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(1) It shall be the duty of the Secretary of State to establish an independent review body to carry out the functions specified in subsections (4) to (6).
(2) The Secretary of State shall appoint at least nine members of the independent review body.
(3) The independent review body shall elect a chairman from amongst its members.
(4) The independent review body shall prepare reports containing proposals relating to the establishment of a local, democratically accountable system of governance for NHS foundation trusts and Primary Care Trusts.
(5) The independent review body may in particular make proposals in accordance with the provisions of subsection (4) relating to—
(a) methods of securing wider public participation in the governance of NHS foundation trusts and Primary Care Trusts;
(b) methods of increasing public awareness and access to information about the governance of NHS foundation trusts and Primary Care Trusts; and
(c) the membership of public benefit corporations.
(6) The independent review body must—
(a) lay a copy of any report prepared in accordance with the provisions of this section before Parliament, and
(b) once they have done so, send a copy of it to—
(i) the Secretary of State, and
(ii) the regulator."

The noble Earl said: My Lords, I tabled this same amendment in Committee and was pleased that the idea underlying it, if not the amendment itself, found

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some favour with the Minister. He kindly said that he would think about the matter further, and he has just referred to that.

My views and those of the Government on what is a sensible and appropriate governance model for foundation trusts are poles apart and are likely to remain so. But we might be able to agree on two points: first, this is brand-new ground for the NHS, and foundation trusts may not get things right first time. Secondly, if it is left to foundation trusts to devise their own systems of democratic governance, we are likely to see a patchwork quilt of arrangements spreading out all over the country. Local flexibility is one thing, but what if the results are flawed or in some way unfair?

We have been told by the Minister that a review of governance arrangements will be carried out by the regulator after the first wave. That is of some comfort. However, I cannot help thinking that for those trusts, a review is likely to be a little late. How would a foundation trust be expected to put its arrangements on to a different footing if those arrangements were found wanting in some way? What would that do to the legitimacy of the board of governors and the directors? I suspect that at present there is no real answer to that. It would be helpful if the Minister could tell us what specific ideas he has had for ensuring that governance arrangements across foundation trusts are fair and that they work as well as they can. That is the concern here.

I welcome what the Minister said about the Joseph Rowntree Foundation, which is an excellent organisation. However, we may need to go further than that. If there is to be a role for the regulator in looking at these issues, I wonder whether that should not be on the face of the Bill. I beg to move.

Lord Warner: My Lords, as I said earlier, we have some sympathy with the ideas behind the amendment, as the noble Earl has recognised. However, we do not think it is necessary to put this on to the face of the Bill. It will not be in anybody's interest—ours or anybody else's—not to distil the wisdom from the first wave and the subsequent waves of experience in this area. The regulator will be able to do that and we know, as I said on the earlier amendment, that the Joseph Rowntree Foundation will have a look at the governance arrangements of a wide range of public bodies, not just NHS foundation trusts. That has the benefit of looking at NHS foundation trust governance in the context of some other public bodies. As I understand from the noble Lord, Lord Best, it will also look at NHS trusts which are not foundation trusts, so some interesting comparators will be made.

That kind of review is likely to be more beneficial than a separate review on the NHS alone. Noble Lords referred constantly in Committee—not unreasonably—to the Higgs recommendations. The Rowntree proposals would give us a context in which to look at the experience of NHS foundation trusts. So while we are sympathetic

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to the principles behind the amendment, we do not think that putting such a requirement on the face of the Bill is the right way forward.

On primary care trusts, we have never said that we are opposed in principle to the idea of PCTs moving along some similar path. We have said that the Bill is not the right place in which to do that, as it is concerned with the provider side of the NHS. If we were moving along the commissioning side, it would be for the government of the day, at an appropriate time, to come forward with ideas after consulting a wide range of opinion.

