Health and Social Care(Community Health and Standards) Bill

Public Bill Committee, 20 May 2003.

Standing Committee E

Schedule 1 - Constitution of public benefit corporations

Evan Harris (Liberal Democrat, Oxford West and Abingdon)

I beg to move amendment No. 181, in

schedule 1, page 95, line 22, at end insert 'and their interests,'.

Win Griffiths (Labour, Bridgend)

With this it will be convenient to discuss the following amendments:

No. 182, in

schedule 1, page 95, line 23, after 'directors', insert 'and their interests'.

No. 132, in

schedule 1, page 95, line 25, at end insert—

'17A (1) The public benefit corporation is to establish a register of interest for those service on the board of governors as directors.

(2) The information to be registered shall include relevant financial interests and any political affiliations within the previous five years.'.

Evan Harris (Liberal Democrat, Oxford West and Abingdon)

I understand that there is an even greater urgency for us press on, so I shall be very quick.

Steve Pound (Labour, Ealing North)

Get on with it.

Evan Harris (Liberal Democrat, Oxford West and Abingdon)

I do not know whether the hon. Gentleman will be happy with one minute, but that is how long I shall give to this matter.

Amendment No. 181 is a very obvious one, as is amendment No. 182. They ensure that a register of interests is set up for directors of, or those who sit on the board of governors of, a foundation trust. That is in line with good practice generally where budgets involving public money are being wielded, or where any large organisation requires transparent accountability. I hope that the Government will not have a problem with it.

It is not appropriate for political affiliations to be registered. If this is supposed to be a genuine quasi-democracy of which people seek to be members, we should not discourage those who are interested in local politics; rather, we should do the opposite. The need to declare such interests seems to imply that there is something wrong with them, and that that might be a factor in the poor or inappropriate performance of a governing body or a board of directors. I am not sure that that is the case. I cannot see how political affiliation would be relevant in the running of a governing body. However, I look forward to the hon. Member for Epsom and Ewell (Chris Grayling) setting out why he and his colleagues think that it is necessary, and we will keep an open mind. We did not include that in our amendments because we did not feel that it was necessary. I hope that the Government will see

that this is a reasonable and necessary step to take, and I commend the amendment to the Committee.

Chris Grayling (Conservative, Epsom and Ewell)

Good morning, Mr. Griffiths. I will also keep my remarks brief on these amendments. The hon. Member for Oxford, West and Abingdon (Dr. Harris) has already indicated broad agreement from the Opposition Benches that some form of register of interests is appropriate. Indeed, in tabling amendment No. 132, we anticipated the Liberal Democrats' amendments and have set out what we believe is the right way to do things.

It is essential and, indeed, common practice, that those serving in an elected public office in today's world register their interests. Sometimes that requirement goes a little bit too far. As the Under-Secretary will know, in some areas of public life, such as county councils, we have had our doubts about whether that is appropriate. That cannot be the case in this circumstance. We are looking at substantial public bodies with significant turnover of anything up to £100 million or more and at people who will have a role in the governance of those organisations.

It seems entirely appropriate that there should be some requirement to register relevant financial interests. That could include directorships of companies that sell services to that organisation or that could, in some circumstances, sell services to a foundation trust, or a directorship or financial interest in another health care organisation. Those are the classic forms of registration that we would go through, and it is entirely appropriate that those people should go through them.

I shall touch briefly on the question of political affiliation, which is connected to the points that have been made by Government Members and me about entryism. In using the word ''political'', we are not referring simply to a political party. We did not use the words ''political party'', because, in today's world, the words ''political affiliation'' can have a broader meaning. If someone is a director of a substantial pressure group, is a member of a political party, has held political office or has been appointed to a position by a political party because of specific interests, it is right and proper that those interests should be registered. That is appropriate.

For all NHS appointments, it is expected that candidates' political affiliations will be registered and made available to the public. It is not unreasonable that a member of a foundation hospital's board of governors should be required to make the same kind of declaration, particularly given the fact that those boards could be the targets of pressure groups that may want to influence unduly the management of hospitals. It is right and proper that there should be some form of political registration.

Evan Harris (Liberal Democrat, Oxford West and Abingdon)

I have listened carefully to what the hon. Gentleman has said. First, would membership of an organisation such as the Society for the Protection of the Unborn Child come into that category? SPUC is often cited as an example in such cases. The hon. Gentleman's explanation suggests that it would not. Secondly, my understanding is that one reason why appointments to bodies such as NHS trusts must

declare affiliations is for the purpose of transparency; they are appointed positions. There may also be other reasons. That rationale would not apply to members of a board of governors, because those members are elected.

Chris Grayling (Conservative, Epsom and Ewell)

In the case of SPUC, let me give the hon. Gentleman a specific example. In recent years, the ProLife Alliance has nominated candidates for election. Candidates have also been nominated for election by other single-issue pressure groups. Surely it is right and proper that someone who stands for election in such a capacity to the board of governors of a local hospital should be required to make such information available, in the same way that a person must declare that he or she is a Liberal Democrat MP, a councillor, or whatever. It is entirely appropriate to do that. It simply means that people declare that they have a political involvement. That information should be in the public domain.

I can see no reason for any objections to including that amendment in the Bill. It is a simple process; it would mean no more than ticking a box, in the same way as financial interests are declared. In a spirit of openness and in an effort to provide full information about the people who run or steward hospitals, there is no reason why people should not be asked to make such a declaration. We endorse the requirement for some form of registration, a practice that is common in public life.

I am sure that the non-inclusion of such information is simply an omission by the Government in the Bill's drafting. I hope that if the Under-Secretary cannot accept the amendments that have been tabled, she will at least give an assurance that she will return with Government amendments that will fill an unnecessary gap in their proposals.

Hazel Blears (Labour, Salford)

The declaration of interests from people who may have a role in NHS foundation trusts is an important issue. ''A Guide to NHS Foundation Trusts'', paragraph 2.24, clearly states:

''The Independent Regulator for NHS Foundation Trusts will publish guidance on eligibility for members to sit as governors on the Board of Governors covering such matters as terms of office, conflict of interest and payment of expenses.''

We are concentrating on those important matters of probity to ensure that there are no conflicts of interests when decisions are made. Potential conflicts of interest are particularly serious for members of boards of governors and boards of directors who would have decision-making powers in the organisation.

However, in accordance with the thrust of schedule 1, we have tried to outline the minimum requirements and have indicated that NHS foundation trusts must make provisions in consultation with local communities. The Bill contains three safeguards. First, there must be consultation and agreement with local communities. Secondly, the Secretary of State must support the application and examine the constitution. Thirdly, the independent regulator must also support the constitution. We expect all NHS foundation trusts to tackle the potential for conflicts of interests in the

provisions of their constitutions. That is the proper place in which to include those provisions. I am happy to confirm that, when the Secretary of State considers constitutions, he will be looking for provisions that deal with conflicts of interests and declarations.

Clause 23, subsections (4) and (5), contain powers for the independent regulator to intervene if there are any problems. If governors or directors abuse their positions, strong powers are available in the Bill. For that reason, I do not believe that the amendments are necessary, and I ask the Committee to reject them.

Evan Harris (Liberal Democrat, Oxford West and Abingdon)

The Under-Secretary's reply is disappointing. It is representative of a general difficulty, which is that when something is suggested by Opposition Members, and perhaps even by Government members of the Committee, for inclusion in the schedule in respect of foundation trusts, the Under-Secretary always says that it should be left to the trusts to solve the problem without including appropriate provision in the schedule. She talks about the need to consult locally and introduce a constitution that must be triply approved.

The same argument, however, could be applied to anything in schedule 1. It could be applied to the series of measures that the Government have seen fit to include in the schedule concerning foundation trusts and their constitutions. What makes a matter important enough to be included in schedule 1 and not merely to be subject to guidance or the good fortune of trusts getting it right first time and reinventing the wheel? The trusts would face potential problems with the way in which they do that, given that they have to be analysed by the regulator, as we would have it, and the Secretary of State, as the Government would have it. To answer that question, fundamental points must be taken into account in the constitutions, and some of those are laid out in schedule 1. Provision for an appropriate declaration of interests by members of the board of governors should be an essential part of a constitution, perhaps more important than some of the provisions that the Government have seen fit to include in schedule 1.

As regards the Government's general answer to amendments that seek to include provisions in the schedule, the Under-Secretary's response is not satisfactory. It would not be appropriate—given the critical role that the Government see the trusts playing—to take chances with the need for trusts to recognise that a register of interests is important. Appropriate provision would bring about proper governance, and there would be seen to be proper governance.

I am very disappointed, therefore, with the Under-Secretary's response, but I do not intend to seek to divide the Committee on the matter now because we may return to it either later in the House or in the House of Lords. On that basis, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Hazel Blears (Labour, Salford)

I beg to move amendment No. 155, in

schedule 1, page 95, line 37, leave out 'or 24'.

Win Griffiths (Labour, Bridgend)

With this it will be convenient to discuss Government amendments Nos. 147 and 150.

Hazel Blears (Labour, Salford)

Clearly a key part of the policy on NHS foundation trusts is to ensure that the new freedoms that they will have will be underpinned by safeguards to protect the public interest. That is why we will provide for a special failure regime with the primary aim of protecting both the staff and assets required to deliver essential NHS services.

In the event that a trust is unable to meet its financial commitments, the independent regulator may require it to take steps to obtain a moratorium or to make a proposal for a voluntary arrangement. The provisions relating to the failure regime are set out in detail in clauses 23 to 25. For the insolvency arrangements to operate properly, it is important that creditors are not able to step in in anticipation to recover their debts before the moratorium is properly in place.

The amendments therefore ensure that notices to be issued by the independent regulator under clause 24 do not become publicly available, thus alerting creditors and enabling them to take precipitative action. In the particular instance in which a notice requiring a moratorium or voluntary arrangement proposes to limit public access to information about the trust's affairs, it is important that the public have fully spotted the information. However, in these prescribed circumstances it is essential that the notice does not become publicly available until the moratorium is in place. It would then become a matter of public record that that would be kept in place rather than the NHS foundation trust aspect.

Simon Burns (Conservative, West Chelmsford)

Are these simply drafting amendments to tidy and improve the Bill that were tabled on reflection after the Bill was published?

Hazel Blears (Labour, Salford)

Yes.

Amendment agreed to.

Evan Harris (Liberal Democrat, Oxford West and Abingdon)

I beg to move amendment No. 183, in

schedule 1, page 95, line 41, after first 'corporation', insert

'the patients' forum of the trust or a patients' forum of a local primary care trust, or a member of the local Overview and Scrutiny Committee'.

Win Griffiths (Labour, Bridgend)

With this it will be convenient to discuss the following:

Amendment No. 160, in

clause 8, page 4, line 17, at end add

'to patient forums in the trust and in surrounding primary care trusts, to overview and scrutiny committees in the local area, and to members of the NHS foundation trust'.

Evan Harris (Liberal Democrat, Oxford West and Abingdon)

I am pleased that we are making such rapid progress on these groups of amendments. The discussion on patient forums will come up more appropriately under another clause, so it is not my intention to detain the Committee. In fact, I do not wish to pre-empt that debate. However, it is difficult to speak to this group of amendments without saying something about the importance of wider consultation. I will speak briefly to this amendment, and I will accept if the Under-Secretary wishes to save

some of her arguments for a later group of amendments.

The amendments in this group comply with clause 8, which refers to amendments of constitution. Clause 8(2) states that

''An NHS foundation trust must send a copy of its constitution, and any amendment of it, to the registrar of companies'',

which includes patient forums and the local overview and scrutiny committee. We will debate the Government's plans to disallow patient forums in NHS foundation trusts.

We must remind ourselves that these are patient forums, which—after many arguments and a massive amount of promotion by the Under-Secretary—were introduced in the NHS. Following that, it was proposed that NHS foundation trusts would not have patient forums. It then became apparent that all trusts would soon become foundation trusts, meaning that no trusts would have patient forums.

Having spent so much time and energy on a fantastic campaign—it failed to win me over but it clearly impressed Labour MPs—to abolish community health councils, it must be galling for the Under-Secretary to find that the campaign has all been in vain because all trusts will be foundation trusts, meaning that there will be no standard patient forums. Of course, we can leave that argument for a later stage.

Does the Under-Secretary think it reasonable that local patient groups that are founded in statute—such as the patient forums of the primary care trusts, which have a significant role in supervising the provision of local services, including the examination of the roles of foundation trusts and members of the overview and scrutiny committee, which in turn have an even more important role in examining the work of foundation trusts—should be charged, as if they were external to the NHS and the basic governance of the trusts, for copies of the documents set out in paragraph 18?

Many documents are listed, and there could be a significant cost involved. In the interests of transparency and accountability, it is reasonable that those documents be available free of charge to those organisations that are listed. Similarly, under clause 8, in deference to those organisations, amendments to the constitution must be made clear before they are made.

I was unable to resist the temptation of getting into the issue of patient forums, and I apologise to the Under-Secretary for doing so after inviting her not to get into that matter now. However, will she say whether there is merit, as I believe there is, in distinguishing between those people with a statutory duty to look at the governance of a trust—and who, therefore, have unimpeded access to these documents—and other organisations and individuals whom she may feel it is appropriate to charge? It is the Government's policy to levy charges in the NHS where they can, so it would not be a surprise if there were charges for this provision. However, there is a distinction to be made, and I invite the Under-Secretary to look kindly on at least part of the amendment.

Chris Grayling (Conservative, Epsom and Ewell)

In my judgment, both of the amendments are wrong. I accept the hon. Gentleman's desire to ensure that information is provided to those who have a professional or official reason for requiring it. However, it seems to me that in this day and age—particularly taking the example set in the House of Commons, Mr. Griffiths—it should be possible for the register to be put online to make it accessible and free of charge to everyone. Therefore, it is my hope that while making this provision in the Bill, Ministers do not really intend for it to be used.

I see no reason for not making constitutional changes and not making information from registers available online. The majority of the population have access to online information, and the cost of providing information to those who do not have internet access is quite small. Therefore, I hope that trusts will not feel the need to make such a charge. On that basis, I do not agree with the hon. Member for Oxford, West and Abingdon, who was trying to make a distinction. All members of the public should have access to that information. It can be provided free and easily, and so it should be.

Evan Harris (Liberal Democrat, Oxford West and Abingdon)

Will the hon. Gentleman address those people who have a legitimate interest, or any interest, but who are not online? We are not in the paradise that he suggests where everyone is online, and I do not think that we can force people to go online. Many people are not able, for good reason, to access information electronically. I hope that the hon. Gentleman will at least concede that there is a problem for those people who choose not to, cannot afford to or cannot access the information in the way that he suggests.

Chris Grayling (Conservative, Epsom and Ewell)

The hon. Gentleman clearly was not listening to what I said. I said that foundation hospitals should make the information available without charge to people who do not have access to online information. However, my experience shows that the majority of people involved in local public bodies in today's world have access to e-mail and online services. Allowances must be made for those who do not but, as time goes by, those people will be a small minority.

Neither of the amendments is necessary. I do not want to strike the provision off the Bill, but I hope that the guidance notes that go out from Departments will make clear what avenues to avoid wherever possible.

Hazel Blears (Labour, Salford)

Again, the schedule sets out the minimum requirements, and in that context I cannot support either of the amendments. It is vital that people have access to information, and that is set out in the Bill. They need to be able to look at the constitution, the forward business plans and the general reports, all of which will drive the process forward. The Bill already secures that in paragraph 18(1) to schedule 1 and in clauses 8 and 10. There is nothing in the Bill that will prevent foundation trusts from putting all their information online if that is what they want to do. The foundation trusts may also decide to issue information and make it more accessible by way of newsletters. I do not think

that the receipt by every member of an indigestible copy of a fairly complex constitution is the way in which to draw people into the organisation.

These days, there are much more innovative ways to provide information that is easily understood and accessible. Foundation trusts should not be required to make copies available to every member of all these organisations without having the power to pass on a reasonable charge. We must not confuse that issue with access to the information. The organisations have the right to access that information; in fact, they could not do their job properly without it. Like the hon. Member for Oxford, West and Abingdon, I look forward to further discussion about patient forums and patient involvement in clauses 28 to 30, and the widening and deepening of democracy in the NHS. However, those provisions are overly burdensome, and I ask the Committee to reject them.

Evan Harris (Liberal Democrat, Oxford West and Abingdon)

Why is paragraph 18(3) necessary at all? Why must the Under-Secretary defend the resisting of amendments with regard to individuals on whom a reasonable charge may be imposed? Surely that depends on local circumstances. The rules and regulations governing the foundation trusts will be deliberated locally, in consultation with the community, and in a genuine democracy—my tone of voice may not come across in Hansard—and the approach that the trust takes will have to be approved by the regulator, the consultees and the Secretary of State. I am surprised that the Under-Secretary even thinks it necessary to ''talk'' about something so trivial as whether the local corporation will impose a reasonable charge. That might, in parlance, be considered a statement of the bleedin' obvious.

Win Griffiths (Labour, Bridgend)

Is this a speech or an intervention?

Evan Harris (Liberal Democrat, Oxford West and Abingdon)

Sorry.

Hazel Blears (Labour, Salford)

I should draw the hon. Gentleman's attention to paragraph 18(3), which states that

''the corporation may impose a reasonable charge''.

That is a matter for the corporation to decide.

Evan Harris (Liberal Democrat, Oxford West and Abingdon)

The point I was making was that the corporation might impose a reasonable charge without paragraph 18(3). That provision is not needed in the legislation. The inclusion of this sub-paragraph demonstrates that the Under-Secretary's arguments in resisting reasonable amendments so that as little as possible is put in the schedule are spurious. Without that measure, it would still be possible for the corporation to impose a reasonable charge for doing all sorts of things. I should be grateful if the Under-Secretary clarified that a statutory provision was necessary for the trust to impose a charge for releasing information or documents to individuals who are not members.

