During the committee scrutiny of the Bill in its draft form—as the Care and Support Bill—the committee advised against a full merger of the boards. In its call for evidence, the committee asked for views on precisely this question. As far as I know, respondents unanimously opposed the abolition of either body or the transfer of their functions. The Academy of Medical Sciences replied:

“There is a great deal of support among our community for the HFEA and the HTA; both are perceived as having developed the experience to respond in a balanced, practical way to the changing landscape that reflects the evolving risks and benefits of research. The relatively small savings to be made through disbanding the HFEA and the HTA need to be balanced against the inevitable period of disruption and uncertainty, and any potential risk of loss of expertise, efficiency, effectiveness and coherence that could hinder research and practice and result in the loss of public and professional confidence … We therefore support retaining both the HFEA and the HTA, providing they work closely with the HRA and other regulators to further streamline the regulation, inspection and governance process for patient and public benefit”.

I accept precisely the point made by my noble friend Lord Winston and others that there are unnecessary delays and that there are clearly issues to be addressed in the way that these bodies operate.

The committee concluded that Ministers should not have the power to abolish the HFEA or HTA and recommended that the relevant clause should be deleted. While its conclusions were about abolition, these same points apply to the merger of the boards: expertise would be lost, there would be huge disruption and all for relatively tiny cost savings at the moment. The work of the HTA and HFEA is of enormous scientific and ethical importance. We accept entirely that there is always room for improvement and we should never be complacent. The review led by Justin McCracken will no doubt make recommendations for further efficiencies. We would be jumping ahead of his proposals by agreeing this amendment at this time.

Earl Howe: My Lords, this has been a very instructive debate and one to which I have listened with enormous care and interest. It takes us back to a well-worn area, as noble Lords have been keen to point out. The amendment proposed by the noble Lord, Lord Patel, would abolish the HFEA and HTA and replace them with a new regulatory body, the human tissue and embryo authority. It would also transfer responsibility for the regulation of infertility treatment involving embryos, sperm and eggs to the CQC.

I listened with great care, as I always do, to the noble Lord, Lord Patel, when he moved the amendment. As has been amply demonstrated in the course of this

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debate, the prospect of the merger of the HFEA and HTA, or of the transfer of their functions elsewhere and the subsequent abolition of the two bodies, is by no means a new one. It has been considered carefully and consulted on on a number of occasions over recent years, including by Members of this House.

In 2007, as we were reminded, a Joint Committee of both Houses of Parliament, chaired by my noble friend Lord Willis, considered a proposal to replace the HFEA and HTA by the regulatory authority for tissue and embryos—RATE. The committee roundly rejected that proposal. It recognised concerns expressed by stakeholders about the risk of losing the specialist expertise that the HFEA and HTA individually hold and the small extent to which the two bodies actually cover common ground. That point was made very powerfully by the noble Lord, Lord Walton, today.

The Government are as keen as anybody to minimise the number of arm’s-length bodies when we possibly can. A substantial exercise was undertaken across government when the coalition was new to do exactly that and a great number of bodies were abolished. Within that framework, last year the Department of Health undertook a public consultation on a proposal to transfer the functions of the HFEA and HTA to the Care Quality Commission and the Health Research Authority, as part of our review of the arm’s-length bodies. Across the full range of respondents, a majority of three-quarters disagreed with the proposal. The main reason cited was that the HFEA and the HTA have developed considerable expertise in their highly specialised fields. They were said to be trusted and respected by the regulated sectors. Respondents believed that this expertise and trust would be lost were a transfer of functions to take place. That point was well made by the noble Baroness, Lady Thornton, who I am delighted to see on the Front Bench opposite. The noble Lord, Lord Patel, indicated that in his view it was unnecessary to have two separate organisations, but that was not the view of those who responded to the consultation.

Respondents also said that they did not believe that the CQC was well-placed at the time to take on the functions of the two bodies and they feared that those functions would be subsumed by the CQC’s other responsibilities. Another strong message from the consultation was that the small size of the two bodies and the small overall anticipated savings did not warrant the risks involved in abolishing them and transferring their functions. I recall that the noble Lord, Lord Warner, made that very point when we debated these issues during the passage of the Public Bodies Bill. The Government listened to the responses and decided not to proceed with the transfer and abolition. However, we also recognised the clear message from the consultation that there is scope for the HFEA and the HTA to achieve further efficiencies in the way that they operate. That much, I hope, all noble Lords agree on.

The noble Baroness, Lady Thornton, asked whether there was any new evidence about the value of a merger. It was with that very question in mind that we commissioned an independent review of the two bodies by Justin McCracken, former chief executive of the Health Protection Agency, in January this year. The review

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included looking at the scope for shared membership and leadership of the HFEA and HTA and for their merger. The report of the review was submitted to Ministers in April and is currently under consideration, so I am afraid that I am not in a position to share any conclusions quite yet. I will give way.

Baroness Thornton: Will we see the white smoke before we get to Report?

Earl Howe: I sincerely hope and anticipate that we will, but I am afraid I do not have a particular date in my brief. If I am able to supply the noble Baroness with that information, I will be happy to do so. The noble Lords, Lord Winston and Lord Patel, cited the number of different regulators involved in the organisational arrangements and the regulation of regenerative medicine in the UK and pointed to the complexity of these arrangements. I understand that point of view, but we are now in a world where the regulators in this area work very closely together to provide regulatory clarity to the sector and to ensure that the system actually works. I know, for example, that the MHRA and the HTA work closely together and have carried out joint inspections.

The department, along with the UK regulators, worked together to produce a regulatory map for stem cell research and manufacture, and I think that too has been helpful. I fully understand and appreciate the interest of noble Lords in this matter and their desire to streamline regulation. We all welcome that aim. I hope that noble Lords will appreciate that the Government have given this matter consideration in some depth, including through public consultations. The strong message we have consistently received from stakeholders is that the HFEA and the HTA should not be abolished or merged or their functions transferred elsewhere. Our latest consideration of this is the scope for regulatory streamlining that the McCracken review looked at, including the scope for regulators to work closely together. That consideration is currently taking place. As soon as the Government’s position on it is determined I will ensure that noble Lords are informed. I am additionally told by a most reliable source that we do not yet have a confirmed date for that announcement.

I am always loath to disappoint the noble Lord, Lord Patel, but I hope he will understand that we did not reach this position without due deliberation and indeed without taking extensive soundings among the stakeholders who are most concerned in this area. I hope he will feel, if not exactly comfortable in withdrawing his amendment, at least satisfied that the matter has been fully debated.

6.15 pm

Lord Patel: I thank the Minister for his comments. Of course, I feel satisfied that the matter has been fully explored. No doubt the noble Lord, Lord Willis of Knaresborough, will take note of all the comments made. I thank all the other noble Lords who took part in the debate. I say to the noble Baroness, Lady Thornton, that I look forward to the day when her party brings forward an amendment again to burn the quangos, including the HTA and the HFEA. I look

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forward to the Minister then being on my side and arguing the point. Until then, I beg leave to withdraw the amendment.

Amendment 64 withdrawn.

Clauses 105 and 106 agreed.

Clause 74 : Warning notice.

Lord Hunt of Kings Heath:My Lords, we now come to Part 2 of the Bill and particularly to Clauses 74 to 77, which may be described as a failure regime for NHS trusts and NHS foundation trusts. Clause 74 makes amendments to the powers of CQC to issue warning notices to those bodies. Where it appears to CQC that the quality of healthcare services provided by a trust requires significant improvement, CQC will be able to highlight those areas in a new form of warning notice. This will state the reasons for CQC’s view, and it will require improvements in the quality of services to be delivered within a specified time. At the end of that period, CQC must review whether the requirements specified in the notice have been met.

Where CQC is not satisfied, it must decide what further action needs to be taken. In the case of a foundation trust, CQC’s review must include use of its power to require Monitor to put the trust into special administration. Clause 75 extends Monitor’s powers to be able to issue additional licence conditions on foundation trusts when CQC has issued a warning notice. At present, Monitor can make use of these powers only if there is a failure in the governance of a foundation trust.

In the event of healthcare services provided by the trust requiring significant improvement, Monitor will as a result be able to take timely action to make changes to leadership or governance with the intention of securing improvements to those services. Clause 76 will enable Monitor to make an audit to authorise the appointment of a trust special administrator in cases where it or CQC is satisfied that there is a serious failure by an NHS foundation trust to provide healthcare services of sufficient quality and that it is appropriate to make the order. At present, Monitor is able to authorise the appointment of a trust special administrator only in cases of insolvency. Monitor may make an order when it is so satisfied, but must make the order when required to do so by CQC.

Let me say at once that the Opposition support the intention of giving greater emphasis to safety and quality and enhancing CQC’s powers in this area. Of course, we are very much influenced by the report of Robert Francis on Mid Staffordshire. We also welcome the introduction of a single failure regime, focused on quality as well as financial failure. However, I suspect that I am not the only noble Lord to have been confused by the respective roles of CQC and Monitor when reading this Bill. Indeed, I was surprised that the

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Department of Health boldly claimed in its factsheet that the new failure regime will give regulators clear roles in tackling failure. I must say that I found it anything but clear. The factsheet says:

“The Care Quality Commission … will focus on exposing problems and requiring action while Monitor and the NHS Trust Development Authority … will focus on intervening if a poor-performing provider is unable to resolve the situation working with commissioners”.

To confuse matters further, CQC retains enforcement powers for social care, general practice and independent sector providers. That is going to be very confusing. I also pose the question as to whether there are not going to be significant risks associated with these changes. As Robert Francis made clear, regulatory complexity can contribute to system failings. It is important that we get this right, so there are a number of matters which I would like to put to the noble Earl, Lord Howe.

Does the Minister consider that with this level of complexity, there is a risk of slowdown in the action required to address failures? How will Monitor, CQC and the NHS Trust Development Authority work together to ensure that problems are acted upon? Will Monitor and the NHS Trust Development Authority be able to question CQC’s findings and recommendations? What happens if those three august bodies disagree about whether action is needed? Will Monitor and the NHSTDA be equipped to come to their own views on quality, or do they have to take the view of CQC on trust?

The noble Earl will know that the potential confusion has been examined recently by the Health Select Committee. Indeed, the Secretary of State explained to the Commons Health Committee that the change in the arrangements so that CQC in essence has to refer concerns to Monitor, which then takes enforcement action, is devoid, as he put it, of conflict of interest when an inspector identifies a fault then later feels obliged to say that there is no longer a fault, simply to avoid the enforcement action appearing ineffective. However, that does not apply to the other sectors. It does not apply to social care provision, general practice or the independent sector. I do not understand why there is deemed to be a conflict of interest in relation to NHS foundation trusts and NHS trusts but not the other bodies. Nor does it apply to other sector regulators, such as the Health and Safety Executive or the Civil Aviation Authority. There are plenty of examples of regulators that monitor and also take the enforcement action.

I also do not understand why, when it comes to healthcare, the NHS has a different regulatory regime from that of the private sector. Surely, there ought to be consistency in approach. The noble Earl will know that we have had the fair playing field work undertaken by Monitor, as a result of discussions on the previous Bill. It does not seem that there is a fair playing field when it comes to regulatory machinery in relation to, say, the independent sector and to the NHS, even though they are both providing services under NHS contracts. I very much welcome Amendments 65, 66 and 67, tabled by my noble friend Lord Warner, and I would add to them my Amendment 66ZA, which would ensure that the NHS is dealt with equivalently.

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On the NHSTDA and the NHS trusts, there is a puzzle regarding what appears from the architecture. I think it is generally accepted that those trusts which have not yet reached foundation trust status are generally considered to be the weaker organisations, given that NHS foundation trusts were introduced quite a number of years ago now. What is puzzling is that the weaker organisations seem to come under a weaker regulatory system. I will be interested to hear my noble friend Lord Warner’s remarks concerning his amendments, but it appears to be a puzzle and an inconsistent approach.

This also takes us back to the recommendations of Robert Francis concerning the merger of regulatory functions, which he suggested in his report that the Government should consider. On the fact that the Government have got themselves into such a tangle on the respective roles of CQC and Monitor, while I can well understand nervousness about having yet another restructuring in relation, for instance, to CQC—given the number of changes that have occurred to the care regulator over the years—I worry that they have come up with such a complex solution that I wonder whether merger might not come to be seen as the easier option.

I would also like to raise some issues about the process under which the failure regime takes place. I start with my Amendment 64A, in relation to the Section 29A warning notice under Clause 74(3). Can the noble Earl give some indication of how the significant improvement required is to be defined and assessed? Can he also say how proportionate CQC will be? Under proposed new Section 29A(2)(a) of the Health and Social Care Act 2008, which is introduced in Clause 74(3), a warning notice will state,

“that the Commission has formed the view that the quality of health care provided by the trust requires significant improvement”.

Is there not a need to clarify either in the Bill or in secondary legislation how “significant improvement” is to be defined and assessed and, specifically, how and where the warning notice applies given the number of multisite trusts offering a wide range of services?

In Clause 75, reference is made to Monitor’s imposition of licence conditions. What criteria will impact on Monitor’s decision to impose those licence conditions? Should they not be subject to statutory guidance, given the serious impact of their imposition? In view of the service implications for NHS trusts and NHS foundation trusts of CQC and Monitor interventions, ought there not to be a clear appeals process for providers, given the potential serious consequences for an individual trust or a local health economy of a warning notice or a “failure to comply” administration, both for the provider concerned and the other providers that may be affected by that decision?

