot."

On Question, amendment agreed to.

Schedule 4 [Amendments relating to NHS foundation trusts]:

[Amendment No. 257 not moved.]

Clause 35 [Offence]:

Lord Warner Amendments Nos. 258 to 260:

    Page 14, line 18, leave out from "form" to end of line 19 and insert "stating which constituency he is a member of".

    Page 14, line 22, leave out "relevant constituency" and insert "constituency for which the election is being held"

    Page 14, line 26, leave out "relevant constituency" and insert "trust"

On Question, amendments agreed to.

[Amendment No. 261 not moved.]

Clause 36 [Representative membership]:

Lord Warner moved Amendment No. 262:

    Page 14, line 38, leave out "its public" and insert "any public constituency and (if there is one) of the patients'".

On Question, amendment agreed to.

[Amendment No. 263 not moved.]

Clause 37 [Audit]:

[Amendment No. 264 not moved.]

Schedule 5 [Audit of accounts of NHS foundation trusts]:

Lord Warner moved Amendment No. 265:

    Page 130, line 30, after second "the" insert "board of governors and board of directors of the"

The noble Lord said: My Lords, for the avoidance of doubt, in moving Amendment No. 265, I shall speak also to Amendments Nos. 266 and 267. Schedule 5 sets out the duties, powers and responsibilities of an NHS foundation trust auditor. Paragraph 3 places a requirement on the auditor to consider whether he should make a report in the public interest on any matter which comes to his notice during the course of the audit.

These amendments have been tabled in response to the concerns expressed in Committee by the noble Baroness, Lady Noakes. She argued powerfully that in order to ensure proper accountability, it is important that there is a mechanism for ensuring that the membership is made aware of any auditors' reports on an NHS foundation trust and that they are made in the public interest. We propose to amend the Bill to ensure that any such public interest reports are sent to the board of governors, as the representative of the members, as well as to the directors of the NHS foundation trust, at the same time as they are submitted to the regulator. I beg to move.

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Baroness Noakes: My Lords, I thank the noble Lord for listening to our arguments in Committee. I am pleased with the amendments.

On Question, amendment agreed to.

Lord Warner moved Amendments Nos. 266 and 267:

    Page 130, line 33, leave out "trust and" and insert "board of governors and board of directors of the trust and to"

    Page 130, line 37, leave out "trust" and insert "directors"

On Question, amendments agreed to.

[Amendment No. 268 not moved.]

Clause 38 [General duty of NHS foundation trusts]:

[Amendment No. 269 not moved.]

Clause 39 [Interpretation of Part 1]:

Lord Warner moved Amendment No. 270:

    Page 15, leave out lines 16 to 18.

On Question, amendment agreed to.

[Amendment No. 271 not moved.]

Schedule 6 [CHAI: supplementary]:

3.45 p.m.

Earl Howe moved Amendment No. 272:

    Page 132, line 13, leave out paragraph (a) and insert—

"(a) a person appointed as chairman by the body specified in section 183(2B),"

The noble Earl said: My Lords, in moving Amendment No. 272, I shall speak at the same time to Amendments Nos. 273 to 282 inclusive, and Amendments Nos. 406 to 408 inclusive. In moving this amendment. I return to one of the key themes of our Committee debates: the extent to which both CHAI and CSCI are to be allowed to operate independently of government.

Independence from government is far from being some kind of heretical suggestion. On the contrary, it is the very characteristic that will ensure the one outcome that we all want to see emerge from these provisions, which is that the two new bodies should command total public confidence. They must not be seen in any sense to be the stooges of Ministers. They must be free to offer advice and to reach conclusions impartially, and must be seen to do that.

I agree that neither body can operate in a way which isolates them from the broad drift of government policy or from the way in which Ministers may wish to see health policy and the health service develop but, as a matter of principle, the leverage that a government are able to exercise over CHAI and CSCI should be kept to the absolute minimum.

There are several levels on which such independence can manifest itself. The first relates to the question of who should appoint the chairman and members of CHAI. As the Bill stands, those appointments are in the gift of the Secretary of State. I do not think that the Government have made the case for this. They have said that it is their intention for all such appointments to be delegated to the NHS Appointments

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Commission. If that is so, then I ask the obvious question: why should that not be written on the face of the Bill?

In Committee, the Minister said that he felt it sensible for the Government to reserve for themselves a power of appointment of the chairman and members of the two bodies. He also said that the Government should be judged on their past performance as regards their readiness to delegate appointments to the commission. I am afraid that I am not swayed by either of those arguments. Even if one were to accept the slightly challenging proposition that this Government are a model of fairness and objectivity in the way that they approach appointments of this kind, the acceptability of the Bill, as the Minister knows, should not be judged according to the practices of the current administration. Those things are beside the point; the Bill should set down rules and procedures appropriate for this or any other government. We know what scope there is for political bias and for the subjective judgment of Ministers to influence their choice of appointee. With bodies as important as these, there is a cast-iron case for ruling out that possibility from the beginning.

I do not propose to deprive the Secretary of State of the power to remove either the chairman or any of the members on the grounds set out in the schedule. Those provisions seem sufficiently fair to cater for a situation where things may be going wrong and speedy action needs to be taken. However, I do not see why the remuneration of the chairman and members of CHAI and CSCI should be directly determined by the Secretary of State. Instead I propose that the Bill should adopt the same formula as that used in the Bank of England Act 1998. Under that Act, it is for the Bank itself to determine the Governor's pay, with the approval of the Secretary of State. That may be a shift only of emphasis, but it is an important shift.

Similarly, it should not be for the Secretary of State to say whether there should be pensions and allowances for the chairman and members. Following once again the model of the Bank of England Act, CHAI and CSCI themselves should be allowed to settle that question. If they decide that there should be pension arrangements, as I expect they would, then they should seek the approval of the Secretary of State for that decision. The Secretary of State would then be responsible for deciding what those arrangements should be.

Lastly, remaining with the theme of independence, the bodies must be independent financially. If they cannot be sure that they can have the money necessary to carry out their functions, they will not be truly independent. Amendments Nos. 277 and 282 amend Schedules 6 and 7 respectively for CHAI and CSCI to remove the absolute prohibition on borrowing other than from the Government with a power to borrow other than from the Government. This new power is not unconstrained, but would allow cumulative additional borrowing up to the amount of the previous year's annual expenditure.

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In the ordinary course of events, if CHAI needed to borrow money, it would do so from the Government. As the Minister pointed out in Committee, that is the cheapest course, but it is not necessarily bad value for money—as the Minister went on to allege—to pay a higher interest rate. Value for money is not only about economy, it is also about efficiency and effectiveness. If CHAI is prevented investing in, say, some new technology because the Treasury's finances are in a mess, the efficiency or effectiveness of CHAI's operations could be seriously harmed. It could represent very good value for money to allow CHAI to borrow if it meant that the body could then discharge its functions in the best way possible.

I am sure that CHAI and CSCI will be responsible bodies; they will have the Comptroller and Auditor General breathing down their necks if they act otherwise. However, to suggest, as the Minister did in Committee, that borrowing by these responsible bodies could present a real danger to the effective performance of their duties is carrying things too far. The reverse is the truth: they have to be given financial freedom if they are to carry out their functions effectively.

The spirit of what the Government said they wanted to see from these provisions is that there should be freedom consistent with proper accountability to Parliament. I believe that our amendments conform with that principle. I beg to move.

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