It is clear that the Under-Secretary is determined to ensure that for those people who rely on paper copies, and those who serve on patient forums, primary care trusts and scrutiny committees—perhaps those who serve on patient forums of the trust itself, who may not be members—an extra barrier is put in place. It is regrettable that if the Under-Secretary considered it worthwhile to include sub-paragraph (3), she did not

feel it worthwhile to exempt in the same sub-paragraph groups of people who need ready access to such documents. I do not seek to divide the Committee at this point, and so I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Hazel Blears (Labour, Salford)

I beg to move amendment No. 156, in

schedule 1, page 96, line 2, at end insert—

'( ) But a person may not be appointed as auditor unless he (or, in the case of a firm, each of its members) is a member of one or more of the following bodies—

(a) the bodies mentioned in section 3(7)(a) to (e) of the Audit Commission Act 1998 (c.18),

(b) any other body of accountants established in the United Kingdom and for the time being approved by the regulator for the purposes of this paragraph.'.

Win Griffiths (Labour, Bridgend)

With this it will be convenient to discuss the following:

Amendment No. 72, in

schedule 1, page 96, line 7, leave out

'with the approval of the Treasury'.

Government amendment No. 157.

Amendment No. 99, in

schedule 1, page 96, line 39, at end insert

'such periods to be coterminous with those in paragraph 21(5)'.

Amendment No. 133, in

schedule 1, page 97, line 6, at end insert—

'(2) Members of the corporation shall have the right to move votes of approval of the annual accounts, annual reports and appointment of the auditor at an annual general meeting and all members present shall have the right to vote on such motions.'.

Hazel Blears (Labour, Salford)

I shall first speak to Government amendments Nos. 156 and 157.

The additional freedoms of NHS foundation trusts will be balanced by the following framework of safeguards: the independent regulator overseeing NHS foundation trusts; accountability to the local community; the legally binding agreements that will exist with PCTs; and inspection by the Commission for Healthcare Audit and Inspection.

In line with that light-touch regime, we want to ensure that the independent regulator's intervention is triggered only when there are problems. In normal circumstances, the independent regulator will rely on the information that he receives both directly from the trust and from the CHAI reports. Inspections of NHS foundation trusts' annual financial reports will be additional important elements of the monitoring process and will be a key means of ensuring that public funds, for which the trusts are responsible, are properly accounted for. It is vital that the accounts are accurate and that they give a true and fair view of the trust to which they refer.

That is why we are improving provision for the independent regulator, why we are concerned with accounting requirements, and why we are presenting amendments that allow the regulator to set audit requirements and ensure that NHS foundation trust auditors are properly qualified. Those are the proper safeguards to impose.

NHS foundation trusts are also concerned with transferring control from Whitehall to local communities. They will remain part of the NHS, so we must ensure that there is proper accountability and probity for public funds. I reject amendment No. 72, because it is important that the accounts of NHS foundation trusts also accord with general Government accounting standards.

Every year, Her Majesty's Treasury prepares whole Government accounts, which include information on public bodies and bodies that are wholly or substantially funded by public money. Those accounts form an important source of information about how public money is used, and, since the principal purpose of NHS foundation trusts is to provide NHS services, most NHS foundation trust funding will come from the public purse. Therefore it is right that the Treasury may choose to include them in the whole Government accounts.

It is important that the form and contents of the NHS foundation trust accounts, as directed by the independent regulator, are consistent with Treasury requirements. Even if the Treasury decides not to include NHS foundation trust accounts in the whole Government accounts, it seems eminently sensible for NHS foundation trust accounts to be prepared in a format that is consistent with those of other public bodies so that they can be properly analysed and assessed.

Evan Harris (Liberal Democrat, Oxford West and Abingdon)

Will the hon. Lady set out which other co-operatives or mutuals are included in the Treasury accounting scheme? I appreciate that she may not be able to do that now. Are the accounts of housing associations—forms of providers that are taken on a mutual, or at least on a public benefit, basis—included in the Treasury accounting scheme that she set out earlier?

Hazel Blears (Labour, Salford)

Yes. As I said, that information relates to public bodies or to bodies that are wholly or substantially funded by public money. I am not aware of any external mutuals that come under that definition; I doubt that there are any. I am not sure about the accounting provisions for housing associations. I will undertake to provide the hon. Gentleman with that information.

Amendment No. 99 is unnecessary. If it is sensible for the reports to be prepared over the financial year, the regulators have discretion to ensure that that is the case. That is set out in paragraph 22(3)(c) of schedule 1.

With regard to amendment No. 133, paragraph 7(1) of schedule 1 states:

''More than half of the members of the board of governors are to be elected by the public constituency.''

The elected governors are responsible for representing the interests of the membership. Therefore it is appropriate that the board of governors exercises powers on behalf of the members whom it represents. We have set up a clear structure in which the membership elects the board of governors, which then appoints the directors. Therefore there is a representative democratic element in the system.

In line with their responsibility, the board of governors receives at a general meeting copies of NHS foundation trusts' annual reports, their annual accounts and any auditor's report on them so that it can give its views. If something is seriously amiss, it can notify the regulator that intervention is required.

The board of governors also appoints the auditors. There is a clear framework for responsibility and power to rest with the governors, and the role of the members is to elect the governors to represent their views in the organisation.

As a matter of principle, it would be wrong for the members of NHS foundation trusts to vote to approve the accounts and the reports, or indeed the appointment of the auditor. They will not be close enough to the decisions that are being taken to enable them to carry out that role properly. The Bill establishes a clear system of electoral representation so that the material presented at the meeting can be considered on behalf of the members. The governors have a responsibility to report to their constituencies so that the decisions that are taken are proper and robust.

Simon Burns (Conservative, West Chelmsford)

I wish to speak to amendments Nos. 72 and 133.

Amendment No. 72 is a straightforward probing amendment, the purpose of which will become apparent in future debates that I do not wish to pre-empt. The so-called independent regulator is not as independent as the Government claim. On the question of Treasury approval, is the Minister saying that the Bill's drafting simply follows precedent and that, given that all Government Departments are subject to Treasury disciplines, rules and regulations, this is a purely straightforward insertion into the Bill to make it fluent and consistent with normal practice?

Amendment No. 133 is less probing because we seek to ensure that an annual general meeting must be held every year and that all members of the corporation must be invited. All members present must have the right to vote on the approval of the annual reports and accounts and the appointment of the auditor. That will ensure full accountability of the board to its members so that the members will own the corporation rather as shareholders own a private company. That is a positive and welcome step towards general decentralisation and the devolution of powers away from the heavy hand of the centre and, in particular, of the Secretary of State.

Gary Streeter (Conservative, South West Devon)

I rise briefly and humbly to speak to amendment No. 99 in the name of my right hon. Friend the Member for North-West Hampshire (Sir George Young).

The point may seem trivial, but it is important. The Minister responded to the debate before the arguments were actually made on the amendments. However, I invite her to think again. She will know that under paragraph 21 of schedule 1, foundation hospital trusts must prepare and produce accounts that run to the end

of a financial year, which is defined as 31 March in every case. That is straightforward and sensible. Schedule 2, paragraph 6 tells us that the regulator must report to the Secretary of State on his activities during a year, which also ends on 31 March, and that is also sensible and straightforward. However, schedule 1, paragraph 22(3)(c) states that the reports—rather than the accounts—that are to be produced by each foundation hospital trust can run to whichever period the regulator decides on. I find that an unusual provision because it does not seem to be consistent with usual practice nor does it tie in with the filing of the accounts by hospital trusts or with the report that the regulator must make.

The point is that in almost every case in almost every organisation that I have ever dealt with, whether in the private or in the public sector, the accounts and the report come together. Indeed, often the report is the introduction to the accounts. However, here we seem to have the possibility of foundation hospital trusts producing accounts up to 31 March, with their reports following later if the regulator so decides or gives them that discretion. Why is that provision in the Bill, as it seems very odd?

Secondly, the regulator may find that he has given permission to a hospital trust to file a report for one period, but that he must report to Parliament and to the Secretary of State for the period ending 31 March. His report may, therefore, be incomplete because the foundation hospital trust for which he is responsible has not yet filed its report for that period.

That would not be the end of the world, but if the provision remains as it is and if the regulator were to give permission to a foundation trust to file its report for a different date, what would happen? That could create confusion; it could also create the risk of increased costs to produce reports for different periods. That is probably an oversight in the drafting of the Bill, and this is an opportunity to tidy it up.

Patsy Calton (Liberal Democrat, Cheadle)

Government amendment No. 156 states that

''a person may not be appointed as auditor unless he (or, in the case of a firm, each of its members) is a member of one or more of the following bodies—

(a) the bodies mentioned in section 3(7)(a) to (e) of the Audit Commission Act 1998''

(b) any other body of accountants established in the United Kingdom and for the time being approved by the regulator for the purposes of this paragraph.''.

Will the Under-Secretary clarify in what circumstances she would envisage sub-paragraph (b) applying to any other body of accountants established in the United Kingdom and, for the time being, approved by the regulator?

Hazel Blears (Labour, Salford)

In reply to the hon. Member for West Chelmsford (Mr. Burns), the amendment seeks to ensure that where public bodies or bodies holding or searching for funding from the public purse are in this position, they are included, or at least can be included, in the whole Government accounts. I understand that that is usual practice to ensure that there is proper accountability for the expenditure of public money. I am sure that the hon. Gentleman will accept that foundation trusts will be delivering services for the

NHS and spending huge amounts of public money and therefore ought to be properly accountable.

Amendment No. 133 refers to an annual general meeting to be held to account each year, and it would be up to a foundation trust to specify in its constitution that that would be the case. I am concerned that the amendment cuts across the governance structure set out in schedule 1, which seeks to have representative electoral democracy under which members elect their governors who appoint their directors to make decisions. It is very important to maintain the integrity of that approach, whereas the ability to draw the accounts to the membership as a whole would cut across the governance structure set out in schedule 1. Therefore I reject the amendment.

I agree with the hon. Member for South-West Devon (Mr. Streeter) that amendment No. 99 would not spell the end of the world for how we define the periods of accounting and reports. The provision in paragraph 22(3)(c) would allow the regulator some leeway on the periods to which the reports ought to relate; however, if that were to cause difficulty we could have another look at it. It is an attempt to give some discretion to the regulator to consider circumstances.

To answer the question of the hon. Member for Cheadle (Mrs. Calton), the amendment seeks to anticipate any changes that would result in other bodies emerging that would need to be endorsed as proper auditors. I am sure that the hon. Lady will agree that it is vital that the auditors who are appointed are people of standing who have recognised skills and abilities, and the amendment will enable us to utilise other bodies, if such bodies were to emerge.

Evan Harris (Liberal Democrat, Oxford West and Abingdon)

Why have the Government moved away from trusts' present position, whereby they are subject to district audit—that is, auditors who have been, in effect, appointed by the Audit Commission? Why has she rejected an approach whereby the Audit Commission will not be responsible for appointing the auditors to these trusts? That system has worked well for existing trusts, and there is no reason why it should not do so for foundation trusts, which, as the Under-Secretary said, will spend a great deal of public funds.

Hazel Blears (Labour, Salford)

I draw the hon. Gentleman's attention to the position of higher and further education corporations, which spend a substantial amount of public funds and which are in an identical position in that they can appoint their own auditors. Balance-for-money exercises will still be carried out by the Commission for Healthcare Audit and Inspection.

It is perfectly appropriate that since we are creating new public benefit corporations, we should allow flexibility in the audit requirements to ensure the standing and probity of appointees.

Amendment agreed to.

Amendment made: No. 157, in

schedule 1, page 96, line 12, at end insert—

'( ) In auditing the accounts the auditor is to comply with any directions given by the regulator as to the standards, procedures and techniques to be adopted.'.—[Ms Blears.]

The Chairman, being of the opinion that the principle of the schedule and any matters arising thereon had been adequately discussed in the course of debate on the amendments proposed thereto, forthwith put the Question, pursuant to Standing Orders Nos. 68 and 69, That this schedule, as amended, be the First schedule to the Bill.

Question agreed to.

Schedule 1, as amended, agreed to.

Clause 2 - Independent Regulator of NHS Foundation Trusts

Andrew Lansley (Conservative, South Cambridgeshire)

I beg to move amendment No. 102, in

clause 2, page 1, line 11, leave out 'officer' and insert 'office'.

Win Griffiths (Labour, Bridgend)

With this it will be convenient to discuss the following amendments:

No. 168, in

clause 2, page 1, line 11, leave out 'officer' and insert

'office within the Commission for Healthcare Audit and Inspection,'.

No. 145, in

clause 2, page 1, line 13, leave out 'Secretary of State' and insert 'NHS Appointments Commission'.

No. 101, in

clause 2, page 1, line 13, leave out from 'appoint' to end of line and insert

'up to five persons, including a Chairman, on the recommendation of the NHS Appointments Commission, to constitute the Office of Regulator'.

No. 169, in

clause 2, page 1, line 13, leave out 'a person' and insert

'up to five persons, including a Chairman'.

No. 98, in

clause 2, page 1, line 13, at end insert

'after consultation with the NHS Appointments Commission'.

No. 233, in

schedule 2, page 97, line 16, leave out from 'for' to end of line 17 and insert

'five years and he may seek reappointment by the NHS Appointments Commission'.

No. 140, in

schedule 2, page 97, line 16, leave out from 'period' to end of line 17 and insert

'of five years and he may seek reappointment'.

No. 184, in

schedule 2, page 97, line 16, leave out 'Secretary of State' and insert 'CHAI'.

No. 185, in

schedule 2, page 97, line 21, leave out 'Secretary of State' and insert 'CHAI'.

No. 234, in

schedule 2, page 97, line 22, leave out 'or misbehaviour' and insert ', misconduct or incompetency'.

No. 141, in

schedule 2, page 97, line 22, at end insert

'subject to approval by resolution of each House of Parliament'.

No. 142, in

schedule 2, page 97, line 23, leave out subparagraph (3).

No. 186, in

schedule 2, page 97, line 24, leave out 'Secretary of State' and insert 'CHAI'.

No. 143, in

schedule 2, page 98, line 2, leave out from 'may' to 'appoint' in line 3.

No. 235, in

schedule 2, page 98, line 4, at end insert

'subject to the terms and conditions of service as laid down by the NHS Appointments Commission'.

No. 236, in

schedule 2, page 98, line 20, leave out '(generally or specifically)'.

No. 237, in

schedule 2, page 98, line 23, after 'expenses', insert

'from a budget set annually specifically for that purpose from the Department of Health annual budget'.

Andrew Lansley (Conservative, South Cambridgeshire)

After only 12 hours of discussion, we have leapt to line 10 on page 1 of the Bill, where we come to clause 2. The purpose of clause 2 is to establish the office of the independent regulator of NHS foundation trusts and to introduce schedule 2. The amendments that we are debating are not concerned solely with clause 2, but stretch into schedule 2 as well. I was tempted for a moment to summarise the purpose of all the other amendments—I had even drawn up a list of them—but thought better of it. Other members of the Committee may like to debate those amendments, as they stray into subjects that are distinct from, although related to, my two amendments. It is those two amendments to which I shall speak.

The purpose of amendments Nos. 102 and 101 is to change the structure of the office of the independent regulator from one that consists of a person appointed by the Secretary of State to one of up to five persons, including a chairman, that has been appointed by the Secretary of State on the advice and recommendation of the NHS Appointments Commission. Amendment No. 102 would change ''officer'' to ''office'', and amendment No. 101 would do the more substantial job of creating an office of up to five persons appointed on the advice of the Appointments Commission.

There are two amendments that relate directly to mine. Amendment No. 169, in the name of the hon. Member for Oxford, West and Abingdon, seeks to appoint up to five persons to the office of the independent regulator, but it would be defective if we did not agree to amendment No. 102. Amendment No. 98, in the name of my right hon. Friend the Member for North-West Hampshire, looks for consultation with the Appointments Commission; his amendment is, to all intents and purposes, similar to part of my amendment No. 101.

What is this all about? It is about the manner in which regulators work in government. As my hon. Friend the Member for West Chelmsford said, we will

go on to discuss the substance of the work of the regulator and the extent to which the regulator is to be independent. For the sake of this argument at least, let us work on the basis that the regulator is independent and has substantial responsibilities. We can take that as read for this purpose.

How should regulators work? This is a non-ministerial department, and I cannot see a major difference between it and many of the other regulators appointed by Government for the purpose of regulating utilities. It is similar to Oftel—or, as it will be—Ofcomm, Ofwat, Ofgem, the Civil Aviation Authority and Postcomm. There are several regulators, most of which were initially established as single regulators. The directors general of the electricity supply, the gas supply, the Office of Fair Trading, Oftel and the water supply were all established as single regulators. However, all of that is changing, Mr. Griffiths.

There may be other documents, but the one that I used to establish this proposition was the Better Regulation Task Force's report, which was published in July 2001. The task force studied economic regulation. For these purposes, I dispute any assertion that what is proposed is not a parallel organisation, even though, in the strictest sense, it is not an economic regulator with the same functions as some other economic regulators. The manner in which it works is similar to many other regulators, although it may not exercise competition powers or a price control mechanism. Nevertheless, the organisation's relationship with those who are to be regulated is similar in many respects; it is a sort of licensing process.

With regard to the third recommendation, the then chairman of the task force, Lord Haskins, said of the questions that those involved asked themselves:

''Our final question proved the easiest: there was widespread agreement that regulators should be run by properly appointed boards.''

The task force's second recommendation concerns the question of whether regulators should be individuals or boards. The task force concluded:

''Regulatory regimes should be consistent and predictable. There is a trend away from individual regulators to a board structure—we support this development.''

The task force went on to recommend:

''The boards of regulatory bodies should include both executive and non-executive members. They should be appointed for their expertise rather than to represent stakeholder groups.''

The report was published in July 2001, and the Government responded in April 2002. They accepted the broad thrust of the recommendations, and that led directly to the consideration of legislative change in the water industry.