My Amendment 66ZB deals with the multisite issue by requiring CQC to define how this is to be assessed. My Amendments 66ZD and 66ZE seek to have published the Monitor criteria under which a licence condition is issued following a warning notice. When such a warning notice is issued, a foundation trust should have the right to appeal under my Amendment 66ZC, which is consequential on Amendment 66ZE. The same principles apply to Clause 76 in relation to the regulator. CQC must surely publish criteria on following a transparent

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process in making judgments on trust special administration, where there also ought to be an appeals procedure.

It seems that there is a lot of work to be done to make sure that the health service and other providers fully understand the new regulatory apparatus that is to be brought into being. I remain concerned that there could be confusion between the two roles of Monitor and CQC and that the NHS Trust Development Authority’s role is rather mysterious. It is hard to understand why NHS trusts are not in fact subject to a much more robust process than other providers because, as far as I can see, apart from a number of community trusts which are likely to get foundation trust status, the intention is that we simply roll on for years to come with these unviable organisations. Money is clearly top-sliced in order to keep them going, and we know that the real issue is, in many cases, a failure to tackle reconfiguration. It is a worry that almost a limbo situation is being created in which no progress at all is going to be made. There is also a very clear need for due process as to how these licensing provisions are to operate and an appeal process for any organisation that is affected by them.

If the noble Earl, Lord Howe, would agree to the principle of that, I think he could look forward to general support within the health service and outside and, of course, public confidence. The overriding principle of making sure that quality and safety are considered at the same level, or even a higher level, than that of financial viability is one that we certainly support from these Benches. I beg to move.

6.30 pm

Lord Warner: My Lords, I will speak to Amendments 65, 66 and 67 and to Clause 77 standing part. I share very much the concerns expressed by my noble friend Lord Hunt and I am not going to repeat what he said about the slightly strange situation that we are now in with the CQC having enforcement responsibilities in relation to some bodies that it registers but not in relation to others.

I want to concentrate on the missing part of this group of clauses, which is the Trust Development Authority, and go into a bit more detail on this area than my noble friend Lord Hunt had time to do. The purpose of these amendments is to try to pursue the question of whether there is parity of action required by the Trust Development Authority and Monitor, when the CQC issues a warning notice, irrespective of whether that notice applies to an NHS trust or an NHS foundation trust. There is something very curious about writing this quite complicated legislation, which, if I may say as a connoisseur of health and social security legislation, has the air of a rather rushed job. The builder was going to go off site quite quickly if we did not get the trimmings of the house finished—it has that feel to it.

The Bill is very focused on the enforcement action by Monitor, but is pretty much silent on what the TDA does. Like my noble friend Lord Hunt, this strikes me as extremely odd, because, as a general rule, the weaker trusts—I exempt my noble friend Lady Wall and her skilful chairmanship of her trust—are tucked away in the Trust Development Authority.

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You have to remember that they have all had the best part of 10 years to convince people that they could be given the autonomy of NHS foundation trust status.

I seem to recall that since its inception the TDA has not made a great deal of progress in getting over the hurdle trusts for which it has responsibility. My recollection, and the noble Earl will be able to correct me if I am wrong, is that there is only one trust in the past 18 months, Kingston, which has made it to FT status. There is hardly a queue of candidates in Monitor’s FT pipeline. Indeed, there is a real danger—if I may say so, slightly pessimistically—that the Trust Development Authority will struggle to live up to the middle word in its title.

What seems likely to happen, as we move forward into the next few years, is that as the money gets tighter we start to see increasing failure among some of the TDA trusts and a greater flow under this new legislation of warning notices from CQC. I have therefore become rather intrigued as to what should happen when the warning notices thud on to the desks of NHS trust boards and they fail to respond adequately.

Under this Bill, it is relatively clear, even with the reservations my noble friend Lord Hunt made, what happens with FT boards and Monitor. Far less clear, indeed totally unclear on the basis of the legislation, is what happens with TDA trusts, which after all account for about £30 billion a year of public sector expenditure, so there are quite a lot of patients going through their beds and doors.

In my search for further enlightenment, I have taken the trouble to read the document that the Trust Development Authority published last December with the rather upbeat title, Delivering High Quality Care for People, the accountability framework. This is a model of Department of Health speak—I am something of an expert on this, as is the Minister. It makes clear that trust boards will have to comply with some of the licence conditions set by Monitor, but it is rather uncertain which ones it will have to satisfy. It has set a lot of operational performance standards which look uncannily like the evil Labour targets imposed from time to time. It promises more details on the Trust Development Authority’s oversight model. I have yet to see very much of that further detail, but nowhere in this document is it clear what happens to these trusts that fail to live up to the expectations of that accountability document published about six months ago.

Continuing my search for enlightenment, I have moved on to read the May Department of Health document entitled, The Regulation and Oversight of NHS Trusts and NHS Foundation Trusts. It claims to throw light on the Bill’s quality of services clause. The first nine pages are pretty clear. We start to get into a bit of difficulty when we get to page 10, which is headed “Intervention”. That is when I became really puzzled. It says—I am not quoting, but this is pretty much what it says—that the TDA can request recovery plans, increase engagement with the trust, commission an independent and rather exciting thing called a deep dive, review the skills and competencies of the board and executives, and commission an interim report.

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The noble Lord, Lord Hunt, and I are veterans of debating the regulations setting up the Trust Development Authority. Many of us thought it would be doing that anyway. We did not think this was some kind of new regime. This looks like a bit of a rehash of what it should have been doing in order to get the trusts for which it was responsible to pass the foundation trust tests set by Monitor. When it was set up, it was supposed to have that responsibility for quite a short period of time. It hardly looks like some new, sexy enforcement set of procedures which we would expect it to take when the CQC warning notices come to its attention. It looks as if the enforcement procedure for the trusts in the TDA remit is that they have to be given further chances. It is not explicit but—dare I suggest, as my noble friend Lord Hunt I think implied? —we could be heading back down the road of money being taken away from the successful trusts to buttress people in organisations who are not cutting the mustard in terms of the quality of services or the financial management that is required not only to be an effective foundation trust but to be an effective trust.

It is not at all clear to me how the Government are going to tackle the fact that the weaker brethren are within the responsibility of the Trust Development Authority but there is nothing in the Bill which actually says what the TDA will do. I am sure that the noble Earl will tell me about other bits of legislation, but it seems to me that if we want to convince the public that there is a new show in town for real enforcement when things continue to fail in a trust, whether it is an FT or an NHS trust, it would be sensible to put these provisions in the same Bill, particularly when we all know that the weaker trusts are under the TDA.

Paragraph 27 of the May document I mentioned is pretty elusive. Commissioners can have a go at reconfiguring if there is failure but that may not work. Eventually, the trust is unsustainable and becomes the responsibility of the TDA. Guess what the TDA can do? The TDA has absolute discretion as to whether it advises the Secretary of State. It can advise the Secretary of State to appoint a trust special administrator but is not required to. Under the current guidance, which only came out a month ago, the most the TDA is required to do is to consider doing that. If it chooses not to, it need not. We therefore have a situation in which the TDA seems to be operating under a different regime from Monitor. This is a really serious situation to be considered, and I suggest to the Minister that it will become a public confidence issue. I am not making a party political speech—this is all about getting legislation which is fit for purpose to restore public confidence after the Mid Staffordshire debacle.

Why does this Bill not provide for a much sharper set of actions from the TDA when the CQC issues a warning notice to a trust? The notice is a clear signal that the TDA’s efforts to rehabilitate the trust are simply not working. I suggest this with a bit of nervousness, but should the Government not consider withdrawing these clauses and provide a clear set of rules and requirements that protect patients effectively, whether or not they are in NHS trusts or FTs? I do not think that the Bill, as drafted, does the job of protecting patients. I do think that the TDA needs to be brought

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into this part of the Bill on a basis of parity and equivalence with the requirements that will be made of foundation trusts through the enforcement panels of Monitor.

Baroness Wall of New Barnet: My Lords, unlike my noble friend Lord Warner, I am not a connoisseur, other than about what happens in my trust. Maybe I can share our experiences in response to the questions on which my noble friend Lord Warner has been seeking clarification. I think it will answer some of them, although not all.

As many noble Lords will know, 18 months ago Barnet and Chase Farm Hospitals NHS Trust took the decision that it could not comply with Monitor’s requirements, primarily the financial aspects, and brought in Deloitte to do a complete survey of all our services. We met the benchmark for clinical services but, because of the historic debt, we did not meet the financial benchmarks. We went up to two for Monitor’s rating on finances, but it goes up to four, and so we were two—two and a bit—for one period.Although we sought support through the SHA at the time, from a body that offers trusts opportunities to apply for funding, we were unsuccessful. This is where I may not be able to assist my noble friend Lord Warner, because we decided ourselves, as a trust, that we would not be fit for purpose in that sense. There is a process, and people who have been involved in it much more than I have will know what that process is. We notified Monitor that we would not be able to do that.

6.45 pm

Noble Lords should bear in mind that the whole driver in all this was the government decision that all trusts had to become foundation trusts by 2014. As a government decision, one respects that, but there were some views in our trust that we would have been able to do it had we had a longer period of time. I have been chairman of the trust for six years and take some responsibility. Although I thank my noble friend Lord Warner greatly for his comments about my custodianship —which I hope are all true—there was an ignorance, if you will, within my trust and maybe others. That process of going through to becoming an FT was not as urgent as it then became with the 2014 deadline, but we should have been making a much better aim for that. In my own trust, the financial position was very much based around us not drawing out cost improvements and always looking for growth.

However, obviously, growth came to an end. My noble friend Lord Warner was on a committee to which we made a presentation in a bid to get some financial support. He was extremely helpful in talking to me about why we would probably not get it, and I agreed with him totally. We decided, as a trust, that we could not make it through to become a foundation trust. There is a process, and we are at the stage of working with the Royal Free in the hope of achieving a partnership with it by April next year.

I think that my noble friend Lord Warner was perhaps a bit harsh in terms of what the TDA does. I do not disagree that maybe it should be in the Bill—I am sure that is right—but there is a contradiction in some of his arguments. First, absolutely correctly,

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my noble friend has said that the TDA was set up for a period, in order to see trusts through to 2014, as the Government required. For failing trusts, as my noble friend has emphasised totally and accurately, it was set up to effect some action that would move them out of operating. Again, I agree totally with my noble friend, in that the whole point of all this, and the whole worry for me as a trust chair, is that the services that patients receive are fundamental. If we, or any trust, are failing, particularly perhaps in service provision, but also in financial terms, that is major worry.

We have the advantage in my trust—if it is deemed to be one—in that we have gone through the reconfiguration ahead of and alongside the partnership. We have had a reconfiguration in place for more than 10 years. It has been put on hold by my Government and by the current Government, but we now understand that implementation will start to happen in November. We have had that perhaps unique experience of being in reconfiguration and going forward for foundation trust status, in a sense drawing those two things together. That is quite a challenge. We are hoping to be in partnership by April 2014 and are bringing about our reconfiguration from November 2013. Noble Lords can imagine the challenges which that brings to my trust, although we are complying, I think, with all the standards except in A&E, which is happening all over world.

My noble friend Lord Hunt and I refer to this all the time, saying, “How’s your trust doing?”. Therefore from our point of view the TDA has been quite clear —perhaps because we made it clear that we were unable to go forward in this. It exists but, according to its remit, only to ensure that by 2014 viable trusts will go forward to FT, and that something else will happen to non-viable, or failing trusts—the more emotive description. Those will either be brought under supervision, or will work in partnership with other trusts to achieve a different outcome. As regards supporting the amendment or otherwise, I am not sure whether the lifespan for TDA is so short that it will have any effect on delivering in the Bill, which has a longer-term view of what we are doing. However, I thought it would be helpful to give some perspective of what happens in the real world.

It is difficult and embarrassing to find yourself in this situation. However, for us the best outcome is that the partnership with the Royal Free works, and that the Royal Free has come to a decision that that partnership will be beneficial for it. Monitor will then get involved with the Royal Free to see whether that combined trust is still viable and whether it still meets all the requirements to ensure that compliance fits. Our patients are receiving good care and being looked after, and we still aim to be the best trust from which they can receive services and get good results. However, ultimately in our partnership with the Royal Free, patients will receive a better service.

I could not agree more with my noble friends Lord Hunt and Lord Warner that reconfiguration has to happen. We had brave words about it from the previous Government, but we did not do it. We now have brave words from the Secretary of State, who is doing a perfect job, from what I have seen—he is going out and seeing how it really works in a trust: rolling up

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your sleeves and making beds. My plea to the noble Earl is that the Government stick to the fact that reconfiguration has to happen. Politically, closing hospitals is dynamite. I have said that more times from these Benches and from the Benches opposite than I can remember. However, unless it happens, failing trusts will continue to fail. The financial aspects of failure are awful, but the performance of some of those trusts is not good enough for patients to be on the receiving end of it. I thought it would be helpful to share that. I am not sure whether I support the amendment, but I am sure I will come to a decision on that.

Lord Warner: My Lords, I clarify that I did not seek to attack the TDA. What my noble friend has said has made me more worried. What happens if these trusts do not make it to FT and people get fed up with the TDA and decide to try something different? We would still have these trusts, which would be providing services, still on the receiving end of CQCs, so why does the Bill not provide for some of these eventualities—which again, could happen in the real world?

Lord Campbell-Savours: My Lords, I will intervene only briefly, unlike yesterday when I went on at length on a couple of the amendments. My noble friend Lord Warner referred to the absence of a new force in town. I suspect that in some ways he is referring in part to the confusion referred to by my noble friend Lord Hunt. I will deal with paragraphs 60 and 61 of the Francis report, where two recommendations are made. Will the Minister, in his response to this debate, just tell us why the Government are refusing to implement those recommendations? I will not read those paragraphs in their entirety, but just the key points. The report states:

“The Secretary of State should consider transferring the functions of regulating governance of healthcare providers and the fitness of persons to be directors, governors or equivalent persons from Monitor to the Care Quality Commission. A merger of system regulatory functions between Monitor and the Care Quality Commission should be undertaken incrementally and after thorough planning”.