Earl Howe: My Lords, I thank the Minister for that reply. I welcome the thought that the Government have clearly given to this issue during the past fortnight. It is a pity that nothing will go on the face of the Bill. I accept the Government's decision on that; nevertheless, it would be nice to find some way of coming back to this subject as a matter of certainty at some time during the next 18 months or two years in the light of initial experience. I shall try to be ingenious enough to find a way of doing that. Like the noble Lord, I shall look forward to what the Joseph Rowntree Foundation has to say on the broader canvas of governance arrangements. No doubt it will be possible to find a vehicle for debating its report if we feel so minded. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 4 [Amendments relating to NHS foundation trusts]:

Lord Warner moved Amendment No. 4:

    Page 109, line 12, leave out sub-paragraph (1) and insert—

"(1) The persons who may become or continue as members of a public benefit corporation are—
(a) individuals who live in any area specified in the constitution as the area for a public constituency,
(b) individuals employed by the corporation under a contract of employment and, if the constitution so provides, individuals who exercise functions for the purposes of the corporation otherwise than under a contract of employment with the corporation,
(c) if the constitution so provides, individuals who have attended any of the corporation's hospitals as either a patient or the carer of a patient."

The noble Lord said: My Lords, in moving this amendment, may I offer some procedural advice which has been agreed by the authorities of the House? Amendment No. 97, which would leave out Schedule 1, is consequential on Amendment No. 2 and should therefore be agreed by the House when we reach it. Schedule 1 will then be left out.

Normally, the House would not spend time discussing amendments to such a schedule. However, we are not prohibited from discussing amendments to Schedule 1, and I understand that it may be for the convenience of the House if we debate the amendments grouped with Amendment No. 4 now.

If I have the support of the House, I will now speak to my Amendment No. 4.

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Lord Hunt of Kings Heath: My Lords, may I ask my noble friend a question? I had some amendments in the previous group headed by Amendment No. 2. In fact, we had a principled debate on foundation trusts and I do not think any of us spoke to the huge number of amendments in that group. Should I speak to those amendments in the group that he is now introducing; or do we go back to this huge group headed by Amendment No. 5 and debate that as a group when we have disposed of Amendment No. 4; or do we unpick the whole grouping so that one waits until one's amendment is reached? I do not know whether the business managers have agreed this—it would be helpful to know.

Lord Warner: My Lords, it is always a pleasure to hear from my noble friend. The short answer as I understand it from the House authorities is that we will deal with Amendment No. 4 and the amendments grouped with it, then move to Amendment No. 5 and then work through the amendments sequentially. So he will have a chance to move his amendments when we reach that point in the Marshalled List.

In Committee, I said that I would listen to arguments, try to take on many of the concerns and bring forward amendments to the Bill where it was appropriate to do so. I shall now try quickly to demonstrate just how reasonable we have been in this by setting out our thinking on these amendments.

Amendments Nos. 4, 7, 9, 12, 13, 14, 15, 27, 34, 37, 38, 40, 52, 90, 258 to 260 and 262 form the first group to which I shall speak. It has always been our intention that NHS foundation trusts should have flexibility to "sub- divide" their public constituencies to provide for different groups to be represented on the board of governors. These amendments ensure that the Bill allows NHS foundation trusts to have a number of geographical public constituencies, and a separate patients' constituency, with each constituency able to elect its own representatives to the boards of governors. I should draw noble Lords' attention to a mistake on the Marshalled List. Amendment No. 52 appears under the wrong names; it is in fact a government amendment which is incorporated in this group.

I turn to Amendment No. 8, on the definition of "carer". The intention behind including carers in the Bill was to provide for informal carers such as family members and others who provide care to patients because of a pre-existing close relationship, to become members of an NHS foundation trust. "Professional" carers such as care home workers, social workers and voluntary workers should not be included. The Government resisted earlier amendments to define "carer" in Schedule 1 in case it removed flexibility to adjust to the changing nature of caring over time. However, we have listened carefully to the concerns that, without a definition of carers, this intention might not be clear. We are therefore proposing to amend the Bill so that people who are employed as carers are excluded.

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Amendments Nos. 28 and 256 deal with the regulations on elections. These amendments seek to build on an amendment passed in Committee requiring the Secretary of State to make regulations specifying the electoral system to be used in elections to NHS foundation trusts' boards of governors. They provide an alternative draft which provides for a much broader regulation-making power and specifies some of the issues which regulations will cover. These issues include among others: nominations procedures, obligations on candidates to declare their interests, election systems, methods of voting, allocation of places on the board of governors to particular constituencies and election expenses.