I confess that I have not taken the trouble to find the references, but I think that the Water Bill 2003 is changing Ofwat from an individual regulator to a board structure. For my sins, I have spent a considerable time discussing the structure of Ofcom, which will be established as a board. The Utilities Act 2000 established Ofgem on a board structure, where

previously there were individual regulators. The Government's response stated that

''Ofgem introduced a management board structure in advance of legislation—and they believe that their new board structure has increased the legitimacy and authority of their decision making process.''

The response went on:

''Ofwat has recently announced the strengthening of its decision making process by announcing its intentions to recruit non-executive directors to the OFWAT Board . . . The Government can see that a move to a more formal board structure could bring benefits.''

The Government have accepted that individuals should not be regulators, but that regulators should be boards. They have done so because they want to avoid the personalisation of the role of the regulator. It is one thing for political argument to swirl around the nature of the person who is Secretary of State, but it is another thing for an appointed regulator to be in that position. The Government have accepted the proposition in order to escape that.

The Government have also done it to avoid inconsistency in decision making, particularly at the point where individual regulators are changed and there may be something of a through-train between boards. Thus, some board members remain, even though, for example, the chairman or a chief executive of a regulator may change.

Also, this is being done to have less arbitrary decision making. In the past, there was not only arbitrary decision making by regulators, but severe tensions that grew up between those who were regulated and the regulator, because it was about personalities and not board structure. The proposal will also create more transparent decision making because the board structure itself will ensure that decisions are the product of open discussion rather than private contemplation.

I am nonplussed. When I saw that there was to be an independent regulator, I assumed that it would be an office with a board, because that structure has been adopted in principle across Government. It seems that the Government have not been joined up on this. Richmond house is not 200 yd from the Cabinet Office in this context, but about five years. The Department of Health has not caught up with the way in which regulators work in government. For my sins, I have spent much time discussing how they work. We may later discuss some further aspects of best practice that have not been incorporated into the legislation.

However, one thing is perfectly clear; the Better Regulation Task Force and the Government themselves believe that regulators should be in a board structure that combines executive and non-executive members. Those members should be appointed for their expertise rather than on the basis of representing stakeholder interests. That is not reflected in clause 2 or in schedule 2, as it should be. My amendments would move matters in that direction. However, it would be better if the Government were to make a commitment to reform the structure of clause 2 and schedule 2 to ensure that those principles, which are accepted elsewhere in government, are absolutely clear.

Evan Harris (Liberal Democrat, Oxford West and Abingdon)

That was an interesting contribution, and a fair point was made. I hope that the hon. Member for South Cambridgeshire (Mr. Lansley) will recognise that much of what he says, although perhaps not all of it, is consistent with the amendments that stand in my name and in the names of my hon. Friends. Our amendments would ensure that the regulator—or the office of the regulator, since it should comprise more than one person—was based within the new Commission for Healthcare Audit and Inspection. I will explain the two main reasons for seeking to do that.

First, although the NHS may not be said to be over-regulated with regard to the level and depth of quality inspection—too much of which is superficial—it has been well established that there are multiple organisations roaming round the NHS and subjecting it to inspection. In fairness, that point was well made by Conservative spokesmen in other debates. I remember them making the point that a trust might be subject to inspection by a whole group of acronyms—an alphabet soup of acronyms—all allegedly involved in ensuring that qualities improve, whether that be in the current Commission for Health Improvement, the National Patient Safety Agency, the National Clinical Assessment Authority or any of a whole series of organisations.

Indeed, one of the reasons why the Government have found it necessary to revisit the Commission for Health Improvement is the need to integrate that with the current National Care Standards Commission in the new inspectorate. It also must be integrated with the Audit Commission's health functions, which is another area in which trusts are liable to be inspected.

It is bizarre for the Government to say that they are reducing the number of bodies that will inspect the NHS by integrating the functions of the National Care Standards Commission as they apply to private health care with the Commission for Health Improvement under CHAI, which are then to be merged with the health functions of the Audit Commission. At the same time, a brand new regulator will be set up whose functions, if one looks carefully, will be to consider quality and audit issues.

One reason for the amendments is to do what the Government should be doing—to continue the drive to reduce and to streamline the inspection and audit regime in the NHS.

The second reason is our strong feeling that a properly independent Commission for Healthcare Audit and Inspection must have the prime role in quality control, inspection and audit in the NHS. The Government's proposals for an independent commission do not provide that independence, but I hope that the Bill will be amended to ensure that they do. An independent, overarching quality control mechanism is vital, and it should apply to the whole of the NHS. We must not create an impression that foundation trusts must reach a different level of quality or have a different system of audit and inspection, except in the matters that make them foundation trusts rather than NHS trusts. Those should not be clinical issues. Most of the quality control, inspection and audit should be in common

between foundation trusts and other NHS trusts, if the Government are to be believed that there will not be a beggar-my-neighbour device in the NHS. However, many fear that that will be a consequence of the Government's sham-elitist approach to the selection of foundation trusts.

Simon Burns (Conservative, West Chelmsford)

I am fascinated by the hon. Gentleman's description of the Government's approach to hospitals applying for foundation status as sham-elitist. Given that his opposition on principle to foundation hospitals is well known through his votes on Second Reading and through some of his comments on the amendments, does the hon. Gentleman support his constituents who are affected by the application of the Nuffield hospital in Oxford for foundation status?

Evan Harris (Liberal Democrat, Oxford West and Abingdon)

The hon. Gentleman has difficulty in understanding. If he does not behave himself, I shall be more than willing to send him our policy document, published last year, which sets out our position clearly. [Interruption.] I hear the hon. Member for Ealing, North (Mr. Pound) say that that is a cruel and unusual punishment. It will be a shock for him to see a policy on that issue from an Opposition party.

Win Griffiths (Labour, Bridgend)

That is not relevant to the amendments.

Evan Harris (Liberal Democrat, Oxford West and Abingdon)

Indeed. The document clearly sets out our position on mutuals. The hon. Gentleman's main question on whether there is unreasonable and divisive two-tierism in the selection of NHS foundation trusts and their different means of inspection as set out by the appointment of the regulator versus the Commission for Healthcare Audit and Inspection is relevant to the amendments, and I am keen to deal with it.

The hon. Gentleman referred to my use of the phrase ''sham-elitism''. We do not oppose elitism if it is based on quality. It is not necessarily bad if one group of hospitals is clearly better; indeed, there should be a process to ensure that every hospital achieves such quality. The Government may select some trusts by claiming that they are better than others. However, such trusts may not be any better as they might have been selected through a sham performance measure, such as the discredited, disbelieved, non-clinically-based, non-evidence-based star-rating system. That is a sham form of elitism. Divisiveness has been created in the NHS for no good reason; it has been created through sham-elitism.

Simon Burns (Conservative, West Chelmsford)

In light of those comments, will the hon. Gentleman now tell the Committee whether he supports the Nuffield hospital's application for foundation hospital trust status?

Win Griffiths (Labour, Bridgend)

I hope that the hon. Gentleman will relate his answer to the amendments.

Evan Harris (Liberal Democrat, Oxford West and Abingdon)

I have already answered the question as far as the Chairman will allow. I shall send the policy document to the hon. Gentleman, and I shall now press on with the amendments. If the hon. Gentleman has a burning desire to question me about my constituency, I invite him to see me after the

Committee so that I can him tell all about the Nuffield Orthopaedic Centre NHS trust. If he has the courage of his convictions he will chase after me. I suspect that his interest will vanish.

Simon Burns (Conservative, West Chelmsford)

In your dreams.

Evan Harris (Liberal Democrat, Oxford West and Abingdon)

On that bombshell, we had better move on.

Our reasons for proposing an office of the regulator within CHAI are that inspection must be streamlined and that a common, overarching and fully independent system of quality control is required. If the Government's opinion that all trusts will gain foundation status is to be believed, CHAI's role in the NHS will be more limited than the role of the Commission for Health Improvement. That is simply because its function for foundation trusts is much more limited than its function for NHS trusts. We shall discuss that issue when we get to that part of the Bill.

Establishing an office of the regulator in the mainstream NHS quality, audit and inspection organisation seems to be the appropriate course of action to reassure people that the Government's plans for all trusts to obtain foundation status will not water down the role of a properly independent CHAI in ensuring proper quality control and audit.

Amendments Nos. 168 and 169 seek to establish an office of the regulator in CHAI comprising five people and a chairman. Amendments Nos. 184 and 185 make it the responsibility of CHAI, rather than the Secretary of State, to appoint those people. Whether we can get a properly independent Commission for Healthcare Audit and Inspection is a big question, but a regulator appointed by and answerable to CHAI will be genuinely independent.

Chris Grayling (Conservative, Epsom and Ewell)

CHAI will have responsibility for monitoring and inspecting the entire NHS—primary care trusts, mental health trusts and hospital trusts. The amendments tabled by the hon. Member for Oxford, West and Abingdon suggest that CHAI should have direct responsibility for the stewardship of one part of the NHS—foundation hospitals. Will he explain why he thinks that that is appropriate? Does having an independent inspector who has a more direct responsibility for the affairs of one part of the NHS than for others not create a distortion?

Evan Harris (Liberal Democrat, Oxford West and Abingdon)

The hon. Gentleman makes a fair point. The Government's proposals for foundation trusts are not the same as the Liberal Democrats' proposals in our much sought after document, a copy of which his hon. Friend the Member for West Chelmsford will receive shortly.

We would rather that the providers in the NHS became mutuals. Early in the process, there were concerns on the one hand about whether moves were being made towards the privatisation of the NHS, and fear on the other hand that there would still be nothing other than direct control by the Secretary of State. The Government's response to those concerns—I am trying to be fair to the Government—was to create

the office of the independent regulator as a compromise.

That office has duties, set out in the Bill, to prevent major changes to the function and governance of foundation trusts. In that respect, I support what the Government seek to do. However, that is also a way to suggest that the Secretary of State would not exert direct control. In that respect, the hon. Gentleman is correct because, at least superficially, the Secretary of State has less control over foundation trusts, whereas the independent regulator has more control because that is the job of his office. In the case of non-foundation trusts, the Government do not even give the appearance of seeking to reduce the Secretary of State's overweening control over their functions.

Our approach for non-foundation trusts—non-mutuals in our terms—and for mutuals is to abolish the target-based culture. All trusts would become independent of the Secretary of State's control; he would no longer set political targets or hoops for trusts to jump through. Our mutual model would be free of that target-based approach. The hospitals that chose not to become mutuals—that would not be imposed on a chosen few by the Secretary of State—would also be free of that control. All trusts would be subject to CHAI to guarantee quality control independently of the Secretary of State. Our vision is coherent, and we seek to do what we can within the Government's structures to amend the Bill to get as close as we can to that model.

Chris Grayling (Conservative, Epsom and Ewell)

I am grateful to the hon. Gentleman for giving way again. He articulates an intriguing argument. Does he see a model for what he describes in the financial services industry in delivering services to the community? For example, in that industry there has been for decades a substantial mutual sector, from the major Scottish investment companies to the building societies, with an independent regulator entirely free of Government. It is a de facto private-sector structure without shareholders. Does he envisage us moving towards that model?

Evan Harris (Liberal Democrat, Oxford West and Abingdon)

I can speak only to the amendments, which relate to regulation rather than to the structure of the providers. I commend to the hon. Gentleman what we said about public benefit organisations as mutuals. If providers are to have more independence from central control and a new independent regulator—I have tried to explain why I think the Government have sought to have one—they must be seen to be independent of the Secretary of State in a way that is, perhaps, analogous to what the hon. Gentleman suggests. I hope that he will accept that, as far as it goes, as my agreeing with him.

I have set out why we should like to see CHAI take over the Secretary of State's role as the creator and supervisor of the independent regulator. We have major concerns about CHAI as the Government envisage it, but it is not appropriate to go into that now. We also have concerns about the function of the independent regulator. I hope, but not with a great deal of expectation, that the Government will see that as a better way to ensure true independence for the regulator and, indirectly, more independence for foundation trusts. Even if for policy reasons the

Government do not accept what we are doing, I hope that they will at least accept that there is a model here and that they reject it in going for the one that they have chosen.

Simon Burns (Conservative, West Chelmsford)

Clause 1 and schedule 1 dealt with the critical issue of setting up foundation trusts. Clause 2 and schedule 2 lay out the equally important issue of the so-called independent regulator.

I listened carefully to the arguments of my hon. Friend the Member for South Cambridgeshire in moving his amendment and found them attractive and convincing. His amendment and ours, Nos. 145 and 235 and, to a lesser degree, No. 237, are an either/or alternative to what the Government propose. He suggests that the way forward is through a board, an approach that, as he said, has precedents. Our more conservative idea is to have a genuinely independent individual regulator. To be frank, I would be more than happy with either proposal. They both improve on the Government proposals.

The Government have heralded the entire Bill and the appointment of an independent regulator as a great devolution of power and cutting of the chains from Whitehall to the NHS locally. Local communities will be empowered to far greater governance of their health care without politicians' interference. The Government have done the same thing with CHAI and social services, as will become clear when we develop the arguments on those clauses.

On the broad thesis of the Government's argument, I wholeheartedly agree that there should be—I paraphrase from elsewhere—''a weak centre and a powerful locality'', so that local communities provide their own health care and ensure its supply with minimal interference from politicians, who would be tempted and, in the purest sense of the word, corrupted by political considerations. It is therefore right that a health service—provided that it delivers standards and meets requirements laid down by the state—is free from the day-to-day interference of politicians who might distort and damage the provision of health care because of political pressures.

The Government have constantly said that the Bill will accomplish that; initially in the acute sector, through foundation trusts. That is why I, and my right hon. and hon. Friends, support the principle of what the Government propose for foundation hospitals. However, from previous debates, from this group of amendments and probably from subsequent debates, we are not convinced that the Government are living up to their rhetoric. The regulator is a classic example. The Government's fashion is to repeat a message over and over again in the hope that people will believe it. They talk constantly about the independent regulator. Indeed, the heading for clause 2 is

''Independent Regulator of NHS Foundation Trusts''.

If that were 100 per cent. accurate, the Opposition would not require a debate. We dearly want an independent regulator, whether it is an individual, as the Government envisage in the Bill or—as my hon. Friend the Member for South Cambridgeshire would prefer—a board. Either proposition would be acceptable. The trouble is that the regulator will not

necessarily be genuinely independent, as is highlighted by our amendment No. 145. That amendment relates to clause 2 (2), which states:

''The Secretary of State is to appoint a person to the office of regulator.''

If the Secretary of State appoints the person to the office of regulator, the system is compromised because the choice of regulator might be determined more by the political considerations of the Secretary of State—whoever that might be—than by the capabilities of the individual to perform the role in a truly independent way.

Similarly, the Secretary of State sets the terms and conditions and period of employment for the post of regulator. That is flawed, or potentially could be flawed. As our amendment highlights, the Opposition want the NHS Appointments Commission, not the Secretary of State, to appoint the regulator.

Steve Pound (Labour, Ealing North)

This is not a critical point, but conversation in the Viaduct public house on Sunday night turned to the Conservative party's grouped amendments. Several of my acquaintances pointed out that the term ''NHS Appointments Commission'', which the hon. Gentleman used, does not appear in primary legislation. A retired crossing sweeper pointed out that the term ''Special Health Authority'' is used in schedule 7(5)(1) of the National Health Service Reform and Health Care Professions Act 2002. That engendered considerable debate in the Viaduct. As the first term is not recognised in primary legislation, would the hon. Gentleman care to substitute the second?

Simon Burns (Conservative, West Chelmsford)

I am fascinated; I had never envisaged that the hon. Member for Ealing, North was a sad man. If his remarks are 100 per cent. accurate and he spent Sunday evening in the Dog and Duck—[Interruption.] If he spent the night somewhere in Ealing discussing with the local retired road sweeper the Conservative party amendments that I was to move this morning, I am flattered. First, because that means that someone outside Chelmsford has actually heard of me. [Interruption.] My hon. Friend the Member for Epsom and Ewell (Chris Grayling) must not be cruel. Secondly, I am flattered that our amendments obviously merit so much consideration and attention that the hon. Member for Ealing, North is prepared to discuss them.

I have just been informed that the hon. Gentleman's remarks are correct. He has made a fair point. However, it is not the end of the world. If the Government accept the principle of what we seek to achieve, they could lend us their draftsmen so that we could re-table the amendments on Report and the Government would then accept them.

If the hon. Member for Ealing, North has served on any Standing Committees in the past five years, he will know that one of the problems with being in opposition—this complaint was frequently heard from current Labour Ministers when they were in opposition—is that, sadly, we do not have the benefit

of parliamentary draftsmen. We receive excellent help and advice from certain quarters, but, like an author of a book, all the good work that we do is attributed to the help and assistance from those who give us specialist advice, and any slip-ups or flaws are our fault and ours alone. That is the problem with being in opposition, which the hon. Gentleman, if he holds his seat, will find out soon. However, the problem can easily be remedied by re-tabling the amendments on Report. We can then tidy up the Bill to ensure that it is ship-shape and 100 per cent. accurate.

The purpose of amendment No. 145 is to remove from the Secretary of State the power to appoint a regulator, in order that that regulator can be truly independent. That power would then be placed in the hands of the body that already exists to make appointments to organisations within the health service, thus ensuring that the appointments process is not clouded by political bias or other influence. The Government set up the body to ensure a more independent approach, whereby people are appointed solely on merit and not because of political considerations—an issue highlighted in the early years of this Government—and to thwart politicians who seek to use the structures of the NHS to stuff it with their placemen. That is why I think that our amendment is superior to the proposals in the Bill.

I hope that Ministers will seriously consider that, because I assume that we are united and that the Minister, the Secretary of State and I all want the best person—or persons, if the amendment standing in the name of my hon. Friend the Member for South Cambridgeshire were to be accepted—to be the regulator and to be truly independent. If we are united in that view, and I am sure that we are, surely the Minister must be tempted by the logic and the reasonableness of amendment No. 145.

