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Baroness Noakes moved Amendment No. 145:


The noble Baroness said: In moving Amendment No. 145, I shall speak also to Amendments Nos. 148 to 150. They all concern the registrar of companies and his involvement in the records of foundation trusts.

Amendment No. 145 is a probing amendment which would delete the requirement to send copies of the constitution to the registrar of companies in Clause 8(2). Amendment Nos. 149 and 150 take a slightly

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different approach to Clause 10, substituting the regulator for the registrar of companies as the person who should keep a register of NHS foundation trusts.

We were mystified as to why the registrar of companies had been selected as the keeper of foundation trust records. The Minister, when challenged on our first day in Committee by the noble Baroness, Lady Barker, positively rejected the use of companies legislation and even threatened that that would involve non-compliance with EU obligations. Therefore, when it suits the Government, they say that foundation trusts are not like companies—they are co-ops, mutuals, social enterprise or whatever Third Way language pops into Ministers' heads.

However, they then completely muddy the picture by saying that the registrar of companies is the repository of foundation trust data. What is the man in the street to make of that? The only logical conclusion is that foundation trusts are indeed companies in all but name.

The most logical place for people to search for information on foundation trusts is the regulator, just as is the registrar of companies the logical place to look for information on companies, or the Charity Commission for information on charities. Sticking with the regulator would avoid confusion all round.

I am struggling with the logic of the Government's decision, unless there is a sub-plot to turn foundation trusts into companies in due course. I hope that the Minister can enlighten the Committee. I beg to move.

Baroness Andrews: Again, I hope that I can enlighten the noble Baroness. There is nothing illogical, sinister or theological about our decision.

In brief, applicants for NHS foundation trusts will be required to publish forward business plans and reports and accounts, along with the constitution and authorisation. They must be made available to the public. That is the point. It is not a muddying of the picture. Our intention is, in keeping with our general commitment, to secure as much public understanding, access and involvement as possible. The Wanless committee referred to public engagement as being a great virtue. This is another example of us trying to secure that. In order to ensure that those documents are widely accessible to the public, the registrar of companies will keep a register of foundation trusts. That will have to include the key constitutional and financial documents and other specified information—for example, the members of the board of directors and governors—for each NHS foundation trust. We are doing this because this is the way in which we can guarantee that the man and woman in the street will have access to information. This is a familiar and customary point to access information. Members of the public will have free access to inspect the register. That register will form the source and will be in a format which can be recognisable and easy to access.

This group of amendments seeks to place responsibility for keeping the register on the independent regulator, but we would argue that this would reduce access and openness. Indeed, the

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decision that the Registrar of Companies should hold the register was a deliberate one—because it is more accessible that way. In addition, the location of the register with the Registrar of Companies means that information about any joint ventures or spin-off companies on which foundation trusts might decide to embark will be available in the same place as information about the foundation trusts themselves.

I would therefore argue that in all logic, and certainly in order to guarantee openness, this is the right decision.

Baroness Barker: The Minister will recall that the NHS Plan contains a proposal that foundation trusts should be able to form companies with the private sector in order to run some services. I imagine that they will be charitable companies which are similarly registered with Companies House. Is that the logic behind this proposal, or is the implication of the Minister's comments that the foundation trusts will be incorporated entities which need not form separate companies in order to carry out some services?

Baroness Andrews: I can only repeat what I have said. The decision to make the information available with the registrar was made for the reasons I have suggested. The other questions are outside the scope of the amendment. I shall be happy to write to the noble Baroness and give her some more detail about that.

Baroness Noakes: I am surprised that the noble Baroness feels unable to answer in our Committee a question which seems to me to be germane to the amendment we are debating. I am sorry that she felt unable to do so.

The noble Baroness talked about public understanding and access, a familiar and customary point being the Registrar of Companies—and that in the context of the man in the street. I put it to the noble Baroness that this is just nonsense. There is no good reason for this. It is another example of muddled thinking in the Bill on which we must reflect most carefully before we come to Report. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 8 agreed to.

Clause 9 [Variation of authorisation]:

Baroness Noakes moved Amendment No. 146:


    Page 4, line 26, leave out "is to" and insert "must"

The noble Baroness said: Amendment No. 146 is a straightforward amendment relating to the use of the words "is to" in Clause 9(2). My amendment replaces these words with "must". At one level, this straightforward amendment is designed to improve the language that the Government have used in the Bill. It is a variation on our old favourite, "may"/"shall". Clause 9(1) provides that the regulator "may" do something; subsection (3) provides that he "must" do something; but subsection 2 provides that he "is to" do something. I believe that the "is to" formulation is unusual, but even more so where the contrast is with the surrounding subsection. We

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believe that the regulator must have regard to the matters in subsection (2) and that any other formula can only import ambiguity into an area which should be absolutely clear.