I would have thought that the Bill was the opportunity to do that. If that is the case, will the Minister tell us precisely what the objection is, and why we are not taking up that particular recommendation from the Francis report?

Earl Howe: My Lords, in addressing this complex and very important topic, I begin by thanking all noble Lords who have spoken in this debate, not least those who have introduced the amendments they have tabled. I welcome the opportunity to debate these clauses as they form a key part of our response to the issues raised by Robert Francis QC. They deal with difficult issues and I recognise the critical importance of getting this right. I particularly welcome the support of the noble Lord, Lord Hunt, for the principles, which I can assure him have governed the Government’s work in this area.

The intention of the changes we are making is to deliver a strong but flexible process for tackling quality failures to ensure that all NHS trusts adopt a rigorous approach to maintaining high quality care. I hope that

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noble Lords have had an opportunity to familiarise themselves with the document my department published, in collaboration with CQC, Monitor, the Trust Development Authority and NHS England, copies of which can be found in the Library. In my response to the amendments, it may help if I summarise the key elements of our proposals and why we feel that the approach we have taken is appropriate.

The Francis report made a strong case that the regulation of NHS trusts and foundation trusts needed to change so that greater emphasis is placed on addressing failures of quality. We agree. In future, roles within the regulatory system will be simpler and clearer. The Care Quality Commission will focus on assessing and reporting on quality, and Monitor and the NHS Trust Development Authority—the TDA—will be responsible for using their enforcement powers to address quality problems. To free up time to care, the overall regulatory burden on providers will be radically reduced. I remember that that concern was raised from the Benches opposite when I made a Statement to your Lordships on the Francis report. However, where there are failings in the quality of care, there will be a stronger response.

The CQC, through its new Chief Inspector of Hospitals, will become the authoritative voice on the quality of care provided. It will take the lead in developing a methodology for assessing the overall performance of organisations in meeting the needs of patients and the public. In doing so, the CQC will consult a range of bodies, including Monitor, the TDA and NHS England, to ensure that national organisations are working to a common definition of quality. The idea here is to arrive at, if I can put it this way, a single version of the truth: a single, national definition of quality that brings together information and intelligence from commissioners, regulators and local Healthwatch, as well as from the other bodies I mentioned. This new approach to assessment and inspection will form the basis of a new system of ratings to provide a fair, balanced and easy to understand assessment of how each provider is performing relative to its peers. It will also provide the basis for identifying where improvements are needed. We will, of course, debate the provisions on ratings later on.

The noble Lord, Lord Hunt, has tabled a number of amendments—Amendments 64A, 66ZB, 66ZD and 66ZF—relating to the consistency of CQC’s judgment. I understand the concern to ensure that there is transparency and consistency over how decisions to intervene are reached, but I am not sure that it can be defined through legislation. In part, it will be for the CQC, Monitor and the TDA to agree and set out in guidance—something, incidentally, they have all committed to doing. However, ultimately they must be matters of judgment rather than the tick-box mentality that allowed the failures uncovered in Mid Staffordshire to go unnoticed for so long.

7 pm

What is important is that these judgments have credibility. That is why the CQC is overhauling its approach to undertaking inspections to ensure that those judgments will be based on expert opinion, led by the new Chief Inspector of Hospitals. The CQC

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has just appointed Professor Sir Mike Richards to become its first Chief Inspector of Hospitals. I am sure the Committee will agree with me that Professor Richards is an outstanding clinician who will command the full confidence and support of medical professionals.

I also agree completely with the noble Lord, Lord Warner, that the failure regime should be as robust for NHS trusts as it is for foundation trusts. That is absolutely our intention. However, as Monitor’s role is defined in primary legislation and the Trust Development Authority is a special health authority established under secondary legislation, we need to take a slightly different approach to achieve that common objective. I can tell the noble Lord, Lord Warner, that a similar failure regime already exists in respect of NHS trusts and it covers failures in quality. The Bill ensures a consistent regime for trusts and foundation trusts alike.

The Bill does not mention NHS trusts and the TDA because the latter is a special health authority established under secondary legislation. The NHS Trust Development Authority Directions 2013 delegate the Secretary of State’s extensive powers in relation to NHS trusts to the TDA. They include appointing directors and terminating their appointment, power to give directions to NHS trusts in relation to quality and recommending trust special administration. We have tried to place the regime on an absolutely equal footing with the regime that we are creating in the Bill for foundation trusts.

Lord Warner: My Lords, I am sorry to interrupt, but I have here a document that the noble Earl’s department sent out in May, signed up to by the TDA, Monitor and the CQC. I want to direct his attention to paragraph 27 of that document, which I mentioned in my remarks. As I understand it, this sets out the Government’s policy on the relative difference between TDA and Monitor. It makes it very clear. I shall quote from it, because this is absolutely the nub of the issue:

“Monitor can also place a foundation trust into special administration directly, following consultation with the Secretary of State and the CQC, on the grounds that it has, or is likely to become, financially unsustainable. The changes proposed in the Care Bill will enable it also to do this where it is apparent that a provider is clinically unsustainable”.

The initiative lies with Monitor. It can do this in relation to the trust of my noble friend Lord Hunt or to any other foundation trust when it has had a warning notice from the CQC and thinks change has not taken place. Hold that thought in the head and look at what the document says about NHS trusts that are in the maw of the TDA. It states:

“Managing the process of reconfiguring local services to provide sustainable, high quality healthcare that meets patient expectations and needs is primarily a role for local commissioners, supported by NHS England. In the event that an NHS trust or foundation trust has failed to make improvements and commissioner-led efforts to resolve the issue have not succeeded, special administration may, as a last resort, provide a mechanism for dealing with NHS trusts and foundation trusts which have become either clinically and/or financially unsustainable. Where the TDA considers it is in the interests of the health service, it can already advise the Secretary of State to place an NHS trust which it considers to be either clinically and/or financially unsustainable into special administration”.

Monitor can simply take that decision itself when it has the evidence. The TDA has to go through a series of hoops with commissioners before it can advise the

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Secretary of State. That is what this document seems to say. If it is wrong we need to be clear that it does not say what the Government mean it to say.

Earl Howe: I think the noble Lord has misled himself. The way in which we envisage the system working for both trusts and foundation trusts, where we have a provider that looks as though it might be clinically unsustainable, is to encourage commissioners and the provider concerned to come together and have a grown-up conversation about the configuration of services. That is the first resort and it is the normal course of action that we would expect, whether it is an NHS trust or an NHS foundation trust. In either case, trust special administration is going to be a last resort.

The noble Lord is right that, while we envisage the process of trust special administration to be broadly the same in both instances, there has to be a difference. The difference arises from the fact that foundation trusts are, in statute, much more autonomous bodies than NHS trusts. NHS trusts are still subject to directions from the Secretary of State. What the TDA does is act as the Secretary of State’s proxy in overseeing their quality, sustainability and governance. That is why there is a process around referral to the Secretary of State before a trust special administration can take place for an NHS trust, whereas that is not the case with a foundation trust. That is because Monitor is the independent regulator for FTs charged with doing that.

The noble Lord does not need to make too much of the differences that he has purported to identify in that document, which I will, of course, re-read in case we have inadvertently misled the Committee. The point I sought to make was that in no way do we envisage a material difference in the process which will ensue from a clinically unsustainable provider, or one whose quality is in question.

The noble Lord, Lord Warner, asked what will happen to NHS trusts that do not meet expectations of the accountability framework published last December. The accountability framework covers clinical and operational metrics, governance, leadership and finance. If the TDA judges that a trust is failing the accountability framework, it has a number of options. It can request recovery plans—Monitor is also in a position to do that with FTs; it will increase the frequency of its engagement with the trust; it can commission an independent investigation; it can review the skills and competence of board members. Again that is something that Monitor can do with FTs. It can commission interim support to provide additional management capacity—again that is something that in theory Monitor could do under its licensing arrangements. Ultimately, the TDA can exercise the Secretary of State’s functions and terminate appointments. Monitor has similar powers. I want to reassure the noble Lord, Lord Warner, that there is not such a gap as he has made out in this area.

Incidentally, the noble Lord called into question the speed of progress of the foundation trust pipeline. I can assure him that the pipeline is moving. It may look rather glacial from his perspective, and I can understand why. However, even though the TDA was established only on 1 April, two foundation trusts have been authorised since then—Kingston on 1 May and Western Sussex, which was announced today.

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The noble Lord, Lord Warner, sounded a warning that this kind of arrangement posed a risk that money could end up being taken away from successful trusts to bolster poorer performers. It is precisely to avoid that that we need to grasp the nettle in some cases as we had to do in south London to ensure that one part of the NHS did not drain the resources that should be shared out more equitably among the rest of the health service. Certainly, this is not the intention of our policy. In fact, the purpose of special administration, if it is deemed necessary, is to ensure both clinical and financial sustainability. When it is clear that a hospital cannot resolve quality failures in its current form, we will no longer have to wait until a trust fails financially before action is taken. That is why I shall talk about special administration in more detail in a second.

In future, issuing a warning notice to a trust or foundation trust will be a sign that there is a serious quality issue at that trust and that significant improvements are required. I fully agree with the noble Lord, Lord Hunt, that it will be important to determine what significant improvements could encompass, as proposed by Amendment 64A. We have been clear that the new warning notices are designed to highlight serious failings, such as a systematic failure to meet fundamental standards. As noble Lords will remember, the fundamental standards are a concept that Robert Francis put forward, whereby treatment or practices in a trust could be said to be absolutely unacceptable by anyone’s measure. The fundamental standards themselves have not yet been defined; that process will be taken forward in the coming months with full consultation with the public, and we need to get that right. That is the issue underlying the provision around significant improvements. Under the 2008 Act, the CQC is already required to publish guidance to detail its approach to issuing warning notices. This will be revised in light of this Bill to include its interpretation of “significant improvement”. That is a flexible and proportionate approach.

When a trust receives a warning notice, just as happens now, it will be published and the CQC will send a copy either to the TDA or to Monitor, depending upon whether they relate to an NHS trust or foundation trust, as proposed by Amendment 65. Clause 74 amends Section 39 of the 2008 Act, which requires that a copy of the notice be sent to Monitor and any other persons whom the CQC considers appropriate. When the notice relates to an NHS trust, this would include the TDA.

I have listened carefully to the noble Lord’s arguments in favour of Amendment 66ZB regarding large providers spread over many sites. This is not a new issue; having a regulatory system that is flexible enough to cope with such organisations has always been critical. At present, the CQC has to ensure that they can take a differentiated approach and can deal appropriately with providers, ranging from large multisite hospital trusts to care homes. This will continue to be the case, so I feel that this amendment, while I sympathise with its intent, is unnecessary.

Clause 75 introduces changes to ensure that when failures are identified, there is a prompt and firm response. We have been clear that when a provider receives a warning notice, the responsibility to resolve problems will remain with the provider in conjunction with the local commissioners, as I referred to earlier.

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However, serious failures in the quality of care must not be allowed to be endure, so Clause 75 makes changes to ensure that, when quality of care at a foundation trust requires significant improvement, Monitor can take timely action to make changes to leadership or governance to secure improvements in those services. It amends Monitor’s powers under Section 111 of the 2012 Act to enable it to impose additional licence conditions on foundation trusts when the Care Quality Commission has issued a warning notice to that trust. At present, Monitor can make use of these powers only if there is a failure in governance. If the foundation trust breaches those additional licence conditions, Monitor will be able to use its powers to suspend or remove directors or governors. The NHS Trust Development Authority already has powers to intervene in NHS trusts or to remove or suspend boards, as appropriate.

7.15 pm

I see where the noble Lord is coming from with Amendment 66ZD, which proposes that Monitor must set out the criteria that guided its issuing of additional licence conditions, but I wonder whether it is wholly necessary, given that the main criteria will always be, as the legislation sets out, that the CQC has previously issued a warning notice, which will provide further details on the nature of the failure and the necessary improvements required. I do not believe that the amendment would add anything substantive to this, although, of course, I am happy to discuss this further with the noble Lord, if he would like that.

The noble Baroness, Lady Wall, in her powerful speech, which brought us to the realities of life in a very vivid way, as the noble Lord, Lord Warner, said, sounded a very appropriate warning about the need to grasp the nettle with regard to reconfigurations. The noble Lord, Lord Hunt, expressed his worry that, taken as a whole, the Government’s approach was a recipe for limbo as regards progress towards the necessary reconfigurations. I do not agree with that. We have been very clear, not least since the debates on the Health and Social Care Bill last year, that those issues, when they arise, should not be ducked.

In the first instance, as I have explained, reconfigurations can typically take place through discussion between commissioners and providers, and many have. Stroke services in London are a classic example of a fantastic series of reconfigurations that took place completely in the public eye and have been outstandingly successful. However, in some cases it may be clear that more fundamental issues prevent an NHS trust or foundation trust from making the necessary improvements in its current form. There may be a series of factors that, despite the best efforts of the board of a trust, are inescapable. In such cases, Clause 76 enables Monitor to make an order to authorise the appointment of a trust special administrator on quality grounds, and for the CQC to prompt it to do so if necessary.

The noble Lord makes a number of fine points on Amendment 65ZF, and I agree that the process of special administration should always be evidence-based and transparent. This will be achieved through a number of provisions, as I will set out. First, before the CQC

12 Jun 2013 : Column 1658

or Monitor could put a trust into special administration on quality grounds, it would need to be satisfied both that there has been a serious failure in the quality of care and that special administration is appropriate. If the CQC or Monitor is satisfied that these requirements are fulfilled, it must consult the Secretary of State and its fellow regulator before then consulting the trust in question, the board, and local commissioners before an order is made. Those are safeguards. They are not designed to hold up the process of a special administration where it seems to be in the best interest, but they are, I think, appropriate safeguards when such a radical step is being considered. Section 65D of the National Health Service Act 2006 already requires Monitor to publish its reasons for making the order in a report laid before Parliament. I hope the noble Lord agrees that, given this, the amendment is not required.