To my mind, amendment No. 233 is equally important. Schedule 2 is the nuts and bolts of the legislation, fleshing out the proposals in clause 2 and giving greater detail on how this system will operate through the mechanics of the process. The purpose of amendment No. 233 is to remove the question of the regulator's terms of employment—rather than the simple appointment itself—from the Secretary of State, because for a piece of legislation that is meant to free the NHS from the control of politicians, the Secretary of State seems to feature quite frequently in giving the orders to set up these schemes, as well as featuring in their operation. Paragraph 1(1) to schedule 2 states:

''The regulator holds office for the period determined by the Secretary of State on his appointment (or re-appointment) to the office.''

If we want a truly independent regulator who is cut away from any possibility of political interference, surely it would be reasonable to specify a five-year term of office. If the Department of Health felt that were too long, for a variety of reasons, the term could be for three years, providing that that is a rational and reasonable period and that there would not be too much chopping and changing. We suggest five years; the Department of Health and the Ministers may prefer a three-year term, but we will compromise.

The re-appointment of an individual who wishes to serve a further term should be done through the NHS Appointments Commission rather than through the Secretary of State. That is equally reasonable and a logical conclusion if one accepts the principle that the appointment will be made originally by the Appointments Commission and not by the Secretary of State.

Amendments Nos. 235, 236 and 237 are consequential to these proposals and again will give the regulator, rather than the Secretary of State in Whitehall, the powers to take certain actions in different areas under the auspices of the NHS Appointments Commission. Amendment No. 234 deals with the way in which the regulator operates and carries out his functions, but the amendment is slightly different in relation to the appointment processes. Paragraph 1(3) to schedule 2 states:

''Subject to that, the regulator holds and vacates office on the terms determined by the Secretary of State.''

We wish to see the NHS Appointments Commission do that.

Referring to amendment No. 141, paragraph 1(2)(b) to schedule 2 states that

''the Secretary of State may at any time remove him from office on the ground of incapacity or misbehaviour.''

Amendment No. 141 seeks to ensure that that must be

''subject to approval by resolution of each House of Parliament''.

That is an important safeguard, because it would lock parliamentary approval into the system and would ensure that there was no abuse by the Secretary of State. At this juncture in my comments, I want to point out that I am not talking about the current Secretary of State, because I certainly would not accuse him of that sort of behaviour. I am talking about the Secretary of State as a person unnamed, because there is always the potential for a future Secretary of State to seek to behave in a way that is highly politicised, and unhelpful both to the NHS and to the provision of that sort of legislation.

Chris Grayling (Conservative, Epsom and Ewell)

My hon. Friend might recall that there is a precedent for such intervention in recent times, in the dispute between the former Secretary of State for Transport, Local Government and the Regions and the rail regulator at the time of the Railtrack insolvency, when a threat was issued to change the regulator's remit. There are, therefore, immediate precedents for a Secretary of State's trying to intervene and suborn some of a regulator's powers. Hence, the requirement that Parliament should have a veto over any such step is all the more important.

Simon Burns (Conservative, West Chelmsford)

I am grateful to my hon. Friend for giving us that example of a precedent. It adds to the point that I have been making that one should try to divorce political interference or control from the legislation in order to achieve the Government's oft-stated aim, which one accepts at face value, of devolving powers and creating independence.

Steve McCabe (Labour, Birmingham, Hall Green)

Further to that last point, can the hon. Gentleman tell me how many regulators created

by the previous Conservative Government were subject to the terms that he now proposes?

Simon Burns (Conservative, West Chelmsford)

The hon. Gentleman must know—as he made the intervention to elicit this reply—that the answer is none. As my hon. Friend the Member for South Cambridgeshire said, the difference with the regulators, as constituted at the time, for the electricity industry, the gas industry, British Telecom or whatever—[Interruption.]

Steve McCabe (Labour, Birmingham, Hall Green)

Railways?

Simon Burns (Conservative, West Chelmsford)

Or the railways. The principle is the same, as the hon. Gentleman is about to find out. In those cases, the Government were dealing with commercial companies that made profits—businesses that were going from state control to more or less total private control in the private market.

The NHS never has been—and, I hope, never will be—a business in that sense. The NHS is a public service owned by the state and the people, and I trust that it will remain in that position. I have no reason to doubt that it will, regardless of whether there is a Labour or a Conservative Government. For that reason, and because it is a provider of a service and, rightly, a non-profit-making organisation, it should have a regulator. If one accepts the Government's rhetoric—if not their translation of that rhetoric into action—that there should be devolution of power and less political control, one should logically ensure that the regulator is independent of political control. The best way to achieve that is to put the appointment of that person in the hands of an independent commission, as happens in the NHS for a host of other appointments throughout the country.

Steve McCabe (Labour, Birmingham, Hall Green)

The hon. Gentleman is tailoring the facts to fit the argument that he wants to advance. He has agreed with the hon. Member for Epsom and Ewell that the rail regulator is an example of what he is talking about. He then lectures me on the fact that the NHS is a public service and is not for profit. He omits the fact that the railways were a public not-for-profit service until his Government privatised them and created these problems in the first place. He did not take any steps to deal with regulators when his party was in power. Why is he trying to add additional features to the regulations now?

Simon Burns (Conservative, West Chelmsford)

The hon. Gentleman slightly misunderstood what my hon. Friend the Member for Epsom and Ewell said. My hon. Friend was giving an example of where there had been interference, and he was seeking to add weight to my argument that the regulator should be totally independent.

I will be brief, because I do not want to go round in circles; I want to make progress. The hon. Gentleman, in his enthusiasm to highlight the flaws in my argument, makes a fundamental mistake: in this country, the supplying of electricity, rail transport and telecommunications services are profit-making commercial businesses. People are at liberty to use them or not to use them—although I accept that the choice in electricity provision is restricted because most people want it and need it.

Those bodies were transformed as businesses from the state sector to the private sector. The NHS is not, never has been and, I hope, never will be a commercial business. It is a service owned by the people for the people, and for that reason, if we are to have a regulator, such a person should be totally independent and should live up to the rhetoric of the Government, who want to take away politicians' control from the centre. They could amply demonstrate their sincerity in that matter by ensuring beyond a shadow of a doubt that, as is outlined in schedule 2 and clause 2, the regulator is genuinely independent of potential interference, control or influence by any Secretary of State for Health. That is the simple point that I am making, and I hope that the hon. Gentleman has now taken it on board.

Paragraph 3(1) of schedule 2 requires the regulator to consult the Minister for the Civil Service about staff terms and conditions of service, and about the appointment of such staff as the regulator may determine are required. Through amendment No. 143, we seek to strip away that requirement, unless there is a justifiable reason why the Minister for the Civil Service must be consulted. The amendment would increase the independence of the regulator. I shall listen carefully to what the Minister says about that, because if there is some legal requirement or some rational reason—depending on what ''consulting'' actually means—I would not want to press the amendment to a Division.

The basis of the amendments is to help the Government to create a genuinely independent regulator and to ensure that the proposals work when they are up and running as legislation—assuming that the Bill becomes an Act of Parliament, as the Government envisage it will.

John Hutton (Labour, Barrow and Furness)

It feels as if it is an awfully long time since I addressed the Committee, and I hope that hon. Members have not suffered too much as a result, as the Committee has been left in the capable hands of my hon. Friend the Under-Secretary of State. I have calculated roughly that if we carry on at the current rate we will need 800 sittings of the Committee to complete our deliberations on the Bill, which would present something of a problem in terms of the programme resolution—I estimate that the Committee would still be sitting in 2007. We need to make more progress today if possible.

There have been some very good speeches. I congratulate the hon. Member for South Cambridgeshire, who, in a very short speech that should be a model lesson for us all, made a very effective point, which I will address in a moment.

Clause 2 sets up the office of the independent regulator, and schedule 2 makes provision for essential operational matters such as staff, pensions and other issues. The independent regulator's powers and functions are set out in subsequent clauses, notably in clauses 3 to 10 and 14 to 26. The Committee will have ample opportunity to discuss all the provisions, which are part of a wider picture. Committee members

who have spoken have been correct to draw together those wider threads.

I shall now set out the wider picture. Our three principal objectives in setting out the arrangements are: first, to ensure the operational independence of the independent regulator; secondly, to ensure that he or she has the necessary tools to do the job properly; and thirdly, to maintain the overall cohesion and effectiveness of the national health service. It will not come as a surprise to Committee members when I say that I believe that the draft Bill meets all those fundamental objectives. That is the reason why I shall not be asking my hon. Friends to support this group of amendments. I should like to set out my reasons for that.

This group of 14 amendments rests on two broad arguments, and the hon. Members for South Cambridgeshire, for West Chelmsford and, to a lesser extent, for Oxford, West and Abingdon set out those arguments when they moved their amendments. The first broad set of assumptions on which the amendments rest is that the independent regulator is not sufficiently independent. That was the theme of the speech by the hon. Member for West Chelmsford. The second argument is that the office of the independent regulator has somehow been misconceived, and that we have set it up inappropriately. That was the theme of the speech by the hon. Member for South Cambridgeshire, who, citing the Better Regulation Task Force report, wants the office of the independent regulator to operate as a committee with a broad structure of five members. The hon. Member for Oxford, West and Abingdon wants the office of the independent regulator to be part of the Commission for Healthcare Audit and Inspection, again with five people appointed. Obviously, five is the magic number.

The first of those two broad arguments rests on the traditional conspiracy theory, whereby the Government, in spite of what they say, secretly plan to direct everything from the centre. In my experience as a Minister and as an Opposition Member of Parliament, a familiar theme in Standing Committee debates—no matter what the subject—is that the Government say one thing but do another, and that the Secretary of State will be able to tell the independent regulator what to do at every turn.

That is simply not true; any objective reading of the Bill will make that palpably obvious. The second argument, advanced by the hon. Member for South Cambridgeshire, rests on the assumption that the chosen regulatory model will be ineffective for the job. Both those assumptions are wrong. The Bill makes provision for an independent regulator and an effective regulatory regime. The independent regulator is bound by the duty in clause 3 to ensure that he acts in the best interests of the national health service, but he is also under a wider general public law duty to act reasonably and proportionately; otherwise, he has complete discretion to exercise his functions.

I must tell the hon. Member for West Chelmsford that the independent regulator is not subject to direction by the Secretary of State. The hon. Gentleman, uncharacteristically, has confused two separate issues. He has confused a group of

administrative arrangements that are required by Act of Parliament for the establishment of a non-ministerial body—arrangements connected with the opening of an office, how an office holder is appointed, and so on—with the actual operational independence of the regulator. That is not possible within the architecture of the Bill.

The hon. Gentleman carries out his work carefully, and I am sure that he will not be able to find any provision in the Bill relating to the discharge of the regulator's functions that is subject to an overriding direction by the Secretary of State. We have made absolutely sure that there is no such provision in the Bill. It is important for the way in which the new arrangements work that the separation of functions that the hon. Gentleman described exists, and that the freedoms that we are discussing are genuine, but are balanced by appropriate safeguards.

On Second Reading and in Committee, the hon. Member for West Chelmsford was unable to reconcile the case for freedoms and the case for safeguards. I am not an absolutist, I am pragmatic about these matters, and the Committee should be pragmatic. The Committee can identify the real and genuine freedoms given in the Bill to foundation trusts to improve the responsiveness of local NHS services but can, at the same time, argue that there is a need for effective safeguards.

How will those safeguards be exercised? That is the sixty-four million dollar question. We are clear that it is the job of the regulator to perform that balancing act. He must judge at what point it is necessary for him to intervene. The Labour party is clear—as, I hope, are all my hon. Friends—that in the new NHS it should not be the job of the Secretary of State to get involved in the operational issues affecting the delivery of health care services. That is not what the regulator is there to do, and it is certainly not what the Secretary of State will require the regulator to do.

Simon Burns (Conservative, West Chelmsford)

I understand that, but there is a problem because interference by Secretaries of State with appointees has set a precedent. I shall give an example from early in the life of the Government when the hon. Gentleman was not a Minister and his Secretary of State was not the Secretary of State. A senior Department of Health press officer was dismissed, and that performance was repeated in several Departments throughout Whitehall. Professional civil servants—not party political appointees—were, in effect, dismissed by Secretaries of State because they did not like what was going on and did not like the independence of those individuals.

John Hutton (Labour, Barrow and Furness)

With the very greatest respect to the hon. Gentleman, that is not a good analogy. He refers to civil servants employed in Departments. His group of amendments has raised the issue of safeguards that he thinks should be in the Bill and the circumstances that would operate if, for example, the Secretary of State were to dismiss the regulator. It is clear from the Bill's wording that the Secretary of State would not have the right to roll across the terms of the appointment of the regulator or to dismiss him if he felt that the regulator was not discharging his functions appropriately. The Bill does not allow that.

The Bill makes it clear that the Secretary of State can intervene in the case of misconduct or incapacity. To be fair to the hon. Gentleman, he is rather wide of the mark.

Simon Burns (Conservative, West Chelmsford)

The Minister is absolutely right. The Secretary of State did not have the authority or the power to appoint senior press officers who were civil servants in the Department of Health. The person mentioned was appointed before this Government came into office. However, my point is that the Secretary of State, even though he had no powers to appoint the press officer, interfered to ensure that he was dismissed. That strengthens my argument that there is a problem if the Secretary of State is responsible for appointing someone, as is the case under the Bill, because, were he so minded and did not like what that person was doing, he could interfere to get rid of him. It would not have to be for misconduct or incompetence, or for any other reason.

John Hutton (Labour, Barrow and Furness)

The hon. Gentleman has rehearsed his argument, but he is wrong. The Secretary of State does not have that power under the Bill. He has a power, which is an essential safeguard in the wider interests of the NHS, to remove from office the independent regulator if there is some issue about incapacity or misconduct. The hon. Gentleman is building his castle of conspiracy theories, and good luck to him, but we must keep our feet on the ground. It is in the interests of the NHS that the Secretary of State should be able to act in those circumstances. What on earth would we be creating if we did not give the Secretary of State that power? That is a basic and essential safeguard, but the circumstances in which that power can be exercised are clearly contained in the Bill. No Secretary of State could reasonably construe that provision in the Bill as giving him a right to terminate the appointment of the regulator at any time for whatever reason. The hon. Gentleman is barking up the wrong tree.

Gary Streeter (Conservative, South West Devon)

On that point, I have a genuine inquiry. The Minister talks about the Secretary of State's power to remove the regulator, and says that the provisions for removing the regulator are either incapacity or misconduct, but the provisions are ''incapacity'' or ''misbehaviour''. I am not sure that I have seen the word ''misbehaviour'' in statute. Will the Minister explain the legal and statutory application of ''misbehaviour''?

John Hutton (Labour, Barrow and Furness)

I do not think that I will. That is not a matter for me. That would be an issue for the courts, should it come before them.

Amendments Nos. 145, 101 and 98 relate to the role of the NHS Appointments Commission. By conferring the functions for appointment of an independent regulator on the Secretary of State, the Bill would allow him to delegate the appointment of the regulator to the NHS Appointments Commission. The question posed by these amendments is therefore whether the Secretary of State should have discretion over the appointment of the independent regulator.

Simon Burns (Conservative, West Chelmsford)

Under what power?

John Hutton (Labour, Barrow and Furness)

Under the Bill. The Bill gives the Secretary of State the power to appoint the independent regulator. Under the arrangements for the NHS Appointments Commission, he can delegate to the commission any of his powers of appointment. With respect, therefore, the hon. Gentleman's argument is something of a red herring. The question is not whether the Appointments Commission should or could appoint the independent regulator—because it could do so in future if the Secretary of State delegated his appointment functions to it—but whether there should be flexibility in the appointment. It will not satisfy any Opposition Members, but as a general principle we should reserve some flexibility in these matters, particularly on the appointment of the first independent regulator.

Amendments Nos. 101, 102 and 169 deal with more substantive issues on the theme that was raised by the hon. Member for South Cambridgeshire. The question is whether the office of the independent regulator should be established with a board structure. The hon. Gentleman cited in support of his argument a very good point from the July 2001 report of the Better Regulation Task Force, which caused some flurry among my officials. He was right to identify the recommendations as relating primarily to economic regulators, whose principal functions concern prices, competition and markets, and it is true that the Government broadly accepted the main recommendations of that report. However, as his hon. Friend the Member for West Chelmsford made clear, the independent regulator is not just an economic regulator; his functions are significantly broader than that. It is self-evident that the independent regulator has some functions that can be described as economic, such as fixing the prudential borrowing limit for each NHS foundation trust—it does not get much more economic than that. In responding to the 2001 report, the Government made it clear that we accepted the principle of its recommendations on economic regulators.

The Better Regulation Task Force is examining the role of regulators who have a wider, hybrid role, with economic and other functions. Because we are a listening Government, if the task force recommends that a board structure might be appropriate for the group of regulators, we will consider it. However, there is a reasonable case for proceeding along the lines that we are proposing. That point was endorsed implicitly by the hon. Member for West Chelmsford, who made it clear that the regulator had a wider range of functions. The argument of the hon. Member for South Cambridgeshire rested largely on the regulator being an economic regulator, and that is not the case.

Andrew Lansley (Conservative, South Cambridgeshire)

Is the Minister seriously suggesting that, if the Committee were to ask the Better Regulation Task Force whether it believed that the reasons it was promoting a board structure were particular to economic regulation, as distinct from regulation that is not principally economic in character, it would say, ''Yes, this applies only to economic regulators.''?

The Minister knows perfectly well that the Better Regulation Task Force was considering issues such as

consistency, transparency, the predictability of decision making and the ability to draw in different sources of expertise. Those are not particular to economic regulators. Will the Minister acknowledge that in this respect there is no distinction between this regulator and the others?

John Hutton (Labour, Barrow and Furness)

As is always the case, there is some truth in what the hon. Gentleman says, but it is not absolutely accurate. We must consider the context of the Better Regulation Task Force report. It was clearly talking about economic regulators. I accept that, but I do not want to make a huge issue of it, because we should keep an open mind about the emerging structure of the office of the independent regulator.

