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Mr. Hutton: I am sorry that I did not respond to that point earlier. We dealt with some of those issues in the consultation process that considered the establishment of NHS foundation trusts. We shall later discuss the application to NHS foundation trusts of the general obligation to consult local communities about any
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substantial change to the pattern of services. In both of those areas, the hon. Gentleman will find an answer to his question about what consultation process would normally be attached to any agreement that the regulator has made to dispose of protected assets in clause 16.
Those assets are fundamental to the provision of core NHS services, and it would be difficult to imagine any disposal of those assets not triggering the normal requirement to consult with the local community about the provision of NHS services. In reaching his decision to approve or otherwise a disposal of a protected asset, the regulator should have regard to the outcome of that consultation process. There is no specific provision in clause 16 that deals with consultation, but the pathways on which the issues would be addressed are dealt with in other parts of the Bill or in other legislation attached to it.
Dr. Harris: I am grateful to the Minister for his explanation. However, he did not address the point that I made, which is not that the regulator must be sure that it is not a core service—I accept that the regulator has a duty to ensure that—but that there may not be a necessary core service for that NHS trust. The best option may be to use that property for another part of the NHS in the local area. That is not the part of the equation that the foundation trusts have to think about; they have to judge whether it is a core service for them. It is not part of the regulator's thinking, because he has to look at it solely in terms of the services provided by the NHS foundation trusts. I should like some reassurance that the needs of the NHS generally will be considered and that the regulator will have regard to that, because the NHS foundation trust may not have regard do likewise.
Mr. Hutton: I can give the hon. Gentleman that assurance, because that takes us back to our discussion on clause 3. In discharging his duties under the Bill, the regulator must take into account the fundamental duties that apply to the Secretary of State in ensuring the provision of a comprehensive and free at the point of use national health service. He must take into account those wide elements to any decision to change the configuration of services locally, which the disposal of protected assets might trigger. I hope that the hon. Gentleman is reassured by my affirmative reply.
Dr. Harris: I am reassured, but I should like clarification that under clause 16(4) the regulator, under one of the conditions that the Minister described, could say that it was applicable to allow disposal of this property. However, if the regulator felt that it was necessary, he would be entitled to say, ''As long as it is offered for use by the rest of the NHS first''.
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Mr. Hutton: The current wording provides a very wide discretionary power to the regulator to attach whatever conditions he thinks appropriate, and it might well cover the point that the hon. Gentleman has raised.
Question put and agreed to.
Clause 16 ordered to stand part of the Bill.
Clause 17
Financial powers
The Chairman: We now come to amendment No. 263, but the hon. Member for Ealing, North (Mr. Pound) is not here to move it. Is someone prepared to move the amendment formally?
Mr. Burns: On a point of order, Mr. Griffiths. The hon. Member for Ealing, North is the nearest that we have to a rebel in this Committee. Has he forgotten to be in his place, or has the Whip nobbled him because the Government do not like the amendments?
The Chairman: That was not a point of order.
Amendment proposed: No. 263, in
clause 17, page 7, line 34, after 'money', insert 'only'.—[Mr. McCabe.]
The Chairman: With this it will be convenient to discuss the following:
Amendment No. 264, in
clause 17, page 7, line 34, at end insert 'direct'.
Amendment No. 18, in
Amendment No. 161, in
clause 17, page 7, line 36, leave out subsections (2) and (3) and insert—
'(2) The trust will have certain limits on its rights to borrow, as outlined in subsection (3).
(3) The trust's borrowings shall not endanger, or incur the loss of protected property, as outlined in section 16.'.
Amendment No. 19, in
Amendment No. 146, in
Amendment No. 21, in
Chris Grayling: You will not be surprised to learn, Mr. Griffiths, that I do not wish to speak to the first two amendments in that group, but to amendments Nos. 18, 161, 19, 146 and 21.
Amendments Nos. 18 and 19 need to be read together. They attempt to introduce a ceiling on borrowing limits to NHS foundation trusts, at a level that is generally accepted as prudent in the commercial world. A gearing level of debt to income of 100 per
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cent. is a fairly standard measure of affordability for a private corporation. It establishes a much more prudent and sensible limit on borrowing than the restrictions that the Bill puts forward otherwise.
