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To ensure transparency, new Section 52C also requires Monitor to consult on and publish guidance setting out the detail of the factors that it will take into account. Before triggering deauthorisation, Monitor must consult with key stakeholders to get their views. Accordingly, Monitor will be required to consult, as a minimum, the Secretary of State, the trust itself, the appropriate strategic health authority and relevant commissioners of the trust's services. This mirrors the clauses relating to trust special administrators.

Having done this, if Monitor gives a deauthorisation notice, the Secretary of State must make an order deauthorising the foundation trust, which will take effect within five working days of the order being made. The new Section 52D provides that the deauthorised foundation trust would then become an NHS trust under Secretary of State powers of direction. In common with the clauses relating to trust special administrators, Schedule 2 to the Bill means transitional arrangements will be put in place to allow the continuation of commercial arrangements entered into using foundation trust freedoms and to ensure continuity of services for local people.

Along with this new process, the amendments will also strengthen democratic accountability. While Monitor is responsible for the regulation of foundation trusts, the Secretary of State is ultimately accountable to Parliament for the overall provision of NHS services.

Monitor's operational independence is a vital part of the regulatory framework, and one that we should seek to maintain. Only Monitor can trigger the deauthorisation of a foundation trust, reinforcing Monitor's independence, and ensuring that its authority is not undermined, but when considering the most serious risks to patients, the Secretary of State should be able to formally express his view.

To enable this, the amendments propose that the Secretary of State should be able to formally request that Monitor consider deauthorising a foundation trust. In any such situation, it will be vital that the Secretary of State and Monitor are able to act quickly and transparently. We therefore propose that if Monitor believes that a differing course of action is preferable, it will be required to publicly explain its decision, either within a default of 14 days, or within such further time as the Secretary of State deems appropriate to the particulars of the case.

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Finally, I turn to Amendment 6. It corrects a minor drafting error in Clause 18(8)(b), which lists orders that are not subject to any statutory procedure. The other orders made in connection with trust special administrators are not subject to any statutory procedure and an order made under new Clause 65L(5) should also have been included in this list. This makes the drafting consistent with the Government's original intention, which was approved by the House of Lords Committee on Delegated Powers and Regulatory Reform.

The Government believe in strong, independent regulation of foundation trusts, and that foundation trust status should continue to be earned. I hope that noble Lords will agree that these proposals give Monitor a useful further regulatory power, while formalising a method for the Secretary of State to have a transparent dialogue with Monitor concerning the most serious of foundation trust failures.

I am glad that we will now have the opportunity for a full debate on this issue, and I beg to move.

Amendment to the Motion

Moved by Earl Howe

1A: Leave out lines 99 to 118

Earl Howe:My Lords, I beg to move Amendment 1A, as an amendment to Commons Amendment 1.

It is perhaps understandable that the Government should have seized the opportunity afforded by the Bill to slot into it a raft of provisions by which they clearly set a lot of store, but it is nevertheless unfortunate that we should be considering these important matters for the first time only at the very last stage of the Bill's passage through the House. Nevertheless, we are where we are, and it is, I hope, helpful that we can debate the amendment under the rules of Committee, because it certainly begs a number of fundamental questions.

The first question is: why is the amendment thought to be necessary? We are here dealing with the situation in which a foundation hospital such as Mid-Staffordshire NHS Trust is found to be delivering patient care to a seriously inferior standard-an unacceptable standard. We can no doubt conjure up all sorts of imaginary examples of how that might come about. Interestingly, we are not here talking about a foundation trust whose viability is under threat only because of financial failure. We already have provisions in the Bill to deal with that situation.

The amendment deals with management failure and what should be done when patients are exposed, for example, to serious clinical risk or serious health and safety shortcomings sufficient to constitute a breach of trust authorisation. Ministers are saying that in such a situation, Monitor should have the option of deciding that the trust should be deauthorised-in other words, that it should lose its foundation status and move back into the jurisdiction of the Secretary of State.

What might be the point of that? The only point that would resonate with me is the likely benefit to patients, but where is the evidence that bringing a

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hospital back under the aegis of a strategic health authority would be more likely to solve its management difficulties than if it were kept under the regulatory eye of Monitor? All the evidence points in the other direction. Take the example of Maidstone and Tunbridge Wells. The fact that Maidstone and Tunbridge Wells was in the direct line of sight of the Secretary of State made no difference to the catastrophe that occurred there. The very serious management problems that emerged in Mid-Staffordshire Hospital were ones that began long before it achieved foundation status. They were there when it was still an NHS trust under the direct scrutiny of the strategic health authority and, by extension, the Secretary of State.

