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Lord Clement-Jones: I speak to Amendment No. 75. This has two key elements. Like the amendment of the noble Earl, Lord Howe, it relates to the way in which foundation trust accounts are drawn up and presented. First, the intention is to ensure that the annual accounts of an NHS foundation trust state explicitly the amount of income arising in the relevant year from private charges and, more importantly, the percentage that that represents of the trust's total income.

A second requirement in that context is that there should be a specific audited statement confirming that that is not higher than the relevant percentage in the base year. That enshrines in the annual accounts easily referenced information relating to the NHS foundation trusts' compliance with the provisions of Clause 15(2) of the Bill. We shall no doubt debate the precise terms of Clause 15(2). Changes were made in Committee but the power under Clause 15 restricting,

effectively the provision of private health services—is the subject matter of the proposed new paragraph (3A) in Amendment No. 75.

The measure seeks to ensure that within six months of the relevant financial year end the annual accounts are published by a foundation trust with a copy posted to each member of its public constituency without charge and that copies are available to members of the public on payment of a reasonable fee. Further, it contains a proposal that foundation trusts should open up their accounts before they are finalised. That would provide a proper mechanism for local scrutiny and financial accountability. That requirement reflects an obligation of local authorities. They are required to open up their accounts before they are finalised; that is, publish a draft statement, make supporting papers available and have the auditor available for questioning. However, as local authorities are obliged to meet transparency requirements under the Audit Commission Act and related regulations, there seems

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no reason in principle why foundation trusts should not be subject to a similar regime. If the desire is that the public should have oversight of a locally devolved NHS structure, they should be given the mechanism that they will need to exercise that effectively. I very much hope that the Minister will look favourably on that provision.

Baroness Finlay of Llandaff: I speak with some trepidation because I am not an accountant, but I am concerned with issues about audit. What provision is there for ensuring that the risk assessment has been adequate in relation to indemnity? How will indemnity issues for the foundation trusts be handled? It may not be the relevant point to ask such a question—if the Minister felt that that were the case I would accept it—but the issue has concerned me throughout some of the debates.

Lord Warner: I am happy to write to the noble Baroness, Lady Finlay, about those issues.

There may be some misunderstanding on Amendments Nos. 71, 73 and 74. It is certainly not our intention to re-establish excessive controls. The reason for the present wording is slightly more mundane than the noble Baroness may think. Each year from 2004–05, the Treasury will prepare whole of government accounts, which include information on public bodies and bodies wholly or substantially funded from public money. Those accounts will form an important source of information on how public funds are used. As NHS foundation trusts have a principal purpose of providing NHS services, the great majority of their funding will be from the public purse, and it is right that the Treasury intends to include their expenditure in the whole of government accounts.

It follows from that that it is important that the form and content of NHS foundation trust accounts, as directed by the independent regulator, are consistent with the Treasury's requirements. That facilitates parliamentary and public scrutiny of how public funds are used. The Treasury accounting requirements reflect UK generally accepted accounting practice—the rules followed by private sector companies—to the extent that is meaningful and appropriate in the public sector context. We are not simply trying to go back to controlling any dropping of bedpans, but ensuring that the accounts are in the right format for the Treasury to deliver its commitment on publishing whole of government accounts.

Our views on Amendment No. 75 are not quite the same as those of the noble Lord, Lord Clement-Jones, as he may or may not be surprised to learn. We believe that the amendment is unnecessary and would place NHS foundation trusts and their auditors under a complex and burdensome set of requirements without delivering any additional benefit. The Bill already provides for information to be made available to the public, including on private patient activity. It provides for independent scrutiny of the accounts and

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the auditor's reports, and for monitoring compliance with the private patient cap. I shall say a little more about each of those in more detail.

Lord Clement-Jones: The Minister has moved on, but I assume that he will direct us specifically to the place in the Bill where the obligation to report on private income arises.

Lord Warner: I am about to go through some more detailed exposition.

I shall deal first with information to be made public. I can well understand the desire to ensure that information on accounts is made public, but that is already covered under a number of different provisions in the Bill. The annual accounts of the NHS foundation trust must be tabled at a general meeting of the board of governors, which must be open to the public. In addition, paragraph 20(1)(d) of Schedule 1 and Clause 10(2)(c) jointly provide that the annual accounts are to be publicly available for inspection and copying. Under paragraph 20(3) of Schedule 1, members cannot be charged for copies of the accounts, although others may be charged a reasonable fee. So we believe that there is adequate provision for making the accounts widely available to the public.

It will be for the independent regulator to monitor compliance with the private patient cap. Paragraphs 22 and 21 of Schedule 1 provide for the independent regulator, with HM Treasury approval, to determine the form of accounts. I have discussed that. The accounts will therefore include information that the regulator requires to monitor compliance with the private patient healthcare cap in Clause 15. As accounts are publicly available, the public will also have access to that information.

There is already provision for independent scrutiny of the accounts and the auditor's report. The independent regulator will be responsible for defining and ensuring compliance with the private patient healthcare cap in Clause 15. Under Schedule 1, paragraph 22(3), the National Audit Office can examine the accounts and the auditor's report. They are also sent to Parliament and to the independent regulator under Schedule 1, paragraph 23(4). An additional requirement for the public to examine draft accounts and auditor's reports, and to interrogate the auditor, adds nothing but bureaucracy.

We agree that accounts should be prepared and audited as soon as possible. However, the Bill already includes powers for the independent regulator to prescribe timetables for the preparation and audit of the accounts in setting terms to the authorisation or accounting and audit requirements. In our view, it would be inappropriate to prescribe any arbitrary timescale within which the accounts must be prepared and audited and we would leave this to the regulator.

6 p.m.

Lord Clement-Jones: I shall read carefully what the Minister had to say. Paragraphs 22 and 23 are magical—they encompass a massive amount of detail

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which I cannot see enshrined in their wording. We shall read as much between the lines of those paragraphs as we can and perhaps return to the matter at a future date.

Earl Howe: I am grateful to the Minister for his explanation. We have heard a great deal about flexibility in the Bill, but this appears to be a case of extreme inflexibility. I would have thought that there the Bill could be less prescriptive. If all the Treasury requires is certain information, the regulator could specify that that information should be provided. An appropriate duty could then be written in to ensure that he does so. It is not necessary to have multiple provisions on the face of the Bill, allowing the Treasury to dictate the form and content of the accounts in detail.

Nevertheless, there are ways and means of arriving at the same objective. This is not a make or break issue. I am pleased that I raised it and I am grateful to the Minister. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Noakes moved Amendment No. 72:

    Page 112, line 14, leave out sub-paragraph (4).

The noble Baroness said: Sub-paragraph (4), paragraph 22 of Schedule 1 provides that the regulator can tell the auditor what standards, procedures and techniques he should use. That is undesirable because it would duplicate standards that already exist for use in both the public and private sectors. Furthermore, I do not believe that the regulator would have the competence to execute the task.

There already exists an Auditing Practices Board currently owned by the Independent Accountancy Foundation and soon to be taken under the wing of the Financial Reporting Council. It sets auditing standards for auditors and is made up of a chairman and 12 highly experienced accountants. It includes non-voting membership from the Department of Trade and Industry. It covers all auditing, including that of public-sector entities. Will the Minister explain why the Department of Health feels it is necessary for its regulator to specify auditing standards? Will he explain how the regulator will acquire sufficient competence to carry out the task? I beg to move.

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