The hon. Gentleman's argument rested on one specific aspect of the Better Regulation Task Force report; however, wider issues are relevant. The hon. Member for West Chelmsford said that we should have a weak centre. I disagree. No part of the system should be weak; all should be appropriate. There is a role for the centre, although it will be different in future. It will be more broadly concerned with setting national standards and not with the operational role of the Department of Health, as has traditionally been the case.

The hon. Member for Oxford, West and Abingdon raised his concerns about the office of the independent regulator wanting to be part of the Commission for Healthcare Audit and Inspection. It was pointed out by the hon. Member for Epsom and Ewell that that would introduce a fundamental clash between responsibilities and respective roles, between the investigator and the person who might need to make decisions about the future operation of those NHS entities. In this regard, we should keep those functions separate. The hon. Gentleman said that he was trying to parachute elements of his proposals into our proposals. I wish that he would not do that. We are happy with our proposals as they are, thank you.

Evan Harris (Liberal Democrat, Oxford West and Abingdon)

It was scrutiny.

John Hutton (Labour, Barrow and Furness)

It did not feel like that to me at the time. Perhaps, on reflection, if I have a chance to read Hansard, it may feel a bit more like scrutiny.

Evan Harris (Liberal Democrat, Oxford West and Abingdon)

Why does the Minister believe that having the office of the regulator and that duty in the structure of the Commission for Healthcare Audit and Inspection creates a conflict of interest?

John Hutton (Labour, Barrow and Furness)

The simple reason is that the independent regulator is like a referee for NHS foundation trusts, whereas CHAI has a more investigative role. Amalgamating those two roles could give rise to a conflict of interest, as the hon. Gentleman for Epsom and Ewell rightly said. In relation to—

Evan Harris (Liberal Democrat, Oxford West and Abingdon)

Will the hon. Gentleman give way?

John Hutton (Labour, Barrow and Furness)

I will not give way. I have dealt with that point. The hon. Gentleman can come back to his point later, if he wants to. We can all look forward to that.

Speaking to amendment No. 142, the hon. Gentleman for West Chelmsford laboured the point ad nauseam that this was a fundamental compromise

in the operational independence of the independent regulator. That is not true. The regulator will be paid for by the Secretary of State using public funds. The Secretary of State is ultimately accountable for the use of public resources, and it is right that he has a say in how they are deployed. The hon. Gentleman's argument bordered on the ridiculous.

We should have some flexibility on amendment No. 140, which deals with the regulator's term of office. That is my only point on that amendment.

On amendments Nos. 143 and 235, of course, the regulator must establish an office and appoint staff. The regulator is the best person to judge what staff and skills are required. The office will be funded by the Government, using public money, and office staff will be civil servants. It is therefore appropriate that the Minister for the Civil Service be consulted on their terms and conditions. That is all that the Bill requires, and it is not unreasonable. There are several precedents in legislation that the Government have enacted and in legislation that the Government of which the hon. Gentleman was a Member enacted.

Gary Streeter (Conservative, South West Devon)

The Minister is talking about a completely new apparatus, which would cost money. I accept that valid inspections cost money. Will there be any corresponding savings in the health service to help to pay for the new apparatus?

John Hutton (Labour, Barrow and Furness)

Yes, that is our intention, and it will be the case as the regulator takes on new roles and responsibilities. We are not creating a parallel or duplicate bureaucracy. We envisage that there will be further reductions in Department of Health staffing as a result of the creation of the new office of the independent regulator.

Several other points have been raised, Mr. Griffiths. Briefly, the key point about amendment No. 236 is that the Bill provides for the regulator to delegate his functions to his staff. The inclusion of the words ''generally'' or ''specifically'' is a standard device, which simply makes it clear that the regulator does not have to delegate his function formally on each and every occasion that he wishes a member of his staff to do something on his behalf. It is not a huge issue.

Win Griffiths (Labour, Bridgend)

Order. As it is twenty-five minutes past eleven—[Interruption.] I apologise; I was misled by a message that was passed to me.

John Hutton (Labour, Barrow and Furness)

It must have been the effect of my speech on you, Mr. Griffiths. I promise that it is rapidly drawing to a close.

The final point that I wish to make relates to amendments Nos. 234 and 141. For obvious reasons, we do not anticipate, or want to be in, a situation in which the Secretary of State removes the independent regulator from office. However, in the unlikely event that the regulator becomes unable to fulfil his role, the Secretary of State must be able to act quickly to ensure that the interests of NHS patients, and the wider interests of the NHS, are protected. To create a further delay or another set of obstacles to the process—as, essentially, the amendments would do—would not be helpful if there were a need to act in those limited

circumstances in which the incapacity or misbehaviour of the independent regulator arose.

The hon. Member for South-West Devon asked me what I meant by misbehaviour, and I declined to give him a verbatim history of the case law and jurisprudence on the subject. I will arrange for him to receive a copy of it, if he would like to peruse it at his leisure. Obviously, he needs to get out more.

There are precedents for the choice of such words, including the appointment of the chairman and other members of Ofgem, the rail regulator, the Director General of Water Services and the Director General of Telecommunications. These amendments raise many issues, but Opposition Members' criticism of the Bill as it stands is fundamentally misconceived. However, I accept the general argument made by the hon. Member for South Cambridgeshire that the Government must keep under review the structure and the shape of the office of the internal regulator. We will certainly do that.

It will come as no surprise to the hon. Gentleman that we examined a variety of different models that we could use to set up the office of the independent regulator, including the sort of board structure that he suggested. We went for this particular shape because we believe it is the right structure, given the specific roles of the independent regulator and his functions in relation to the wider national health service. However, we are always willing to listen to arguments on how the structure could be improved from the Better Regulation Task Force or others, including Conservative Members and my hon. Friends. However, at present, given where we are and where we will start from, I ask my hon. Friends to reject any amendments that are put to the vote for the reasons that I have given the Committee.

Andrew Lansley (Conservative, South Cambridgeshire)

The generous words of the Minister in his opening remarks do not deflect me from the view that amendments Nos. 102 and 101 are an entirely appropriate and fundamentally well-conceived way in which to address the Bill.

I have made the point that I do not accept for one minute the proposition that this regulator will be so distinct from all other economic regulators that he is required to be one person, as distinct from the board structure. It seems that almost all the arguments that I have ever seen on the reasons why most regulatory structures shift inside government from a single person to a board are equally applicable to this regulator.

We will return to that point in the future; we may return to it on the basis of further recommendations from the Better Regulation Task Force. I hope that the Minister will write to the chairman of the task force, David Arculus, about it; if he does not, I will, because I expect to return to the matter. The Government are creating a rod for their own back because, if this argument is presented to the House of Lords in its current form, the noble Lords—who are equally familiar with the argument—will change the Bill. The Government will have to change it later, if they do not do so now. Therefore, I am seeking a down payment from my hon. Friends and from the Government.

Amendment No. 102 simply changes the word ''officer'' to ''office''. It is technically consistent with the manner in which the explanatory notes describe the office of the independent regulator, as distinct from an officer. If I may, Mr. Griffiths, I want to press amendment No. 102 to a Division, as a down payment on the fact that the Government will have to reconsider that there should not be ''an officer'' but ''an office''. We will return on Report or at another point to see that that office is properly constituted in a board structure.

Question put, That the amendment be made:—

The Committee divided: Ayes 8, Noes 13.

Schedule 2 - Independent Regulator of NHS Foundation Trusts

Chris Grayling (Conservative, Epsom and Ewell)

I beg to move amendment No. 238, in

schedule 2, page 98, line 25, leave out 'As soon as possible' and insert

'No more than twelve weeks'.

Win Griffiths (Labour, Bridgend)

With this it will be convenient to discuss the following:

Government amendment No. 158.

Amendment No. 74, in

schedule 2, page 98, line 28, leave out from 'must' to end of line 29 and insert

'lay a copy of the report before Parliament'.

Amendment No. 243, in

schedule 2, page 98, line 29, leave out 'who must lay it' and insert

'and must lay a copy'.

Government amendment No. 159.

Chris Grayling (Conservative, Epsom and Ewell)

This is a simple set of amendments. Amendment No. 238 would amend paragraph 6(1) to schedule 2, which states that:

''As soon as possible after the end of each financial year, the regulator must prepare an annual report on how he has exercised his functions during the year.''

The purpose of the amendment is to set a time guide for the regulator to prepare his report. However, if the Government suggested a period other than 12 weeks, we would be receptive to it. We do not believe that the regulator's obligation should be left open-ended; ''as soon as possible'' is a very loose phrase. We hope that Ministers will be slightly tighter in drafting the Bill and will set out a specific time. This is a probing amendment to explore whether Ministers are willing to place such a time stipulation in the Bill. If they are not, perhaps they will tell the Committee what time guidance they are prepared to give to the regulator on the delivery of his report.

Amendment No. 74 is designed—I am glad to see that the Government have accepted the principle in their amendment No. 158—to ensure that the report is laid before Parliament before it goes to the Secretary of State. The duty of the regulator is not solely to the Secretary of State; it is also to Parliament. That is tremendously important. My hon. Friend the Member for West Chelmsford set out clearly why we believe the regulator should not be subject to undue control from the Secretary of State. The amendment would provide a small, but symbolic, statement that the regulator should be accountable to Parliament above the Secretary of State.

Having read Government amendment No. 158 carefully, we are happy to accept it, as it achieves what we want to do. It allows the Secretary of State to receive a copy of the report, and I have no desire to deprive him or her of that right. I welcome the change and am happy to accept the Government amendment.

Are Ministers prepared to put a time limit in the Bill? I applaud their responsiveness on the matter of submitting the regulator's report to Parliament, but I await their response.

John Hutton (Labour, Barrow and Furness)

I wish to say a few words about the Conservative amendments. First, Government amendments Nos. 158 and 159 will ensure that the independent regulator will be more directly accountable to Parliament for his actions, rather than, as the hon. Member for Epsom and Ewell said, being solely accountable to the Secretary of State. That is appropriate, and it emphasises the proper role of Parliament in those matters. The Government amendments emphasise the independence of the regulator, and I hope that the Committee will

support them, as they broadly cover the issues dealt with in amendments Nos. 74 and 243.

However, I cannot advise my hon. Friends to agree to amendment No. 238. The regulator may wish to include in his report to Parliament information that has been taken from financial and annual reports of NHS foundation trusts. As NHS foundation trusts are likely to require some weeks to prepare their reports, it is unlikely that the 12 weeks proposed in amendment No. 238 would give the regulator enough time to study and interpret them and to report fully on them to Parliament. That is, I am afraid, a pragmatic judgment. ''As soon as possible'' has a sense of urgency and immediacy; it means that we wish something to be done as quickly as possible. That is what we wish the regulator to do. However, putting an arbitrary time limit in the Bill could be counter-productive and could undermine the purpose and value of the regulator's report in Parliament.

I urge the Committee not to agree to the amendment. I understand that the hon. Member for Epsom and Ewell is trying to elicit from us some understanding of our thought processes on the matter. However, I hope he will understand that rejecting his amendment does not mean that I wish the independent regulator to be unduly delayed. I, too, wish the report to be available to Parliament as quickly as possible.

I want the report to be available to Parliament as quickly as possible, but the Committee should take into account the variety of information sources on which the regulator will need to draw to prepare an effective and meaningful report. For that reason, we should give the independent regulator a strong steer that we want the report to arrive as soon as possible after the end of the year.

However, we should leave it to the regulator to put together the relevant information that will add to the scrutiny of his role and provide an opportunity for Parliament to judge the effectiveness of the regulatory arrangements, rather than shooting him in the foot by requiring him to produce his report within a specific time. If the Committee insists on that, we may end up with a less than useful report, and that would not be in anyone's interests.

Patsy Calton (Liberal Democrat, Cheadle)

In bringing to the attention of the Committee the two amendments tabled by the Liberal Democrats, I must explain that there is no longer a need for amendment No. 243, given that Government amendment No. 158 answers our concerns. My party sought to clarify that amendment by specifying a copy. It was an interesting amendment but, I shall not press it.

Amendment No. 215 still has—

Win Griffiths (Labour, Bridgend)

Order. Amendment No. 215 belongs to a different group and will be debated separately.

Patsy Calton (Liberal Democrat, Cheadle)

Thank you, Mr. Griffiths.

Chris Grayling (Conservative, Epsom and Ewell)

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendments made: No. 158, in

schedule 2, page 98, line 28, leave out from 'must' to end of line 29 and insert

'lay a copy of the report before Parliament, and

(b) once he has done so, send a copy of it to the Secretary of State.'.

No. 159, in

schedule 2, page 98, line 36, at end insert—

'6A The regulator must respond in writing to any recommendation which—

(a) is made by a Committee of either House of Parliament, or a Committee of both Houses, and

(b) relates to the exercise by the regulator of his functions.'.—[Mr. Hutton.]

Patsy Calton (Liberal Democrat, Cheadle)

I beg to move amendment No. 215, in

schedule 2, page 98, line 36, at end insert—

'Right to Appeal to Regulator

6A Employers of health service staff in nonfoundation trusts affected by decisions made by foundation trusts in respect of their terms and conditions of employment, may ask the regulator to judge if these are a breach of section 26 of the Health Act 1999, as amended by this Act.'.

I apologise for my somewhat premature attempt to introduce this amendment—I had not noticed the omission of a plus sign between the lines on the Selection List. Owing to the phased implementation of the Bill introducing foundation hospitals, we are concerned that staff may be poached from employers and non-foundation trust hospitals. Amendment No. 215 seeks to deal with cases in which employers find that NHS staff in non-foundation trusts are affected by decisions made in foundation trusts about terms and conditions of employment. The amendment proposes that the regulator judge whether the foundation trusts are in breach of section 26 of the Health Act 1999, as amended by this Bill when it becomes an Act, which will state:

''It is the duty of Strategic Health Authorities, Health Authorities, Special Health Authorities, Primary Care Trusts and NHS trusts to co-operate with each other in exercising their functions.''

The Minister should consider the amendment from the point of view of ensuring that section 26 is observed.

John Hutton (Labour, Barrow and Furness)

I appreciate the motive and intention behind the amendment. I understand that the hon. Lady is simply trying to elicit from me some appreciation of the importance of the issue that she is dealing with, and an explanation of how the Bill tackles it. We all accept that she has raised an important issue. We all want the NHS to work effectively and to co-operate to provide a better health care service for the people of our country.

However, we must be clear about one thing. We must dispel the myth that there is no competition for staff now. There is competition, and the hon. Lady has raised the difficulties that that causes. That competition will continue, because there is a labour market shortage right across the health care sector for key front-line staff, particularly doctors and other medics. We must address that problem. Unfair competition is taking place, but we do not like to talk about it, and it is often swept under the carpet.

I should say two things to the hon. Lady. The new pay deal for the national health service, ''Agenda for Change'', will make those issues much more transparent. NHS employers will no longer have to torture the existing pay system to get the result that they want when they have difficulties recruiting staff. Within that pay deal, all NHS organisations covered by ''Agenda for Change'', whether they are foundation trusts, NHS trusts or primary care trusts, will have significant local flexibility to increase pay when that is needed to deal with recruitment and retention difficulties.

As the hon. Lady knows, all applicants for NHS foundation trust status must be early implementers of ''Agenda for Change''. The Secretary of State will not approve an application if that does not happen. We are locking in the benefits and the flexibilities that the new national pay system will give to national health service staff and patients alike.

We are alert to the difficulty that the hon. Lady has brought to the Committee's attention, but the question for the Committee is how we deal with it. I say that we should deal with it as we have envisaged in the Bill, which is to give the regulator the powers to ensure that the NHS foundation trusts and the NHS trusts work effectively together. Clause 3 also says that the Secretary of State's responsibilities under sections 1 and 3 of the National Health Service Act 1977 are the overarching obligations of the regulator himself.

Clause 27 amends the 1999 Act so that the statutory duty of co-operation and partnership also applies to NHS foundation trusts. I hope that that will bring them into a virtuous circle, and that we shall not retreat into the misjudged and ill-executed internal market of the previous Conservative Administration, which created enormous bureaucracy and a two-tier system. The traditional NHS value of co-operation can continue to influence how the system develops in future, in the new world of more NHS foundation trusts.

Gary Streeter (Conservative, South West Devon)

The Minister is right to say that the hon. Lady has raised an important point, and he is trying to deal with it maturely. Once the Bill is passed, will the NHS foundation trusts have any more flexibility than non-foundation hospitals over what they pay, or over their employees' terms and conditions?

John Hutton (Labour, Barrow and Furness)

No. The flexibilities and freedom under ''Agenda for Change'' will apply to all NHS organisations. The flexibilities that the hon. Gentleman is huffing and puffing about are significant. For example, they allow NHS employers to increase national salary rates by up to 30 per cent. if there are recruitment and retention difficulties. That is a transparent and obvious attempt to deal with those issues. That flexibility to go up to 30 per cent. above basic rates will be the same for NHS foundation trusts as for NHS trusts.

Andrew Lansley (Conservative, South Cambridgeshire)

Addenbrooke's NHS trust, which will be in the first wave of foundation trusts, recognises

that it would not seek any greater flexibility than is available under ''Agenda for Change''. However, I am afraid that the Minister has not really answered the question asked by my hon. Friend the Member for South-West Devon. Where in the Bill does it say that the regulator is required to apply ''Agenda for Change'' as a maximum degree of pay flexibility, and that he cannot authorise greater flexibility for foundation trusts?

John Hutton (Labour, Barrow and Furness)

The Bill deliberately does not provide for that; I will come to that point in a minute. The hon. Gentleman has made another useful contribution to the debate. The other myth that surrounds the debate about NHS foundation trusts leading to unfair poaching of staff is the assumption that everyone who wants to be in an NHS foundation trusts wants to do that. There is an assumption that NHS foundation trusts want to be able to undermine local NHS employers, take their best staff and recruit them into the service of the foundation trust. I generally do not believe that to be true. I do not believe that NHS foundation trusts are seeking operational freedoms. During the past few months' discussions they have not argued that to operate more effectively they would need such freedoms.

