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Mr. Gary Streeter (South-West Devon): I rise briefly and humbly to speak to amendment No. 99 in the name of my right hon. Friend the Member for North-West Hampshire (Sir George Young).
The point may seem trivial, but it is important. The Minister responded to the debate before the arguments were actually made on the amendments. However, I invite her to think again. She will know that under paragraph 21 of schedule 1, foundation hospital trusts must prepare and produce accounts that run to the end
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of a financial year, which is defined as 31 March in every case. That is straightforward and sensible. Schedule 2, paragraph 6 tells us that the regulator must report to the Secretary of State on his activities during a year, which also ends on 31 March, and that is also sensible and straightforward. However, schedule 1, paragraph 22(3)(c) states that the reports—rather than the accounts—that are to be produced by each foundation hospital trust can run to whichever period the regulator decides on. I find that an unusual provision because it does not seem to be consistent with usual practice nor does it tie in with the filing of the accounts by hospital trusts or with the report that the regulator must make.
The point is that in almost every case in almost every organisation that I have ever dealt with, whether in the private or in the public sector, the accounts and the report come together. Indeed, often the report is the introduction to the accounts. However, here we seem to have the possibility of foundation hospital trusts producing accounts up to 31 March, with their reports following later if the regulator so decides or gives them that discretion. Why is that provision in the Bill, as it seems very odd?
Secondly, the regulator may find that he has given permission to a hospital trust to file a report for one period, but that he must report to Parliament and to the Secretary of State for the period ending 31 March. His report may, therefore, be incomplete because the foundation hospital trust for which he is responsible has not yet filed its report for that period.
That would not be the end of the world, but if the provision remains as it is and if the regulator were to give permission to a foundation trust to file its report for a different date, what would happen? That could create confusion; it could also create the risk of increased costs to produce reports for different periods. That is probably an oversight in the drafting of the Bill, and this is an opportunity to tidy it up.
Mrs. Patsy Calton (Cheadle): Government amendment No. 156 states that
''a person may not be appointed as auditor unless he (or, in the case of a firm, each of its members) is a member of one or more of the following bodies—
(a) the bodies mentioned in section 3(7)(a) to (e) of the Audit Commission Act 1998''
(b) any other body of accountants established in the United Kingdom and for the time being approved by the regulator for the purposes of this paragraph.''.
Will the Under-Secretary clarify in what circumstances she would envisage sub-paragraph (b) applying to any other body of accountants established in the United Kingdom and, for the time being, approved by the regulator?
Ms Blears: In reply to the hon. Member for West Chelmsford (Mr. Burns), the amendment seeks to ensure that where public bodies or bodies holding or searching for funding from the public purse are in this position, they are included, or at least can be included, in the whole Government accounts. I understand that that is usual practice to ensure that there is proper accountability for the expenditure of public money. I am sure that the hon. Gentleman will accept that foundation trusts will be delivering services for the
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NHS and spending huge amounts of public money and therefore ought to be properly accountable.
Amendment No. 133 refers to an annual general meeting to be held to account each year, and it would be up to a foundation trust to specify in its constitution that that would be the case. I am concerned that the amendment cuts across the governance structure set out in schedule 1, which seeks to have representative electoral democracy under which members elect their governors who appoint their directors to make decisions. It is very important to maintain the integrity of that approach, whereas the ability to draw the accounts to the membership as a whole would cut across the governance structure set out in schedule 1. Therefore I reject the amendment.
I agree with the hon. Member for South-West Devon (Mr. Streeter) that amendment No. 99 would not spell the end of the world for how we define the periods of accounting and reports. The provision in paragraph 22(3)(c) would allow the regulator some leeway on the periods to which the reports ought to relate; however, if that were to cause difficulty we could have another look at it. It is an attempt to give some discretion to the regulator to consider circumstances.
To answer the question of the hon. Member for Cheadle (Mrs. Calton), the amendment seeks to anticipate any changes that would result in other bodies emerging that would need to be endorsed as proper auditors. I am sure that the hon. Lady will agree that it is vital that the auditors who are appointed are people of standing who have recognised skills and abilities, and the amendment will enable us to utilise other bodies, if such bodies were to emerge.
