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Lord Hunt of Kings Heath: My Lords, I disagree with my noble friend. He spoke very thoughtfully. I know that he has given these matters a good deal of attention. I cannot agree with him that the right solution to the issues surrounding governance is to reduce the board of governors to the role of advisory council. I do not believe that that stands any chance of success in terms of ending the micro-management of the health service from the centre unless one transfers accountability. That means one has to have an electoral process. One also has to have a strong board of governors who are responsible for the essential running of the organisation.

Noble Lords will know that I do not believe that the present governance structure is the right one. We should build on it. If I had the opportunity to start with a clean sheet, I would have undoubtedly made the governing body the sovereign body. I would then have had an executive management board accountable to the governing body for the day-to-day running of the organisation. I would have rested sovereignty in the governing body itself. In the Bill at the moment is a board of directors which is the sovereign decision-making organisation within the trust, and an elected board of governors which is given certain responsibilities and powers. We shall later see whether we can amend that to make the powers more focused.

The fact is that my noble friend's amendments would reduce the board of governors to a consultative body. I do not believe that that would work. If there is a strong membership base and people put their names forward for election, engage in the hustings and are elected, they would not expect to attend a governing body to find that their only role is to proffer advice. They must be given a stronger role. If they are not, there will be trouble because the elected members of the governing body will have the legitimacy which is provided by election.

I understand my noble friend's position, but I would be much more convinced if he were making proposals to give the governing body more power rather than seeking to take it away. I believe that we are all agreed that the governance structure is not ideal. My noble friend has said that the Joseph Rowntree review of democracy and governance will enable further revision. I believe that we should continue with what we have and seek to clarify the powers of the board of governors. I invite noble Lords to look at some

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amendments which I have tabled later in this group which seek to do that. To reduce the governing body to an advisory council would be a mistake.

Baroness Noakes: My Lords, I do not wish to prolong the debate on a schedule which no longer exists. These Benches support the noble Lord, Lord Lipsey.

Lord Clement-Jones: My Lords, I have enjoyed the bi-play on the Government Benches. The common theme appears to be "I would not have started from here, guv'nor" which is always a very edifying place to start. The noble Lord, Lord Hunt, has been fighting a splendid rearguard action and I am very surprised that he did not go into the Opposition Lobbies at the time of the clause stand part debate. There are some fundamental issues here.

Perhaps I may explain why I have added my name to the amendments of the noble Lord, Lord Lipsey, dealing with the advisory aspect of the governing board and the separation of the chairmen of the board of directors and the board of governors. I am concerned about clarity on the one hand and governance on the other. It is right that we should clarify the role of the governing board. One of the running sores throughout Schedule 1 is the fact that the governing body appears to have a very nebulous role. In a very straightforward and simple way, the noble Lord, Lord Lipsey, has inserted something which gives greater clarity. It may be that in the best of all possible worlds one might want a two-tier structure with governance at the top in the way the noble Lord, Lord Hunt, suggests. But going with the unfortunate grain of Schedule 1, I suspect that "advisory" is as good as it gets in these circumstances.

At the moment the governing body is neither fish nor fowl. At least the noble Lord, Lord Lipsey, has defined it as a fish and perhaps the noble Lord, Lord Hunt, would prefer it as a fowl. But there is the benefit of clarity. As regards governance, there is no doubt that the noble Lord, Lord Lipsey, is right. In all seriousness, one cannot have the same chairman for the board of governors and the board of directors. That means when the two bodies have a disagreement there is a conflict for the chairman and all kinds of other consequences flow.

I thought that the scenarios which the noble Lord, Lord Lipsey, put forward were a masterclass in machiavellian organisational conspiracy. I would not like to be in an organisation where I crossed the noble Lord because I feel quite certain that he would make sure I was ejected fairly swiftly.

Baroness Howarth of Breckland: My Lords, this may not be fish or fowl, but a real red herring. I am with the noble Lord, Lord Hunt, on this matter. The noble Lord, Lord Lipsey, is very convincing. Let us think about how governance works. Many noble Lords have sat on various boards. They will know that if the various layers of authority do not understand the nature of their responsibility—and if the board is to be elected it will expect to make certain decisions—they will be in deep trouble. I dislike these provisions intensely because I

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believe that they will make for extraordinary difficulties in managing the health service in future. To make the board advisory can only complicate the situation even more. I am all for trying to strengthen the nature of the board, getting its role clear and moving forward.

Lord Warner: My Lords, I believe that I am destined never to satisfy my two noble friends on some of these issues. I shall have to be phlegmatic about that as I proceed through the Bill. I was grateful to my noble friend Lord Lipsey for almost endorsing my earlier exposition on the role of a board of governors. He will recall that I said that its role went beyond being advisory. It has an important role which goes significantly beyond that of advice. That includes the appointment of the auditor of the NHS foundation trust and the non-executive directors. I suggest that is significantly more than the functions of an advisory body.

It would be misleading to refer to such a board as an advisory board, which would occur if the noble Lord's amendments were accepted. We shall later debate Amendment No. 96 in the name of my noble friend Lord Hunt which concerns a forward business plan. I do not want to anticipate that.

I should like to reassure my noble friend Lord Lipsey about the constraints on the board of governors about which he is clearly worried. There is an alternative approach in some ways in Amendment No. 24, but it is unnecessary. I hope that my noble friend will be reassured that the Bill already provides that the board of directors must carry out the functions of the corporation and that these functions cannot be delegated. That provides them, and only them, with the power to run the day-to-day operations of the trust. That is one reason why we believe that Amendment No. 24 is unnecessary, but it is also a bulwark against many of the concerns of my noble friend Lord Lipsey. I say this as gently as I can. We respect the noble Lord's expertise on electoral systems and we have tried to respond to that. But on the issue of governance, we do not believe that he has got it right and we would not support the amendments describing the board of governors as an advisory board.

Lord Lipsey: My Lords, I thank the noble Lord for that reply. The trouble is that power does not always follow constitutions or laws. Although the law may say that management is for the board of management, when sitting with a group of people who can sack someone, one finds that power lies in a slightly different place. I believe that the shareholders in BSkyB have found that Rupert Murdoch was in power despite the fact that he did not have a majority of the votes. There are often cases of that kind.

I cannot say that my noble friend's reply satisfies me. The noble Lord, Lord Clement-Jones, put the matter very well by saying that it was a choice of fish and fowl. I have more sympathy with my noble friend Lord Hunt's fish than with the Government's fudge, although personally I remain persuaded that fowl would be better.

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I am extremely tempted to seek the opinion of the House. I shall not, simply because further discussions have to take place about the issue. I hope all noble Lords, whatever their position on the amendments, will agree that it is clearly not right at the moment and that deep down the Government agree with that. We have to sort the matter. By having further votes at this stage I would not be assisting the process of sorting. I hope that we can all leave the Government with the message that they do not have it right yet and that there must be changes before we can go forward on the Bill. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 23 to 26 not moved.]

Lord Warner moved Amendments Nos. 27 and 28:

    Page 110, line 15, leave out "the public constituency or the staff" and insert "a"

    Page 110, line 17, leave out sub-paragraph (5).

On Question, amendments agreed to.

4 p.m.

Lord Hunt of Kings Heath moved Amendment No. 29:

    Page 110, line 18, at end insert—

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