However, the hon. Gentleman is correct to say that the regulator will not have the direct power to set the terms and conditions of NHS foundation trust staff—nor should he. Employment contracts are a matter for staff, unions and employers. The role of the regulator, as we envisage it, is not to become involved in the day-to-day issues surrounding the operation of an NHS foundation trust. One could not become more involved in the nitty-gritty of operational issues than by telling the regulator that, regardless of what had been agreed locally, he could decide the terms and conditions of NHS foundation trust staff. Of course we could go down that road, but that would be to put the regulator in a different position from the one that we envisaged. Such an approach would involve regulators in day-to-day managerial and operational decisions, and we should not go down that path.

The issue raised by the hon. Member for Cheadle is about how we tackle the potential problem of NHS foundation trusts using their freedoms to undermine the ability of local NHS providers to provide the required level of service for local communities. That can be achieved through the duty of co-operation in clause 27 and the overall obligation of the regulator to ensure that when discharging their functions, NHS foundation trusts continue to keep in mind the overarching principles of sections 1 and 3 of the National Health Service Act 1977—that is the regulator's job. In a nutshell—I apologise to the hon. Member for South-West Devon if I am cutting too many corners in my summary of sections 1 and 3 of the 1977 Act—the aim is to provide a health care service that is comprehensive, and free at the point of use.

A neighbouring or adjacent trust could put the argument to the independent regulator that the human resources, freedoms or policies being implemented by a particular NHS foundation trust, if they went beyond ''Agenda for Change'', would so undermine the ability of a local NHS provider to deliver its services

effectively—for example, because it was losing its key staff—that the NHS foundation trust could be seen not to be complying with the statutory duty of co-operation in the Bill. That is how that argument could be resolved under the provisions of the Bill, and that is the approach that we have taken, rather than give the regulator an inappropriate power to intervene directly in setting the terms and conditions for NHS staff.

Chris Grayling (Conservative, Epsom and Ewell)

Elements of the Minister's argument are odd. He has said, as was reinforced by the comments of my hon. Friend the Member for South Cambridgeshire, that there is an issue. He then says that ''Agenda for Change'' will do the job. If that is the case, why is it necessary to constrain the ability of an NHS foundation trust to set pay and conditions? One imagines that he will accept individual cases in which, for example, a specialist hospital wants to upgrade the pay significantly for a particular type of staff to encourage people to train for that role, as there might be a shortage in future. Surely if the broad problem, as described, does not exist, there is no need to prevent a trust from doing that.

John Hutton (Labour, Barrow and Furness)

I am not sure that the hon. Gentleman followed my point. Under ''Agenda for Change'', there is a significant latitude and an area of flexibility in the national pay system that did not exist previously, and that will deal with the issue that the hon. Gentleman raised. For the reasons that I have outlined to the hon. Member for South Cambridgeshire, we do not want to give the regulator the role, which was suggested by some, of indirectly setting the terms and conditions of staff.

Chris Grayling (Conservative, Epsom and Ewell)

The Minister misunderstands; I was talking about the powers of the trusts, not those of the regulator. Why do trusts need to be constrained in their ability to set pay and conditions? If the Minister is correct, and ''Agenda for Change'' delivers the flexibility that they need, why handcuff the trusts and remove their ability to take detailed decisions about individual clinical issues and staffing problems that might help to solve a local issue in a specialist hospital?

John Hutton (Labour, Barrow and Furness)

We are going around in circles, and I would rather not do that. However, the hon. Gentleman raised the valid point that we should give freedom and flexibility to deal with local recruitment and retention problems to all NHS employing organisations, whether or not they are foundations trusts. That is what ''Agenda for Change'' does, and that is the benefit of the national pay agreement for NHS foundation trusts. That is why all potential applicants for NHS foundation trust status have agreed to proceed as early implementers of the ''Agenda for Change'' package. There is much in it for NHS employers, whether or not they are foundation trusts.

The point raised by the hon. Lady is fair and reasonable, and we are alert to the problem that she mentioned. It is in no one's interest, across the NHS, for that type of unfair competition for staff to go unchecked.

It being twenty-five minutes past Eleven o'clock, The Chairman adjourned the Committee without Question put, pursuant to the Standing Order.

Adjourned till this day at half-past Two o'clock.

[Part I]

Schedule 2 - Independent Regulator of NHS Foundation Trusts

John Hutton (Labour, Barrow and Furness)

I have absolutely no idea where we finished before lunch. I am sure that we were having a useful discussion; I was on my feet, so that is axiomatic.

The hon. Member for Cheadle (Mrs. Calton) raised the important issue of how to deal with poaching or unfair competition between NHS organisations for staff. The hon. Lady clearly wished to insert a provision in the Bill, although she did not make clear whether this was a probing amendment, that would involve the independent regulator in making decisions on whether there had been a breach of the statutory duty of co-operation. He must do that anyway, as it is his job to ensure that all NHS foundation trusts comply both with the terms of their authorisation and the terms of the statutory provisions that relate to their function. Therefore, the hon. Lady's point is already encompassed in the Bill.

The discussion ranged further, Mr. Atkinson, as to whether it would be appropriate for the independent regulator to vary employment terms and conditions, or for him to impose additional restrictions on NHS foundation trusts when it came to the employment of staff. We do not want to go down either of those two latter roads, as that would not be an appropriate role for the regulator. I hope that Committee members take that view. Such matters are best dealt with by unions, staff and employers. I hope that I have been able to assure the hon. Lady that the valid point she raises is covered by the Bill, and that she will not press her amendment to a Division.

Patsy Calton (Liberal Democrat, Cheadle)

I thank the Minister for his thoughtful response; I am reeling from the tributes. I am pleased that he recognises that there is a recruitment problem in the NHS, which could worsen

as we phase in foundation trust status for, as I understand it, all hospitals.

I have listened to the Minister's reassurances that ''Agenda for Change'' deals with the problem, and I would ask the Secretary of State to keep a watchful eye on that aspect of the two-tier system. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That this schedule, as amended, be the Second schedule to the Bill.

Simon Burns (Conservative, West Chelmsford)

I do not intend to detain the Committee for long. First, as will have become apparent during our debate on the amendments proposed to schedule 2, my hon. Friends and I are still concerned—notwithstanding what the Minister has said to seek to reassure us—that the independence of the independent regulator is compromised by the arrangements, even if they are administrative arrangements over his appointment. I will check that in Hansard on Thursday morning, and study it further, with a view to possibly returning to the subject. My hon. Friend the Member for South Cambridgeshire (Mr. Lansley) may wish to do that at a later stage in the proceedings.

Secondly, paragraphs 10 and 11 in the schedule are perfectly straightforward. They amend the House of Commons Disqualification Act 1975 and the Northern Ireland Assembly Disqualification Act 1975, and those will now state that the regulator for foundation trusts is disqualified from being a Member of this House or of the Northern Ireland Assembly.

The Under-Secretary said—I think it was during the debate on clause 1—that, at some point, the Government would table an amendment to make it a disqualify from this House someone on the board of governors of a foundation trust. Presumably that would be a straightforward amendment; however, looking through this morning's list of amendments, I see that it has not been forthcoming. Would it have been possible for the Government to have produced the amendment to include in the schedule because it deals with disqualification, or would that be inappropriate? Will the Government have to attach that amendment to another schedule or clause? When does the Minister expect that amendment to be tabled for our consideration?

John Hutton (Labour, Barrow and Furness)

The current intention is to table that amendment as a consequential amendment to schedule 4. It would not be appropriate to insert such an amendment in schedule 2, which relates to the office of the independent regulator. The hon. Gentleman's point relates to non-executive directors.

Schedule 2, as amended, agreed to.

Clause 3 - GENERAL DUTY OF REGULATOR

Andrew Lansley (Conservative, South Cambridgeshire)

I beg to move amendment No. 232, in

clause 3, page 2, line 2, at beginning insert—

'(1) The primary duty of the regulator is to facilitate the provision by NHS foundation trusts of health care services at a higher clinical standard and responsiveness to patients.

(2) '.

Peter Atkinson (Conservative, Hexham)

With this it will be convenient to discuss the following amendments:

No. 107, in

clause 3, page 2, line 2, leave out from 'functions' to end of line and insert

'in order to secure that NHS foundation trusts have the freedom from external constraints needed to enable them to offer health care services which are enhanced in terms of their volume and quality, and in a manner not inconsistent with'.

No. 244, in

clause 3, page 2, line 2, leave out 'consistent with' and insert 'in pursuance of'.

No. 200, in

clause 3, page 2, line 5, at end add

'and shall have a duty to safeguard the best interests of the NHS as a whole'.

No. 245, in

clause 3, page 2, line 5, at end add

'and that is consistent with the principles of fairness and of universal coverage'.

No. 123, in

clause 3, page 2, line 5, at end add—

'(2) In performing his duties under this Act, the regulator must have regard to such of the following as appear to him to be relevant in the circumstances—

(a) the principles under which regulatory activities should be transparent, accountable, proportionate, consistent and targeted only at cases where action is needed,

(b) the different needs and interests of persons using NHS services and, in particular, of the different interests of children, and of those living in rural and urban areas; and

(c) the principles set out in the Compact between Government and the voluntary sector and the codes of practice set out under it.'.

Andrew Lansley (Conservative, South Cambridgeshire)

I shall forbear to say that schedule 4 is not the right place to insert House of Commons disqualification. That relates to the previous debate. Schedule 4 is the schedule of amendments to the law in relation to the introduction of the term ''NHS foundation trust''. There we go; we have moved on.

Clause 3 is simple in its way, but therein lies a wealth of meaning. The purpose is to introduce the duties of the regulator. The manner in which the duties are defined says that they are, in effect, consistent with the duties of the Secretary of State as consolidated under the National Health Service Act 1977.

Before discussing those duties and where there might be enhancement and improvement of their definition, it might be helpful to recognise that in a whole series of Acts in recent years—and, perhaps more to the point, in the practice that has flowed from that legislation—it has become apparent that there is a significant difference in practice between the exercise of duties by a Secretary of State and by a regulator.

There was an exchange this morning about the nature of regulation as opposed to other ways of exercising functions. A Secretary of State is not a creature of statute, with limitations bounded by statute, as are regulators and local government. He is not precluded from having regard to issues beyond those set out in the statutes that he uses. A Secretary of State has to have regard to certain duties that are set out in statute, but is not circumscribed by those duties

as not to have any regard to other issues. In practice, we see Secretaries of State as policy-makers who expand the boundaries of their vision as they apply their duties according to changing circumstances.

Regulators are somewhat different beasts; they are creatures of statute. All recent experience tells us that if one does not tell regulators—as distinct from Secretaries of State—what their duties are, or what they should have regard to in the exercise of their duties, it is highly likely that they simply will not expand the boundaries of their thinking to embrace any additional duties or consider matters that are outside the boundaries that have been set in statute.

It is necessary when establishing the post to set out precisely the duties of the regulator and what he or she ought to have regard to. I hope that the Minister agrees. The difficulty is that the manner in which clause 3 is drafted suggests that the regulator is nothing other than a statutory counterpart to the Secretary of State and has no distinct function. The duties of the Secretary of State in relation to the NHS seem, in effect, to be carried through into the duties of the regulator, even though the regulator has specific functions to perform.

John Hutton (Labour, Barrow and Furness)

I am not sure that I follow the hon. Gentleman's point. If he is saying that the regulator is simply a replication of the Secretary of State, he has fundamentally misunderstood the nature of the Bill. The Secretary of State has a range of additional functions relating to, for example, resources and national standards that are not the responsibility of the regulator, whose statutory functions are set out clearly in part I of the Bill. There is no ambiguity about the respective roles of the regulator and the Secretary of State.

Andrew Lansley (Conservative, South Cambridgeshire)

I accept that some functions relate to standards and the like, and we shall discuss those later. Those form part of the structure of the NHS as a whole and are not the functions of the regulator. Perhaps I should be more precise. With regard to the functioning of the trusts, it is clear from clause 3 that the regulator's objectives are simply a reiteration of the Secretary of State's duties.

Steve Pound (Labour, Ealing North)

The hon. Gentleman is aware that not every person in the room is wholly enamoured of every comma in the Bill. Will not he agree, however, that when the post of regulator was advertised widely in the newspapers last week, the role had inevitably to remain slightly elastic, as the person clearly would be interviewed, and perhaps even appointed, before the Bill became law?

Andrew Lansley (Conservative, South Cambridgeshire)

I was not aware that the post of regulator had been advertised.

Steve Pound (Labour, Ealing North)

I have a copy if the hon. Gentleman wants it.

Andrew Lansley (Conservative, South Cambridgeshire)

I am grateful to the hon. Gentleman, but I am not sure that that bears upon the issue in clause 3. Let us say that the regulator will be in place by October, for the sake of argument. If I were proposing to have a regulator appointed and in place by then, I should certainly consider advertising now. I do not dispute the necessity of preparing for that

appointment, but that has no bearing on the duties of the regulator. Those are for the Committee to determine and cannot be pre-empted by the nature of an application and interview.

Whatever the existing statutory provisions regarding the duties of the Secretary of State in the matter of NHS trusts that become foundation trusts, we must ensure that the duties of the regulator are properly expressed so that, when in place, the regulator will have the statutory breadth to be able to fulfil his or her functions fully and adequately, without being constrained by clause 3.

Some of my amendments are probing, but I believe that the Government should accept the others. Amendment No. 232 is a probing amendment. At this stage, it might be helpful to recall the 1977 Act, although it would be tedious to quote it at length. Section 1—the Secretary of State's duty as to the health service—states:

(1) It is the Secretary of State's duty to continue the promotion in England and Wales of a comprehensive health service designed to secure improvement—

(a) in the physical and mental health of the people of those countries, and

(b) in the prevention, diagnosis and treatment of illness,

and for that purpose to provide or secure the effective provision of services in accordance with this Act.

(2) The services so provided shall be free of charge except in so far as the making and recovery of charges is expressly provided for by or under any enactment, whenever passed.

That section of the 1977 Act appears to be wide-ranging, given that comprehensive objectives are set out. Secretaries of State can cope with wide-ranging duties, but regulators require detailed knowledge of their objectives. To what extent does the fact that the Secretary of State has a duty to secure improvement of people's physical and mental health and in the prevention of disease, diagnosis and treatment of illness imply that the regulator would already have a duty to promote ''higher clinical standards''? If the Minister says that the first part of amendment No. 232 is clearly embraced, that would be step one and a tick in the box.

The second part of the amendment deals with ''responsiveness to patients''. As far as I can see, section 1 of the 1977 Act does not give the Secretary of State a statutory duty to respond to patients directly, although some interpretations may imply that that is the case. That issue may be dealt with elsewhere in the Bill, but given that it is not included in that section of the 1977 Act, it is not the regulator's duty.

Section 3 of the 1977 Act—concerning services generally—states:

(1) It is the Secretary of State's duty to provide throughout England and Wales, to such extent as he considers necessary to meet all reasonable requirements—

(a) hospital accommodation;

(b) other accommodation for the purpose of any service provided under this Act;

(c) medical, dental, nursing and ambulance services;

(d) such other facilities for the care of expectant and nursing mothers and young children as he considers are appropriate as part of the health service;

(e) such facilities for the prevention of illness, the care of persons suffering from illness and the after-care of persons who have suffered from illness as he considers are appropriate as part of the health service

(f) such other services as are required for the diagnosis and treatment of illness.

That section does not suggest responsiveness to patients so much as responsiveness to NHS providers. A regulator must not only be responsive to applications from NHS trusts to become foundation trusts; he or she must have a duty to respond to patients' needs. Can we put a tick in the box to say that the regulator's duty is to respond to patients?

I am sure that the first part of amendment No. 107 is not embraced in the existing duties of the Secretary of State under the 1977 Act. The Bill should ensure that

''NHS foundation trusts have the freedom from external constraints needed to enable them to offer health care services which are enhanced in terms of their volume and quality''.

A clear duty already exists to enhance the volume and quality of NHS services, but there is no duty on the Secretary of State to free NHS foundation trusts or other NHS institutions from external constraints to enable them to do so. The concept of deregulation is not built into the Secretary of State's current duties.

John Hutton (Labour, Barrow and Furness)

The hon. Gentleman makes a good speech, but will he explain what he means by ''external constraints''? For example, external constraints could reasonably include the work of the medical royal colleges and outside regulatory bodies. If he believes that that type of constraint should be covered by this clause, there is clearly a problem with the wording of his amendment.

Andrew Lansley (Conservative, South Cambridgeshire)

The Minister is being uncharacteristically literal and narrow. If he reads the amendment, he will see that the freedom from external constraints that is spoken of enables the foundation trust to offer

''health care services which are enhanced in terms of their volume and quality''.

Clearly, if the work of the royal colleges forms part of the process by which NHS foundation trusts improve the volume and quality of their health care services, it would not be an external constraint from which they would need to be free.

I freely confess that the drafting of the amendment is not important here; it is the argument that is important. The point is that there is no deregulatory duty laid upon the independent regulator. The Minister may tell the Committee that it is not the intention of the Government to deregulate by the imposition of the independent regulator, but is that not the structure of the legislation? Is it not the intention to create freedom for NHS foundation trusts?

If the intention of the Bill is to create a new structure within which foundation trusts are given the freedom, through localisation of management and the removal of constraints upon managers, to deliver

effective services, is it not curious that the role of the regulator does not explicitly contain just such a deregulatory duty? It is not in the Bill. Other legislation in other contexts, which we have debated here, does lay a duty of a deregulatory character upon regulators. I have simply phrased it in terms of deregulation to the extent that is consistent with all their other duties to raise the volume and quality of health care services that are being offered. If the principle of the Bill is one of freedom for foundation trusts, why is that principle not included in the Bill as one of the duties?

The latter part of amendment No. 107 has another small but significant purpose, and that is to rephrase clause 3. As it stands, clause 3 states that functions must be exercised

''in a manner that is consistent with the performance by the Secretary of State''.

