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Baroness Noakes: My Lords, I thank the Minister for his reply. He is clearly setting a pattern of wanting to disappoint these Benches with his responses, and I reassure him that he has achieved that yet again. I doubt that we will have a meeting of minds on this matter, because we want freedoms for foundation trusts. That is one of the most important elements that should be part of any foundation trust regime. The Government think of controlling and limiting. That will remain a fundamental difference between us. I shall obviously consider carefully what the Minister has said. In the mean time I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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7 p.m.

Lord Warner moved Amendments Nos. 199 and 200:

    Page 8, line 8, leave out "he" and insert "it".

    Page 8, line 11, at end insert "or

"( ) for the purpose of doing anything which the trust is required to do under section 14(6)"

On Question, amendments agreed to.

[Amendments Nos. 201 and 202 not moved.]

Lord Warner moved Amendment No. 203:

    Page 8, line 12, leave out "he" and insert "it".

On Question, amendment agreed to.

[Amendment No. 204 not moved.]

Baroness Noakes moved Amendment No. 205:

    Page 8, line 18, leave out subsections (2) and (3) and insert—

"(2) The trust shall have no constraints on its right to borrow except as outlined in subsection (3).
(3) A trust's total borrowing shall not exceed 100 per cent of its total revenues without the approval of the regulator."

The noble Baroness said: My Lords, in moving this amendment, I shall also speak to Amendments Nos. 207 and 210 and, in doing so, will start the final chapter for today of the issue of borrowing provisions in the Bill.

Amendment No. 205 would do away with the narrow, controlling, annual borrowing limit envisaged in Clause 17. It sets what is in effect a high borrowing ceiling and does not require the regulator to involve himself in further detail. Lying behind this is the presumption that the best people to determine whether to lend money to a foundation trust are the lenders. Of course, a major part of the financial needs of a foundation trust will be advanced by the Department of Health. I cannot see that an annual borrowing limit set by the regulator will help the Department of Health one iota in its decisions about whether to advance money to NHS trusts as loans or public dividend capital. Even in the Department of Health, lending is more complicated than that. It will certainly be no help whatsoever to private sector lenders—if there are any. They will make their own assessment of borrowing capacity and will be quite unmoved by anything that the regulator sets.

What is the borrowing limit in the Bill? It is a mechanism devised by the Treasury to control foundation trusts. That is why we believe that it should be eliminated from the Bill, which is what Amendment No. 201 would achieve. If it remains Amendment No. 207 would allow that straitjacket to operate in the real world by giving the foundation trust the opportunity to ask for a review. That ability needs to be explicitly allowed for in the Bill. I beg to move.

Baroness Barker: My Lords, I speak to Amendment No. 206. I apologise for being absent for most of today's proceedings. I have been an NHS user, and I am pleased to give that particular trust three stars for its work this afternoon.

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There is a horrible perception that we on these Benches are in cahoots with the noble Earl, Lord Howe, and the noble Baroness, Lady Noakes. I seek to dispel that straightaway in the remarks that I am about to make. Amendment No. 206 takes a completely contrary view to that outlined by the noble Baroness, Lady Noakes. We believe there should be a limit. She might agree that that is sound, and a lender might consider it prudent.

The difference in our amendment is that we believe that the duty should lie with the trust itself. We do not see any point in the responsibility lying with the regulator. In the Bill, it is possible still to limit the amount of regulation and to make sure that the services are right. Where a foundation trust has assets, it is simply good management that it does not place them in jeopardy. Therefore, we believe that it is a fairly unexceptional and wise move. We do not see why the freedom to be wise should not be held at a local level and we can dispense with the regulator's services.

Baroness Finlay of Llandaff: My Lords, I speak to Amendment No. 208. I hope that the Minister will be able to provide me with some reassurance. On reading the Bill, I note that,

    "An NHS foundation trust may give financial assistance . . . to any person for the purposes of or in connection with its functions".

