Select Committee on Delegated Powers and Regulatory Reform Twenty-Fourth Report


PART 1: NHS FOUNDATION TRUSTS

Clause 1: NHS Foundation Trusts

Clause 2: Independent Regulator of NHS Foundation Trusts

Clause 3: General duty of Regulator

Clause 4: Applications by NHS Trusts

Clause 5: Other applications

30.  These clauses contain no delegated powers.

Clause 6: Authorisation of NHS Foundation Trusts

31.  This clause provides the Independent Regulator with the power to authorise applicants under clauses 4 or 5, whom he is satisfied have met the necessary criteria set out in subsection (2) to be an NHS foundation trust. The criteria are that the constitution and governance requirements are in accordance with Schedule 1, that there will be a board of governors and directors constituted in accordance with that Schedule, that necessary steps to prepare for NHS foundation trust status have been taken, that the applicant will be able to provide the goods and services which it will be required to provide and that any other requirements the Independent Regulator considers appropriate are met.

32.  Subsection (4) gives the Secretary of State power to make delegated legislation setting out consultation requirements on applicants for NHS foundation trust status. Authorisation may not be granted unless the Independent Regulator is satisfied that the applicant has complied with the regulations.

33.  Given the level of detail required in relation to consultation and the need for flexibility, our view is that it is appropriate to deal with this issue by way of delegated legislation, rather than on the face of the Bill. In this respect, the provision mirrors existing provisions for consultation on the establishment and dissolution of NHS Trusts. Under section 5(2) of the National Health Service and Community Care Act 1990, an NHS trust may not be established without the completion of "such consultation as may be prescribed"; and, under paragraph 29(3) of Schedule 2 to the same Act, an NHS trust may not be dissolved unless prescribed consultation requirements are met. It is pertinent to note that these consultation requirements, which normally apply when NHS trusts are "restructured" to meet changing health needs, will not apply where an NHS trust becomes an NHS foundation trust. In this regard, the proposed power will provide an avenue for public involvement when NHS trusts become NHS foundation trusts that is analogous to the current powers.

34.  All regulations made under this clause will be subject to the negative resolution procedure. This is thought to be the most appropriate procedure for regulations of this kind.

Clause 7: Effect of authorisation

Clause 8: Amendments on constitution

Clause 9: Variation of authorisation

Clause 10: Register of NHS Foundation Trusts

Clause 11: Power of Secretary of State to give financial assistance

Clause 12: Prudential borrowing code

Clause 13: Public dividend capital

Clause 14: Authorised services

Clause 15: Private health care

Clause 16: Protection of property

Clause 17: Financial powers

Clause 18: General powers

Clause 19: Information

Clause 20: Entry and inspection of premises

Clause 21: Fees

35.  These clauses contain no delegated powers.

Clause 22: Trust Fund and Trustees

36.  This clause provides for the Secretary of State, by way of an order, to provide for the appointment of trustees for an NHS foundation trust to manage charitable assets on its behalf. The arrangements are analogous to those set out under the National Health Service Act 1977 and the National Health Service and Community Care Act 1990 Act for NHS trusts.

37.  Subsection (2) allows the Secretary of State to make provision for the persons by whom trustees are to be appointed, their method and terms of appointment and removal, and the number of trustees to be appointed. The provision mirrors section 11(2) of the National Health Service and Community Care Act 1990. The intention is that appointment of such trustees will be delegated to the NHS Appointments Commission, which is a Special Health Authority. The Secretary of State has delegated his power to appoint trustees to NHS trusts to the NHS Appointments Commission, under powers set out in section 11(2)(a) of the 1990 Act.

38.  Subsection (3) allows the Secretary of State to transfer property from a NHS foundation trust to its trustees where they have been appointed under this clause. This provision is analogous to section 11(3) of the 1990 Act.

39.  Under the terms of clause 191 of the Bill, an order made under this clause will be subject to negative resolution of either House of Parliament. However, the Department has realised that the analogous orders made under the National Health Service and Community Care Act 1990 in respect of NHS trusts are not subject to any Parliamentary procedure on the basis that they concern administrative matters. Instead they are made by Executive Order. On reflection, therefore, the Department's view is that orders made under clause 22 of the Bill should also be made by Executive Order and it is our intention to propose a technical amendment to clause 191 in the House of Lords to this effect.

