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Baroness Carnegy of Lour: My Lords, these are important amendments. There is a great difference between how it feels to be the chairman of a quango if you are appointed by the Secretary of State and your salary and conditions of service are fixed by him, and how it feels if you are appointed independently by someone else and your salary and conditions of service are determined by the body of which you are the chairman. It is a completely different feeling.

In my experience, there are two possible kinds of independence in these circumstances. If one has been appointed by the Secretary of State, there is independence within the broad spectrum of what is acceptable to him and to the Government of the day. Should one go on into a different kind of government, one's freedom changes slightly and one is prepared to accept that. However, if one is appointed quite independently, one can, if necessary, stand up to the Secretary of State and be truly independent. That is what we want in this case. We want the two bodies to be able to carry out, within their terms of reference, a completely independent job.

Of course we understand that there are two ways of doing so, but this is a new situation. Foundation trusts are supposed to be independent hospitals and they need independent bodies to inspect them. I strongly support the amendments.

Lord Clement-Jones: My Lords, I support the amendments. When they first announced the merger of the acute inspection aspects of CHI and the

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National Care Standards Commission, the Government promised a new CHAI which would be every bit as independent of government as the Audit Commission. In a sense, these amendments are designed to ensure that the Government honour that obligation. They are a natural way of ensuring that the independence of CHAI and CSCI is absolutely clear. As the amendments are drafted in moderate tones, I shall be surprised if the Government can find any reason to resist them.

Baroness Howarth of Breckland: My Lords, the noble Earl has raised a number of issues. I shall deal with them steadily as I am not as practised a parliamentarian as I hope to be in the future.

I support Amendments Nos. 278 and 281 in relation to appointments because they reflect current practice in that chairs and board members are appointed by the NHS Appointments Commission. I do not understand therefore what difficulty there will be in establishing that as a pattern. It has nothing to do with the issue of accountability through Parliament and the Secretary of State for the work carried out, but it does give a degree of separation in terms of appointment. It is suggested that an independent element could be added to the system for the appointment and dismissal of the chair and board members. This is similar to the existing system for local authority chief executives. Both suggestions are valuable.

However, I have real concerns about the amendments that would allow the commissions—certainly in relation to CSCI, which I would understand more than I would CHAI—to repay borrowed money. This is because of the complexity in regard to how repayments would be made and how money would be raised in order to make such repayments. It must be remembered that these organisations will have the freedom to impose fees and to increase them in certain circumstances. I am concerned that fees should be kept at a proper level and not used to pay for borrowed money.

It would be extraordinarily helpful if CSCI and CHAI—I do not quite understand how the process works—were able to make direct submissions to spending reviews independent of the Department of Health. The problem at the moment is that they must make their submissions through the Department of Health's total submission, where they are in competition with other groups rather than able to make their own direct interventions.

A great difficulty may arise if both commissions are not properly resourced in the future by the Government, but I am sure that the noble Lord, Lord Warner, will assure us that they will have appropriate resourcing in the future.

Lord Warner: My Lords, this large group of amendments concerns the appointment, pay and financial independence of the two commissions and the regulator.

The effect of Amendments Nos. 272, 273, 278, 406, 407 and 408 would be that all appointments to the boards of both CHAI and CSCI and also the

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independent regulator would be automatically delegated to a special health authority—effectively the NHS Appointments Commission.

I said previously that the Government envisage that the vast majority of national appointments for which the Department of Health is responsible will be delegated to the NHS Appointments Commission, with only a very small proportion of appointments being made directly by the Secretary of State. The position regarding CHAI and CSCI has already been made quite clear in Committee and in another place. The Government are committed to delegating all stages of the appointments processes for both commissions to the NHS Appointments Commission for chairs and non-executive members. Ministers will not be involved other than by setting the criteria against which candidates are judged.

