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I remind the Committee that the NHS has started to recognise its staff. We have the health and social care awards, which recognise achievement in the NHS. There are prizes to recognise a significant challenge and a significant achievement, such as the example of Peter Mansfield’s achievement. On many occasions we have debated the challenges that the health service will face over the next decade. Most of us are fully familiar with the ageing population, long-term conditions and lifestyle diseases. There are many challenges out there. If we can encourage our innovators to think about solutions for those major challenges, that will be money well spent.
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I will return to backfill. Historically, most researchers who have received sums of money of this type have invested that money in further research. There are many examples of this. The seven Nobel Prize laureates for physiology and medicine who worked in the NHS are a good example of how that funding maintained and continued their research.
I have addressed how the expert panel will be constructed. As I said, we need expertise from outside to help us determine who these experts are, but not just to do the assessments. Let us not forget that the challenges need to be decided. It is not for me and the Department of Health to do that. It is for the expert panel to decide the challenges that will have the biggest impact on the health service. I believe that I have answered most of the issues raised by the noble Earl, Lord Howe. I very much hope that I have reassured him and that I have the support of the Committee in pushing this culture of innovation in the health service.
Earl Howe: I thank the Minister for his reply. I know that I am a miserable old Tory Scrooge—I am sure that the noble Baroness, Lady Tonge, is right to berate me on that score—but the Minister gave me an entrée into something that I was going to say anyway when he talked about the need to ensure that innovation was adopted. That is the challenge that the noble Baroness, Lady Murphy, spoke about as well. It says to me that innovators really desire not so much a pot of money to reward them for their work but to see their innovations used widely in the NHS and quickly to improve patient care. In fact, it is as well to recall a passage from what the Health Committee in another place wrote in 2005:
“The UK is a world-leader and centre of excellence for the development of new medical technologies, but it lags behind many countries in the implementation of these innovative products”.
Therefore, we need better incentives designed to encourage the uptake of those innovations.
The noble Lord will know that, even today, there remain a whole host of innovative treatments, tools and therapies that the NHS is not adopting rapidly enough. I have a number of examples. One is new therapies for rheumatoid arthritis, where the UK lags behind other countries in adopting new drug treatments. Another is a tool called C-PORT, a wonderful innovation that improves access to cancer medicines and enables services to be planned better but at present not all hospitals with chemotherapy centres have taken advantage of it. There are all sorts of new diagnostic tests where the UK has been held up as a bad example among European countries for the rate at which we adopt them.
I am not sure—I would be delighted to be proved wrong—that the prize scheme will make a difference to those sorts of things. The noble Lord mentioned a number of government initiatives in this area, and I note all that he said. I could add one or two more in the review that he published that could do a good job of encouraging uptake, such as the CQUIN schemes. CQUIN is nominally designed to incentivise innovation, and could be used to encourage the system-wide uptake of innovative treatments and therapies. Were one to mandate the national adoption of CQUIN schemes, if
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I do not propose to draw out the debate any longer. At heart, there is a fair degree of agreement among us. I still have a number of niggling doubts about the prize fund. It could lever in some private money on top, which could be very positive, but I note from the impact assessment that the Government regard it very much as an experiment, the results of which they will evaluate in due course. Let us leave it on that basis and wish it all the best.
Clause 13: Trust special administrators: NHS trusts and NHS foundation trusts
Earl Howe: We move to Part 2 and the clauses relating to trust special administrators. I am moving Amendment 72 and speaking to Amendment 76, and it will be apparent from these amendments that I am not happy with the provisions in this part of the Bill as they relate to foundation trusts.
When foundation trusts were established, it was made clear by the Government that they would be a completely different sort of entity from a standard NHS trust. Although remaining part of the National Health Service, they would cease to be subject to performance management by strategic health authorities; they would be granted considerable operating and commercial freedoms; their governance would be totally different from that of an NHS trust; they would not be subject to the Secretary of State’s powers of direction; their fixed assets would be transferred to independent trustees; and they would be regulated by a dedicated new body quite separate from the Department of Health. The regulator we now know as Monitor would be responsible for authorising foundation trusts in the first instance, and would remain responsible for the oversight of their finances and performance from then onwards. The whole raison d’être of foundation trusts was therefore to distance the management of health services from Ministers and devolve decision-making to a local level, to transfer risk and to set NHS management free from top-down political diktat.
