SCHEDULE 1: PRIMARY CARE TRUSTS
61. Clause 2(2) gives effect to Schedule 1, which
inserts a new Schedule 5A in the 1977 Act, and makes additional
detailed provisions about Primary Care Trusts.
62. Paragraph 5 provides that the Secretary
of State may make regulations about Primary Care Trust membership.
These will be subject to negative procedure, as is the case with
comparable Health Authority and NHS trust membership regulations
made in Schedule 5 of the 1977 Act and section 5(7) of the 1990
Act respectively. The regulations will cover matters such as the
number of members, their appointment and tenure of office, any
particular requirements for membership, committees of the body,
and the procedure to be followed by the body. They are necessary
to avoid placing large amounts of detail on the face of the Bill
(for example, provisions as to the variety of factors which may
disqualify an individual for appointment, or detailed provisions
as to the conduct of meetings), which may then require frequent
amendment to meet changing circumstances. The Department's experience
has been that rules about membership and procedure develop over
time to reflect changing circumstances. If these matters were
detailed on the face of the Bill, changes could only be made by
way of primary legislation.
63. Paragraph 9 provides that the Secretary
of State may direct a Primary Care Trust to loan its staff to
other Primary Care trusts, or to employ former employees of other
Primary Care Trusts. The directions will be specific in nature
and will be given by an instrument in writing. Similar provisions
exist for Health Authority staff under paragraphs 10(3) and 11
of Schedule 5 to the 1977 Act.
64. The power could be used, for example, in
the event of a problem in a Primary Care Trust, where there is
a short-term need for staff with particular expertise. The power
is therefore concerned with operational matters in relation to
particular Primary Care Trusts, and is not, in the Department's
opinion, a matter which requires Parliamentary scrutiny. The provision
contains safeguards for the employees concerned in the form of
a consultation requirement. Exercise of the power is subject to
consultation by the Secretary of State, with the staff involved,
or with their representative body. Exceptions to this include
cases of temporary emergency, for example if specialist public
health skills of a Primary Care Trust employee are needed by a
Primary Care trust elsewhere to deal with an epidemic. The power
does not detract from an employer's duty to consult staff under
other mechanisms, eg TUPE Regulations or General Whitley Council
65. Paragraph 10 does not provide for
any new regulation-making power, but it brings Primary Care Trusts
within the scope of the current regulation-making power in paragraph
10(2) of Schedule 5 to the 1977 Act, which concerns the transfer
of staff and making staff available to other Health Authorities
or local authorities. The regulations are subject to negative
66. Paragraph 17 enables the Secretary
of State to regulate how Primary Care Trusts publicise their accounts,
annual report, any auditor's report or other documents specified
in the regulations. For example the regulations may require that
a Primary Care Trust holds a public meeting at which it must present
such documents. Regulations will set out the circumstances in
which and the time or times at which such public meetings shall
be held. This puts Primary Care Trusts on a similar footing to
other NHS bodies. Regulations provide flexibility for change and
avoid the need to put a large amount of detail on the face of
the Bill. Comparable powers exist in relation to Health Authorities
and NHS trusts, and these are also subject to negative procedure.
These are largely matters of detail. It would clutter the legislation
unnecessarily to include the detail of these matters on the face
of the Bill. In addition, there is a need for flexibility, for
example, to extend the list of documents that must be publicised
by a Primary Care Trust.
67. Paragraph 19 provides that a Primary
Care Trust may be authorised to purchase land compulsorily for
the purposes of its functions by means of an order made by the
trust. The order will be subject to the usual procedures set out
in the Acquisition of Land Act 1981 and to confirmation by the
Secretary of State. Primary Care Trusts will therefore have the
same powers to acquire land as other NHS bodies.
68. Paragraph 20 provides that where a
Primary Care Trust is dissolved the Secretary of State may by
order transfer the property, rights and liabilities of the Primary
Care Trust to himself or another NHS body. The order will be specific
to individual bodies and not be a statutory instrument. Similar
arrangements apply for Health Authorities (see section 8(6) of
the 1977 Act, as substituted by section 1 of the Health Authorities
Act 1995) and NHS trusts (paragraph 30 of Schedule 2 to the 1990
Act). Any necessary consultation arrangements will be set out
in regulations subject to negative procedure. The Department does
not consider it appropriate to set out the details of the consultation
requirements on the face of the Bill.