For NHS trusts, the TDA has a duty under secondary legislation to advise the Secretary of State if it thinks that it would be in the interests of the health service for him to put an NHS trust into administration. We therefore propose to amend the TDA directions to oblige the TDA to make such a recommendation where advised to do so by the CQC. I hope that the noble Lord, Lord Warner, will see that that is perhaps one of the missing links that he was looking for. We would expect the CQC to consider doing so where an NHS trust had failed to comply with a warning notice, as proposed by Amendment 66, in the same way in which it must for a foundation trust. If necessary, the Secretary of State could exercise his powers under Section 4(2) of the Health and Social Care Act 2008 to direct that the CQC must have regard to this aspect of government policy.

For foundation trusts, the objective of trust special administration is currently focused on continuity of services and financial stability. Clause 77 is therefore needed to ensure that there is necessary focus on the quality of services. To achieve this, Clause 77 broadens the objective of trust special administration as it applies to foundation trusts to include an additional requirement for services to be of sufficient safety and quality. The objective will apply to any foundation trust in special administration, regardless of whether the order was made to resolve a financial failure or a serious failure to provide services of sufficient quality. The intention is to ensure that the CQC is satisfied that the services that continue are not only financially viable but clinically sustainable.

Clause 77 also requires that the CQC is consulted before the trust special administrator provides a draft report to Monitor recommending the action to be taken by Monitor in relation to the trust. The administrator may not provide a draft report to Monitor unless he or she has first obtained a statement from the CQC that the part of the objective relating to the quality of the services has been met. When considering the final report from the trust special administrator, the Secretary of State must also be satisfied that the CQC has fulfilled these functions. So there is, if you like, a “triple lock” here for the quality of services.

In contrast, in reference to Amendment 67, special administration can be triggered for NHS trusts where it is in the interests of the health service to do so. That

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is a far broader definition that already focuses on securing quality services. In relation to NHS trusts, we envisage a similar role for the CQC in providing a statement about the quality of services to an administrator that considers the recommendations made in the draft report. This will not require primary legislation. Instead, it will be set out in guidance.

There are a further series of issues that I am sure noble Lords want me to cover. I apologise for the length of my remarks, but this is a very large group of amendments.

I appreciate the concern that there should be clarity throughout the system for providers as to why action is being taken against them and where they stand. However, we need to balance that with the need to act promptly, when necessary, to protect patients. I think we have got that balance right in the clauses as they stand.

Under current legislation—and I am afraid that duty requires me to remind the House that it was enacted by the Opposition when they were last in government—no provider has a right of appeal to the First-tier Tribunal where the CQC issues a warning notice. I see no reason why the situation should be different in the future for NHS trusts and foundation trusts, as proposed by Amendment 66ZC.

Neither is there currently any right of appeal against the imposition of licence conditions under Section 111 of the 2012 Act, as proposed by Amendment 66ZE, just as there is none when the Secretary of State determines it appropriate to intervene to rectify concerns at an NHS trust. Again, this is consistent with the position established by the Opposition when they were in government. To establish one now would be to create an unhelpful discrepancy between the way in which Monitor’s powers under Section 111 would apply to quality issues and the way in which they already apply to failures of governance.

Amendment 66ZG proposes that there should be a right of appeal where there is disagreement as to whether the order should be made. We have included the power for the CQC to ensure that the chief inspector, as the guardian of quality in the system, can direct Monitor to put a foundation trust into administration if he considers it necessary in order to protect patient safety. To allow a right of appeal in that instance would be to cast doubt on the chief inspector’s judgment at what could be a most crucial juncture, if one were to imagine another situation like that of Mid Staffordshire. While I understand noble Lords’ concerns, I think that the approach that we have taken is the right one when one considers that, in the future, such action will be based on expert judgments and reserved for the most serious failures where the priority should be securing safe and sustainable services for local patients as quickly as possible.

I will address the questions posed to me. The noble Lords, Lord Campbell-Savours and Lord Hunt, asked why the Government had not simply accepted the recommendation of Robert Francis to merge Monitor with the Care Quality Commission. We were explicit at the outset that this was one recommendation that we were not going to accept, because we firmly believe that there remains a strong case for maintaining the

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CQC and Monitor as separate organisations that fulfil distinctly different functions. The inspection and assessment of quality of care should not be conflated with the responsibility for turning around failing providers.

We agree with Robert Francis that we need to tackle duplication and misalignment, and we will achieve this through the single failure regime. The single failure regime will provide a clearer understanding of roles between organisations, with the CQC responsible for exposing problems and Monitor and the NHS Trust Development Authority responsible for overseeing enforcement action. We have received much support for our proposed approach. For example, the Nuffield Trust,

“recommended against transferring Monitor’s responsibilities to the CQC”,

and the Royal College of Nursing supported,

“moves that will allow for the NHS Trust ‘failure regime’ to be enacted on the basis of failures of quality, instigated by the CQC”.

There is a difference of view between us and Robert Francis. We feel that we have met the spirit of his recommendations in other ways.

The noble Lord, Lord Hunt, pointed to an apparent difference of treatment between NHS trusts and foundation trusts on the one hand and private providers on the other. The CQC’s current powers simply have not been as effective in NHS hospitals as they have been in other sectors. I would go so far as to say that the nuclear option which the CQC currently has of closing down a hospital simply is not credible when one considers that many hospitals are the only show in town in providing services. The CQC has never exercised that power in relation to an NHS trust. It has exercised it in relation to a care home, but I believe noble Lords will readily see that a care home is a rather different animal from an acute hospital, not least because it operates in a market where very often there are alternative sources of provision. That is why we have reshaped these provisions. It is vital that effective and timely action can be taken where quality is found to be lacking in our hospitals, and that the regulators have a range of powers available to them according to the severity of the issue.

7.30 pm

Monitor and the CQC are subject to enhanced duties of co-operation in the 2012 Act. The bodies have also committed to closer working, and these clauses have been developed jointly with them. As I said, the CQC has appointed Mike Richards as the first Chief Inspector of Hospitals, and he will be the authoritative voice of quality. These things have happened since Robert Francis looked at the whole issue. The way in which the CQC and Monitor now work together is a direct product of the events of Mid Staffordshire, even before Robert Francis was appointed to his second inquiry.

Government Amendments 66A, 67A and 68 to 72, in my name, are minor and technical amendments to Clauses 76 and 77, and are necessary to ensure that the requirements which the Bill introduces to consult the CQC in the preparation of the administrator’s draft report under Section 65F of the National Health

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Service Act 2006 and when preparing guidance for trust special administrators under Section 65N of that Act will apply correctly until such time as all NHS trusts have been abolished and paragraphs 15 and 24 of Schedule 14 to the Health and Social Care Act 2012 take effect.

I hope that noble Lords are content with my assessment of the failure regime in the light of the amendments tabled and that I have been able to provide reassurance that the approach that we have taken is correct. As I said, these clauses are a direct response to the report of the public inquiry led by Robert Francis, which sets out how regulators, commissioners, professional bodies and the Department of Health failed to secure high-quality care. The single failure regime will ensure that when quality is found to be lacking, a prompt and robust approach will be taken.

Lord Hunt of Kings Heath: My Lords, I will not detain the Committee other than to say that the noble Earl’s response bears careful reading. I am still confused about the role of the CQC. If it is able to enforce action against non-NHS social care providers, I do not understand why it is unable to enforce action against NHS providers. I hear what the noble Earl says about the better working relationship between Monitor and the CQC and I am sure that is right. I pay tribute to the new leadership of the CQC and to the appointment of Sir Mike Richards. However, I believe that the architecture still allows for confusion. I would like further clarification on when Monitor and the CQC can take a different view on quality issues. Perhaps we will come back to this on Report. I cannot believe that Monitor will simply accept the CQC’s judgment at face value. Surely its board will have to come to its own view on those issues. That is an area I would like to explore further.

The noble Earl was reassuring about the issue of non-foundation trusts raised by my noble friend Lord Warner. None the less, it does not feel quite like that on the ground. It does not feel as though immediate action is being taken with the many trusts that are clearly nowhere near achieving foundation trust status. I may encourage my noble friend to come back to that point. Having said that, I am grateful to the noble Earl for his comments, and I beg leave to withdraw the amendment.

Amendment 64A withdrawn.

Amendments 65 to 66ZC not moved.

Clause 74 agreed.

Clause 75 : Imposition of licence conditions on NHS foundation trusts

Amendments 66ZD and 66ZE not moved.

Clause 75 agreed.

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Clause 76 : Trust special administration: appointment of administrator

Amendments 66ZF and 66ZG not moved.

Amendment 66A agreed.

Amendment 67 not moved.

Amendment 67A agreed.

Clause 76, as amended, agreed.

Clause 77 : Trust special administration: objective, consultation and reports

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Amendments 68 to 72 agreed.

Clause 77, as amended, agreed.

Clause 78 agreed.

House resumed. Committee to begin again not before 8.37 pm.

Business and Society

Question for Short Debate

7.37 pm

Asked by Lord Sacks

To ask Her Majesty’s Government what is their assessment of the relationship between business and society.

Lord Sacks: My Lords, I am grateful for this opportunity to discuss the relationship between business and society. I welcome in particular the opportunity short debates such as this provide to step back from the specifics of policy to take a wider and longer view of the moral dimensions of economic policy. This is a very large subject indeed, and I will hazard just a few words about it in general and then turn to one aspect, confident that other speakers will touch on others.

In the light of the G8 protests and so much else that has been said in recent years, it is often assumed that when a religious leader speaks about business, it is to be critical of capitalism and all its works. That is not the case in the tradition from which I speak. The Hebrew Bible, after all, records perhaps the world’s first economist, Joseph, who invented the theory of trade cycles, seven years of plenty followed by seven lean years, which has thus far proved to be a more accurate guide to the 21st century than most other economic forecasts.

We believe that business and the market economy generally play a moral role in society. Business is the greatest stimulus we know to human creativity and increases the common wealth. It reduces poverty, and poverty is profoundly humiliating. Economic liberty has a deep association with political liberty. Trade, as Montesquieu pointed out in the 18th century, is a deep alternative to war. Throughout history, trading centres, such as the city of London, have been at the forefront of tolerance and respect for difference. However, economics is always subject to an overarching moral law. According to the Talmud, the first question we are asked in heaven is: were we honest in business? It does not say what happens if the answer is no, but in my mind’s eye I see an angelic figure like the noble Lord, Lord Sugar, with wings, saying, “You’re fired”.

However, I wish to express my concern at one specific aspect of our current situation, namely youth unemployment. Today, unemployment is high throughout Europe, and youth unemployment far higher still. In Britain, the current figure is 20.7%. This is by no means the worst. In Greece, the figure is 58%, in Spain, 55%, in Italy, 37%, and in France, 25%. These are all disturbing figures. The real question hovering in the background is: is this a mere temporary feature of a low point in the economic cycle or is it likely to become

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a permanent feature of economies in the West, as virtually everything to do with business becomes increasingly globalised as we continue to outsource manufacturing and service industries to low-wage economies elsewhere in the world?

It used to be thought that high unemployment was the price we paid for low interest and inflation rates. Is it now to be the price we pay for global free trade? Are we condemning a significant proportion of young people to a future in which they will never find work? If so, the price we pay is likely to be very high indeed. There is the economic danger of an increasingly small working population supporting an ever larger non-working population, something that is already happening because we are living so much longer. There is a political danger. Historically, and in many parts of the world today, youth unemployment is a prime cause of political instability. Above all, however, we should be mindful of the moral, psychological and—dare I say it?—spiritual hazards at stake.

In Judaism, we believe that work is fundamental to human dignity. We believe that everyone should be able to say, “I made a contribution to the common good. I gave; I did not just receive. I earned my daily bread. I did not depend on the generosity of others”. Our ancient sages said, “Do even the most menial work rather than be dependent on others”. Maimonides, our most eminent medieval scholar, held that the highest form of charity was job creation because it enabled the recipient to become independent of charity. These remain compelling ideas.

A Jewish economist, David Ricardo, formulated one of the most morally beautiful of all economic theories, the law of comparative advantage, which states that even if you are better than me at everything, if you are still better at some things than others, and I am also better at some things than others, then if we both concentrate on what we are best at, and trade, we are both better off. That means that every one of us has a contribution to make to the common wealth. We all have something to give.

In a very moving article a few months ago, the columnist Matthew Parris wrote about the experience of life on welfare benefit that he had once undertaken for a television documentary. He discovered that the real issue was not so much material as psychological. Without minimising the deep financial hardship, he wrote that,

“what I'll never forget was the slow, quiet, killing quality of a life without purpose, a life where you depend, but nobody depends on you; a life where all the people around you, too, are without occupation”.

He spoke of the “shame” and “indignity” of worklessness. That is precisely what drives Jewish economic ethics.

There is an inescapable moral dimension to economic policy because it is, in the end, not about abstractions, such as GDP, but about people. There could be no more dispiriting prospect than the thought that a significant proportion of young people in this country will grow up without prospect of employment, without contributing to the nation’s economy and without having the chance to say, “I made this, I contributed, I helped this to happen”.

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I therefore ask the Government to explain how they are exploring ways in which business, education, local and regional groups and civic and voluntary organisations can work together to increase the skills of and job opportunities for young people. Employment is a moral issue because dignity comes from what we do to enhance the lives of others.