Dr. Harris: Why have the Government moved away from trusts' present position, whereby they are subject to district audit—that is, auditors who have been, in effect, appointed by the Audit Commission? Why has she rejected an approach whereby the Audit Commission will not be responsible for appointing the auditors to these trusts? That system has worked well for existing trusts, and there is no reason why it should not do so for foundation trusts, which, as the Under-Secretary said, will spend a great deal of public funds.
Ms Blears: I draw the hon. Gentleman's attention to the position of higher and further education corporations, which spend a substantial amount of public funds and which are in an identical position in that they can appoint their own auditors. Balance-for-money exercises will still be carried out by the Commission for Healthcare Audit and Inspection.
It is perfectly appropriate that since we are creating new public benefit corporations, we should allow flexibility in the audit requirements to ensure the standing and probity of appointees.
Amendment agreed to.
Amendment made: No. 157, in
schedule 1, page 96, line 12, at end insert—
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The Chairman, being of the opinion that the principle of the schedule and any matters arising thereon had been adequately discussed in the course of debate on the amendments proposed thereto, forthwith put the Question, pursuant to Standing Orders Nos. 68 and 69, That this schedule, as amended, be the First schedule to the Bill.
Question agreed to.
Schedule 1, as amended, agreed to.
Clause 2
Independent Regulator of NHS Foundation Trusts
Mr. Andrew Lansley (South Cambridgeshire): I beg to move amendment No. 102, in
clause 2, page 1, line 11, leave out 'officer' and insert 'office'.
The Chairman: With this it will be convenient to discuss the following amendments:
No. 168, in
No. 145, in
clause 2, page 1, line 13, leave out 'Secretary of State' and insert 'NHS Appointments Commission'.
No. 101, in
clause 2, page 1, line 13, leave out from 'appoint' to end of line and insert
'up to five persons, including a Chairman, on the recommendation of the NHS Appointments Commission, to constitute the Office of Regulator'.
No. 169, in
No. 98, in
No. 233, in
No. 140, in
No. 184, in
schedule 2, page 97, line 16, leave out 'Secretary of State' and insert 'CHAI'.
No. 185, in
schedule 2, page 97, line 21, leave out 'Secretary of State' and insert 'CHAI'.
No. 234, in
schedule 2, page 97, line 22, leave out 'or misbehaviour' and insert ', misconduct or incompetency'.
No. 141, in
schedule 2, page 97, line 22, at end insert
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No. 142, in
schedule 2, page 97, line 23, leave out subparagraph (3).
No. 186, in
schedule 2, page 97, line 24, leave out 'Secretary of State' and insert 'CHAI'.
No. 143, in
schedule 2, page 98, line 2, leave out from 'may' to 'appoint' in line 3.
No. 235, in
No. 236, in
schedule 2, page 98, line 20, leave out '(generally or specifically)'.
No. 237, in
Mr. Lansley: After only 12 hours of discussion, we have leapt to line 10 on page 1 of the Bill, where we come to clause 2. The purpose of clause 2 is to establish the office of the independent regulator of NHS foundation trusts and to introduce schedule 2. The amendments that we are debating are not concerned solely with clause 2, but stretch into schedule 2 as well. I was tempted for a moment to summarise the purpose of all the other amendments—I had even drawn up a list of them—but thought better of it. Other members of the Committee may like to debate those amendments, as they stray into subjects that are distinct from, although related to, my two amendments. It is those two amendments to which I shall speak.
The purpose of amendments Nos. 102 and 101 is to change the structure of the office of the independent regulator from one that consists of a person appointed by the Secretary of State to one of up to five persons, including a chairman, that has been appointed by the Secretary of State on the advice and recommendation of the NHS Appointments Commission. Amendment No. 102 would change ''officer'' to ''office'', and amendment No. 101 would do the more substantial job of creating an office of up to five persons appointed on the advice of the Appointments Commission.
There are two amendments that relate directly to mine. Amendment No. 169, in the name of the hon. Member for Oxford, West and Abingdon, seeks to appoint up to five persons to the office of the independent regulator, but it would be defective if we did not agree to amendment No. 102. Amendment No. 98, in the name of my right hon. Friend the Member for North-West Hampshire, looks for consultation with the Appointments Commission; his amendment is, to all intents and purposes, similar to part of my amendment No. 101.
What is this all about? It is about the manner in which regulators work in government. As my hon. Friend the Member for West Chelmsford said, we will
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go on to discuss the substance of the work of the regulator and the extent to which the regulator is to be independent. For the sake of this argument at least, let us work on the basis that the regulator is independent and has substantial responsibilities. We can take that as read for this purpose.