That now becomes a matter of interpretation. It was not part of my argument when we debated clause 2 that there was some conspiracy theory about the independent regulator's functions to be determined by the Secretary of State. That did not form part of my discussion of clause 2, nor was it part of my amendments.

Here, however, the question does arise. Is it, in fact, the case that, because of the structure of the wording of the clause, the independent regulator will be constrained to behave in a way that is consistent with the Secretary of State's past, present or future interpretation of his duties under sections 1, 3 and 51 of the National Health Service Act 1977?

In so far as those are wide-ranging duties, and many of the things that the Secretary of State does could be interpreted as being in accordance with that, it might well be that, by virtue of the statute, the independent regulator has no independence to interpret those duties in a way that is different from the Secretary of State. In practice, therefore, the independence is undermined. That is why I turn the wording around and say

''in a manner not inconsistent with''

so that at least we do not allow clear division inside the NHS about this, but do allow a degree of latitude as to how the independent regulator—as compared to the Secretary of State—interprets the duties into any particular set of circumstances.

That sums up amendments Nos. 232 and 107. I confess to you now, Mr. Atkinson, and to the Committee, that I do not intend to press those amendments. They are designed to get answers on the way in which the duty of the regulator ought to be structured, and on some matters that ought to be included but which I do not see. The Government should accept amendment No. 123 as it is. This is not so much about the duties of the regulator as about the manner in which the regulator should exercise those duties. There are three elements to this; the words

''as appear to him to be relevant in the circumstances''

do not refer to overriding considerations but to considerations according to the circumstances.

First, we are meeting regulators everywhere nowadays. Again, we get into the rigmarole of how regulators work, yet the principles of the Better Regulation Task Force, of blessed memory, are reflected in the principles that are applied to regulators. Those are the principles of transparency and accountability. Moreover, regulators must be proportionate, consistent, and target only cases in which action is needed. To an extent, of course, if those principles were included through amendment No. 123, some of the deregulatory duty implied in amendment No. 107 would not be needed.

The question is whether the regulatory principles—the best regulatory principles enunciated by the Government for regulators across Government as a whole—are to be reflected in the statutory obligations of this independent regulator. Will the different needs and interests of persons using NHS services be addressed? As far as I can tell, Mr. Atkinson, the duties that are included in the National Health Service Act 1977 do not differentiate. It may be that, although we are talking about localisation and, in theory, about responsiveness to the different needs of patients, the regulator has no statutory backing to require him to address responsiveness.

I have isolated two examples. The first, in practice, is the structure of foundation trusts and how they work and interact with other health service bodies and, indeed, other local authority bodies, which may well differ between rural and urban areas. I will not make a long argument about rural areas. Departments ought to take this as read because of the nature of rural-proofing of legislation. However, as the Bill has regard to the different interests of urban and rural areas, the independent regulator is obliged to rural-proof the way that he does his work.

Secondly, the different interests of children in the NHS must also be addressed. Again, the different interests of children in the NHS ought to be meat and drink to Ministers. As a consequence of a range of reports that were discussed in the House as recently as the publication of the Kennedy report on the outcome at Bristol royal infirmary, Ministers are trying to ensure that the NHS has a separate and distinct focus on the needs of children. That focus is enunciated in the first part of the national service framework for children, and has been made obvious by the Government's initial response to the Victoria Climbié inquiry and the promotion of the pilots for children's trusts.

Not only that, but within the structure of the NHS—linking together local authorities and other bodies with responsibilities for children—the presence of children's trusts will make it clear that the independent regulator must have regard for the ways in which services are configured for children. Those services must be distinct and different from those configured for the rest of the NHS's patients.

The third limb is the compact between Government and the voluntary sector. I am sure that the Minister will recall that the Department of Health has an obligation—the terms of which are available on one of the Department's web sites—by which it is

''determined to see all NHS organisations in England signed up to a geographically relevant Local Compact by 31 March 2004''.

I am sure that the Minister will be equipped to tell us today whether that will be the case, and whether it will apply to NHS foundations trusts. However, it does not completely answer the point, because ''geographically relevant local compacts'' are relevant from the point of view of trusts working with local authorities and local voluntary organisations.

The question is whether the independent regulator will be required to comply with the compact, which, at a national level, is an agreement between central Government and the National Council for Voluntary Organisations. That is important, because voluntary organisations may, in the fullness of time, become substantial clients of the independent regulator. If, for example, under clause 5, which deals with other applications, a body other than an existing NHS trust, such as a group of hospices, was to become an applicant for NHS foundation trust status, it would be a voluntary sector organisation seeking to receive authorisation from the independent regulator.

As I understand it, the compact is currently an agreement—without statutory backing—between central Government and the voluntary sector. It applies to Departments in central Government. By extension, it applies to Executive agencies and non-departmental public bodies that are answerable to those Departments. It does not apply to existing regulators. I know that to be a fact because the NCVO has been in touch with other regulators, who have said that they have been established by statute as non-ministerial Departments and that their responsibilities and requirements are laid down in statute. The compact is not part of those requirements and, therefore, cannot be applied to those independent regulators simply because Ministers have agreed with the NCVO.

If the good principles set out in the compact about the manner in which central Government deal with voluntary sector organisations are to be applied, including, for example, some of the principles of fairness and equity in applications for NHS funding—NHS authorisation of a foundation trust is a very good example—it is important that the compact be applied specifically to the independent regulator as a non-ministerial Department. Provision for that must be included in the Bill.

I hope that I have explained to Ministers, particularly on amendment No. 123, why these aspects of the independent regulator's work should be expressed at this point in the Bill. As far as I am aware, and unless I am told otherwise, the drafting is adequate for that purpose. I speak to amendment No. 232 for the purposes of our discussion today, but I reserve the possibility of pressing amendment No. 123 to a Division later.

Patsy Calton (Liberal Democrat, Cheadle)

I shall speak to amendments Nos. 244 and 245.

On amendment No. 244, I follow some of the arguments made by the hon. Member for South Cambridgeshire, who referred to the difference

between ''consistent with'' and ''not inconsistent with.'' My party and I should like to explore the idea that the terminology of ''consistent with'' is less sharp than ''in pursuance of.'' Clause 3 states:

''The regulator must exercise his functions in a manner that is consistent with the performance by the Secretary of State of the duties under sections 1, 3 and 51 of the National Health Service Act 1977''.

There should be no room for muddying the water with terminology. The phrase ''consistent with'' is not as clear as ''in pursuance of''. I am keen to hear the Minister's response to our suggested wording.

Amendment No. 245 proposes that the regulator should have regard to

''the principles of fairness and of universal coverage''.

When foundation trusts are being established, there is a concern that initially there might be a two-tier system. Some new foundation trusts may cherry-pick some services over others; for example, they may choose to do away with emergency care.

Simon Burns (Conservative, West Chelmsford)

The hon. Lady explained forcefully, in discussing amendment No. 244, why she thought that the words ''consistent with'' were inappropriate and why the words ''in pursuance of'' were better. Why, therefore, does amendment No. 245 not use the words ''in pursuance of'' rather than ''consistent with'', given that the words ''consistent with'' are so inappropriate in amendment No. 244?

Patsy Calton (Liberal Democrat, Cheadle)

We could all split hairs. I wondered what amendment No. 232—

Simon Burns (Conservative, West Chelmsford)

Will the hon. Lady give way?

Patsy Calton (Liberal Democrat, Cheadle)

If I might finish what I was saying. Amendment No. 232 states that

''The primary duty of the regulator is to facilitate the provision by NHS foundation trusts of health care at a higher clinical standard''.

The amendment does not state what the standard is higher than. We are concerned that emergency care and other vital services such as mental health—[Interruption.]

Andrew Lansley (Conservative, South Cambridgeshire)

My intervention is directly relevant to the point that the hon. Lady makes. I do not understand why she believes that the ''principles of universal coverage'' is a better expression of the need to maintain services than the duty under section 1(1) of the 1977 Act:

''to continue the promotion in England and Wales of a comprehensive health service''.

Is a ''comprehensive health service'' not, by definition, similar to the ''universal coverage'' that she seeks?

Patsy Calton (Liberal Democrat, Cheadle)

I thank the hon. Gentleman for his intervention. There are distinct similarities between the expressions. However, as we move into a new system, it is important that the Minister answers the questions and confirms that the intention is to have the same universal coverage as that we expect now.

Chris Grayling (Conservative, Epsom and Ewell)

I speak in support of the amendment that my hon. Friend the Member for South Cambridgeshire seeks to press to a Division. He will, of course, have the support of his

colleagues. His is a sound and well-articulated amendment.

The tone of clause 3 prompts once again the question as to where is the clinical element of the Bill. Too much of the Bill is about structures and constitutions, and there is little mention of the duty of care to deliver proper clinical improvements. My hon. Friend the Member for South Cambridgeshire, in his first amendment, makes an extremely important point about strengthening the role of the regulator in delivering higher quality health care.

John Hutton (Labour, Barrow and Furness)

The hon. Gentleman bemoans the fact that there is nothing in the Bill specifically about clinical quality and about promoting higher quality services. Does he not realise that it was the Labour Government that introduced a duty to improve the quality of clinical care in NHS trusts? His Government had a long time to do that and never managed to get round to it. The duty to improve the quality of care was imposed on the NHS by this Labour Government.

Chris Grayling (Conservative, Epsom and Ewell)

There is a difference in philosophy on the two sides. On the Opposition Benches, we prefer to do things, whereas those on the Government Benches prefer to draw up, organise and restructure. The weakness in the Government's approach is that the national health service has spent far too much time reorganising and far too little time spending money on the front line of clinical services. To that effect, a duty that requires the regulator to focus on clinical improvements is entirely appropriate and is to be supported. I look forward with interest to hearing the Minister's responses to amendments that are well articulated and deserve a proper response.

George Young (Conservative, North West Hampshire)

I want to add a short footnote to the powerful speech of my hon. Friend the Member for South Cambridgeshire. [Interruption.]

Peter Atkinson (Conservative, Hexham)

Order. I am sorry to interrupt the right hon. Gentleman, but I am having difficulty in hearing his footnote because there is so much conversation going on in the Room.

George Young (Conservative, North West Hampshire)

I am grateful for your protection, Mr. Atkinson. Clause 3, as it stands, is stark and does not do justice to the role of the independent regulator that the Secretary of State and the Committee would like to see. Clause 3, entitled ''General duty of regulator'', is basically saying, ''Don't get in the way of the Secretary of State; exercise your functions in a manner that is consistent with the performance of the Secretary of State''. I should prefer to see a more explicit statement on the general duties of the regulator. It is some time since I considered the Railways Act 1993, but the railway regulator had a positive duty to promote the welfare of rail travellers. In his negotiations he found it useful to point to the equivalent of clause 3 and to say that he had a duty to promote the interests of rail travellers.

It would be helpful if the regulator pointed to a provision in clause 3 of the Bill that gives him some clout, rather than the present wording, which puts him in the shadow of the Secretary of State. At the

moment, the clause reads as if the regulator is a planning inspector performing what I call ''the Dolcis function''; he stands in the shoes of the Secretary of State.

The regulator is more than just a shadow of the Secretary of State; he has a duty in his own right to promote the sort of functions that my hon. Friend has spoken about. Those views are not just mine; they are also the views of the Select Committee. My amendments replicate paragraph 137 of the Health Committee's second report on foundation trusts. The Committee said:

''We therefore urge the Government to overlay these plans with a mechanism to ensure that these potential problems do not materialise. This could include placing a legal duty on the Regulator to safeguard the best interests of the NHS as a whole.''

That is what amendment No. 200 seeks to do. It picks the recommendations of the Select Committee, which had the Bill before it when it made its recommendations. The paragraphs before paragraph 137 explain why the Select Committee felt that such a duty should be placed on the regulator.

The hon. Member for Cheadle mentioned some of the fears of non-foundation hospitals, including the fear that there might be an initial diversion of funds. Placing a legal duty on the regulator to safeguard the best interests of the NHS would reassure those hospitals. However, other amendments tabled by my hon. Friend the Member for South Cambridgeshire would give the regulator the necessary credibility and clout in his negotiations.

It would be better to state the regulator's duties clearly in the Bill rather than to leave the regulator to interpret clause 3. It is nebulous and replicating; it is all about not falling out with the Secretary of State. The Minister said that the regulator does have duties, which we will move on to shortly, on financial matters and on the processing of applications. Clause 3 is entitled ''General duty of regulator'', and unless the Government agree to some of these amendments, the Minister will miss a trick and the regulator will not be able to do the job that we want him to.

Gary Streeter (Conservative, South West Devon)

I support my right hon. Friend the Member for North-West Hampshire and my hon. Friend the Member for South Cambridgeshire. I wish to read out clause 3, which, as my right hon. Friend says, is important. I am concerned about transparency and accessibility. Members of the public who become members of a foundation hospital trust, some of whom will sit on boards of governors, will want to know the legal framework within which they will operate. One of their first questions will be on the duty of the regulator. The Act, as it will then be, will read:

''The regulator must exercise his functions in a manner that is consistent with the performance by the Secretary of State of the duties under sections 1, 3 and 51 of the National Health Service Act 1977 (c. 49) (duty as to health service and services generally and as to university clinical teaching and research).''

The next question will be, ''What does that mean?'' Reference must then be made to the 1977 Act. Although I accept that it is not unknown in statute for the Government to refer to previous Acts, it would be better and would make accessibility cleaner and

clearer if the Bill did not refer to a former statute to identify the duties of the regulator, but had them fully set out in the Bill. Therefore everyone could read the duties of the regulator in what could be called a mission statement.

The Under-Secretary has been passionate about her wish for new people to experience ownership of the trusts and to sit on boards of governors. She wants to make foundation trust hospitals open to all; that is laudable. So why have such a barrier to accessibility in a completely imprecise clause setting out the duties of the regulator?

My right hon. and hon. Friends made some powerful points. Can it possibly be right that a section that was drafted in a different world from today's and refers to a Secretary of State for Health in 1977 can give the full and comprehensive framework for a regulator operating in 2003? We have already heard examples of how there must be differences and incompleteness in the provisions of the 1977 Act. I do not need to remind the Committee of how different the world was in 1977. I think that that was the year in which Harold Wilson handed over to the now Lord Callaghan.

Andrew Lansley (Conservative, South Cambridgeshire)

That was 1976.

Gary Streeter (Conservative, South West Devon)

That is what I said. It was shortly after Harold Wilson handed over to Lord Callaghan.

It was the year in which Austin Allegros littered the sides of the motorway, because they could not go for more than 30 miles without breaking down. It was the year in which I left university—now my daughter is leaving university. The world has moved on since 1977.

Simon Burns (Conservative, West Chelmsford)

Was not 1977 also the year in which the Chancellor had to return to London from the IMF humiliation?

Gary Streeter (Conservative, South West Devon)

My hon. Friend makes a powerful political point. [Interruption.] It is certainly not irrelevant: every Labour Government fails in fiscal management.

Peter Atkinson (Conservative, Hexham)

Order. We are discussing clause 3, not political history.

Gary Streeter (Conservative, South West Devon)

My point, Mr. Atkinson, is a serious one. The provisions of the 1977 Act cannot possibly form a comprehensive framework for a regulator in 2003. I refer to my previous point: if we wish to make this process honest, open and transparent, why not set out the general duties in the Bill and make it the mission statement that the regulator can photocopy and pin up on his wall? That is the kind of simplicity at which we should be aiming.

My hon. Friend the Member for South Cambridgeshire made a point about creating links with the voluntary sector, and Governments have always talked about statutory bodies working in partnership with the voluntary sector. I have had many dealings with the voluntary sector over the past few years, including many discussions with the National Council for Voluntary Organisations and others, and I know for sure that the laudable aspirations set out in the compacts that the Government produce are not realised in practice. It

is very important that the regulator has a duty, in accordance with his wider duties, to make sure that professionals who are running services in foundation hospital trusts have a mind to partnerships with voluntary sector organisations. That should be expressly included in the Bill. It is to be hoped that the Minister will not just pay lip-service to these amendments, rather that he will dig down deep into his character, listen carefully to the points being made and improve the Bill. If he does that, he will go down in history as a new Labour Minister who does not just say that he will listen and take the Opposition's points seriously, but who means it.

John Hutton (Labour, Barrow and Furness)

I congratulate the hon. Member for South Cambridgeshire for another very effective contribution. I hope that that does not embarrass him too much. I shall not enter into a philosophical discussion about the nature of regulation vis-à-vis the powers of the Secretary of State. That would not be useful. There are substantive and important differences, but we can have that discussion at another time. He is right, as is his right hon. Friend the Member for North-West Hampshire, to focus on clause 3 as an important part of the Bill. The hon. Member for South-West Devon (Mr. Streeter) is right too in some of his comments about the centrality of the clause to the Bill.

However, I disagree with the hon. Gentleman's commentary on clause 3. With respect, it is not opaque or unclear about the duties of the regulator; they are set out clearly in the Bill, although there is a cross-reference to an earlier statute. Part of the problem with the debate is that sections 1, 3 and 51 of the 1977 Act are very clear about the general duties of the Secretary of the State, and those general duties have stood the test of time. No one can dispute that the legislation is 26 years old; that alone is no reason to say that it is no longer effective. It provides an effective guide for the regulator through his duties under the Bill.

I must disagree with the hon. Member for South Cambridgeshire on one fundamental point: the principle of greater operational freedom that both he and I want to see for NHS foundation trusts is not incompatible with the Secretary of State's general duties under the 1977 Act. Running through his presentation of the amendment and the comments of various Opposition Members was the fundamental flaw that the two things were not compatible. Therefore a need for an express duty in the Bill to defend the regulator's job to be a deregulator to preserve the freedoms of NHS foundation trusts is misplaced.

The duties of the Secretary of State, under sections 1, 3 and 51 of the 1977 Act are in no way incompatible with greater operational freedom for local NHS hospitals. I take issue with the hon. Gentleman's criticism of clause 3 and with his attempt to redress what he sees as shortcomings in that part of the Bill. He is wrong in that regard.