7.44 pm

Lord Patten: My Lords, I shall make three points about where business and society meet from an ethical point of view. First, there is surely no iron curtain between business and society because, after all, the shared values of business people and people in society are the same. They try to help and look after each other, doing good not bad, being supportive and helping people in ways that they can. That is at least the best reading of that shared value. Equally, most businesspeople such as my wife and me go back at the end of our business day into society. We are not some other class. Most people in business look to society as a haven and a home, just as most people in society look to business to supply their needs. There is no iron curtain of any sort there.

Secondly, all of us should be extremely cautious when things go wrong in business, such as giving in to the sound bite delights of, say, bad banks and the rest, because I fear that that will discourage a lot of those who are not bad but good bankers. There are a great many of them, and that is why I very much welcome what the noble Lord, Lord Sacks, said about the ethics that drive his religion. They are sometimes very different from those that drive mine but, with due respect to some of the cassock-wearing classes—I entirely exonerate the right reverend Prelate the Bishop of Chester—there has sometimes been a bit too much bad bankery around, which distresses a lot of people. One has to be careful, moderate and modest in what one says.

Thirdly and lastly, society has a lot to learn from business and big business. I recently looked at the ethical code of an extremely successful global corporation, which has got away without having any ethical problems in the past two or three decades because of the high levels of ethical training that everyone in that business has to go through. They have to sign up each year to a final question: “Would I be pleased where conscience meets ambition? Would I be pleased to see what I am going to do today in the media tomorrow to be seen by my loved ones?”.

7.47 pm

Lord Glasman: My Lords, it is always an honour to participate in a debate introduced by the noble Lord, Lord Sacks, the Chief Rabbi, who has led my community, the Jewish community, in an exemplary way. He has renewed our most important tradition, modern orthodoxy, and made it relevant for the modern world. As ever, he has it completely right by bringing our attention to the relationship between business and society. There has been a rupture in that relationship, and it is extremely important to reconceptualise it.

I want to concentrate on the issue that the noble Lord brought up regarding youth unemployment and the way that faith can cast light on it. He has a unique

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voice, but he is not alone in what he said. Two weeks ago, I was invited to Rome, where I received a medal from the Vatican. One must understand that, as someone who grew up in Jewish north London, receiving medals was not something that I ever expected to happen. They would normally have been for sporting or military activities, neither of which, according to the comparative division of labour, was a speciality of Palmers Green and Southgate Synagogue.

However, the Pope also has a very pro-business and pro-worker agenda. Issues regarding usury and interest rates are extremely important to that. Above all, what faith brings, and what we neglect, is the realisation that there is no solution to youth unemployment without bringing older people into the equation. There needs to be intergenerational solidarity. Traditionally, we have always put a strong emphasis on our elders. It is essential that we retrieve the idea of vocation and bring in older people, who should not be abandoned and whose wisdom and experience are so important in generating the values that will be essential to earning a living in the world and generating employment. We need to find ways to allow older people to relate to younger people, who should hear their stories and learn their skills. I commend the Chief Rabbi for this debate.

7.49 pm

Baroness Scott of Needham Market: My Lords, perhaps oddly in a debate on business, I am going to focus on the topic of volunteering. I am going to do so because the good news is that more and more people of working age are volunteering, but they are able to do so through the good offices of the businesses and people who employ them and give them time off to do so. Many organisations are going further than this, and are participating in bespoke schemes which enable their staff at all levels to become involved with volunteering. This is perhaps with chosen charities through team activities, fundraising or joining in the work of the charity, or in other cases, giving professional advice such as legal, IT or financial.

The Westminster volunteer centre has a very good track record of working with large organisations and corporations to enable this to happen. I recently met a lady called Nikki King. She is the managing director of Isuzu trucks, and she decided to tackle the lack of aspiration that she sees so often in young people by giving them mentors from the world of business and industry. She started just doing this by herself, but she now works with the Freight Transport Association, DHL, Asda, William Hill and many others to provide mentoring to 14 to 18 year-olds. In my own area, AXA insurance and Willis have both worked with local volunteer organisations.

Academic studies from around the world have shown that creating an employer supported volunteering scheme is a cost-efficient way for business to increase staff job satisfaction, build internal and external networks, contribute to high-quality personnel recruitment, teach new skills to their employees, improve customer relationships and increase shareholder value.

What do we, as parliamentarians, need to do to encourage this trend? First, we need to keep our house in order. I think that it is rather a pity that, as one of

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the largest employers in Westminster, we do not have a corporate volunteering scheme here. I have raised this with the House, and perhaps other noble Lords will support me in this endeavour.

Secondly, the Civil Service has a very good track record of volunteering and I hope that the Government will remain committed to it. Finally, the Government need to take a look at the funding for volunteer centres. Volunteering does not come free; there is no substitute for the face-to-face expertise and bespoke service provided by good volunteer centres.

7.51 pm

Lord Mawson: My Lords, when I began my work as a social entrepreneur in the East End of London 30 years ago, there was a clear perception that the public sector and charities were the good guys who do good to people and that business was for, and I quote, “greedy capitalist pigs”. Of course, many of us at that time had little, if any, real practical experience of working with business people. However, we read the Guardian and completed our university degrees and so we were experts.

As a clergyman, I am in the religion business, and the religion at that time was very clear and of a fundamentalist nature. Religion had moved out of the churches and on to the street, and its belief systems were firmly established in the public and charitable sectors. Over the past three decades, our understanding has changed. We have been led through the Common Purpose programmes of the 1990s into practical working relationships with the business community. We have come to know and respect many business people because they often know how to run things well. Many of us have formed business partnerships to deliver our programmes in local communities.

Today only 6% of the funding at the Bromley by Bow Centre, which I founded, comes through the state. The majority of our success stories are because we work in partnership with business. This week a £1.5 billion development programme has been announced in Silvertown Quays in the Royal Docks. With a good wind behind it, this programme could change the lives of one of the poorest communities in east London. I was invited to join the team and I am proud to be a member of this business consortium which I hope will transform this piece of London over the next decade and create hundreds of jobs. Here, of course, I must declare my two interests.

What does the future look like? I think we need to use the present financial crisis to create a new alignment. The state needs to create the conditions within which the business, social enterprise, and charitable sectors can work together. As a practitioner, I have to grapple every day with the insensitive bureaucracies and silos of government systems, and it is not getting any easier despite years of rhetoric from Ministers of every political persuasion. The real moral challenge to all our parties is not with business per se but with the state and its seeming inability to deliver at ground level.

We must have a more intelligent discussion about the size of these state institutions and how we enable each of them to work more easily with small and medium-sized enterprises. This is the real moral issue: size matters.

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7.54 pm

The Lord Bishop of Chester: My Lords, I want to risk the wrath of the noble Lord, Lord Patten, by suggesting that society as a whole would be better off if more businesses and organisations were to pay the living wage. The aim is to pay enough to sustain a basic but adequate standard of living. The current rates, as determined by the Living Wage Foundation, are £8.55 an hour in London and £7.45 an hour elsewhere.

Over the past 30 or so years, there has been a general move towards more liberalised markets. Whether this is a move back to the Hebrew Bible or not we can perhaps discuss at greater length, but no doubt it is. It has produced many benefits, but the problem is that any society based upon freedom tends to produce more winners and losers and exaggerates the differences, and indeed, an underclass very easily emerges.

While low pay is a feature of most advanced economies, the UK has a particularly high, and rising, share of low-paid workers. If we use the living wage as a guide, in 2011 nearly 5 million UK employees were paid less than the living wage. This included 25% of all female employees, and 41% of all part-time employees.

I travel regularly in Scandinavia for family reasons, and the benefits of having a minimum in excess of our living wage in relation to dignity at work as well as the wider and broader features of society, are pretty obvious to me. Surveys in the UK suggest that paying the living wage has led to improved productivity by reducing the staff turnover, and raising morale.

I remember all the predictions of economic damage when the minimum wage was introduced in this country. They were mistaken. Is it not time for businesses across the UK—and for that matter, the Government—to work towards a greater implementation of the living wage? Church bodies are resolved to do this as they are able to, and I am glad to say that real progress is being made. Very recently the Church Commissioners, with their extensive property holdings in London, have agreed to pay the living wage to all employees, including cleaners and everyone else.

In this spirit, I ask the Minister whether all those who work in these buildings, including contract workers, are themselves paid at least the London living wage. If not, why not?

7.56 pm

Baroness Bottomley of Nettlestone: My Lords, I warmly congratulate the noble Lord on introducing this debate. I became a Conservative when working for the Child Poverty Action Group, influenced by a distinguished Jewish politician who had a profound influence on Margaret Thatcher, the late Lord Keith Joseph. I had written a wonderful paper about family benefit, or child benefit, and how critical it was. He read my paper when I was aged 23 or 24, and he said, “Virginia, you only have to understand one thing; it is much easier to divide the cake up than it is to bake it in the first place”.

Wealth creation matters. If we want schools, hospitals, roads and infrastructure, and if we want to do good and change the world, wealth creation is a critical element. I am pleased that the recent UN millennium

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development goals particularly emphasise the need for a much greater role for business in any new global framework. Only recently the

Economist

—of which I am a trustee—wrote an article about the number of people coming out of poverty. They are coming out of poverty because of wealth creation.

Of course there have been examples of the unacceptable face of capitalism, but there has been much more of a profound move to corporate social responsibility, of which one of the greatest champions and pioneers has been the Prince of Wales. His work with the Prince’s Trust, Business in the Community and International Business Leaders Forum has all been about recreating the principles that I suppose surrounded the 19th century businesses of the Cadburys and many others, of serving your community. By serving and strengthening your community you also strengthen your business at the same time.

Business now also informs much of the philanthropic sector and the noble Lord, Lord Mawson, was beginning to touch on this. I am fascinated by the work of social impact bonds, Big Society Capital, social incubators and social enterprises. We used to have different rules of engagement for the philanthropic side than for the commercial side. Now there are far more people saying, “No, philanthropic organisations should use their money wisely and well”.

The gap has been universities. Universities are a catalyst between business and society. With great pride, I am chancellor of the University of Hull—which is an area of high unemployment. The university makes a profound difference working with industry and enterprise to create the conditions where external business wants to invest and wants to create employment. A recent example is the Humber port project, leading to the investment of Siemens, and there are many other examples where the local workforce is being trained to be fit for purpose and global businesses are being encouraged to invest in a needy but thrilling part of the country—Kingston upon Hull.

7.59 pm

Baroness Warwick of Undercliffe: My Lords, I was prompted to speak by a meeting with the impressive Ethical Trading Initiative, an alliance of companies, trade unions and voluntary organisations, which sets out principles on which international trade should be founded and to which companies and their supply chains have signed up.

Businesses alone cannot take the blame for the pressure for cheap-as-chips products. We, as consumers, are helping to drive their business decisions, yet when a disaster occurs, such as the collapse of the garment factory in Dhaka, we are outraged at the loss of life and the conditions of the garment workers. An event such as that makes the ETI principles all the more valid and emphasises the need for them to be underpinned by the UN guiding principles. Therefore, I ask the Minister: when will the Government publish their strategy for implementing the UN principles?

Sound corporate governance is integral to sustainable economic growth and to the delivery of a better society. It helps us to discharge our duty to the disadvantaged,

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such as the clothing workers in Bangladesh. That is why I hope that the current review of non-financial reporting requirements will produce strengthened social, environmental and human rights commitments.

I also welcome the proposed amendment to the EU accounting directive, which would require companies to account for their impact on society more generally. Can the Minister confirm that the Government will support that amendment?

Finally, closer to home is the CAF/NCVO Back Britain’s Charities campaign, launched in response to a 20% drop in donations when charities face a 67% increase in demand for their services. Businesses are as much a part of their local communities as local government or charities. They have a significant role to play in addressing difficult social issues. Next week, the CAF/all-party parliamentary inquiry on growing giving, chaired by the right honourable David Blunkett MP, starts taking evidence. Can the Minister tell us the Government’s views about encouraging both employers and employees to work together to give more time and money to good causes?

8.02 pm

Lord Phillips of Sudbury: My Lords, I have a sober view of where we now stand as a nation and, in my two minutes, I intend to concentrate on the relationship between business and local communities. I do that from a comparative basis. I am lucky enough still to live in the small town that I was bred in—Sudbury in Suffolk—and the contrast between my first 20 or 25 years and now could not be more stark in terms of business engagement with civic and public life. I do not think that the town is any different from any other in the country.

In my youth, there was strong community cohesion. Most businesses—professional businesses, factories and shops—were locally owned, and there was a happy elision between self-interest and public interest in that, if you did nothing by way of public service, people would notice. They would say, “That miserable so and so, Phillips. He sits in his office coining the money and does”—I must not use the Saxon expression—“very little”.

Today, it is tragically noticeable how few lawyers, doctors, accountants, factory owners, shopkeepers and bank managers—we do not even have those—engage with the community. The disconnect between business and civic life is astonishing and is, I think, at the root of so much that is damaging in our public and national life. It is not because people are bad; it is because of the values by which this society of ours is currently driven. Commercialisation and individualisation have done grave damage to the contribution that business people of all types should and could make, to their great advantage. One irony is that public service has huge come-back and rewards. It brings status, self-satisfaction and so on.

There is no point in pretending that we, here in Parliament, can deal with these matters. We can add a bit of help and a bit of a push but, by and large, this is a deep cultural problem for all of us—individually, collectively and communally. I just want to make that point because, unless we have a reformation and we

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reconnect, remoralise and re-relate business, I think that our next 20 years could be the worst of the past 200.