There is another level to the amendment. Subsection (2) provides that when the regulator varies an authorisation for a foundation trust, he is to have regard to what the local authority overview and scrutiny committees and the Commission for Patient and Public Involvement in Health think. However, when a foundation trust is initially authorised, there is no formal role for those bodies. That was the focus of an amendment to which the noble Baroness, Lady Barker, spoke a little earlier.

Under Clause 6, those bodies might be involved in consultation prior to authorisation but there is no requirement for the regulator to have regard to their views. However, for some reason, by the time we reach variations, it is regarded as important that regard should be had to their views. Will the Minister explain the rationale for that? It seems to us that, like so much of the Bill, that is utterly lacking in logic. I beg to move.

Lord Warner: By including the word "must", the aim of the amendment appears to be to require the regulator to take into account the matters listed in the subsection. But that is already the effect of the words on the face of the Bill. There is no legal difference in the terms proposed.

Baroness Noakes: I thank the Minister for explaining that there is no legal difference. In that case, first, it would be a simple matter to accept the amendment. Secondly, will he answer my questions about why the regulator must have regard to the opinions of the bodies that I mentioned when variations come into play?

Lord Warner: I have already indicated that. At this stage in our deliberations, having a discussion about an amendment which does not alter the legal purport of the Bill does not seem to me to be a very sensible use of the Committee's time.

Baroness Noakes: If that is to be the way that the Minister intends to conduct the rest of our Committee stage, we shall have a rather difficult time. I invite him to answer the simple question that I posed and I hope that he will write in order to put it on the record for the Committee. I also hope that his temper will improve and that we shall conduct our Committee proceedings in the normal way for the rest of this evening's session. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 147 not moved.]

Clause 9 agreed to.

Clause 10 [Register of NHS foundation trusts]:

[Amendments Nos. 148 to 150 not moved.]

Clause 10 agreed to.

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Clause 11 [Power of Secretary of State to give financial assistance]:

Baroness Noakes moved Amendment No. 151:


    Page 5, line 21, at end insert "including the guarantee of any obligations of an NHS foundation trust"

The noble Baroness said: In moving Amendment No. 151, I shall speak also to Amendments Nos. 152 and 153. All the amendments relate to Clause 11, which deals with the Secretary of State's power to give financial assistance to foundation trusts. I shall also speak to Clause 11 stand part in order to raise a number of general issues about the financial regime under Clause 11.

It would help the Committee to consider this clause if the Minister were able to set out for the record how he expects foundation trusts to be funded. Clause 11 gives the Secretary of State wide powers to make payments to foundation trusts. We need to be clear how the Government intend to use those powers. Perhaps I may pose a series of questions to the Minister.

Will foundation trusts have access to grant moneys for, for example, modernisation or IT on the same terms as NHS trusts? Will the Government allow foundation trusts access to capital moneys on the same basis as NHS trusts currently have such access or will there be any differences? When will the Government publish the terms under which foundation trusts can obtain money from the Government? When that was considered in another place, the Minister, Mr Hutton, said that borrowing for protected businesses would attract the prevailing national loan fund rate, which is fairly straightforward, but that loans for non-protected businesses would be set at a level consistent with private sector borrowing rates. The Minister will be aware that that is a moveable feast. Therefore, will he be more specific about the rates that the Government will use?

Will the NHS bank have any role in the financing of foundation hospitals? Again, in another place, the Minister, Mr Hutton, said that there would be a new financing facility, which the Department of Health is establishing. He said that it would involve independent credit specialists and that the financing facility would be operated on an arm's length basis. Is that the NHS bank or a new organisation? Can the Minister explain what that is? Can he describe the legal basis of the constitution of that organisation? If it is the NHS bank I have always been told that the legal constitution is yet to be determined. When it was originally announced as the NHS bank, it was announced as an arm's length body, which sounds like the body to which Mr Hutton referred, with a board of governors. However, I understand that at present it is run by a few civil servants and NHS managers on a part-time basis.

Against that general background I turn to our amendments. Amendment No. 151 adds to the end of subsection (1) the power to guarantee obligations of NHS foundation trusts while Amendment No. 152 deletes subsection (3), which allows the Secretary of State to guarantee private finance agreements. Can the

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Minister explain the logic of taking a specific power to guarantee PFI obligations while not taking the equivalent power for other borrowing? That is particularly important because foundation trusts will not be able to borrow against the security of their protected assets and if no guarantee is available to them they may find it very difficult to borrow from the private sector, particularly if they want to borrow to fund significant new premises, for example.

There may be nice theory about private sector lending on the basis of the strength of operational cash flows, but the experience of PFI, which did not get off the ground until the Secretary of State took the legal power to guarantee projects, should have taught the department that the private sector will not lightly take the credit risk of dealing with the NHS.