Frankly, we are concerned that the level of restriction on foundation trusts' ability to borrow cuts away and undermines many of the benefits that foundation hospitals experience in other countries, where they have much greater control over their own financial affairs and are not subject to centralised prescription over what they can and cannot do financially. It is our view that the Government's approach—that hospitals can have freedom, but freedom in a straitjacket—which is applied to many sections of the Bill, is wrong and flawed. That is ironic, because the Government have had a difficult time with the Bill. There has been a Back-Bench rebellion, although not, sadly, in the Committee. However, we know that those Labour Members who sought to express themselves in the Chamber about the principles of the Bill were not given the opportunity to bring those arguments to the Committee.
Mr. Mike Hall (Weaver Vale): On a point of order, Mr. Griffiths. Some of those who did not vote for the Bill in the Chamber refused to serve on the Standing Committee.
The Chairman: We have all heard that comment.
Chris Grayling rose—
Mr. Hall: The hon. Gentleman should withdraw what he just said.
The Chairman: Order.
Chris Grayling: I suspect, Mr Griffiths, that I would be trespassing beyond your strictures if I were to be diverted down that route.
We must not restrain foundation trusts from delivering a high-quality service. The Government are getting the worst of both worlds; they have all the difficulties of convincing those who are doubtful about the rights and wrongs of foundation hospitals, and all the political difficulties that that brings with it. However, they are also failing to implement effectively the principles of foundation hospitals. They are not giving foundation hospitals the freedom to truly deliver improved services. They are placing them in a position in which they will be able to make improvements only at the margins. That will ultimately be a lost opportunity.
We want to put our view on record that the constraints in the Bill are far too great. Borrowing should be an area in which there are much greater powers—within the control of the governing bodies and boards of directors of foundation hospitals—and where the limits placed on borrowing should be prudent rather than prescriptive. The measures that would implement the prudential code, which will place limits on authorisation, are almost certainly going to be highly prescriptive, and will not give hospitals the real freedom to innovate, to expand and to develop
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their services. There is a powerful opportunity, but the Government are failing to offer hospital trusts the chance to take advantage of it.
Amendment No. 146 is a probing amendment; it is none the less extremely important. Many of the hospitals that seek foundation status will have been involved with PFI projects on either a small or large scale during the past few years. Many of them have built up substantial liabilities that must be repaid across a 20 or 30-year period. Some will be entirely new hospitals, which have been PFI-funded to the tune of hundreds of millions of pounds. The typical bill for a new hospital is anything between £200 million and £400 million. The recent building of new hospitals—or substantial additions or modernisations to existing hospital buildings—has been carried through the PFI scheme. The PFI scheme brings with it substantial long-term liabilities with regard to debt repayment and the provision of services by third-party providers. By any stretch of the imagination, these liabilities are as substantial as a conventional bank loan or debt payment.
What is the position for those trusts? How will the overall borrowing framework that the Government intend to set up through the regulator reflect the long-term liabilities that have been built up through PFI? Will the prudential borrowing limits imposed on a hospital trust reflect those liabilities? It is conceivable that a brand new hospital, with a huge liability to repay debts for its buildings, would have the ability to carry on borrowing if the PFI element was not reflected in the prudential code. That hospital could then increase its liability and increase the challenge in finding the funds to repay its liabilities.
On the other hand, an older hospital without the new buildings would find itself less able to develop, modernise and improve for the future. We touched upon that in an earlier debate, but we still do not truly understand the status of PFI and PFI liabilities as part of the borrowing framework. This amendment is designed to extract from the Minister some clearer indications as to how those liabilities will be handled.
Amendment No. 21 states:
''A foundation trust shall show the total value of all its liabilities on its balance sheet.''
In recent years, the Government's favourite way of spending money without admitting it has been to shift it off-balance sheet. Across the public sector, substantial liabilities have been built up that do not appear on the national books. The public sector borrowing requirement figures each year—the total national debt—do not reflect the tens of billions of pounds of liabilities that the Government have built up through PFI and through other off-balance sheet schemes.
My party does not want to see the future of the national health service being built on the back of off-balance sheet accounting. This amendment is designed to write into the Bill a simple and straightforward provision; that the balance sheets of an NHS trust should reflect all of its liabilities, whatever those may be. That is not something that is practised in the
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Exchequer today, but it should exist on the balance sheet of these books. I hope that the Minister will accept that principle.
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