By contrast, it is a matter of common agreement that Monitor has an extraordinarily successful record as a regulator. It has extensive powers of intervention, as the Minister mentioned. It has used those powers on a number of occasions to great effect. Where trusts have breached the standards set out in their terms of authorisation, Monitor has, in every case, taken action that has brought them back into compliance. Sometimes, this kind of action need only be informal, but if we look at the provisions contained in Section 52 of the 2006 Act, we are rapidly reminded that there is no shortage of weapons at Monitor's disposal, should it chose to deploy them. I find it difficult to imagine a situation where to resolve a failure of management, it would be thought better to move a trust out of Monitor's jurisdiction and into that of Ministers. Therefore, my first question to the Minister is about the evidence that has led the Government to believe that there really is a regulatory gap here. The gap identified by Dr David Colin-Thomé was much more about better co-ordination and communication between the various regulators than it was about deficiencies in legislation.

My next question relates to some of the wording in the amendment. New Section 52B covers the conditions governing the serving of a notice by the regulator. To paraphrase this section, it says that the regulator may give the Secretary of State a notice if it is satisfied that a foundation trust is contravening any term of its authorisation or any of its legal obligations and that the breach, whatever it is, is serious enough to justify deauthorisation. If we compare the wording of this section with new Section 65D(1), which deals with the process leading up to the appointment of a trust special administrator, we find a clear difference. New Section 65D states-again, I paraphrase-that the regulator may give the Secretary of State a notice if it is satisfied that a trust has already failed to comply with a notice served under Section 52 and that further exercise of Monitor's powers under Section 52 is not likely to rectify the problem. In other words, a notice under new Section 65D is there very much as a final resort when all else has failed. There is no flavour of that idea in new Section 52B. There is nothing there that suggests that a notice to deauthorise is appropriate only after Monitor has exhausted its intervention powers. Why is that?

For example, it is quite possible to imagine Monitor being satisfied that a trust was committing a serious contravention of its terms of authorisation, while at same time believing that the contravention was capable of being remedied without deauthorisation being

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necessary. The absence of any provision making clear that Monitor may and, indeed, should treat its powers in new Section 52B as a measure of last resort is slightly worrying. Can the Minister confirm that it does not lay Monitor open to the possibility of judicial review?

Let us imagine that at a certain foundation hospital, there was a serious failure of care and the course of action taken by Monitor to remedy it stopped short of going down the deauthorisation route. Let us further imagine that someone thought that that decision was quite wrong and that deauthorisation was the only appropriate course to take. Could Monitor be open to legal challenge? In other words, does new Section 52B send a signal that deauthorisation should be treated as just an alternative to the normal remedial measures that Monitor has at its disposal? I very much hope that the Minister will say that this is not so, but it is not obvious from a straight reading of the text.

I turn now to the subject of my amendment. To add greater clarity-as I noticed that the Marshalled List does not print line numbers, whereas the amendment does refer to line numbers- the amendment seeks to leave out proposed new Section 52E in the government amendment. As the Minister has explained, we see at the end of the government amendment proposed new Section 52E, which would give the Secretary of State a statutory power to request Monitor to consider exercising its power to commence the deauthorisation of a foundation trust. I heard what the Minister had to say about this provision. She said that it amounts to a request and no more than that. Monitor is at liberty to decide not to commence the deauthorisation process and all it has to do is publish its reasons for not doing so. All this sounds innocuous, but is it? I think we should consider very carefully whether this is a step we wish to take.

When we debated what became the 2003 Act-the Act which established foundation trusts-the one cardinal feature of the new regime, as the Government were keen to emphasise, was that Ministers should not be involved in operational decisions about the delivery of healthcare by foundation trusts. That principle was the very reason why Monitor was created as an independent regulator-accountable directly to Parliament, not to Ministers-and why foundation trusts were made accountable to their governors and members, as well as to Monitor. It was explicitly recognised that, however tempted Ministers might be to weigh in if something ever went wrong in a foundation trust, it would not serve anyone's interests if they actually did so. Other mechanisms would instead kick in. The independence of foundation trusts, and their freedom from political manipulation, were the key features that would underpin their ability to raise standards and to be responsive to the needs of their patients.

I maintain that the power contained in proposed new Section 52E, innocuous as it may look, oversteps the line of political interference to which I have just referred. It is one thing for a Minister to make an informal request to Monitor: nobody can have an objection to that and legislation is not required for it.