40.  It is likely that orders to be made under certain other clauses in Part 1 of the Bill which concern administrative matters should, by analogy with the arrangements for NHS trusts under the 1990 Act, be made by Executive Order rather than the negative procedure in Parliament. We will be looking at these with Parliamentary Counsel with the intention of proposing amendments to clause 191 in the Lords to rectify the general anomaly.

Clause 23: Failing NHS Foundation Trusts

41.  This clause contains no delegated powers.

Clause 24: Voluntary arrangements

42.  This clause gives the Independent Regulator powers to intervene in the operation of an NHS foundation trust in cases of financial failure.

43.  Under this clause, the Independent Regulator has powers to require an NHS foundation trust's directors to make a proposal for a voluntary arrangement with its creditors. In addition, the Independent Regulator also has the power to require an NHS foundation trust's directors to obtain a moratorium on its business prior to the approval of a voluntary arrangement.

44.  The arrangements relating to such voluntary arrangements and moratoriums are to be set out in an order applying the provisions of Part 1 of the Insolvency Act 1986 with modifications. This part of the Insolvency Act 1986 enables directors of companies to file papers to the court for a moratorium during which creditors cannot take action to seize assets to recover their debts while steps are taken to establish a voluntary arrangement to reschedule that debt. Subsection (2) gives the Secretary of State the powers to apply Part 1 of the Insolvency Act 1986 with modifications.

45.  A similar approach, allowing Part 1 of the Insolvency Act 1986 to be applied with modifications by way of delegated legislation, was adopted in section 14 of the Limited Liability Partnerships Act 2000. Given the level of detail required in the regime, and the technical nature of the modifications to Part 1 of the Insolvency Act 1986 that are necessary, it seemed more appropriate to deal with the detail of the failure regime by order than on the face of the Bill. It may also be necessary to change the failure regime over time, so the need for flexibility is also important. The aim of the modifications will secure that, in the event of failure or insolvency, an NHS foundation trust's property and NHS services continue to be protected while arrangements with the creditors are reached.

46.  All regulations made under this clause will be subject to the negative resolution procedure. Given the complexity and nature of the subject matter, this is thought to be the most appropriate procedure for regulations of this kind.

Clause 25: Dissolution, etc.

47.  This clause gives the Secretary of State the power in certain specified circumstances to dissolve an NHS foundation trust by order: clause 25(5). The power may be exercised where an NHS foundation trust fails to comply with a notice under clause 23 or 24, or where an NHS foundation trust fails to implement a voluntary arrangement under clause 24, and where the Independent Regulator considers that, despite the exercise of his powers under those clauses, the goods and services of the NHS foundation trust remain at risk.

48.  Under subsection (2), the Secretary of State has a power to require the Independent Regulator to consult prescribed persons about prescribed matters before dissolving an NHS foundation trust. This consultation provision is intended as a check and balance on use of the dissolution power. There are similar powers allowing the Secretary of State to prescribe consultation where an NHS trust is dissolved under paragraph 29(3) of Schedule 2 to the National Health Service and Community Care Act 1990.

49.  An order made under subsection (2) will be subject to the negative resolution procedure. This is thought to be the most appropriate procedure for regulations of this kind.

50.  Where an NHS foundation trust is dissolved under clause 25, the Secretary of State may transfer any of its property, rights and liabilities to the persons listed in subsection (3). The transfer is made by order. This power to transfer property, rights, and liabilities is analogous to the power conferred on the Secretary of State where an NHS trust is dissolved: see paragraph 30 of Schedule 2 to the National Health Service and Community Care Act 1990.

51.  Such an order may also transfer the staff of an NHS foundation trust, by virtue of paragraph 1 of Schedule 3 to the Bill. This is the same approach that is employed under paragraph 30(3) of Schedule 2 to the National Health Service and Community Care Act 1990, which allows an order transferring the property, rights, and liabilities of a dissolving NHS trust to include provisions about staff. Under Schedule 3 to the Bill, the contract of any employee that is transferred under clause 25(3) is not terminated. Rather, it transfers to the transferee as if it were originally made between the employee and the transferee. The employee is, however, given the right to object to such a transfer. Where an employee objects in this way, his or her contract of employment is terminated immediately before date of termination. The termination is deemed to not to be treated as a dismissal by the trust.