69. Whenever a Primary Care Trust is dissolved,
section 1 of the National Health Service (Residual Liabilities)
Act 1996 (as amended by paragraph 64 of Schedule 4 to the Bill)
will require the Secretary of State to exercise his powers so
as to secure that all of the Primary Care Trust's liabilities
are dealt with.
70. Paragraph 21(1) provides that the
Secretary of State may by order transfer the property, rights
and liabilities of a health service body, to a Primary Care Trust.
This power is comparable to that in section 8 of the 1990 Act
in respect of transfers to NHS trusts. The property that Primary
Care Trusts will require in order to exercise their functions
will often be under the ownership or management of the Secretary
of State, Health Authorities or NHS trusts. Paragraph 21(1) enables
the Secretary of State to transfer such property to a Primary
Care Trust, either on establishment, or when a change in the functions
of a Trust means that it will require additional property. The
orders will be specific in nature; each order will only apply
to the particular bodies and particular property specified in
the order. Having regard to the nature of these instruments, the
Department considers that such orders need not be statutory instruments.
71. Paragraph 23(1) provides that the
Secretary of State may by order transfer staff to a Primary Care
Trust from a Health Authority, NHS trust or another Primary Care
Trust. This will frequently occur when a Primary Care Trust is
established. Paragraph 24 provides for safeguarding the terms
and conditions of service of staff being transferred. The power
is comparable to provisions in relations to NHS trusts (sections
6 and 7 of the 1990 Act), and similar provisions were made in
Schedule 2 to the Health Authorities Act 1995. It will be used
in individual cases and will not be a statutory instrument.
CLAUSE 3: PRIMARY CARE TRUST FINANCE
72. This clause inserts sections 97C and 97D
into the 1977 Act, which mirror existing arrangements for funding
Health Authorities (see sections 97 and 97A of the 1977 Act).
Under section 97C(5), the Secretary of State may give directions
to a Primary Care Trust regarding the payment of capital charges,
and this enables Primary Care Trusts to be brought within the
capital charging system. The system involves the payment by NHS
bodies of charges calculated by reference to the value of the
assets that they hold. The system ensures that capital costs are
included as an overhead when a Primary Care Trust or other NHS
body is calculating the cost of any services it provides. The
directions must be given by an instrument in writing.
73. This power is modelled on the existing section
97(6)(b), and avoids placing a large amount of technical financial
detail on the face of the Bill. In addition it provides flexibility
for amendment, which is necessary given that the capital charging
system has changed over time and may continue to do so. For example,
the level of charges and the assets to which they apply may change
over time, in accordance with future requirements set by the Treasury.
74. Section 97C(6) requires a Health Authority
to direct a Primary Care Trust to apply part of its allotted sum
for a particular purpose, where a direction to that effect has
been issued to the Health Authority by the Secretary of State
under section 97(6)(a) of the 1977 Act. Sometimes the Secretary
of State gives Health Authorities earmarked allocations, and in
future these sums will often be passed to Primary Care Trusts.
This power will enable the Secretary of State to require Primary
Care Trusts to apply some of their allocation for a particular
purpose. In the past this power has been used to protect, for
example, funding for HIV and AIDS treatment and care. The directions
must be given by an instrument in writing, as is currently the
case for directions under section 97(6)(a). A flexible power is
required to enable the Secretary of State to ring-fence different
amounts of money, at different times, depending on the existing
circumstances and priorities. The Department considers that it
would be unnecessarily restrictive to list exhaustively in primary
legislation or regulations the situations in which the Secretary
of State is able to ring-fence.
75. Section 97D(2) enables the Secretary
of State to give directions to Primary Care Trusts to ensure they
comply with their financial duty. These directions mirror those
for Health Authorities in section 97A, and must be given by an
instrument in writing. Again these directions would contain matters
of technical detail which the Department consider would be inappropriate
for primary legislation or regulations.
76. Section 97D(7) enables the Secretary
of State to give directions defining the categories of expenditure
and receipts which are to be counted for the purposes of ascertaining
whether a Primary Care Trust has complied with its financial duty
under section 97D(1). It mirrors the provisions in section 97A(6)
to (9) regarding Health Authorities. The directions must be given
by an instrument in writing. Again these directions would deal
with matters of technical and financial detail. In addition, the
Secretary of State will need the flexibility to change the categories
that are to count for the purposes of section 97D, depending on
the particular financial circumstances applying at any time. For
example, the Secretary of State may need to use these powers to
ensure that Health Authorities retain and spend receipts that
Parliament and Treasury have agreed can be appropriated in aid
by the Secretary of State.