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Here, however, we have not only a statutory power given to Ministers, but also a bit of sleight of hand. If we read the wording carefully, we see that what is termed a "request" is in fact akin to an instruction. Upon receipt of a request from the Secretary of State, the regulator has no choice but to take certain action. It has to go through the process of deciding whether it is satisfied that there is a serious contravention or failure in the trust concerned, and it has to give formal consideration to the matters listed in proposed new Section 52C. It must, then, either serve a notice to deauthorise, or publish its reasons for not doing so. In other words, Monitor cannot just say "no": it cannot just decline to take any action at all. What we see here, therefore-albeit in a disguised form-is a power of direction over Monitor. That, for me, is one step too far.

If one thinks of the kind of situation which might give rise to a request from the Secretary of State to Monitor, it is highly likely to be characterised externally by intense media interest and intense pressure on the Government to do something about a reported problem in the hospital concerned. Ministers will find it difficult to protest, in the midst of a media feeding frenzy, that they are not accountable for what may or may not be going on. So their safety valve, politically speaking, is to put public pressure on Monitor.

Looked at in the cool light of day, the statutory power contained in proposed new Section 52E is simply a means of allowing Ministers to grandstand on an operational issue for which, as a matter of law, they are not responsible. The proper course is not for Ministers to be given a statutory power to order Monitor about, but rather for us to remind ourselves what we agreed in 2003, which is to let Monitor do its job in the way it was set up to do and which it has proved it can do, free of political second-guessing. I should like to hear the Minister's reply to this. It will not be lost on her that I think that this entire government amendment has been rushed into the Bill with undue haste and that new Section 52E has been inserted as a result of misplaced ministerial backsliding on a key point of principle. For myself, I do not think that that is the direction of travel we should be taking. I therefore beg to move.

3.30 pm

Baroness Murphy: My Lords, I rise to speak Commons Amendment 1 and Amendment 1A tabled by the noble Earl, Lord Howe. I should say straightaway that I have sort of jettisoned my speech after counting lines 99 to 153 of the government amendment again and thinking further about the noble Earl's amendment. For the benefit of one or two noble Lords, I ought to remind the House about Monitor and what it does. I should also declare an interest as a member of the board. As such, I should say straightaway that I have been party to the negotiations held outside this Chamber with the Government about the amendment, and after many weeks the board declared itself to be content because we felt that we had pushed it as far as we could. But, as the code of conduct reminds us, none of us sits in this House as the representative of an organisation, and I am wholly won over by the amendment of the noble Earl, Lord Howe.

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A Member of this House who is in the Chamber today asked me who on earth Monitor is as if its members were a small group of aliens parachuted in from outer space. We were created by the Government in 2003 to regulate independently foundation trust hospitals and the mental health services that come under that grouping. The organisation is accountable to Parliament and does not float in administrative space. We produce an annual report on which questions can be raised. Its membership is appointed by the Appointments Commission in exactly the same way as are the boards of NHS trusts, so we are not a peculiar bunch of independent-minded folk who do not think carefully about the impact of our decisions on public sector organisations; we are of the public sector.

I can think of several good reasons why a trust may be returned to the Secretary of State. We already have provisions in the Bill for those which fail financially, and I can see that there could be times when quality issues require powers of intervention beyond those held by Monitor. It has draconian powers in terms of appointments to and removals from boards, for example, and together with the Care Quality Commission, can intervene and prevent services from running if they are failing dramatically. But what strategic health authorities as links in the Department of Health's chain of command, and through them the primary care trusts, can do is occasionally recontract a service or change a sector economy to ensure that a service is acting effectively in concert with other services. They can do some of the restructuring that might enable a service to reinvigorate the quality of its care. These are very rare occurrences, but I can see that it could happen. It has not happened yet, I might say, but I can see that it might.

As we go into a time when money is going to be very tight and the temptations at the centre will be to implement mechanisms of restraint-which it has been tempted to implement before and they have usually been disastrous in the NHS-it will be very tempting for the department and for Ministers, under certain circumstances, to try to intervene more than would probably be in the best interests of local services.

It is also important to remember that there is a group of people at the back of these foundation trusts called governors and members-a million of them-who have a part to play and local powers to intervene. We do not wish to do anything which cuts across those powers of influence. That is why the governors and members were created and why this Government were so keen that there should be some local accountability which would enable powers to be given to local people to intervene under these circumstances. I can see that there could be occasions when it would be necessary for Monitor to request the Secretary of State to rethink the system of accountability and that it should go back to NHS trusts. This is not because we believe that the Department of Health has any greater history of improving services than Monitor; as we have said, the history is worse.