8.04 pm

Lord Bilimoria: My Lords, when I came to this country from India in the early 1980s, entrepreneurship had the image of Del Boy and second-hand car salesmen. There was a glass ceiling. Today, everything has changed. Entrepreneurship is cool, and I believe that we have a society where anyone can get anywhere, regardless of race, religion or background. Yet business still has such a bad image. We have executive pay. The noble Lord, Lord Sacks, spoke about the noble Lord, Lord Sugar. We have the “Apprentice” image of “You’re fired”. We also have the financial crisis and bankers. I thank the noble Lord, Lord Sacks, for initiating this debate.

At an Industry and Parliament Trust event last week, I chaired a dinner where the theme was trust in business and government. I was shocked when statistics were quoted: only 17% of the public trust business. Even worse, a poll was taken after the Olympics in which the question was, “Are you proud of Britain?”. Overwhelmingly the public were proud of Britain. However, when asked, “Are you proud of British business?”, 4% said that they were. That is shocking.

The Zoroastrian community, of which I am proud to be a member, is based on three tenets: good thoughts, good words and good deeds. When Jaguar Land Rover was taken over by Tata, the company headed and founded by Parsis, the workforce was happy because of Tata’s reputation for welfare in the workforce. The motto of the World Zoroastrian Chamber of Commerce is “Industry and Integrity”—industry as in hard work, of course. The noble and right reverend Lord, Lord Williams, the former Archbishop of Canterbury, explained that “integrity” comes from the Latin word “integrum”, which means “wholeness”. You cannot practise integrity unless you are whole.

Can the Minister explain what more the Government can do to make sure that our people and the country appreciate business and are proud of business? Regardless of everything, British business is still in every sector one can imagine the best of the best in the world. Therefore, why do people not appreciate that it is business that, on the whole, pays the taxes, creates the jobs and pays for all the public services that we all benefit from?

8.06 pm

Lord Griffiths of Fforestfach: My Lords, I am delighted to take part in this debate for two reasons. The first is that the subject is hugely important. As we have just been reminded, business is the source of jobs, of wealth creation, of innovation and of tax revenue. The second reason is my regard for the noble Lord, Lord Sacks. As a religious leader in this country, he has been unrivalled in his support for business—but not just any kind of business. He has consistently championed business which serves society, business which has an ethical core and business which has a purpose larger than just profit.

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Profit is essential to any business—without profit, a business will cease to exist—but the noble Lord, Lord Sacks, has repeatedly asked what I think are the fundamental questions. What is the purpose of business? What is a business really for? Why does it exist? His answer, with which I totally agree, is that business is not an end in itself. Business has to be seen within a larger framework which puts the human person—or, as he said today, the young unemployed—at the centre of economic life, emphasising creativity, work, integrity in the product, sustainability of the environment and so on. That is why, as he said, business plays a moral role in our society. I also greatly value the theological underpinning—the Hebrew Bible—of what he said, which is not just the basis of Jewish economic ethics but is also the fundamental basis of Christian ethics.

In asking the Government to assess the relationship between business and society, I believe that the paramount issue, as was mentioned by the noble Lord, Lord Bilimoria, is trust. People instinctively know what is good and what is bad, and what is right and what is wrong in business. It is because of this that they are dismayed by the constant stream of bad news from business: mis-selling, price-fixing, money-laundering, tax avoidance and bribery.

I think that government can help by ensuring greater transparency and rebuilding trust, but the greater challenge, which is what I think the noble Lord, Lord Phillips, talked about, is the moral leadership which comes from business itself and which has to emphasise honesty, integrity and openness as the way forward. That is why I really applaud what the noble Lord, Lord Sacks, said.

8.09 pm

Lord Parekh: My Lords, it is a pleasure to be participating in a debate initiated so eloquently by the noble Lord, Lord Sacks, and in which my good friend the noble Baroness, Lady Bottomley, spoke so wisely. I want to concentrate in the next two minutes that I have on the paradoxical relationship between business and society. Business simply cannot survive without three conditions. One is an educated workforce and skilled personnel, which society provides. Another is a well regulated market with a civic morality, which only society can cultivate and nurture through its institutions. It also requires a well regulated state, which only a good society can sustain.

Those three conditions constitute the invisible capital that business requires in order to survive. Business depends not just on the financial capital that businessmen produce, but on the moral, cultural and political capital that society at large provides. Business, therefore, is vitally dependent on society, and yet it has the constant tendency to undermine all those three conditions on which it depends for its survival. It is used to counting the money and therefore does not see the value of the invisible capital that society’s moral and political institutions provide. It takes a short-term view of things, and institutions, moral institutions in particular, are built over generations. It also takes an instrumental approach to life and turns almost everything into business so that in a society such as ours, medicine, law and even the priesthood might become a business.

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Given business’s hegemonic and expansionist tendency to turn everything into its own mirror image, it inevitably undermines the capital on which it depends. Therefore, it desperately requires a regulatory framework, which is provided by the state. The state therefore is not the enemy of business let alone of the market: the state provides the sole preconditions that business requires in order to flourish. That was the big mistake made by Mrs Thatcher and the neoliberals. They thought that they could deregulate the economy and remove the state. In the process, they released forces that caused the havoc that we are still experiencing. Unless we properly grasp the relationship between business and society and the way in which business depends vitally on the moral capital that society provides, we are in grave danger of repeating the mistakes that were made only a few years ago.

8.12 pm

Lord Kalms: My Lords, the noble Lord, Lord Sacks, the Chief Rabbi, has covered the ground well, and I thank him for inaugurating this short but valuable debate. Regretfully, the market economy is both hero and villain. Our task and our duty is to deal with its flaws. It will be fatal if we do not find the cure. The market is selfish, greedy and inward looking. Its thinking can be short term and it is corruptible. The bankers’ poisoned products leave an indelible mark on our memory. The search for gold temporarily blinds the market to its consequences. It deliberately confuses charity with its tax efficiency against a wider social responsibility. Its wealth is for internal consumption—and fat do they all grow.

Today, the market looks to globalisation, particularly in Africa and Asia, to create new wealth. It employs young labour, tax avoidance, subsistence wages, unacceptable working conditions and the corruption of local bureaucracies. Investment often becomes exploitation. Its sole raison d’être is the creation of wealth. The white T-shirt sold for a few pounds with a high margin must not be allowed to hide an invisible sheen of blood and tears.

We all recognise that these defects are part of all of us. The weaknesses are of a human nature. Few are totally innocent, and we must exercise self-criticism. To know the problem is how to solve the problem. Wealth creation must become remodelled. It must include the community and the world, and it can no longer be a golden island. It must embed into its character and soul the concept of ethics. It must ensure that wealth has to be transformed into spreading prosperity.

This concept is not in the stars; it is within our own hands. There are many companies and great philanthropists who pursue this model. They see the City as their responsibility. We must insist that all wealth creators have a duty of care to the society that creates their opportunity.

8.14 pm

Lord Mitchell: My Lords, even with a two-minute deadline, I cannot let the moment pass without paying a few words of tribute to the noble Lord, Lord Sacks. This coming September, and after 22 years, he will

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retire as Chief Rabbi. He has been an inspirational leader and teacher in his own community, but also an exceptional ambassador for Judaism in the public arena. Through his writings and radio broadcasts, he has become an unparalleled moral voice for the nation.

I have always been personally grateful for his wisdom and support, and I know many other noble Lords are too. I am sure I speak for all noble Lords here this evening in thanking him for his service to our country and wishing him well for the future.

Noble Lords: Hear, Hear!

Lord Mitchell: If the BBC is listening, we must all hope that the noble Lord’s slot on “Thought for the Day” will continue.

The Jewish Association for Business Ethics was partially set up by the noble Lord, Lord Sacks. On two quite separate occasions, we had two leading lights from the UK advertising industry as keynote speakers. I asked both of them the same question: “In view of the UK’s recent actions to ban tobacco advertising, would your agency run advertisements in countries where cigarette advertising is still permitted?”. Both of them gave me the same answer: “If it’s legal, we will do it”. I was shocked.

The issue of strict legality came up again when I attended the Google Big Tent event last month. Not surprisingly, keynote speaker Ed Miliband criticised Google for avoiding UK tax. Eric Schmidt, Google’s worldwide CEO, gave a reply that was a tad disingenuous: “Google pays the tax it is legally due to pay. If you don’t like it, then change the law”. I was shocked again.

Codes of conduct, voluntary tax payments and exhortation are all very well, but seldom enough. Governments around the world need to work harder to ensure that the laws are in place and that the rules are clear. That way, both the spirit of the law and the letter of the law will come closer together, giving business the certainty that it needs to fulfil its vital role in our society.

8.17 pm

The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Viscount Younger of Leckie): My Lords, I am grateful to the noble Lord, Lord Sacks, for initiating this important debate. I had the pleasure of meeting him for the first time when I happened to sit beside him during the gracious Speech. I am grateful to Her Majesty the Queen for unwittingly engineering this. I echo the words of the noble Lord, Lord Mitchell, in thanking the noble Lord, Lord Sacks, and wishing him well for the future.

In considering one of the key raisons d’êtres for business, the fundamental question is whether the pursuit of profit can ever be good for society. In the 1980s, the answer would have been, for most, a resounding yes. For others, especially those who were wary of privatisation, the answer might have been a firm no.

Through the boom years, when house prices were rising, unemployment was low, when gadgets were readily purchased by all and frequent and exotic holidays seemed commonplace, many people might have agreed

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that the pursuit of profit was not a bad idea. During recent times, people have begun to question the pursuit of profit as a greater emphasis is placed on the benefit of business to society.

This Government are clear that business, and the pursuit of profit, can be a force for good in society by strengthening our economy and bringing together local communities. The noble Lord, Lord Sacks, acknowledged that earlier in his speech. At a fundamental level, businesses contribute significantly to society by creating jobs and improving the skills of the workforce. Many noble Lords made that point today. The noble Lord, Lord Sacks, in particular spoke about the importance of the value of work, the benefit of doing business and the satisfaction that many employees and employers gain from simply trading, which in itself is good for society.

I am pleased to report that figures from the Office for National Statistics published earlier today show that 1.3 million new private sector jobs have been created over the past three years. Some 24,000 more people are in work since the previous quarter, which is a fantastic figure. Figures relating to the period between February and April 2013 show that youth unemployment was down by 43,000. The noble Lord, Lord Glasman, concentrated on youth employment in his speech. It is an extremely important issue on which the Government are focusing in their aim of growing the economy. The noble Lord also made the point that, at the opposite end of the spectrum, older workers have a valuable role to play in the workplace. Further, since 2010, over 1 million apprenticeship starts have been created, and provisional data show that there were 245,000 apprenticeship starts during the first six months of the 2012-13 academic year. Of those, 69,600 were in the 16 to 18 year-old bracket. These figures are very encouraging, but there is a long way to go and we will keep working hard on this issue.

Businesses provide much more than just employment. They can improve the quality of life and well-being of employees, protect the environment and invest in a wide range of community activities. My noble friend Lord Griffiths emphasised that the purpose of business is more than just profits and stressed that employment has a moral purpose. In adding to that point, the noble Lord, Lord Parekh, defined it as a civil morality. Many businesses actively seek to improve opportunities for young people through apprenticeships and by supporting schools and charities.

The Government are showcasing schemes that encourage businesses across the country to support their local communities through corporate responsibility activity. There are many examples of this. In 1999, Greggs, the high street bakers, established its Breakfast Club programme within primary schools in disadvantaged areas. I am happy to say that this now provides a healthy start to the day for more than 10,000 children. In 2011, Greggs donated £250,000 to support existing clubs and open additional ones in areas of need. Lloyds Banking Group’s community investment similarly focuses on community sponsorship and funding local charities, supporting colleagues with their local community engagement and improving levels of financial inclusion and financial literacy in the United Kingdom. This includes building the financial capabilities of people

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with learning disabilities, thereby enabling access to financial services. Marks & Spencer’s Marks & Start work experience programme for disadvantaged groups has helped more than 800 people in the United Kingdom to get back into work. One might perhaps say, “It’s not just altruism, it’s Marks & Spencer altruism”.

It is not just big business that can make a difference. The Voice of Local Shops Survey polled more than 1,100 independent retailers across the country and found that 80% of store owners are involved in their community in some way, with 71% collecting for a local or national charity and 25% providing sponsorship for local schools and sports teams. The UK should be rightly proud of the many companies that go beyond their own self-interest and undertake activities that are of benefit to business, the environment and, indeed, society. The Government are taking steps to encourage this. At the end of the month, my honourable friend in the other place, Jo Swinson, will be launching a three-month consultation on corporate responsibility with business and other stakeholders. The Government are also committed to supporting and promoting an economy that is comprised of a diverse range of business and organisational models that includes the private sector, the public sector, co-ops, voluntary groups and charities with the aim of achieving a stronger society. This was a point that the noble Lord, Lord Mawson, emphasised in his speech.

Additionally, the coalition agreement in 2010 stated that the Government would take action to support the growth of the social enterprise sector. This sector is more important than ever to achieve an economy where a responsible approach is taken to growth, risk, the business environment and society with the aim of achieving long-term, sustained economic prosperity alongside the responsible use of resources. Its focus on responsible social business practices not only drives its profitability, it improves the well-being of local communities. These businesses are often concentrated in the UK’s most deprived communities, addressing social problems and building economic resilience.

For example, an organisation called Blue Sky is a social enterprise that focuses on reintegrating ex-offenders into society by offering employment and training opportunities. It exemplifies the economic and social good catalysed by social enterprises. To date, it has provided more than 700 jobs to ex-offenders. Some 51% of them leave with formal training qualifications, 48% move into permanent employment and, on average, only 15% have reoffended, which is a quarter of the national average. Blue Sky is also a growing profitable business whose commercial income has increased sixfold since 2007. It is helping to break the cycle of reoffending and is challenging society’s negative perception of offenders. Another example is Cockpit Arts, an award-winning social enterprise based in London, which is the UK’s only creative business incubator for designer-makers. It works with hundreds of businesses to help them conceive, develop and deliver innovative products to take to market. Moreover, in 2012, Cockpit Arts reinvested its profits into its Creative Careers for NEETS programme, providing jobs and work experience placements for local unemployed people with raw creative talent.