CLAUSE 4: FURTHER FUNCTIONS OF PRIMARY CARE TRUSTS
77. Clause 4 contains no delegated powers. The
Committee may wish to note that under section 18A(6), the Secretary
of State may give directions under section 17 specifying the circumstances
under which a Primary Care Trust will need to obtain Secretary
of State consent before exercising its charging or income generation
powers. The directions could, for example, specify an amount or
percentage of income above which the Secretary of State's consent
is required. Such figures are likely to require amendment in future,
and directions provide the flexibility necessary to enable the
provisions to be amended.
CLAUSE 5: PRIMARY CARE TRUST TRUST-FUNDS AND TRUSTEES
78. This inserts section 96B into the 1977 Act.
Section 96B(1) enables the Secretary of State by order
to provide for the appointment of trustees for any Primary Care
Trust. The orders under this subsection will be statutory instruments,
subject to negative procedure. Section 96B(4) provides
that the Secretary of State may provide for the transfer of trust
property to such trustees, also by order. These arrangements echo
those for Health Authorities under section 96A of the 1977 Act
and NHS trusts under section 11 of the 1990 Act. As such arrangements
concern the administration of property held on trust, it is thought
appropriate to adopt the approach of the 1977 and 1990 Acts and
provide that such orders should be subject to Parliamentary scrutiny.
CLAUSE 6: PAYMENTS RELATING TO PAST PERFORMANCE
79. Clause 6 does not provide for any new powers
to make delegated legislation.
CLAUSE 7: DIRECTIONS
80. This clause restates sections 13, 17 and
18 of the 1977, which confer powers of direction on the Secretary
of State and set out the procedures by which they are exercisable.
It also expands section 17 to cover NHS trusts, and provides for
a scheme of delegation under which Primary Care Trusts have their
functions conferred upon them.
81. The power of direction is a particularly
important feature of the Part I system. Sections 2 to 5 of the
1977 Act set out the services that it is the responsibility of
the Secretary of State to provide (ie. Part I services). The Secretary
of State may delegate these functions to Health Authorities by
directions under section 13 and then control the exercise of these
functions under section 17. Otherwise, there is very little prescription
as to what the Secretary of State must do or how he must do it.
At present the Secretary of State delegates most of his functions
to Health Authorities, and he will continue to do so. Schedule
1 to the National Health Service (Functions of Health Authorities
and Administration Arrangements) Regulations 1996 (S.I. 1996/708)
lists most of the functions that the Secretary of State has delegated
to Health Authorities. For example, the Secretary of State currently
delegates to Health Authorities the responsibility for securing
the provision of hospital and community health services in their
area (see section 3(1) of the 1977 Act).
82. In addition to the Part I system, the Secretary
of State may issue directions to Health Authorities under section
17 as to how they should exercise any of their other functions,
for example their functions in relation to Part II services.
83. Directions under these provisions are essentially
instructions issued to individual NHS bodies or classes of such
bodies, either directing them to exercise a function of the person
or body issuing the direction, or giving instructions as to how
the body should carry out its functions. As indicated in the introductory
section, these powers enable the Secretary of State to organise
the way services under the 1977 Act are delivered.
84. In practice, the Secretary of State uses
his power under section 17 fairly sparingly; in relation to Part
I services, matters of operational detail are generally left to
Health Authorities. As well as avoiding unnecessary detail in
primary legislation, the system of directions allows a flexible
approach, enabling the Secretary of State and individual Health
Authorities to adapt to meet changing circumstances and priorities,
both local and national.
85. Subject to certain exceptions, directions
under sections 13 to 17 may be given by regulations, subject to
the negative resolution procedure, or by an instrument in writing
(see section 18(1)). For the most part, the choice of procedure
is a matter for the Secretary of State. In certain cases however,
the primary legislation provides (and is to provide) for exceptions
in cases where it is appropriate for the directions to be given
by regulations and thereby subjected to Parliamentary scrutiny.
86. Primary Care Trusts are to exercise many
of the functions currently exercised by Health Authorities. Primarily,
they will arrange for the provision of Part I services, and in
some cases provide such services. They are to be accountable to
Health Authorities, but also subject to the control of the Secretary
of State. The Department considers that the most appropriate way
to deal with Primary Care Trusts is to integrate them within the
existing structure of the 1977 Act, in essence creating a new
tier of NHS body below the Health Authority. As with Health Authorities,
the distribution of functions to, and exercise of functions by,
Primary Care Trusts will be dealt with in directions.