I think that, on balance, the powers in the Commons amendment go too far. They enable the Secretary of State to push when under pressure from the media and

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elsewhere to do so. I am entirely won over by the amendment of the noble Earl, Lord Howe, which still leaves the basic requirements for the deauthorisation of trusts in place but allows for a more sensible provision.

There is one point which remains unsatisfactory in the Commons amendment and that relates to the period of time which Monitor is given to respond to the Secretary of State's request to deauthorise a foundation trust. The proposals require a response from Monitor within 14 days, with flexibility for the Secretary of State to set longer deadlines if appropriate. I seek reassurance from the Minister that, if Amendment 1 is adopted, an appropriate timetable for consideration of any request will be agreed with Monitor on a case-by-case basis. It is clear from our dealings with hospitals that it is likely to require more than 14 days, and a timetable should be set accordingly. I seek reassurance on that. Overall, I am very attracted to the amendment of the noble Earl, Lord Howe, and will give it my support.

Lord Warner: My Lords, it might help the House if I say a few words as the Minister who took the 2003 Bill through this House. The noble Earl, Lord Howe, has reminded us of some of our exchanges. It is certainly true that I swore undying support for the independence of the regulator on the basis that Ministers would resist the temptation to interfere in the workings of foundation trusts when things did not go quite as everyone would want them to go.

In the case of mid-Staffordshire, neither the Healthcare Commission nor Monitor covered themselves in communications glory over the way that some aspects were handled. There are some issues on which I have some sympathy with Ministers for intervening. However, proposed new Section 52E crosses the line with regard to the assurances that government Ministers, including myself, gave in good faith about the independence of Monitor.

I have not heard the arguments for why we need the proposed new Section 52E. Indeed, the noble Earl, Lord Howe, made some good arguments for why we do not and it is incumbent on Ministers to explain why the amendment is now necessary. What circumstances have changed since the 2003 Act to make that kind of amendment necessary?

To add to that, the way that Monitor has behaved for five to six years is, for the most part, overwhelmingly a triumph of successful early interventions when things were going wrong in particular foundation trusts. Admittedly, many of those issues were financial but, even then, Monitor intervened with trusts whose financial circumstances were going off the rails much more rapidly than strategic health authorities, either in their current or previous form, have ever done.

In answer to a Question that I put down a couple of months ago, the noble Lord, Lord Darzi, replied that there are still 40-odd existing trusts, not foundation trusts, that have historical deficits. That situation simply would not have happened with Monitor; those sorts of issues would have been tackled earlier. This comes back to the question raised by the noble Earl, Lord Howe: if we return a failing trust to an SHA, what guarantee do we have that the responses in putting

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things right for local people will be faster than they would have been if left with Monitor? I have some sympathy with the points that the noble Earl has raised.

Baroness Barker: My Lords, I shall follow on from the last point made by the noble Baroness, Lady Murphy, about timescales. The noble Earl, Lord Howe, was right to remind us that these decisions are often made in the glare of publicity when something has gone seriously wrong. We are not talking simply about financial mismanagement; as the Minister said in her introductory remarks, we are talking about the deauthorisation of a trust on grounds that include health and safety and quality of service as well as finance and other managerial matters. Those are complex and difficult matters to question and establish.

Why are the periods of time mentioned in proposed new Section 52D, which is about the process of deauthorisation as it would be taken under proposed new Section 52B, so short? An order must take effect within five working days of when it is issued. Proposed new Section 52D(8) specifies a period of seven days after the Secretary of State makes an order for the regulator to publish its report. That is a very short time to report on potentially deep and complex matters. I would welcome some clarification from the Minister.

Baroness Pitkeathley: My Lords, I speak in favour of the Commons amendments; I believe that they will provide more reassurance to patients and the public. However, I ask for some clarification from my noble friend on a couple of points about regulation. I declare an interest as chair of the Council for Healthcare Regulatory Excellence. It is important that patients know who they can expect to be regulating services when trusts are deauthorised or identified as unsustainable and come under the Secretary of State's powers of direction. Is it going to be Monitor or the Care Quality Commission? Are they going to fight over it? We need to be very clear about that. If the purpose of regulation is to guarantee patient safety, it is important that patients are informed and have clear directions about where to take their concerns. I would welcome clarification about that.

I also have some concerns about the potential impact on revalidation, especially for doctors, of the trusts which enter these proposed arrangements. Medical revalidation at the local level relies on the responsible officers-who are likely to be medical directors-to maintain the process of revalidation. We need to be assured that the function of responsible officer could still be discharged in such circumstances. If not, what other measures could be put in place to avoid what might be unintended consequences for the revalidation of doctors?


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