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Lord Warner: I was trying to make the point—and I thought that I had done so—that the applicant's property rights and liabilities, including public dividend capital, will continue with the new body. I am not sure where the idea of "cleaning up" comes from.

Baroness Noakes: The idea of "cleaning up" came from Mr Hutton on 22nd May. It was part of the quote I read out in introducing my amendment. He stated that applicant trusts had been asked to make a case where they believed that historical deficits should be written off before they achieved foundation status. Is the Minister telling me that that process is not taking place or that it is?

Lord Warner: I will look again at the noble Baroness's point and at the source she is quoting. My briefing states that the applicant's property rights and liabilities, including public dividend capital, will continue with the new body. If some legitimate changes can be made before that transfer, no doubt they will be made. However, it is not true that we are writing off public dividend capital.

Baroness Noakes: I thank the Minister for agreeing to go away and look at the matter again. The quotation I made was from one of his ministerial colleagues in another place and it raised significant issues. These PDC issues might seem small and trivial but I suggest that we wait until the Minister has had a chance to look again at the matter and we can reconsider it. I hope that he will write to me with the outcome of his further inquiries and we can return to the matter on Report. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 159 not moved.]

Clause 13 agreed to.

Clause 14 [Authorised services]:

[Amendment No. 160 not moved.]

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Earl Howe moved Amendment No. 161:

    Page 6, line 33, leave out ", subject to any restrictions in the authorisation,"

The noble Earl said: In moving Amendment No. 161, I shall speak also to Amendments Nos. 162, 165 and 166. I come to a somewhat troubling set of issues arising from the provisions in Clause 14. They point to the likelihood of an authorisation for foundation trust status being made conditional on a trust providing for particular goods or services. I find these prescriptive provisions surprising and contrary to the claims that the Government have been making about foundation trusts. We thought that foundation trusts were going to be free to configure their services in a manner appropriate to local needs as they saw them. We see from this clause that the regulator will decide what services they must provide.

We thought that local patients and the public were to have an influence on the development of service provision. We now see that any influence they may choose to exercise will be curtailed by the regulator, who will effectively have second-guessed them. Subsections (4), (7) and (8) are, in my view, misconceived. We earlier debated cancer networks. I do not believe that we need Clause 14 to safeguard those, if that should be a concern.

In any case, I find it extraordinary that Ministers are fearful that an NHS trust, once granted foundation status, might suddenly decide to abandon the services it provides to its customers. It is the job of hospitals to provide treatment and services which their patients need and for which they are paid by their respective PCTs. Their raison d'etre is to treat patients. The idea that foundation hospitals will not continue to deliver high-quality, broad-ranging services when their patients want those services is absurd.

It looks to me as though the Government are fearful that the operational freedoms being given to foundation trusts will in some way undermine the delivery of mainstream NHS services. I do not believe that. These subsections show the timidity of Ministers. Ministers are not prepared to let go, even when they say that is what they are doing. I find that regrettable, to say the least. I beg to move.

Lord Warner: First we were foolhardy; now we are timid. I want to deal with the two sets of amendments in sequence. First, Amendment No. 161 removes the regulator's powers to restrict NHS foundation trusts' non-healthcare activities. Perhaps I may remind Members of the Committee that the principal purpose of an NHS foundation trust is to provide NHS services to NHS patients. The Bill also provides that foundation trusts may carry out other activities with the objective of generating surplus income to support the NHS principal purpose. These provisions parallel the income generation powers already available to NHS trusts. Examples of income generation activities might include: running occupational health services on behalf of non-NHS employers; engaging in commercial R&D projects; providing non-clinical amenities, such as Internet facilities, for patients, staff

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and visitors; leasing space to service providers, such as newsagents or hairdressers; and providing private health services.

In normal circumstances, the regulator would not intervene in those activities. We are not setting up the regulator to intervene, and he has restraints on his ability to do so. There must be a significant problem before he can intervene. But it is right that he should have the power to place restrictions on income generation activities to ensure that they do not interfere or conflict with, or detract from, the principal purpose of providing NHS services. That is the purpose of the power of restriction already in the Bill.

I turn now to Amendments Nos. 162, 165 and 166, which remove the regulator's power to protect services. In order to safeguard essential NHS services, the regulator will, under their terms of authorisation, require NHS foundation trusts to offer certain "protected" services to NHS commissioners on a continuing basis. From earlier discussions, I thought that noble Lords were very concerned about this issue. Protected services will include essential education and training and research programmes, as well as NHS clinical services.

The independent regulator's decisions on what should be classified as protected will be based on, among other things, the criteria set out in Clause 14(7). The regulator needs to protect services, in line with his general duty under Clause 3, to act consistently with the Secretary of State's duties under the 1977 Act to promote and provide a comprehensive health service in England and to provide clinical facilities to universities with medical or dental schools.