The Bill which passed these provisions into law became the Health and Social Care (Community Health and Standards Act) 2003. At that time, Ministers were quite open about the fact that the failure regime for foundation trusts represented unfinished business and that further legislation would be needed once the mechanisms for a suitable regime had been devised. It was expected that these mechanisms would dovetail with the arrangements set out in the 2003 Act; in other words, that the responsibility for implementing the failure regime for foundation trusts would rest with Monitor.
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It has taken the Government the best part of six years to come forward with their final proposals, and what they have come up with is, frankly, a cop-out. The proposals in the Bill overlook the fact that within a very few years the vast majority, if not all, NHS providers will be foundation trusts. Once this happens, as night follows day, there will be no role for the NHS chief executive as regards running hospitals and no role for strategic health authorities as the performance managers of hospitals. Almost the entire provider arm of the NHS will consist of autonomous enterprises subject to independent regulation under Monitor.
Yet what do we find in the Bill? It is as if none of this is even recognised; the tape is being wound back to the beginning. Monitor is being told to surrender its authority back to the Secretary of State, who will then take over. The message that this gives is that Monitor, as the economic regulator for foundation trusts, cannot be trusted to manage the failure regime, nor can it be trusted to fulfil its statutory duty to secure the assets of foundation trusts to maintain services for the NHS. That is a dismal state of affairs. The essential feature of a failure regime should be that the assets that are required for the maintenance of NHS services should continue to be available after insolvency has been declared. Therefore the regime should enable the regulator to step in and control those assets and services. It would do this while ensuring that the rights of creditors were recognised.
That broad procedure is consistent with a good deal of public service regulation in other sectors and other countries. It does not risk hospitals being closed because of financial failure but, crucially, it preserves the transfer of risk from the Department of Health, which these proposals seem to nullify, by offering what amounts to a government guarantee for all debts of all foundation trusts. If the Government now underwrite all the debts of foundation trusts, we need to consider what effect this will have. It is bound to affect, however subtly, the quality of decision-making on the part of management and governors of trusts simply by virtue of the way that they view business risk. Tight and prudent management and the disciplines that go with it, I contend, will be compromised by the existence of this failure regime. If we want to see foundation trusts using their freedoms ever more effectively and creatively, this is definitely not the way to do that.
I said that these proposals were a cop-out. They are also a far cry from what we were being told in 2002. The document published by the department in December of that year called A Guide to Foundation Trusts strongly implied that it would be the independent regulator who would be given powers to intervene in failing foundation trusts, and that in extremis a special administrator would be appointed to wind up the trust. At the Second Reading of what became the Health and Social Care (Community Health and Standards) Act 2003, John Hutton said:
“The new financial and operational freedoms for NHS foundation trusts will not be gained at the expense of other parts of the NHS because that would not be fair or equitable. There will therefore be no unfair advantages for some for which others pay. Peter will not be robbed to pay Paul”.—[Official Report, Commons, 7/5/03; col. 794.]
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That is precisely what is happening with this Bill. Unfair advantages are being granted for which others will pay. Peter is being robbed to pay Paul. That is because the freedoms and independence which foundation trusts enjoy are now to be underwritten by the taxpayer. If the taxpayer were ever to end up settling the totality of the bill, it would be other arms of the health budget that would suffer.
I do not expect to get any change from the Minister on this. I very much hope I am wrong, because I view this as a seriously bad wrong turning on the part of the Government. I should make it clear that in making this case, I have not been prompted in any way by Monitor which—the noble Baroness, Lady Murphy, will I am sure be able to confirm—has stood back from the issue. It is not really a matter for Monitor; it is a matter for Parliament, and therefore I beg to move.
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Baroness Murphy: I have no support from Monitor, although I am a member of that regulatory body, to speak on its behalf. Instead, I speak purely for myself today. This represents a terrible back-pedalling, and it is not the first time that it has happened over the past few months. For the chief executive of the NHS to intervene seems to represent a clawing back of powers yet again to the Secretary of State, where we had hoped that we were moving away from that position. I am surprised that the Treasury has espoused this plan because if a foundation trust with joint capital ventures were to go bust, it would expose the Exchequer to considerable risk. I am rather surprised that when we had provisions that would have moved away from such a risk, this returns us to it.
I am very disappointed. After many months of negotiation, Monitor has stood back because it felt that it was getting nowhere. It is prepared to work within the framework set down in the Bill, but in my view it is a sad day.
Lord Campbell-Savours: What would happen if the noble Baroness had her way? If a trust got itself into trouble, who would fund its liabilities?