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My right honourable friend in the other place, Dr Vince Cable, has already established quarterly bilateral meetings with Social Enterprise UK, the leading trade organisation for the sector. These productive and positive meetings help us to identify the acute challenges facing the social enterprise sector and look at what the Government can do to help. We are introducing new tax relief to encourage successful business people to invest in social enterprise, and it is good to have support in this area from my noble friend Lady Bottomley. Social enterprises are also challenging the glass ceiling, with 86% of their leadership teams boasting at least one female director and 27% with directors from the black and minority ethnic communities.

The relationship between arts and business is extremely important to enable a thriving and resilient arts and cultural sector which enriches society. Businesses provide a vital funding source that is essential to maintaining our high-quality arts culture. For example, for many years BP has supported the BP Portrait Award for the National Portrait Gallery, which encourages young artists to develop their portrait technique. Last year, more than 2,000 artists from 75 countries took part in the competition and almost 250,000 visitors attended the event. The Frieze London art fair, sponsored by Deutsche Bank, is one of the world’s most influential contemporary art fairs and brings an international audience to London every October. These sponsorships are vital for a greater number of people to experience and be inspired by the arts, irrespective of their background.

I turn now to a number of points that were raised by noble Lords in the debate. I should say to the noble Lord, Lord Bilimoria, that I greatly enjoyed the television programme this week in which he featured so strongly. He made the point that instilling the words “industry” and “integrity” into the workforce is important because, in turn, they create a certain wholesomeness that leads to better well-being in society. That is a point which is very well made. The right reverend Prelate the Bishop of Chester brought up the subject of the living wage. It is an important issue, and I thank him for raising it. I will write to him with some details on the living wage in relation to this particular building, which I think was the point that he made.

The noble Baroness, Lady Warwick of Undercliffe, asked whether the Government would publish the UN guiding principles on business and human rights. As I mentioned earlier in my speech, on 27 June we are launching a consultation on a UK framework for action on corporate responsibility, and we will take full account of the UN guiding principles. The final document setting out government and business corporate responsibility commitments will be published in December this year. I believe that it was my noble friend Lady Bottomley who raised the issue of ethical supply chains, as did my noble friend Lord Kalms. The Bangladeshi factory crisis and the horsemeat scandal illustrate the importance of promoting ethical and responsible supply chains. The Government are encouraging businesses to value and develop responsible supply chains. My noble friend Lord Kalms also referred to transparency, and indeed he is correct to say that we need to be more transparent in the supply chain. That will lead to

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better information being made available to consumers, thus allowing them to make a choice as to whether a £2 T-shirt is actually worth all the blood, sweat and tears.

The initiatives discussed today provide just a few examples of the Government’s engagement with business, a relationship that this Government seek to improve and strengthen.

8.29 pm

House resumed. Committee not to begin again before 8.38 pm.

Care Bill [HL]

Committee (3rd Day) (Continued)

8.38 pm

Clause 79 : Unitary board

Lord Warner: My Lords, I have put down this amendment to explore briefly the Government’s thinking on the appointments set out in the amendment. As has already been said, I am sure we are all delighted that Professor Sir Mike Richards has been appointed Chief Inspector of Hospitals. I was doubtful about the practicality of this post but if anybody can make a success of it, I think Mike Richards can. Why did the Government not make this a statutory post? Is it because they see it as a time-limited appointment?

The second part of the amendment explores a slightly wider issue. I know that the post of Chief Inspector of Social Care has been advertised but does the Minister think that the post has been too narrowly drawn and represents a bit of a missed opportunity? I know from remarks he has made at events I have been at that the Health Secretary has considered whether there should be a chief inspector of primary care, which I am sure has strengthened his relationship with GPs. For my part, poking around in some of the murkier corners of primary care and trying to strengthen it would be no bad thing.

However, the wider system problem we face in the NHS is the weakness of the combined set of non-hospital services and their integration with social care. That weakness is now leading to moves in some places for acute hospitals to think of themselves as the base for community-based services. I suspect that is a development we will regret in the longer term, particularly if those services end up bearing a disproportionately high amount of the overhead costs of acute hospitals. Can the Minister say a little more about whether the Government are considering appointing a chief inspector of primary care and whether further consideration could be given to widening the brief of the Chief Inspector of Social Care to embrace community health services and possibly primary care? I beg to move.

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Lord Hunt of Kings Heath: My Lords, my noble friend’s amendment is very penetrating. Under this clause the Secretary of State will appoint only the chair and other non-executive members while the CQC appoints its own executive members, including the chief executive. I draw the noble Earl’s attention to our debate on day one of Committee when we discussed the governance of Health Education England and the Health Research Authority. I still fail to understand why the Secretary of State has to approve the appointment of the chief executive of those bodies when he does not in relation to the CQC. I take from it that HEE and HRA are less independent than the CQC. It would be interesting to know whether he can confirm that.

I thought my noble friend made a very powerful point about the appointment of a chief inspector. I endorse his remarks about the appointment of Mike Richards. He commands great respect, but I wonder why it is not in the Bill. It seems to me that the relationship between the chief inspectors and the chief executive and the board of the CQC is going to be a delicate one. Once you nominate somebody as chief inspector the implication is that they are independent in their job. My experience when I was at the DWP and responsible for the Health and Safety Executive is that it had some chief inspectors. There was the equivalent of the Nuclear Installations Inspectorate, although that has now gone, and the Chief Inspector of Construction. It was felt necessary in some of the most important sectors to have a figurehead. My understanding was that when it came to issues to do with the regulatory function they were independent and could not be second-guessed by the board. The relationship between the chief inspectors and the board is very important. I wonder whether the noble Earl’s department is storing up trouble for the future by not making them statutory post-holders so that it is absolutely clear in legislation what their responsibility is. I can see problems arising in future on this.

This issue about putting primary and community healthcare together will also be very important. The breakdown in the NHS over the past few months has been a breakdown in integration between different parts of the service. Putting primary and community care together would be very helpful.

Baroness Wall of New Barnet: I support the amendment and in particular the argument for the chief primary and community care inspector. Many of us who operate within the service—even people who use it—know that often the weakness has been in the delivery of primary care. We talked earlier about reconfiguration. The only way that that would be successful is if we had better primary care facilities and care that people could access nearer to home—all aspirations that the Government have. I strongly support having that watchful eye on making sure that primary care works effectively.

8.45 pm

Baroness Northover: My Lords, I thank noble Lords for their contributions to this mini-debate on Amendment 73. We are sympathetic to the view behind this amendment —or what seems to lie behind it—which seeks to ensure that the new chief inspectors will be given a place on the board of the CQC. I echo here the praise

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of the noble Lord, Lord Warner, for Professor Mike Richards. I know that the professor’s cancer colleagues will miss him in that field.

Noble Lords are absolutely right about the importance of improving quality and in particular of trying to drive up quality within primary care. The Secretary of State announced the appointment of a Chief Inspector of Hospitals as part of the Government’s response to the Francis review into Mid Staffs. As has been referred to, since that time the Government have also announced the positions of a Chief Inspector of Social Care and a Chief Inspector of General Practice. These three chief inspectors will sit within the CQC and lead for it on the inspection and regulation of all registered providers of health and adult social care. They will be high-profile positions—as the appointment of Mike Richards demonstrates—and will speak for the CQC on the quality of care that they find. As such, it is likely, as noble Lords have indicated, that they will have a lot to offer the CQC board in knowledge, experience and leadership.

The noble Lord, Lord Warner, asked about the areas that the Chief Inspector of General Practice might cover and whether the post might be drawn more widely. In some ways, that rather bears out my point: setting this in stone in statute may not be the best way to make everything link up so that the new positions work as effectively as possible. The CQC needs to move this forward so that it can best drive up quality. It will be for the CQC to determine the exact remit of each of the chief inspectors. All providers of registered health and adult care services will fall within one of the chief inspectors’ remits. Perhaps that will reassure the noble Lords, Lord Warner and Lord Hunt. The CQC is working up detailed proposals. No doubt it will pay attention to what noble Lords have said. Broadly, the Chief Inspector of Hospitals will cover acute trusts, including mental health trusts; the Chief Inspector of Social Care will cover providers of regulated adult social care, including care homes and domiciliary care agencies; and the Chief Inspector of General Practice will cover GP and dental practices as well as walk-in centres, private healthcare and independent ambulance providers. Clearly, the CQC will look at how it gets comprehensive coverage.

We have deliberately avoided requiring that these inspectors should have a seat on the board for two reasons. First, the aim of Clause 79 is to give the CQC more autonomy in determining which executive members sit on its board. This is in line with best practice, as no doubt noble Lords will recognise. We would not wish to remove this new autonomy by requiring that any executive, other than the chief executive, must sit on the board. Secondly, we have designed the chief inspector roles to be non-statutory. They are internal to the CQC, and the CQC will have the power to design, shape and adapt the roles in a way that best enables their operational effectiveness. I hope that that helps to reassure the noble Lord, Lord Warner.

Lord Hunt of Kings Heath: I am very grateful to the noble Baroness. Does that mean that at the end of the day the chief executive of the CQC can overrule the chief inspectors? That must be the implication of what she said.

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Baroness Northover: Perhaps I could carry on. I will come back to that in a minute.

Setting these roles as non-statutory clearly gives the CQC important flexibility to design them to fit their method of regulation in the fast-developing field of health and social care, without the constraints of prescribing the functions of the chief inspectors in statute. As these roles are not mentioned in the legislation, it would not be appropriate to require in legislation that they should have a seat on the board. Having said that, discussions with the CQC chair and chief executive showed them to share the view that chief inspectors will have much to offer the board. Their preference, subject to appropriate board approval, is that when practicable these executives should be appointed to the board. Given the intended importance of these roles, we fully agree with that. In advance of the new legislation coming into operation, I can confirm that the Secretary of State would consider using his current powers to appoint the three inspectors to the board if that was requested by the present CQC chair and chief executive.

The noble Lord, Lord Hunt, asked about Health Education England and the HRA. These will be established as unitary boards, which is to say that they consist of both executive and non-executive members. I can clarify that the chief inspectors are accountable to the chief executive and to the CQC’s board. They will speak for the CQC on their findings when they inspect providers. Having clarified these areas and reassured noble Lords about the significance of these roles and the need for flexibility, I hope the noble Lord will be content to withdraw his amendment.

Lord Warner: Clearly the noble Baroness has clarified matters, but whether she has reassured me is another question. I think the Government underestimate the profile of the Chief Inspector of Hospitals in particular. There is no doubt that this will be a very powerful and important post with an enormous profile. The idea that this person can be overruled by the chief executive and the board, as this legislation sets out, poses a problem I certainly want to think more about.

I also think that there is a gap here. Community health services are not clearly in anybody’s remit. I am sure my noble friend Lord Hunt would agree that if we were to identify one black hole where there is not a great deal of data on performance and quality, it would be community health services. It is an area that has not been probed well by independent inspection, and as far as I can see the game plan is to have no inspector looking into that area. Given everybody’s concern about integration, it seems a bit of a missed opportunity for there not to be some linking up there.

I want to consider this much further. It would be helpful if Ministers sent the Committee the job description for the three inspectors they propose. In my experience, it is rather difficult to appoint anyone to anything without a job description. It would be very helpful to our deliberations to have that before Report.

Lord Hunt of Kings Heath: It seems to me that unless this is sorted out there will be problems in the future, notwithstanding the calibre of the current

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leadership of the CQC, which I readily acknowledge. If the chief inspector does not have total operational independence when acting as chief inspector, I see a recipe for potential trouble. We will not reach Report until October, so there is plenty of time. My noble friend and I would be very interested to have at least some discussion about how the CQC will avoid the kind of conflicts that clearly we would rather not have, if at all possible.

Baroness Northover: I am very happy to take back to the department the request for further descriptions of the jobs in these cases. We should also bear in mind that the aims of these chief inspectors, as part of the CQC, are to maintain safety and effectiveness and drive up quality. They have shared aims; it is not as if they have different ambitions in this regard.

Lord Warner: That is extremely helpful, but my noble friend is absolutely right. Bearing in mind our earlier discussion about warning notices and enforcement, in reality what the chief hospital inspector says in many cases is what will determine whether the CQC goes ahead with a warning notice, which might trigger trust special administration. That is a really powerful position in the public arena. I would welcome, with my noble friend, a discussion with Ministers about this, but in the mean time I beg leave to withdraw the amendment.

Amendment 73 withdrawn.

Clause 79 agreed.

Lord Hunt of Kings Heath: My Lords, we come to a very important clause, which I think the Government might describe as a Francis clause since it clearly seeks to respond to the Robert Francis inquiry into the Mid Staffordshire hospital problems. In fact, judging by the rigour of the Government’s initial response to Mr Francis, one might have thought that there would have been a series of clauses reflecting the 290 recommendations. It would be helpful to know why the Government consider that this is an adequate legislative response. Can the Minister say whether there is likely to be further legislation or whether, in effect, this is the definitive legislative response to the Francis report?

Clause 81 creates a new offence so that providers of health services and adult social care that supply, publish or otherwise make available information that is “false or misleading” could be subject to criminal sanctions. The offence applies to a care provider as a corporate body, not to individual directors or employees. Clause 81 outlines the scope of the offence, including where care providers are potentially subject to it and the type of information to which it relates. I understand that further detail will be specified in the regulations as appropriate.

