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Lord Warner: My Lords, a secret of political success is to lower expectations. I am glad that the noble Lord, Lord Clement-Jones, has moved away from his ideas on a cap. I gently say to him that the fact that the NAO is setting up an inquiry does not prove his point in any way on loss-making. I am sure that he takes comfort from it, but I do not believe that the point is valid. The NAO looks at all kinds of things and we look forward to seeing what it has to say in that area when it produces its report.

On Amendment No. 195, we support the principle that information about income and expenditure from private healthcare must be available and publicly accessible. However, the amendment is unnecessary and could require NHS foundation trusts to produce the same information in different statements. The annual accounts, which must cover income and expenditure from private healthcare and income and expenditure from NHS healthcare, will already be made public. The annual accounts must be presented at a public meeting of the board of governors. Under the provisions of the slightly mauled Schedule 1—to which I am sure that we shall return later—the annual accounts must be made publicly available. To require the information to be published separately would place additional burdens on NHS foundation trusts, without delivering any additional benefit to patients or the public. Information on private healthcare expenditure will already be available, so I suggest that we do not pursue the amendment.

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Turning to Amendment No. 196, it will come as no surprise to noble Lords opposite that we are rather attached to Clause 15. It gives the independent regulator power to place restrictions on non-NHS activity and requires the regulator to place a cap on the total level of income derived by an NHS foundation trust from the provision of services to private patients. That is what we seek to do; we do not want arrangements under which private healthcare is expanded at the expense of NHS patients. I understand where many Opposition Peers are coming from. Arithmetically, it must be true that if trusts perform more private healthcare they will bring in more money, but the point is that they may do so at the expense of services to NHS patients. That is why Clause 15 is in the Bill.

Income derived from provision of services to private patients will be capped as a percentage of total income from clinical activities. The percentage will be fixed at that which applied for each foundation trust in the financial year ending in April 2003. In essence, that will prevent NHS foundation trusts from doing a higher proportion of private work than they do today. Of course, because it is a percentage, if the volume of clinical activity increases, naturally—arithmetically—the amount of private healthcare can increase.

However, there is deliberately no flexibility to vary the cap because, as I said, the purpose of defining the cap is to avoid gaming in any way whatever. So we reject Amendments Nos. 195 and 196.

Lord Clement-Jones: My Lords, I fear that the rules of Report make response interesting in such circumstances. I have sympathy with the Minister's response to Amendment No. 196, because we would not want Clause 15 deleted. We should be vigilant about the proper use of NHS capacity. On the other hand, the Minister is a little blithe in saying that transparency will be present in the accounts that foundation hospitals will be obliged to produce.

How particular areas of cost or income are categorised is very much at the discretion of those who perform the accounting for the foundation trust. If the Minister can point me to something in Schedule 1—as eliminated earlier this afternoon; that rather spectral Schedule 1—that absolutely specifies that private income and the costs and income attributable to that activity will be contained in the accounts and will be transparent for all to see, I will agree with him that the amendment is unnecessary. But I do not believe that that provision is there.

For instance, capital building development may take place that affects both an NHS wing and a private wing. The capital costs, the cost of repayment of loans, and so on, will be stated in the accounts but will all be mixed together. Income may be lumped together for both NHS and private patient activity. The Bill does not specify that that must be separate. It may be specified in a code of practice or code of accounting that exists in shadowy form in the Department of Health, but I do not see it. It is important that, when

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there is a public presentation of the accounts, as the Minister mentioned, the public can see clearly how NHS capacity is used in those circumstances.

I agree with much of what the noble Lord, Lord Blackwell, said. Sometimes the proper use of beds for private patients is right. It can be wholly beneficial if it creates a super profit that enables hospitals to buy equipment and testing facilities for the benefit of NHS patients. But it would not be right if a UCLH situation were established by the NAO, as Mr Dobson seems to believe to be the case. In those circumstances, we should be extremely vigilant. I hope that the Minister will consider the issue. We must continue to tease out the matter during the next stage of the Bill. In the mean time, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 196 not moved.]

Clause 16 [Protection of property]:

[Amendment No. 197 not moved.]

Baroness Noakes moved Amendment No. 198:

    Page 8, line 7, at end insert "but does not include property acquired subsequent to the date of its establishment as an NHS foundation trust"

The noble Baroness said: My Lords, I shall speak also to Amendments Nos. 201, 202 and 204. The amendments concern protected property in Clause 16. I should say at the outset that I shall not move Amendment No. 204 to leave out Clause 16.

The protected property regime was designed initially to give effect to what used to be called a lock on NHS assets. We have no fundamental problem with that and can see the necessity for the state to be able to control the NHS assets that endow foundation trusts. But we have real problems with later-acquired property, especially if it is acquired for non-regulated activities. We want foundation hospitals to be entrepreneurial in their actions and we believed that the Government shared that aspiration.

Amendment No. 198 would allow the trust to keep its later-acquired property away from the regulator's clutches. The Minister said nothing in Committee to provide us with any real comfort that entrepreneurialism would be valued in foundation trusts. That is why we have returned to the question on Report. My simple question to the Minister is: where is the incentive for NHS foundation trusts to be entrepreneurial?

Amendments Nos. 201 and 202 deal with flexibility from a foundation trust perspective. They would allow the trust to challenge the designation of property as protected and to apply for property to be de-designated. The Minister said in Committee that the administrative law is a great protector of foundation trusts. But he knows full well that the only remedy available to foundation trusts will be judicial review. That is not adequate protection, which is why explicit provisions to allow flexibility are needed in the Bill. I beg to move.

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Lord Warner: My Lords, I shall speak first to Amendment No. 200, tabled by the Government, before considering Amendments Nos. 198, 201 and 202. Amendment No. 200 is a straightforward technical measure to ensure that assets associated with protected research and training carried out by NHS foundation trusts—that is, research and training services that they are required to provide under their terms of authorisation—can be protected against disposal under Clause 16 in the same way as property required for the provision of essential NHS healthcare services.

That means that NHS foundation trusts will not be able to sell or grant security against any asset required for the provision of essential training and research services. That may reassure my noble friend Lord Turnberg, given his earlier concerns.

On Amendment No. 198, we believe that NHS foundation trusts reflect a form of social entrepreneurialism. That entrepreneurialism should not take place without any restraint. Amendment No. 198 would exclude any property acquired after establishment as an NHS foundation trust, whether or not it was needed for the provision of NHS services. It is essential that new property, when it is used to provide NHS services, is covered by the regulator's powers to protect NHS assets to safeguard the continuity of essential NHS services for patients. The amendment would jeopardise the continuity of provision of essential services.

Amendments Nos. 201 and 202 seem to be designed to place the regulator under a statutory duty to take account of representations from NHS foundation trusts when considering the initial protection of property and declassifying once-protected property and to give the regulator the power to declassify protected property. However, the regulator already has powers to declassify protected property under the powers to vary an authorisation in Clause 9. The amendment to allow that is therefore unnecessary. As I explained in Committee, the regulator is under a common law duty to act reasonably, and discussions with NHS foundation trusts would naturally form part of the process of determining and revising the list of protected assets. The amendments are therefore unnecessary because the regulator already has the power and the obligations proposed by the amendments.

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