How should regulators work? This is a non-ministerial department, and I cannot see a major difference between it and many of the other regulators appointed by Government for the purpose of regulating utilities. It is similar to Oftel—or, as it will be—Ofcomm, Ofwat, Ofgem, the Civil Aviation Authority and Postcomm. There are several regulators, most of which were initially established as single regulators. The directors general of the electricity supply, the gas supply, the Office of Fair Trading, Oftel and the water supply were all established as single regulators. However, all of that is changing, Mr. Griffiths.
There may be other documents, but the one that I used to establish this proposition was the Better Regulation Task Force's report, which was published in July 2001. The task force studied economic regulation. For these purposes, I dispute any assertion that what is proposed is not a parallel organisation, even though, in the strictest sense, it is not an economic regulator with the same functions as some other economic regulators. The manner in which it works is similar to many other regulators, although it may not exercise competition powers or a price control mechanism. Nevertheless, the organisation's relationship with those who are to be regulated is similar in many respects; it is a sort of licensing process.
9.45 am
With regard to the third recommendation, the then chairman of the task force, Lord Haskins, said of the questions that those involved asked themselves:
''Our final question proved the easiest: there was widespread agreement that regulators should be run by properly appointed boards.''
The task force's second recommendation concerns the question of whether regulators should be individuals or boards. The task force concluded:
''Regulatory regimes should be consistent and predictable. There is a trend away from individual regulators to a board structure—we support this development.''
The task force went on to recommend:
''The boards of regulatory bodies should include both executive and non-executive members. They should be appointed for their expertise rather than to represent stakeholder groups.''
The report was published in July 2001, and the Government responded in April 2002. They accepted the broad thrust of the recommendations, and that led directly to the consideration of legislative change in the water industry.
I confess that I have not taken the trouble to find the references, but I think that the Water Bill 2003 is changing Ofwat from an individual regulator to a board structure. For my sins, I have spent a considerable time discussing the structure of Ofcom, which will be established as a board. The Utilities Act 2000 established Ofgem on a board structure, where
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previously there were individual regulators. The Government's response stated that
''Ofgem introduced a management board structure in advance of legislation—and they believe that their new board structure has increased the legitimacy and authority of their decision making process.''
The response went on:
''Ofwat has recently announced the strengthening of its decision making process by announcing its intentions to recruit non-executive directors to the OFWAT Board . . . The Government can see that a move to a more formal board structure could bring benefits.''
The Government have accepted that individuals should not be regulators, but that regulators should be boards. They have done so because they want to avoid the personalisation of the role of the regulator. It is one thing for political argument to swirl around the nature of the person who is Secretary of State, but it is another thing for an appointed regulator to be in that position. The Government have accepted the proposition in order to escape that.
The Government have also done it to avoid inconsistency in decision making, particularly at the point where individual regulators are changed and there may be something of a through-train between boards. Thus, some board members remain, even though, for example, the chairman or a chief executive of a regulator may change.
Also, this is being done to have less arbitrary decision making. In the past, there was not only arbitrary decision making by regulators, but severe tensions that grew up between those who were regulated and the regulator, because it was about personalities and not board structure. The proposal will also create more transparent decision making because the board structure itself will ensure that decisions are the product of open discussion rather than private contemplation.
I am nonplussed. When I saw that there was to be an independent regulator, I assumed that it would be an office with a board, because that structure has been adopted in principle across Government. It seems that the Government have not been joined up on this. Richmond house is not 200 yd from the Cabinet Office in this context, but about five years. The Department of Health has not caught up with the way in which regulators work in government. For my sins, I have spent much time discussing how they work. We may later discuss some further aspects of best practice that have not been incorporated into the legislation.
However, one thing is perfectly clear; the Better Regulation Task Force and the Government themselves believe that regulators should be in a board structure that combines executive and non-executive members. Those members should be appointed for their expertise rather than on the basis of representing stakeholder interests. That is not reflected in clause 2 or in schedule 2, as it should be. My amendments would move matters in that direction. However, it would be better if the Government were to make a commitment to reform the structure of clause 2 and schedule 2 to ensure that those principles, which are accepted elsewhere in government, are absolutely clear.
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