87. Section 16C restates section 13 of
the 1977 Act, which enables the Secretary of State to delegate
his functions in relation to the health service to Health Authorities.
88. In a similar way, the new section 17A(1)
enables Health Authorities to delegate their functions to Primary
Care Trusts, subject to certain exceptions in subsection (3).
A Health Authority may delegate its Part I functions by directing
a Primary Care Trust to exercise those functions. Such directions
may encompass both functions delegated by the Secretary of State,
and those conferred directly on Health Authorities by statute.
A Health Authority will only be able to direct a Primary Care
Trust within its area. Section 17A(1) directions will be given
by an instrument in writing. Such directions will of course be
subject to directions given by the Secretary of State; the Secretary
of State will therefore retain overall control.
89. Section 17(A)4 provides a new power
for the Secretary of State to require the Health Authority to
delegate functions to PCTs. This scheme is comparable to that
which governed distribution of functions amongst the Secretary
of State, Regional Health Authorities and District Health Authorities,
before their abolition under the Health Authorities Act 1995.
The directions enable the Secretary of State to create a national
model for Primary Care Trusts, within which local flexibility
may be exercised. The directions will be given by an instrument
in writing or in regulations; this mirrors the procedure for directions
under section 16C and 17 of the 1977 Act. It is envisaged that
as with directions to Health Authorities under section 13, the
Secretary of State will give directions setting out in general
terms the functions which are to be delegated to Primary Care
Trusts, and those which are not, by regulations. Directions in
writing will then provide any necessary additional detail.
90. The new section 17 replaces the existing
section 17 of the 1977 Act, which applies to Health Authorities
and Special Health Authorities. The new section 17 extends the
power of direction to include Primary Care Trusts and NHS trusts
and allows the Secretary of State to give instructions to any
of the NHS bodies listed in subsection (2) about how they are
to exercise their functions. It enables the Secretary of State
to set national parameters within which Health Authorities, Special
Health Authorities, Primary Care Trusts and NHS trusts must exercise
their functions, and it also enables the Secretary of State to
direct individual bodies, should particular circumstances require
it. The 1977 Act required such directions to be given by an instrument
in writing or by regulations and this is not changed by the Bill.
91. The power is essential for Secretary of State
to maintain control over the exercise of his functions under Part
I of the 1977 Act by Health Authorities and Primary Care Trusts;
and to ensure that health service bodies operate within the context
of a national health service. Under the 1990 Act, the Secretary
of State had only limited powers of direction over NHS trusts.
The new section 17(1) confers on the Secretary of State similar
powers in respect of NHS trusts as he has in respect of Health
92. Particular examples of where the direction-giving
power might be used initially for NHS trusts include ensuring
that major investment decisions of NHS trusts are consistent with
their strategy for improving local health and health care; requiring
that laboratories in all NHS trusts report certain test results
to strengthen communicable disease control; and limiting the borrowing
and investments of NHS trusts (see clause 12 and paragraph 58
of Schedule 4).
93. Section 17B(1) provides that Health
Authorities will also be able to direct Primary Care Trusts about
the exercise of functions they have delegated to them. This reflects
the fact that Primary Care Trusts will be accountable to Health
Authorities. Any Secretary of State directions under section 17
will take precedence. It is not intended that Health Authorities
should use their powers to seek to control the detailed day-to-day
operation of Primary Care Trusts. Such directions will be specific
to the bodies directed and will therefore be made in an instrument
94. The new sections 18(1) to (1B) replace
section 18(1) of the 1977 Act in the light of the revised sections
16C, 17 and 17A. They specify how directions under the Act are
to be given: either by regulations or an instrument in writing.
Any directions given by regulations are subject to negative resolution
procedure. As indicated above section 18(1) sets out the exceptional
cases in which directions must be given by regulations. The existing
section 18 provides that regulations must be used to give directions
delegating the Secretary of State's functions relating to special
hospitals (see clause 34 for a further discussion of special hospitals),
and any directions about the Secretary of State's functions regarding
the establishment of Community Health Councils (section 20(1)
and (2) of the 1977 Act).
95. The new section 18(1A) adds to this list
directions under the new section 17A(4) requiring Health Authorities
to delegate functions in relation to general medical services
(ie. the Part II services provided by GPs under arrangements made
under section 29 of the Act). This reflects the general approach
in the 1977 Act that the details of the arrangements under which
Part II services are provided are dealt with in regulations rather
than by directions given by instruments in writing, and ensures
that the system remains transparent.