Amendment No. 152, which knocks out the ability of the Secretary of State to guarantee PFI contracts is also important because subsection (3) flatly contradicts what Mr Hutton, the Minister in another place, said:


    "The Government are proposing that, in future, all Department of Health-approved NHS foundation trust PFI schemes will be under novation to the Secretary of State. PFI consortia will be in a direct primary contractual relationship with the Secretary of State. The Secretary of State will, in turn, appoint the NHS foundation trust either as his agent or subcontractor".—[Official Report, Commons Standing Committee E, 22/5/03; col. 333.]

That is a quite different arrangement from the guarantee envisaged in subsection (3). Can the Government explain why subsection (3) has been included if it is not the Government's policy?

Finally, Amendment No. 153 inserts the requirement for an annual report covering all the financial flows or arrangements under Clause 11. It is clear that there will be significant interest, both in Parliament and among those bodies which have not been allowed to be foundation trusts, in what financial support has been given to them by the Secretary of State. I am happy to go through the individual requirements but the simple point is that they require the Secretary of State to account for his financial support to foundation trusts, and I hope that that will not be controversial. I beg to move.

9.30 p.m.

Lord Warner: I shall try to respond to as many as possible of the questions raised by the noble Baroness. However, I should like to do that in a form in which I set out the Government's position on the specific amendments. Given the remarks by the noble Baroness on the last amendment, I assure her that I am in an extremely affable mood, so I shall be as helpful as I possibly can be.

The position on Amendment No. 152 is that as independent organisations, NHS foundation trusts will fall outside current arrangements for the allocation of capital in the NHS. Instead, they will have access to a wider range of financing options than is currently available to NHS trusts. Capital made available to NHS foundation trusts by the Department

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of Health will be on a loan basis and they will be expected to pay off both the principal and the interest of any loan, rather like a mortgage.

However, to the extent that any public funds are made available for any central initiative—for example, implementation of national service framework initiatives—NHS foundation trusts should have access to an equitable proportion of those funds, whatever the actual source. Such funding might be paid to NHS foundation trusts by way of a grant or injection of public dividend capital from the Secretary of State.

That is why we are taking those powers to ensure that the Secretary of State is able to make loans or issue public dividend capital or grants when providing financial assistance to NHS foundation trusts. Those powers mirror the equivalent legislative provisions applying to existing NHS trusts.

That power is not intended for bailing out failing NHS foundation trusts. It is an essential aspect of the new disciplines being placed on management, as the quid pro quo for the additional freedoms that come with foundation status, that the Secretary of State will not guarantee debt. In the event of failure, the Government will of course stand behind NHS patients and essential NHS services—that is, protected services. We will not stand behind or bail out poor management. Instead of bailing out NHS foundation trusts, the Bill includes specific powers in Clause 24 for the independent regulator to intervene in the operation of an NHS foundation trust if it cannot meet its financial commitments. We have made our intentions quite clear on that. The amendment is wholly inconsistent with our policy aims and therefore ought not to be pursued.

On Amendment No. 152, which concerns private finance initiatives, our position is as follows. PFI schemes are and will continue to be an essential part of the building programme for the NHS. We intend to ensure that sponsors and funders of PFI schemes are left in no worse a position as a result of the introduction of the Bill and the establishment of NHS foundation trusts. Foundation trusts will continue to be able to access the PFI process to finance major capital investments, subject to similar terms and oversight as apply under the current arrangements.

To achieve that, we propose that in future the Department of Health-approved NHS foundation trust PFI schemes can, if necessary, be guaranteed by the Secretary of State. The Secretary of State would be able to undertake a "deed of safeguard", accepting the obligation to pay sums due under the PFI contract if they were not paid by the NHS foundation trust. He could also enter into an agreement with the NHS foundation trust. Such an agreement would give the Secretary of State the ability to reclaim from the foundation trust any moneys that he had had to pay as a result of the non-performance by the foundation trust of its contractual obligations. The same agreement would also make clear that performance of the PFI contract on a day-to-day basis was a matter for the NHS foundation trust.

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The Secretary of State already has the legal powers necessary to allow him to guarantee PFI deals entered into by foundation trusts. However, parliamentary convention requires that any ongoing government expenditure should have express legislative cover. The Bill was therefore amended in the other place to provide the required legal cover, should it be needed. The amendment would remove that provision and is therefore inappropriate.

Amendment No. 153 concerns the Secretary of State providing foundation trust information to Parliament. We have always made clear that the additional freedoms that come with NHS foundation trust status will be balanced by appropriate safeguards to ensure the public benefit and protect NHS services. That is why we have provided for each NHS foundation trust to make its accounts available to the public and the National Audit Office and to lay the accounts before Parliament.

The Bill therefore already provides more than adequate provision for public and parliamentary scrutiny of the financial arrangements for foundation trusts. The requirement for the Secretary of State to prepare additional financial accounts for presentation to Parliament is an unnecessary burden. Any necessary information will be provided through individual foundation trust accounts presented to Parliament.

I have tried to deal with the points in a policy context. The noble Baroness asked many detailed questions. I shall read Hansard very carefully and I promise to write to her if I have failed to deal with any aspects or details in my response.


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