As regards the independent regulator for NHS foundation trusts, it is the Government's intention that the Secretary of State will appoint the regulator on first establishment. He may in the future consider delegating appointment of the independent regulator to the NHS Appointments Commission. It is likely that appointments to the new board structure will also be delegated in that way. Against this background, we do not believe that there is any need for the amendments.

As regards Amendments Nos. 274, 275, 276, 279, 280 and 281—which concern the determination of remuneration and other allowances—we do not believe that the parallel with the Bank of England is at all valid. The effect of the amendments is that CHAI and CSCI would themselves be responsible for determining remuneration and other allowances, including pensions, of the chairmen and members of the commissions. This would be highly inappropriate because, as I said in Committee, it is proper that these functions should belong to the Secretary of State as he sets the overall budget for CHAI and CSCI in consultation with the inspectorates—and, in the case of CHAI, with the National Assembly for Wales—and he will be able to ensure that the remuneration paid to the chair and other members is appropriate and proportionate.

It would be a little bizarre to follow the path of the amendments because the chairs and other members of CHAI and CSCI are public appointees rather than employees of the commissions. As such, their remuneration should not be determined by themselves as that would hardly ensure proper public accountability. It cannot be right for the chair and other members of CHAI and CSCI to determine themselves the amount of remuneration they are to receive. I am not sure that they would wish to do so as this would leave them open to accusations of lining their own pockets. Certainly, as someone who has chaired an NDPB, I would not want to be in the position of effectively fixing my own pay. The backstop proposed by the noble Earl of the Secretary of State having to approve such determinations would put him in an impossible position because he might have to disagree publicly with the proposals put forward by the commissions.

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I am unclear about what benefits the amendments would have. They would not serve to make the commissions more financially independent as the Secretary of State—in consultation with the Assembly in the case of CHAI—will remain responsible for setting the overall budget. The amendments would serve only to set up a system for CHAI and CSCI which, for no good reason, would be different from all other public appointments to NDPBs and would muddy the waters of accountability.

Amendments Nos. 277 and 282 seek to allow CHAI and CSCI to borrow money from the private sector. In Committee, I made clear that the Government are committed to ensuring that CHAI and CSCI are fully funded to carry out all their functions effectively, whether that funding is obtained through fee income or through central funding. Clearly, we would not wish to go to all the trouble and expense of setting up a new and powerful independent set of commissions only to render them incapable of doing their work due to lack of funding.

It would be unprecedented for NDPBs such as CHAI and CSCI to be able to raise money by borrowing from the private sector in this way. As I stated in Committee, there are good reasons, we think, in terms of value for money on interest rates and accountability for their core functions why we should not take this particular path. It is not the case, as the noble Earl has previously suggested, that this unwillingness to allow the commissions to borrow from the private sector undermines our stated belief in their capabilities and independence.

CHAI and CSCI will be independent inspectorates of health and social care, and we have every confidence in their undoubted expertise in these areas. However, I see no reason why we should depart from well established financial practices for NDPBs for CHAI and CSCI. I do not believe that these amendments make sense.

Earl Howe: My Lords, I am grateful to the Minister for setting out the Government's stall so clearly. The way in which he has done so starkly opens up the difference in philosophy between ourselves and the Government on what these two bodies should look like. I thank my noble friend Lady Carnegy for what she said. I am grateful, too, for the support from the noble Baroness, Lady Howarth, at least in part, for what I had to say.

I simply do not think that the Minister has made the case for reserving a power of appointment to government. He has not said why or in what circumstances this power would be needed. If, as they say they do, the Government intend to use the NHS Appointments Commission for the vast bulk of these appointments, that is surely the track we should pursue. For the life of me, I cannot think why this should not be set down.

There is a very good reason for creating that Appointments Commission. Our memories do not need to be that long to recall that there was some of controversy during this Government's initial period in

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office over politically biased appointments. Whether the allegations were well founded is another matter, but the Appointments Commission was set up to address that concern, and I applauded it.

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