Baroness Murphy: I am not sure I can talk about who would fund the liabilities, but certainly we would propose another scheme. In effect, you would intervene to ensure that services to be maintained were probably maintained by someone else. Indeed, Monitor has intervened in this past week in an unsatisfactory hospital to support the change of leadership in a trust where things were going wrong. It has used its powers of intervention far more willingly—though sparingly—than the NHS chief executive uses his powers. An organisation that has its finger on the performance of these organisations, is trusted with widespread intervention powers and is expected to rescue the organisations as we go along, trying to pick up on a compliance basis when they are likely to fail and intervening before they do, should then at the point of failure have to hand over to another system, back to the Secretary of State, for the final administration and interventions. I am surprised by this regime; it is unsatisfactory. I wholeheartedly agree with the noble Earl.
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Baroness Cumberlege: I support my noble friend and the noble Baroness, Lady Murphy, on this. I have a key question: what has changed in six years? Why are we rowing back? My perception of Monitor is that it has been a very effective regulator—as the noble Baroness has said, probably because it has used its powers sparingly but effectively. There has been minimal disruption but we have seen standards improve. When one compares foundation trusts with other trusts, there is no doubt that they excel. What has changed?
Baroness Meacher: I am not sure that anyone other than the taxpayer in the end can bail out a hospital, whether you call it a foundation trust hospital or an NHS hospital. My concern is about procedural matters—the systems and the apparent unawareness on the part of the people who drafted the Bill of the way that things are done for foundation trusts. It is remarkable that under new Clause 65B(2), which is a slightly different bit from the lines the noble Earl referred to:
“An order may be made under subsection (1) only if the Secretary of State considers it appropriate”.
Why the Secretary of State? The Secretary of State has no role in relation to the foundation trusts. Before making the order, the Secretary of State must consult the strategic health authority. Why? It has no relation—
Lord Darzi of Denham: This is not for foundation trusts.
Baroness Meacher: Not for foundation trusts at all? Then that is fine. Maybe the Minister can assure me that it will be Monitor that decides about systems for FTs. I thank him for the clarification.
Lord Darzi of Denham: I will spend a bit of time going through this group, Amendments 72 and 76, tabled by the noble Earl, Lord Howe, and the noble Baroness, Lady Cumberlege, and the question of whether Clause 14 should stand part. However, before I address these issues in detail, I shall set out some of the wider context behind these proposals, which will help frame this debate.
The majority of hospitals and trusts are performing well, providing high-quality services to patients and managing resources effectively. In the few cases where they are not, however, action must be taken. The first step to improve performance should be at a local level through the commissioners, the strategic health authority or, in the case of foundation trusts, through Monitor. In the rare cases where these interventions are unsuccessful, patients and staff rightly look to the Government to take action. It is therefore essential that we have a transparent process in place to resolve failures. The regime for unsustainable NHS providers, set out in Clause 13 and in the subsequent three clauses, is, in practice, the very last step for a provider which has been subject to these previous actions aimed at recovery.
The amendments would have the specific effect of disapplying the whole regime to foundation trusts. Let me be clear at the outset, as I have been saying throughout the Committee’s proceedings, that the process outlined in the Bill upholds the independence of foundation trusts and of Monitor. Indeed, the lack of
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As a Government, we are committed to the concept of foundation trusts. This is demonstrated by the fact that we have laid down an explicit timetable for strategic health authorities to support eligible trusts to become foundation trusts. Acute and mental health trusts that are capable of achieving NHS foundation trust status are expected to have applied to the Secretary of State by 31 December 2010 to go forward to Monitor to be considered for authorisation.
The process set out in the Bill does not remove any of Monitor’s powers. The same test is used to apply this regime as exists in the current legislation governing the dissolution of foundation trusts. Only Monitor can trigger the regime and request that a foundation trust is de-authorised, and that will remain the case. This would only happen if and when it was satisfied that a trust had failed to comply with a notice under Section 52 of the NHS Act and that a further notice would be unlikely to secure the provision of those services it is required to provide by its foundation trust authorisation. It is Monitor that will trigger the process and say, “We have done everything”.
I will now move to the specific points on insolvency. The Health and Social Care (Community Health and Standards) Act 2003, now consolidated into the National Health Service Act 2006, envisaged an insolvency procedure for NHS foundation trusts, drawing on aspects of the Insolvency Act 1986, but we have never found an appropriate way to take these plans forward. After careful consideration, we have concluded that it is not appropriate to apply an insolvency process to NHS foundation trusts. Fundamentally, insolvency would place financial failure above other considerations such as quality and patients’ interests when the cause of the organisational failure may well relate to a broader clinical issue. We are concerned that an insolvency-based approach, even in a modified form, would not be in the best interests of patients and would not meet the public’s expectation that the Government should step in and assist a failing NHS organisation.