52.  Subsection (6) gives the Secretary of State the power to apply Part 4 of the Insolvency Act 1986, which relates to the winding up of companies, with modifications where an individual NHS foundation trust is dissolved. Unlike the power under clause 24(2), which is designed to apply Part 1 of the Insolvency Act 1986 with modification for all NHS foundation trusts, this provision is designed to deal with specific cases, allowing insolvency procedures to apply where an individual NHS foundation trust is wound up. The provision will allow any remaining property and liabilities that have not been transferred away from a failed NHS foundation trust under an order made under clause 25(3) to be dealt with through a modified version of the insolvency proceedings that relate to companies.

Clause 26: Sections 23 to 25: Supplementary

53.  This clause contains no delegated powers.

Clause 27: Mergers

54.  This clause provides the Independent Regulator with the power to allow NHS foundation trusts, or NHS foundation trusts and NHS trusts to merge. An authorisation may be issued for such a merger by the Independent Regulator if he or she is satisfied that the application has met the necessary criteria set out under subsection (5). The criteria are that the constitution and governance requirements are in accordance with Schedule 1, taken as a whole the actual membership of the applicant's public constituency will be representative of those eligible for such membership, there will be a board of governors, and a board of directors constituted in accordance with the constitution, the applicant will be able to provide the goods and services which the authorisation is to require it to provide, and any other requirements he considers appropriate are met.

55.  The clause gives the Secretary of State power to make delegated legislation setting out consultation requirements where trusts propose to merge. Authorisation may not be granted unless the Independent Regulator is satisfied that the applicant has complied with the regulations.

56.  In similar terms to the consultation requirements set out under clause 6(4) of the Bill, this provision mirrors existing provisions that apply when NHS trusts are established or dissolved. Under section 5(2) of the National Health Service and Community Care Act 1990, an NHS trust may not be established without the completion of "such consultation as may be prescribed"; and, under paragraph 29(2) of Schedule 2 to the same Act, an NHS trust may not be dissolved unless prescribed consultation requirements are met. Again, these consultation requirements normally apply when NHS trusts are "restructured" to meet changing health needs. However, they will not apply where NHS trusts and NHS foundation trusts are merged. In this regard, the proposed power will provide an avenue for public involvement when hospitals are restructured that is analogous to the current powers.

57.  All regulations made under this clause will be subject to the negative resolution procedure. This is thought to be the most appropriate procedure for regulations of this kind.

Clause 28: Section 27: Supplementary

58.  Where the Independent Regulator gives an authorisation to merge, this clause gives the Secretary of State a power to dissolve the old organisations (subsection (2)(a)) and to transfer any of their property, rights and liabilities to the new NHS foundation trust (subsection (2)(b). The dissolutions and transfer are made by order.

59.  The Secretary of State is also given the power to transfer any remaining property, rights, and liabilities to himself, or to the health service bodies set out in clause 25(3) of the Bill. Such an order may also transfer the staff of an NHS foundation trust, by virtue of provision corresponding to paragraph 1 of Schedule 3 to the Bill.

60.  These dissolution and transfer powers are analogous to the power conferred on the Secretary of State to dissolve NHS trusts, and transfer their property, rights, liabilities, and staff to himself or other health service bodies where an NHS trust is dissolved: see paragraphs 29 and 30 of Schedule 2 to the National Health Service and Community Care Act 1990.

Clause 29: Co-operation between NHS bodies

Clause 30: Public involvement and consultation

61.  These clauses contain no delegated powers.

Clause 31: Patients' Forums

62.  Subsection (3) of this clause amends clause 17(1) of the NHS Reform and Health Care Professions Act 2002, allowing the Secretary of State to make delegated legislation for the entry and inspection of NHS foundation trust premises by Patient Fora. Any powers included in this clause are not new powers, but rather a consequence of transferring certain functions from NHS trusts to NHS foundation trusts.

63.  All regulations made under this clause will be subject to the negative resolution procedure. This is thought to be the most appropriate procedure for regulations of this kind.

Clause 32: Commission for patient and public involvement in health

Clause 33: Taxation

64.  These clauses contain no delegated powers.

Clause 34: Other amendments relating to NHS Foundation Trusts and Schedule 4

65.  This clause introduces Schedule 4 which makes various minor and consequential amendments relating to NHS foundation trusts. There are amendments to existing powers in legislation to make delegated legislation, but these amendments only enable such delegation legislation to apply to NHS foundation trusts in the same way that it applies to NHS trusts.

Clause 35: Offence

Clause 36: Representative membership

Clause 37: Audit

Clause 38: General duty of NHS Foundation Trusts

Clause 39: Interpretation of Part 1

66.  These clauses contain no delegated powers.


 
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