On reading those words, I became concerned that foundation trusts might be able to act as bankers. I am concerned that perhaps the scrutiny associated with the application for financial assistance from a person who wanted money to carry out work for the foundation trust might entail a degree of hoodwinking of the trust. The checks and balances as regards the accounts and the way in which the person operated might not be in place.

I was concerned that there was no limit put on that procedure by the regulator. I can understand that a foundation trust with good financial planning might foresee that, at some stage, it might need to make an advance or a loan with a specific contractor in an area involving high expertise associated with research development. I am concerned that the matter is left completely open to the trust board. I seek reassurance from the Minister. It was because of that concern that I tabled the amendment with the wording to the effect that the function of being able to lend should be stipulated in an authorisation.

Lord Warner: My Lords, I am pleased that the noble Baroness, Lady Barker, has returned from her experiences with the NHS so satisfied and able on this occasion to distance herself from noble Lords opposite.

Turning to Amendments Nos. 205 and 206, as I explained in Committee and in debate on Clause 12, the prudential borrowing code will give NHS foundation trusts the freedom to borrow to invest in services within a limit that ensures that NHS services are not put at risk. Amendments Nos. 205 and 206 would take away that balance. Both amendments would allow NHS foundation trusts to borrow without regard to their cash flow. That would be irresponsible and could endanger patient access to essential NHS services.

6 Nov 2003 : Column 1024

I turn to Amendment No. 207. Clause 17(3) provides that the prudential borrowing limit must be reviewed annually by the regulator. That will provide ample opportunity to take account of changes in an NHS foundation trust's circumstances. The amendment should therefore be rejected.

I turn to Amendment No. 208. An NHS foundation trust's functions are set out in its authorisation; for example, under Clause 14(1), the regulator must,

    "authorise the NHS foundation trust to provide goods and services for purposes related to the provision of health care".

I have to say to the noble Baroness, Lady Finlay, that I think that that fairly safely will ensure that NHS foundation trusts do not join Barclays in the marketplace. An NHS foundation trust cannot have functions outside its terms of authorisation. That is a clear part of the Bill. Therefore, any action by an NHS foundation trust, including the giving of financial assistance which is consistent with its functions, is also by definition consistent with its terms of authorisation. That does not mean that people can simply become—willy-nilly—bankers in the sense normally meant by that term. Because of the controls of authorisation by the regulator, Amendment No. 208 is unnecessary and would, in fact, have no legal effect.

Baroness Finlay of Llandaff: My Lords, while the Minister is still on his feet, perhaps I could press him a little further. The service certainly would be stipulated in the terms of authorisation, but, suppose, for example, that an NHS trust wanted to rebuild a renal unit and was looking to a contractor to do that. The contractor might say that it was the only one and that it would require an advance. It might require an inappropriately large advance. It would be difficult to see how the foundation trust would necessarily have the safeguards in place. That would be public money being loaned to someone making inappropriate demands.

I have a concern regarding the safeguard to the public purse with regard to the details around which money might be requested. That goes down further to the micro-management level than to the explicit functions that would be stipulated in the authorisation. I cannot see an authorisation being able to stipulate everything down to the minutiae. In fact, it would be inappropriate to do so with devolved responsibility to the trust. My concern is about the potential safeguard of loans from the public purse of NHS money.

Lord Warner: My Lords, an authorisation may include any terms, including terms about financial powers. That will be down to the regulator when considering particular sets of proposals from trusts. On the example cited by the noble Baroness, I would say that none of that changes a public body's responsibility to secure value for money in the way it spends its money. None of it would enable particular payments to escape the eagle eye of the auditor. So, if a trust engaged in practices that were inappropriate, leaving aside the authorisation, one would expect those to come to the notice of the auditor and to be the

6 Nov 2003 : Column 1025

subject of comment. The combination of the auditor and the market authorisation should give the noble Baroness the assurances she seeks.

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