I am slightly confused. At one moment, noble Lords were concerned that NHS foundation trusts would not meet the wider health needs required; at other times, when faced with provisions which ensure that the trusts will meet those wider obligations, noble Lords want to remove the protection. The amendments would remove the regulator's powers to protect those services, and that would jeopardise the regulator's ability to protect the interests of NHS patients. The effect of the amendments would be that NHS patients could be denied essential services, and that, in the Government's view, is clearly not acceptable.

Earl Howe: I am far more concerned that, if one takes this clause literally, we are likely to have regulation with a heavy rather than a light touch. I am not against default powers or the thought of the regulator intervening where there is a clear need for him to do so. But this clause seems to suggest that he will be highly prescriptive.

I take some comfort from what the Minister said about the selective nature of the use of the powers. Even so, I remain uneasy. There are concerns about the wider health needs across the health service as a whole but, frankly, I doubt whether powers as extensive as this are needed to protect those needs. Nevertheless, I shall read carefully what the Minister said. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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[Amendment No. 162 not moved.]

Earl Howe moved Amendment No. 163:

    Page 6, line 40, leave out "and may require"

The noble Earl said: A very similar point arises in relation to this amendment, which concerns teaching and research. No one wants to see research diminish across the health service. We have argued long and hard in this Chamber for sensible mechanisms to ensure the continuation of research in the reformed NHS. But surely we cannot have a regulator who insists on telling a foundation trust that it must carry out, and continue to carry out, this or that type of research. We have only to reflect on what has happened recently in medical schools around the country to realise how misconceived that idea is. This year the DfES decided to skim off 2.2 per cent of the teaching budget in medical schools and channel that money instead into a programme of social inclusion. The result is that medical schools are 2.2 per cent worse off than they were and are having to make cuts.

In some cases those cuts are painful. Collaborative clinical research work between medical schools and NHS trusts is being rationalised and the relevant staff are having to be laid off or redeployed. The effect on some NHS trusts is very direct. However, the point is that that process of rationalisation is something which the medical schools and trusts have no option but to put in train. In any given year it is always possible for the HEFCE to reduce its funding for medical research in certain areas, as has happened this year with Queen Mary's Medical School, for example. At Queen Mary's, as elsewhere in London, there has been a major restructuring of the research base at the behest of the HEFCE.

Against that backdrop it would be totally inappropriate for the regulator to require trusts to carry out particular types of research. It would place a tie on them which is quite unrealistic. If the medical school alongside them, for reasons beyond the trust's control, decided to reconfigure the research base, the trust may have no option but to quit that area of research. Trusts need operational flexibility in the field of research as they do everywhere else. That is why I believe that the provisions in subsection (6) are overly prescriptive. I beg to move.

10.45 p.m.

Lord Turnberg: In speaking to Amendment No. 164 in this group I express an interest as vice-president of the Academy of Medical Sciences and adviser to the Association of Medical Research Charities. My particular concern is in the need to pay specific attention to our major teaching hospitals associated with our medical schools where research is such a vital part of their raison d'etre.

Research and teaching goes on in virtually all hospitals. That is why I support the amendment tabled by the noble Earl. However, it is much more than simply an optional extra in our medical schools and university hospitals. I suspect that everyone is supportive of the need to pursue medical research. I do not need to expand on that to noble Lords.

13 Oct 2003 : Column 735

Most basic research is done in research laboratories, but at the end of the day it is the research on and with patients which has to be done and that is where the problems lie. It is in hospitals, largely university hospitals, and in the community, where that has to be done and here it is easy for research to be regarded as a distraction from the prime purpose of caring for patients here and now.

Care for today's patients will always take precedence over efforts to improve care for tomorrow's patients. Targets for waiting lists and so forth will always focus the attention of managers on the need to put their resources quite reasonably into immediate care for patients. So, research will always come down the list of priorities. I refer, for example, to major university hospitals. It does not seem to figure highly in bids for foundation status, nor does it contribute to star ratings. So, it has a lower priority than most activities in hospitals.

If we consider that medical research is important—I hope that we do—it has to be specifically identified and protected. I am not talking about the direct costs of research, which are borne by research grant giving bodies—such as the MRC—and medical charities but about the facilities in hospitals for research to be possible: the extra space and extra time needed for staff to pursue the research. Nor is it that those hospitals should simply allow research to be undertaken in a kind of passive way. They have to take research into account when they are calculating their need for staff and other facilities. While funding from the NHS research and development budget undoubtedly helps, it needs more than that. It requires the research ethos of teaching hospitals to be fostered throughout. My fear is that foundation trusts with their new-found freedoms will tend to neglect this seemingly non-essential but vitally important activity in the face of clinical demand.

That is why I tabled the amendment which, although it may not the most elegantly worded that your Lordships have read this evening, focuses attention on the need for foundation hospitals associated with medical schools to accept a key responsibility for that activity.

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