The regime that we have outlined in the Bill allows consideration to be given to the most appropriate long-term outcome for the organisation. This is unlike the existing insolvency arrangements; they present dissolution of the organisation as the only option, which may not be the best outcome for patients and the public locally.
The regime also gives clarity to staff and patients about the process that will be followed, when decisions will be made, and how they can input into the process. Unlike in the insolvency provisions, staff and patient involvement in this process is guaranteed in the legislation. In addition, the process ensures that the Secretary of State’s final decision on the future of services is informed by an independent process involving evidence-based judgments, underpinned by accountability to the public and patients. I believe that this is a better approach.
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The majority of respondents to our recent consultation on this approach agreed that it would not be appropriate to apply an insolvency regime to a state-owned healthcare service. For example, the Audit Commission commented:
“An insolvency regime is unlikely to protect the interests of either taxpayer or patient, but we do consider it right that there is a clearly identified regime for unsustainable NHS organisations”.
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Finally on these amendments I turn to the issues raised on the incentives and risks. It is worth reiterating that the measures outlined in the Bill would apply extremely rarely and only in cases that Monitor could not solve using its existing interventional powers. We are in a different position from that which applied when the Health and Social Care (Community Health and Standards) Act was passed in 2003. We are now in a position where we can see the positive effect that Monitor’s compliance framework has had and the financial rigour that it has introduced into the system. The measures that Monitor has in place are widely recognised as being successful in identifying risks at an early stage, and its interventions give foundation trust boards a strong incentive to address poor performance. Even though there are now 115 foundation trusts, Monitor has needed to use its formal intervention only on three occasions since foundation trusts were first authorised in 2004.
I do not agree that the measures in the Bill diminish the incentives for foundation trust boards. In the same way that board members would not want to be responsible for an organisation becoming insolvent, they are unlikely to want to be responsible for a foundation trust having its licence revoked or being de-authorised and having its independence removed.
There will continue to be regulation of borrowing. As required in the NHS Act 2006, Monitor sets a prudential borrowing limit in each foundation trust’s terms of authorisation. This limits a foundation trust’s cumulative long-term borrowing and is designed to keep it at an affordable level with an acceptable risk. Monitor’s compliance regime assigns a financial risk rating to every financial trust. The financial risk rating is intended to reflect the likelihood of a financial breach of the terms of authorisation and is reviewed regularly. There is a strong incentive for foundation trust boards to maintain their trust rating at an acceptable level, as a poor rating is likely to result in Monitor using its interventional powers, which include dismissal of the board.
Given these safeguards, we do not expect that the regime will change the incentives on NHS foundation trusts’ behaviours in their investments and borrowing decisions. But this is uncharted territory and so, if and when the regime is implemented, we will work with Monitor to observe the effects on foundation trusts’ incentives and behaviour, particularly with regard to borrowing.
I hope that I have been able to reassure the noble Earl that Monitor’s independence in regulating foundation trusts will be maintained. We are addressing what the process, if Monitor decides that an organisation is no longer viable for any reason, should be to deal with
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Earl Howe: This has been a useful debate and I thank all those who have taken part in it. I am grateful to the Minister for his reply.
I was not concerned that the independence of Monitor was being interfered with within the framework of its current responsibilities; that was not the focus of my remarks. I am concerned that the Government have not looked creatively enough at the alternatives. I do not know what has led them to conclude that an insolvency regime would be less likely to deliver good value for money for the taxpayer than the alternatives—perhaps we can go into that—but for those who do business now with foundation trusts it is clear that there will be no such thing as an unsecured creditor.
Lord Campbell-Savours: Perhaps I may ask the noble Earl a question in order to assist people when they read Hansard. In the insolvency regime, to which he referred, what would happen where suppliers of services at a local level had outstanding invoices that had not been paid? Is it that as suppliers they may not be paid? What about wages in the trust? What about property liabilities, such as rentals or property held by the trust? Are the outstanding borrowings of the trust at risk in the insolvency regime to which the noble Earl refers? Alternatively, am I completely misunderstanding him and there would be no risk?
Earl Howe: The noble Lord does not misunderstand me. There would be risk for some people. One would certainly hope that there would not be risk for the employees of the trust, who would be regarded as preferential creditors. But there would be some risk, which should be priced into leasing contracts and other arrangements that the trust makes currently. That is part of the whole idea of creating this new entity called a foundation trust. I do not think that it is healthy that doing business with a foundation trust should be regarded as a risk-free exercise. That was never meant to be the case.
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