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Let me say at once that this clause is welcome, as far as it goes. However, I have two questions to ask. First, is it possible to be rather more explicit than the Explanatory Notes are as to what information is likely to be covered by the offence? This is important as I have received a briefing from NHS employer organisations, which recognise the seriousness of the potential offence in this clause and would like to see clarity as to the kind of information that is embraced.

It is disappointing that the clause does not contain a provision to enact a duty of candour, as recommended by Robert Francis. That is the subject of my Amendment 76B. He said that a statutory duty should be imposed to observe such a duty of candour on healthcare providers who believe, or suspect, that treatment or care provided to a patient has caused death or serious injury to inform that patient or another duly authorised person as soon as is practicable. At Second Reading, the noble Earl said that the duty of candour would be dealt with through CQC registration via regulations. I am very puzzled that such a key recommendation—it was almost the headline recommendation—of the Francis report is not going to be dealt with in the Bill when the Government clearly have the vehicle to put it there, so I am very sympathetic to my noble friend Lord Warner’s Amendment 77, which I think is consistent with my Amendment 76B. It is always nice to feel that I am consistent with my noble friend.

9 pm

It is also noticeable that the Government appear to have rejected Francis’s recommendation to place on individuals a statutory duty of openness, candour and transparency. I am not unaware of the concerns in the NHS and social care that an individual duty such as this might perversely lead to increasing the incentives to staff to hide information about adverse events because of the potential repercussions. It has certainly been put to me that any legislative proposal must avoid dissuading the reporting of any kind, deterring clinicians from undertaking complex medical cases or discouraging innovation.

I well understand that and why the Government may be somewhat reluctant to go down that route, but it is noticeable that Mr Francis has expressed in public his disappointment with the Government’s response. Most recently, he was reported as saying that prosecutions should occur only for the most serious cases for the sorts of behaviour that he saw so many examples of in the Mid Staffordshire inquiry, as he describes it,

“of absolutely appalling care, insulting to human dignity and in some cases life-threatening behaviour leaving people naked, unfed, covered in faeces”.

He went on to say:

“Unless we have a criminal offence, we will not be reflecting adequately the gravity of the terrible things it seems are capable of being done in our hospital wards if they are not properly run”.

He concluded:

“If we don’t reflect somehow the fact that the public rightly think some things are terrible and there should be real accountability for them, then I believe the public confidence in the NHS will evaporate”.

I do not pretend this is an easy question, but I would be grateful if the Minister would inform the House of his thinking, the extent to which Professor

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Berwick’s review will input into this, and whether the Government have closed the door completely on individual statutory liabilities.

Of course, I was tempted to put down amendments relating to all 290 recommendations of the Francis report, but I have chosen two as symbols because they are so important. I would be interested to know whether the Government are going to move on them. The first relates to the consequence of the abolition of the National Patient Safety Agency. We debated this in the Health and Social Care Bill. I have a particular interest since I was a former chair, although the noble Lord, Lord Patel, has also chaired the NPSA. The key point about the NPSA is not the organisation. It practically ran the national reporting and learning system. This was developed by the former Chief Medical Officer using the example of the airline industry, where airline staff are encouraged to report near misses on the basis that they will not be penalised for doing so, but by reporting one can learn and improve safety. The airline industry is a very good example of how that has occurred.

The Government’s current decision was to transfer responsibility for the national reporting and learning system to NHS England. I think they have sub-contracted the job to Imperial College, which is fine, but I have concerns about NHS England being the repository of the national reporting and learning system, because the role of NHS England is basically to beat up the system to deliver on the targets. I heard with interest Sir David Nicholson’s rather extraordinary speech where he presented an image of NHS England taking forward the great vision of the future and taking everyone with it. However, those of us on the ground see old-style performance management operating well and effectively in NHS England, and there could be issues in the future with staff being reluctant to report incidents because they are sent to the management body that oversees the performance of the NHS. Robert Francis said, first, that the NPSA’s resources need to be well protected. He clearly recognised the importance of the national reporting and learning system and made clear that he thought that the responsibility should be placed under the regulator. I wonder if that is not a sensible suggestion. I do not think it is at all satisfactory that it remains with NHS England.

Amendment 73B, my second, comes back to the current debate about safety and quality in the NHS. One thing that has become clear from Mid Staffordshire is that, in its urgency to get foundation trust status, the board was prepared to squeeze the staffing numbers. That was surely one of the main contributors to the poor quality of care. I do not think we can run away from the fact that there is a direct relationship between the number of clinical staff treating patients and the quality of care. Interestingly, Mr Francis, in one of his earlier recommendations, said:

“The National Institute for Health and Clinical Excellence should be commissioned to formulate standard procedures and practice designed to provide the practical means of compliance, and indicators by which compliance with both fundamental and enhanced standards can be measured”.

He went on to say:

“The standard procedures and practice should include evidence-based tools for establishing what each service is likely to require as

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a minimum in terms of staff numbers and skill mix. This should include nursing staff on wards, as well as clinical staff”.

Are the Government going to ask NICE to be commissioned to undertake that work? If they are, the Care Quality Commission clearly needs to take that into account when it monitors, visits and inspects NHS organisations and, indeed, other organisations for which it is responsible.

I am not holding a candle for rigid staff to patient ratios on every ward in the country being set at a national level, which is why I am attracted rather more to Robert Francis’s concept of benchmarking. However, I have no doubt that he is right to want to try to safeguard quality by making sure that enough staff are available in clinical areas. We cannot escape from this. Given the financial constraints on the NHS, there has to be some protection when it comes to staff numbers, and the Francis report offers us a rather sensible way through on this. I beg to move.

Baroness Finlay of Llandaff: My Lords, this is a very interesting group of amendments. I will initially address the amendment relating to staffing requirements. I declare an interest, having been involved with Gwent Police at the beginning of its Operation Jasmine investigation into nursing homes. It became evident there that the staffing levels in nursing homes—which were owned privately by a GP at the time—fell to such a level that the care was non-existent. What was happening was absolutely appalling. I urge the Government to ask NICE to look at this and come up with some guidance. The biggest problem may well be outside of the hospitals, in the nursing home and care sector. It is not only the staffing levels and the skill mix but about how staff are expected to behave, what they are expected to do and their taking on broader responsibilities for the care of patients. I am not sure whether the wording is right for the Bill itself, but it might be helpful for NICE to come up with some guidance that CQC could use for benchmarking.

It is important that we look at the organisational duty of candour and are cautious so that it cannot simply get focused down and pinned on the individual. The Government have done a great deal of work already, as has the General Medical Council, on the duty of candour of doctors towards patients when something has gone wrong. Sadly, however, the medical defence unions have all found that doctors, by and large—two-thirds of doctors have reported this—are working in what they feel is a blame-and-shame culture in which it becomes increasingly difficult to report errors, and 70% of them report that they do not feel supported when they report errors. However, there is an undoubted need for there to be a duty of candour to patients when something has gone wrong.

One of the clinical difficulties that arise is that in very complex situations, however well a team functions, things sometimes do not go the way you expect them to. It is important to be able to differentiate that situation from one in which somebody has done something wrong, which has resulted in harm to a patient. Therefore, I have a slight worry about whether perverse outcomes might occur that could increase that fear of blame and shame. However, it is important to emphasise that

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since April this year there is a contractual duty on organisations providing care that advises that doctors should tell patients when something has gone wrong. That has been a major culture shift for many, but patients are, in fact, very receptive to being told when something has gone wrong. I have done it myself with the team, and the other, non-medical members of staff were astonished at how welcoming the patient and their relatives were to being told that something had gone wrong and what we were doing about it. There is also already the ability to impose fines, with the recovery of up to £10,000 from the provider and criminal prosecution for significant or recurrent breaches of the duty of care, and, of course, if an individual professional has failed to be candid about an error, they should be referred for impaired fitness to practice and potential suspension or erasure from the professional register, whether it is a doctor or a nurse.

I will give a quick clinical example of where the situation could get complicated. Take a patient who is prescribed a drug such as methotrexate and is to be monitored regularly by the GP. The GP asks the receptionist to put a flag on the system, but the receptionist forgets to do it. The patient carries on taking the methotrexate, becomes neutropenic—has bone marrow failure—is admitted to hospital and is septic. The patient recovers from that, and in hospital is told exactly what has happened. When the patient leaves hospital, understandably very angry, and goes straight round to the GP, the GP has not yet received the discharge letter and finds it difficult to understand what has happened, and there have been delays in the system so that the discharge letter was delayed in getting to the GP.

That is the kind of catalogue within a whole team of lots of people not quite doing it right, and it becomes very difficult to pin the blame on someone, although undoubtedly an error occurred. That is why I support the duty of candour on an organisation, but we have to be careful that we do not end up creating such a culture of fear and blame that other parts of the organisation get scapegoated and blamed, rather than there being corporate ownership for what has gone on.

One of my other concerns about Amendment 76B is in the first part of the amendment, about being,

“honest, open and truthful in all their dealing with patients and the public”.

I would like to be assured, by those who tabled the amendment, that there is no conflict with the requirement for confidentiality in terms of what you are told by a patient. I could see a clinical situation in which information held by a patient might have made their care more difficult. It might have been disclosed to only one healthcare professional, and the patient may have said that it was not to be disclosed to anybody else. Therefore there are complexities behind this, so that enforcing it in law and imposing sanctions and penalties might become difficult.

9.15 pm

Lord Warner: My Lords, I shall speak to Amendment 77 standing in my name. I have taken a slight different approach from that of my noble friend, but I was out of the traps a little before him. I was trying to do something slightly different, but I am equally happy

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with his rather more elegant amendment on the duty of candour. Whether I have got the wording of the amendment right is another matter, but I was trying to link the organisational responsibility for a duty of candour to the registration process. Therefore, that right at the outset, as a condition of registration, the organisation had to sign up to the idea of a duty of candour.

When one is in the patient’s position, the duty of candour in relation to the employee becomes very important. The patient sees individual people, not necessarily something called an organisation. On the other hand, for the reasons that the noble Baroness, Lady Finlay, mentioned, one has to provide cover for individuals who operate in that organisation, both to protect them from unreasonable attacks by the victim of the mistakes, but also from attacks by the employer for blowing the whistle on them. In this amendment, I am striving for an obligation on the employer—the provider of the services—to have a duty of candour as part of their registration conditions. At the same time, the employee should be protected against unfair employment practices or unfair criticism. One is then forced along a path—which is not fully explained in my amendment—where the contract of employment between the individual and the employer gives some protection to the employee who blows the whistle.

That is quite complicated stuff and this is a complicated area, but we have to strive not just for organisational candour, but for some protected way for the employee to level with people when things have gone wrong. I think the secret lies somewhere in the contract of employment. We do not want that routed only through doctors. In a care home, for example, it will not be the doctors talking to the residents, their families or whoever. We need to do more work on this. Given that this was such a high-profile issue in the Francis report I, like my noble friend Lord Hunt, find it surprising that we are not trying to deal with it in the Bill, complicated though it is. We need to put some wet towels around our heads to try to find a way of capturing this in the Bill, so it is both fair to the employer and to the employee. That is what I am trying to do. Whether I have succeeded in my simpler version in Amendment 77 I am not sure, but that is the thinking behind it.

Baroness Jolly: My Lords, I welcome the debate on the duty of candour. It almost seems as though we are rewinding to 18 months ago, when we had similar debates during the passage of the Health and Social Care Bill. Although I would not have wished the events at Mid Staffordshire Hospital on anybody, I am really pleased that as a result the Francis report recommended a duty of candour. I therefore welcome the Government’s intention to implement that duty. However, as we have seen over the past 20 minutes, nothing is as straightforward as it first seems, so a lot of hot-towel work needs to be done to get this right.

I shall not detain the Committee long, but there are two sets of choices that the Government have made and I am curious why they made them. The first is whether the duty of candour is on the individual or on the organisation. The second, to which the noble Lord, Lord Warner, has just referred, is whether it is going to be in the Bill or in secondary legislation.

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The duty of candour will cause a large change in people’s behaviour and it should be a game changer in lots of ways. As an aside, I think that complaints will fall. If somebody turns around and says, “I’m sorry”, people are less likely to complain. Certainly, those of us who have been involved in complaints will know that on many occasions patients just want someone to say that they are sorry and to explain why and how it went wrong, because they do not want it to go wrong in the same way for anybody else. So there might be an unintended consequence there.

When the Minister sums up, I would like to know why the decision was made not to put the duty in the Bill. Is that decision irrevocable?

Baroness Masham of Ilton: My Lords, I support Amendments 76B and 77. There has been so much said that there should be a change in the culture in the NHS after the scandal of Mid Staffordshire Hospital. Amendments 76B and 77, dealing with the duty of candour, might help to do this. For years, relatives of patients who have died or been badly damaged have not always been treated in an honest and open way; many times, the causes have been covered up and there has been much suffering by those who need to know the truth and have an apology. It is also terrible that when people who fear for patients’ safety speak out to warn of unsatisfactory and dangerous situations, they are silenced and gagged. Surely, we should do something about that. It is our duty to speak out now and make patients’ safety a reality.

One elderly Member of your Lordships’ House told me yesterday that she was frightened in case she might have to go to hospital. How many people throughout the country must feel like that? The culture of fear and neglect must be changed. I hope that the Government understand that.

Lord Campbell-Savours: My Lords, I have considerable reservations about the whole question of the duty of candour, as I was saying to colleagues earlier today. I want to put to a counterargument to the House.

Recommendation 177 of the Francis report says:

“Any public statement made by a healthcare organisation about its performance must be truthful and not misleading by omission”.

Therefore I presume that, under a duty of candour arrangement, there would be a requirement to admit negligence, if there was negligence.