The new clause draws on both the Representation of the People Act 1983 and the European Parliamentary Elections Act 2002 to ensure that the regulation-making power is sufficiently wide and addresses the key issues to ensure that elections to NHS foundation trusts' board of governors are conducted in a fair, open and appropriate way.

The Delegated Powers and Regulatory Reform Committee has today tabled a report recommending that the regulations under this new clause should be subject to the affirmative procedure. We are today tabling an amendment to Clause 191 responding to those recommendations, which would require the affirmative procedure in the first instance, and thereafter the negative resolution. Given that we have accepted the spirit and intention of the amendment passed, I hope that this modified version is acceptable across the House.

Amendments Nos. 48 and 73 deal with the chief executive being an accounting officer. In response to concerns raised in Committee, we are proposing to amend the Bill to clarify that the chief executive of an NHS foundation trust will be the accounting officer. The accounting officer is responsible for the preparation of accounts and their transmission to Parliament and the regulator.

On Amendment No. 50, we have listened to the concerns raised in the other place, and much earlier in discussions in Committee. In recognition of the concerns raised, I propose government Amendment No. 50, which replicates the requirements on NHS trusts to have a medical or dental director and a nurse or midwife as an executive director. I understand that the British Medical Association supports this amendment.

Amendment No. 66 is consequential on continuity of non-executive directors. The Bill was amended in Committee in your Lordships' House to provide for continuity of the chair, non-executive directors and chief executive of an NHS trust applicant for NHS foundation trust status. A consequential amendment is required to ensure that where a non-executive director from an NHS trust is appointed to an NHS foundation trust, the requirement under paragraph 15(3) of Schedule 1 that they be a member of the public or patient constituencies, or, in the case of a teaching hospital, a university representative, is waived. Without this amendment there would be a barrier to transitional continuity of the non-executive directors.

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Amendments Nos. 68 and 72 deal with governors' interests. The issue of alternative interests, and potential conflicts of interests, is particularly important for members of the boards of directors, who have decision-making powers and are responsible for the day-to-day running of NHS foundation trusts. That is why we accepted amendments in the other place providing for a register of interests of directors, and placing a requirement on NHS foundation trusts to include provisions in their constitutions for dealing with any conflicts of interest that arise. Concerns were raised in Committee that it was important that similar provisions should apply to the members of the boards of governors, to ensure proper transparency and accountability in these large public bodies. We have listened carefully to these concerns and are bringing forward these amendments to address them.

I turn to Amendments Nos. 73, 86, 88, 164, 168, 172, 174 to 177, 233, 241 and 270. During the passage of the Bill, it has become apparent that the location of the register of foundation trusts with Companies House has caused confusion about the corporate form of NHS foundation trusts. In order to address that, we are proposing to require the independent regulator to hold the register rather than Companies House. This amendment should have an additional benefit of reducing costs, since the regulator would already hold most of the documents required for the register for the purposes of fulfilling his other functions. Members of the public will have free access to inspect the register of NHS foundation trusts.

Amendment No. 73 ensures that the information held on the register relating to each NHS foundation trust is also available from the NHS foundation trust itself. Together, these amendments will ensure that information on NHS foundation trusts is readily and widely accessible to the public. I think that they meet concerns raised by the opposition Front Bench in Committee, so I hope that they can support them.

I turn, finally, to Amendments Nos. 76, 79 and 82. We are still firmly of the view that, in line with the principle of greater freedoms and flexibility, NHS foundation trusts should be free to appoint their own auditors. Paragraph 22(3) provides for reputable sources of auditors for NHS foundation trusts, but we have listened carefully to arguments that the Audit Commission should be included in the group of bodies eligible for appointment as NHS foundation trust auditors. These amendments allow Audit Commission auditors to audit NHS foundation trusts, if appointed by an NHS foundation trust as its auditor. I beg to move.

1.15 p.m.

The Deputy Speaker (Lord Elton): My Lords, I have to tell your Lordships that if Amendment No. 4 is agreed to, I shall be unable to call Amendments Nos. 5 or 6 for the reason of pre-emption.

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