CLAUSE 8: NHS TRUST ESTABLISHMENT ORDERS
96. This clause does not create any new delegated
powers. It does, however, amend the provisions in section 5 of
the 1990 Act which provide for the Secretary of State to establish
NHS trusts by Order.
97. Most NHS trusts are established under section
5(1)(a) of the 1990 Act to assume responsibility for owning and
managing hospitals or other establishments or facilities which
were previously managed or provided by Health Authorities. There
has been some doubt as to whether such a function encompasses
all property arrangements entered into by NHS trusts to date.
In particular, there is some doubt as to whether NHS trusts established
under section 5(1)(a) have the power to own property not formerly
managed by a Health Authority, or to enter into leasehold arrangements
in respect of their property.
98. This issue has only recently come to light
and, as the parties concerned entered into the arrangements in
good faith, the Government wishes to put their validity beyond
doubt. The provisions in clause 8 will therefore have retrospective
effect. Subclauses (3) and (4) will serve to regularise most of
the arrangements entered into by NHS trusts over which there is
99. However, some NHS trusts have establishment
orders so narrowly drawn that they have very little room for flexibility.
Individual orders may be needed to remedy this, on a case-by-case
basis. Subclauses (5) enables such changes to be made to individual
NHS trust's establishment orders with retrospective effect. The
Government wants to reassure trusts and those who have dealt with
them in good faith that their actions have been beyond doubt within
CLAUSE 9: EXERCISE OF NHS TRUST POWERS
100. This clause does not create any new delegated
powers. It amends section 5(9) of the 1990 Act, however, to enable
the Secretary of State to issue directions under section 17 of
the 1977 Act (as inserted by clause 7) regarding the exercise
by NHS trusts of their charging and income generation powers.
101. At present section 5(9) provides that NHS
trusts may only exercise these powers if they are satisfied that
this will not to a significant extent interfere with the functions
set out in their Establishment Orders or their obligations under
NHS contracts. Clause 9 extends this protection to all functions
of NHS trusts and their obligations under NHS contracts. Furthermore,
it allows the Secretary of State to specify in directions circumstances
in which NHS trusts will also require his consent to exercise
102. The use of directions avoids placing detailed
provisions on the face of the Bill. The directions could, for
example, specify an amount or percentage of income above which
the Secretary of State's consent is required. Such figures are
likely to require amendment in future, and directions provide
the flexibility necessary to enable the provisions to be amended.
Comparable provision is made for Primary Care Trusts and this
is described in paragraph 48 of this memorandum.
CLAUSES 10 AND 11: PUBLIC DIVIDEND CAPITAL
103. These clauses do not create any new delegated
CLAUSE 12: NHS TRUST BORROWING
104. This clause does not create any new delegated
powers. Subclause (2) does, however, provide that the ability
of NHS trusts to borrow shall be subject to the Secretary of State's
power of direction under section 17 of the 1977 Act (as inserted
by clause 7).
105. The intention is that for the most part
NHS trust borrowing will be from the Secretary of State. However,
there are certain circumstances in which NHS trusts will be able
to borrow from the private sector - for example, they may have
"step-in rights" to take over a loan to a private contractor
in a PFI scheme. Directions will be used to set parameters on
the ability of NHS trusts to borrow from the private sector. The
use of directions avoid places a large amount of administrative
detail on the face of the Bill, and provides the flexibility for
amendments to be made to meet the needs of changing financial
CLAUSE 13: DUTY OF QUALITY
106. Clause 13(3) provides that the Secretary
of State may extend the duty of quality to specific Special Health
Authorities. It is the intention that the duty of quality will
apply to certain but not all Special Health Authorities. The delegated
power, therefore, gives the Secretary of State the flexibility
to determine which SHAs will be subject to the duty. At present,
it is envisaged that these will be the SHAs responsible for the
three high security special hospitals. It is possible, however,
that the management of these special hospitals may be transferred
in the future from the SHAs to NHS trusts (see clause 34). The
use of delegated legislation to extend the duty of quality removes
the risk that a reference to SHAs may become obsolete on the face
of the Bill.
CLAUSE 14: THE COMMISSION FOR HEALTH IMPROVEMENT
107. Although this clause does not directly contain
any delegated powers, it gives effect to Schedule 2.