I shall develop that point briefly, although I do not wish to detain the Committee unnecessarily, as I do not think that the hon. Gentleman will press the

amendment to a Division. I wish to discuss how we perceive the role of the regulator.

The second tier of the hon. Gentleman's argument, about having an express deregulatory duty built into the legislation of the regulator, is unnecessary because the deregulatory aspects of the Bill, in the sense of the greater operational freedoms of NHS trusts, are clearly set out in part 1. It will be the duty of the regulator to give effect to those provisions, and the freedoms secured by clause 14 are clearly set out.

There is a crucial difference between this reform of the NHS and previous attempts at reform, including the then Conservative Government's attempts to set NHS trusts free from Whitehall control in the National Health Service and Community Care Act 1990. This legislation will not allow the Secretary of State to direct either the regulator or an NHS foundation trust in any aspect of their work. That is the key cultural division and the historical significance of this measure. It is a break with the past. I accept that. That is one of the provisions that will ensure the operational freedom that the hon. Member for South Cambridgeshire wants to see for NHS foundation trusts.

George Young (Conservative, North West Hampshire)

The Minister said that there is nothing in the Bill that gives a Minister power to direct the regulator. However, if the Secretary of State, having consulted clause 3, came to the conclusion that the regulator was acting in a manner inconsistent with sections 1, 3 and 51 of the 1977 Act, presumably he would notify the regulator that, in his view, the regulator was acting outside those guidelines, and he would request the regulator to step back within the boundaries of the legislation. Therefore, in practice, does the Secretary of State not have the power to direct the regulator when he thinks that the regulator is wrong?

John Hutton (Labour, Barrow and Furness)

I shall come to that point, because it is important. To some extent, it takes us into the debate about the word ''consistent'' that the hon. Member for Cheadle was developing in her short contribution. I do not see that as a power of direction.

There is an important issue in clause 3 for the Committee to discuss, although I hope that it will not do so at length. NHS foundation trusts will play an important role in future and will make an important contribution to the delivery of NHS services for millions of people. Given that importance, it is right that there should be consistency between how the regulator develops his responsibilities and the responsibilities of the Secretary of State. The Secretary of State has the primary statutory duty to ensure the provision of comprehensive NHS services that are free at the point of delivery and that will improve the health and well-being of the people of this country. There is a need for consistency in how these responsibilities are discharged.

It cannot be in the best interests of the NHS to be pulled in two directions, one way being pursued by the regulator and his interpretation of the duties and the other way by the Secretary of State. Given the right

hon. Gentleman's extensive ministerial experience, I am sure that he will recognise that it would not be sensible for us to legislate for that.

There must be a way of resolving these matters. The Bill makes it clear that the regulator must discharge his duties in a way that is consistent with how the Secretary of State would perform his responsibilities under sections 1, 3 and 51 of the 1977 Act. That is the right, sensible and pragmatic view to take.

Andrew Lansley (Conservative, South Cambridgeshire)

Even if it were not a power of direction, the manner in which the clause is drafted could imply an obligation being laid on the independent regulator. For example, if clause 3 said ''in a manner that is consistent with the duties laid on the Secretary of State'' instead of

''in a manner that is consistent with the performance by the Secretary of State of the duties'',

the question of how the Secretary of State interpreted and performed those duties would appear, according to the statute, to give a power of guidance in relation to the regulator, if not a power of direction. Is that how the Minister sees it?

John Hutton (Labour, Barrow and Furness)

Yes. That is closer to how the provisions will eventually operate. We must be clear about one important issue: we can will the means, which are methods of improving the national health service by providing more responsive, tailor-made services for patients, but we cannot deny the Secretary of State the means. The danger in the path that the hon. Gentleman wants to go down is that we would end up doing precisely that. With the greatest respect to the hon. Gentleman, I suggest that that would not be a sensible or prudent thing for us to do.

I know that I have been rather long-winded, but my argument comes down to this: it is the Government's view that the independent regulator should be required to exercise his functions in a manner that is consistent with the Secretary of State's general duties under the 1977 Act, including the duties to promote and provide a comprehensive health service in England and to provide adequate facilities to universities with medical or dental schools. The duties imposed by the provisions of the 1977 Act should be overriding ones because, fundamentally, they will help to ensure that the NHS remains an integrated, coherent and effective national service, and those are important objectives.

I think, with respect, that the hon. Gentleman is inviting the Committee to qualify or somehow to dilute those overarching statutory duties, because he is providing several riders or provisos to them. Qualifying or diluting them, which is essentially how the hon. Gentleman's amendments can be interpreted, would be unhelpful. Those general duties should be unencumbered. The hon. Gentleman's amendment would encumber them, and that is why I cannot support it.

Andrew Lansley (Conservative, South Cambridgeshire)

I am not sure to which amendments the Minister was referring. I acknowledge that, in practice, amendments Nos. 232 and 107 would qualify the duties. However, I hope that he would not apply that argument to amendment No. 123, which is not intended to qualify the duties laid on the regulator but to give the regulator guidance on how he is to carry

out his duties. They are not in any sense inconsistent with the general duties.

John Hutton (Labour, Barrow and Furness)

That is right. I was talking primarily about amendment No. 107. With respect, I am sure that the hon. Gentleman will concede that it is an attempt to qualify the overarching statutory obligations; otherwise I would not be able to understand his amendment at all.

That is the Government's position on the work of the regulator, and the way in which we have expressed it in the Bill is clear for all hon. Members to see. For those reasons, I cannot support the hon. Gentleman's amendment.

The hon. Gentleman moved amendment No. 232, which requires a higher clinical standard and responsiveness to patients. Again, with respect, I hope that he is prepared to accept my assurances that the amendments are not strictly necessary for two reasons: they are already covered by section 1(1) of the 1977 Act, which is clear in that regard; and NHS foundation trusts, like other trusts, have a duty that is set out in clause 40. It states:

''It is the duty of each NHS body to put and keep in place arrangements for the purpose of monitoring and improving the quality of health care provided by and for that body.''

Amendment No. 107, which proposes ''freedom from external constraints'', has been dealt with, although perhaps not to the hon. Gentleman's satisfaction. However, I do not wish to replicate the arguments. The amendment may also be unnecessary as NHS foundation trusts' freedoms are properly and effectively guaranteed and they are set out in legislation, particularly in clause 14 and in Government amendments Nos. 148 and 149.

Chris Grayling (Conservative, Epsom and Ewell)

Surely the point about amendment No. 232 is that it is, in effect, a reminder to the regulator. We have heard much about the work that the regulator will need to do with trusts in shaping constitutions and in identifying the best way of selecting members across geographical areas. Surely, it must be worthwhile to have a perpetual reminder to the regulator that his prime job is to look after patients and not allow other factors to intervene to prevent that.

John Hutton (Labour, Barrow and Furness)

No, I absolutely agree with the hon. Gentleman; that is precisely what the Bill does. He described this as a reminder—reminding the regulator of his clear and explicit existing functions. However, with great respect to the hon. Gentleman, I do not think that the Bill, having made those commitments clear and unambiguous, must contain a reminder designed to achieve that. That is not a good principle of drafting legislation in the House.

The hon. Member for South Cambridgeshire raised a concern in amendment No. 123 about the compact. The hon. Gentleman is a member of the NCVO, and he takes that work very seriously, on which I congratulate him. We strongly support the compact and the spirit of the provisions set out in paragraph (c). However, the amendment is not strictly needed. As the head of a non-ministerial department, and consistent with his common-law duty to behave reasonably and proportionately, the office of the

independent regulator would already be expected to work within the compact, as was agreed with the community and voluntary sector in 1998. However, the hon. Gentleman would accept that his amendment would take the compact into completely different legal territory by giving it some statutory backing and making it legally binding. It gets its authority from being jointly endorsed by the Government and by the community and voluntary sector. A trust and partnership working is about relationships, reaching goals and obtaining wider benefits, and I would not want to convert the compact into a statutory creation.

Amendment No. 200 is also unnecessary, as the matter has already been dealt under the 1977 Act as incorporated into clause 3. We should not debate that any further. I tried very hard to take notes during the contribution made by the hon. Member for Cheadle on amendment 244, but I completely failed because I did not understand the point of her argument. I do not intend to say anything about it, other than that, from what I can work out, it is an attempt to give the Secretary of State the power to direct the independent regulator, and we do not intend to go down that road.

Andrew Lansley (Conservative, South Cambridgeshire)

I am grateful to the Minister for the almost comprehensive way in which he replied to the amendments. I accept, on the grounds of its being implied in section 1 of the 1977 Act, and under clause 40 of the Bill, that higher clinical standard does not need to be specified for the regulator.

I would accept that the reference to freedom from external constraints and so on—the deregulatory function—does not need to be specified as a duty of the regulator had the Minister gone on to accept that the better regulation principles enunciated in amendment No. 123, under proposed new subsection (2)(a), had been accepted. However, the Minister is not inclined to accept them. That would have delivered not only the deregulatory objective, in so far as regulatory action would be targeted only in cases in which action was needed, but some of the other principles of good regulation would also have been set out. It is wrong that the Minister did not deal with that point in detail, and it is wrong simply to gloss over them and say that they are implied in some way by the practice elsewhere—it has been specified in statute for other regulators.

John Hutton (Labour, Barrow and Furness)

I apologise to the hon. Gentleman. I have got so many sheets of paper that I overlooked a reference to proposed new paragraph (a). I should like to have said in my speech that the clauses in the Bill have been drafted with a view to establishing a light-touch regulatory approach. If the hon. Gentleman were to look at clause 23, he would notice that the regulator can intervene only where there is a contravention or failure of a significant nature. We do not envisage the regulator's intervening daily in the work of NHS foundation trusts. The office of the regulator has been constructed in accordance with the spirit of the best approach to regulations.

Andrew Lansley (Conservative, South Cambridgeshire)

I find that astonishing. In other contexts, Ministers have said that they want to create light-touch regulators and then, as part of the process

of doing so, have made it clear that the regulator in question will be the subject of the best regulation principles as enunciated by the Better Regulation Task Force. Those principles are built into the Bill.

The Minister has not presented an argument for not accepting amendment No. 123; he has only said that it is not needed ''because, because'' and then found other examples. That is also true of proposed new paragraph (b).

I am sure that one could find places in the Bill in which the regulator might, in authorising services, consider the interests of children or of rural and urban areas; no doubt, the regulator might have regard to the principles set out in the compact. However, in none of those cases is that certain, nor is it likely to be applied across all the functions of the independent regulator unless we set it out in statute that the regulator must have regard to those matters. That is true of the compact itself.

Those in the voluntary sector would not think that the regulator's duty to have regard to the various groups' interests would be any more or any less adhered to simply because it was referred to in statute. The issue is whether the Minister is right in telling us that, as a non-ministerial department, the independent regulator is required to have regard to the compact if it is not referred to in statute. My understanding is that regulators who are covered by statutes in which there is no reference to the compact—that has not generally been the case so far—do not have to have regard to it. Perhaps the Minister will tell me that I am wrong, although if we study the matter we might find that he is wrong.

Chris Grayling (Conservative, Epsom and Ewell)

In reinforcement of my hon. Friend's argument about the need to strengthen the guidance given to the regulator, is he aware that, as public corporations, foundation trusts can only have functions that are given to them by statute? It is clear from the drafting of the Bill that foundation trusts do not have the power to appeal against a decision made by the regulator. The Bill must be as precise as possible about the duties of the regulator to ensure that there is no breakdown between the regulator and the foundation trusts.

Andrew Lansley (Conservative, South Cambridgeshire)

My hon. Friend makes an interesting point that could take us into a completely different territory, which could be the subject of a debate in itself—should there be an appeal mechanism, and under what circumstances might an appeal be made? Presumably, foundation trusts would have scope for a judicial review if they felt that the regulator behaved unreasonably. We would have to wait to see whether an appeal was justified before we judged the merits of the decisions.

I have heard nothing to convince me that amendment No. 123 is not highly desirable for setting out the issues to which the independent regulator should have regard. Some of the explanations on consistency with duties were quite interesting, and I suspect that when we come to consider the matter later we may conclude that the

clause should read: ''He must exercise his functions in a manner consistent with the duties laid upon the Secretary of State as distinct from the performance by the Secretary of State of those duties.'' If we accept the point of my hon. Friend the Member for South-West Devon, there is technically nothing to prevent the legislation setting out the duties again in detail.

Given that that is the case, I find myself in the same position as when I began. I shall not seek to press amendments Nos. 232 or 107 to a Division, but I am wholly persuaded of the merits of amendment No. 123. I am surprised that the Government should resist their inclusion in the Bill, as they would help the regulator to do his job in the way that we all wish him to. Therefore I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment proposed: No. 123, in

clause 3, page 2, line 5, at end add—

'(2) In performing his duties under this Act, the regulator must have regard to such of the following as appear to him to be relevant in the circumstances—

(a) the principles under which regulatory activities should be transparent, accountable, proportionate, consistent and targeted only at cases where action is needed,

(b) the different needs and interests of persons using NHS services and, in particular, of the different interests of children, and of those living in rural and urban areas; and

(c) the principles set out in the Compact between Government and the voluntary sector and the codes of practice set out under it.'.—[Mr. Lansley.]

Question put, That the amendment be made:—

The Committee divided: Ayes 7, Noes 14

Clause 4 - Application by NHS trusts

Andrew Lansley (Conservative, South Cambridgeshire)

I beg to move amendment No. 103, in

clause 4, page 2, line 8, after 'trust', insert

', a Primary Care Trust, or any combination of trusts,'.

Peter Atkinson (Conservative, Hexham)

With this it will be convenient to discuss the following amendments: No. 201, in

clause 4, page 2, line 8, after 'trust', insert

'or combination of NHS trusts'.

No. 106, in

clause 5, page 2, line 31, after 'trust', insert

', Primary Care Trust or combination of trusts'.

No. 202, in

clause 5, page 2, line 31, after 'trust', insert

'or combination of NHS trusts'.

Andrew Lansley (Conservative, South Cambridgeshire)

Clause 4 is about applications—[Interruption.] I thought that the Government had abandoned clause 4, but I am reminded that it was rewritten, and we shall rewrite it again.

The structure of clause 4 does not cause me any difficulties, although later clauses may. My four amendments have a specific purpose, which is to broaden the scope of those NHS organisations that can apply to become NHS foundation trusts.

Amendments Nos. 106 and 202 apply to clause 5 and are consequential on the other two amendments. Therefore the first two in the group, amendments Nos. 103 and 201, are the ones that matter. Amendment No. 103 relates to the beginning of clause 4, which states:

''An NHS trust may make an application''.

The amendment proposes to insert after ''NHS trust'' the words,

''a Primary Care Trust, or any combination of trusts''.

That amendment takes up one of the principal arguments, which, as the Committee may recall, was discussed in January when the House debated a Conservative motion on hospital foundation trusts. One of the strongest arguments for consideration at that early stage concerned the question of with whom responsibility and accountability should lie—that is, where patients' proper control should lie in the NHS. If, as I hope is the case, NHS patients have a clear mechanism for controlling the structure and the way in which the NHS is delivered in their locality, then primary care trusts are the obvious starting point. Primary care trusts are the commissioning bodies that operate on behalf of patients.

I have annual discussions with the primary care trust and the hospitals in my area about service level agreements. Although there is negotiation between the hospital and the primary care trust, technically speaking, the operation is primary care trust-led. However, if the hospital is essentially a monopoly provider—as is the case in some places—and offers services to the primary care trust with the expectation that they must simply take what they are given, we are not getting the primary care-led NHS in the form in which the Government have told us it should be structured. If the NHS is to be primary care-led, it will have to be primary care trust-led, and the involvement and the accountability of patients should be focussed on primary care trusts. I will not argue that point at length because the hon. Member for Oxford, West and Abingdon (Dr. Harris) made a similar argument on an earlier group of amendments, and that was set out then and on Second Reading.

I suspect that Ministers must agree, in theory, and are minded to say, ''Make us logical, but not yet.'' They want to keep primary care trusts out, on the grounds that they have only recently been established and therefore need to bed down before being given the opportunity to become NHS foundation trusts.

That is slightly odd in two respects. First, the Select Committee report details the frequency with which NHS bodies are subjected to an additional administrative overhaul. The Government's desire to get all the mechanisms of primary care trusts thoroughly bedded down, before digging them all up again and turning them into something different, is perverse. If we know where primary care trusts are travelling, and if that route is one of accountability to patients through direct membership of a foundation trust by NHS patients in their area, why not move there more quickly? Why not quickly make the primary care trusts accountable?

Alternatively, the amendment may commend itself to Ministers on the grounds that, although they do not wish to carry it out now, they will wish to do so at some later stage. Unless a later amendment that I support were to succeed, an NHS trust or any other trust could make an application to become a foundation trust only if it were supported by the Secretary of State. If Ministers want to hold primary care trusts back—even for years—there is absolutely nothing to stop them doing so.

Adrian Bailey (Labour/Co-operative, West Bromwich West)

I follow the logic of the hon. Gentleman's argument, and I concede that there is something in it. However, does he not recognise that when an essentially new concept is introduced—local involvement in the provision of health care—it is sensible to make that provision for the body that local people most readily understand, identify with and want to get involved with? If that were set up and working well, it would be much easier to make other elements of health service organisation and provision more democratic by using the first as an example and inspiration.

To put it simply, were I to ask people on the streets of West Bromwich whether they wanted to get involved in the running of the local Sandwell hospital, I could be quite sure of a favourable reply. However, if I were to ask people whether they wanted to get involved with the running of Oldbury and Smethwick PCT, I should be met only with blank looks. That approach tries to surmount that difficulty.

Andrew Lansley (Conservative, South Cambridgeshire)

I understand the hon. Gentleman's point; however, it is essentially an issue of timing and phasing in rather than of principle. In his argument, the hon. Gentleman does not dispute that, if we seek accountability to patients and patients exercising greater influence over the structure of services provided to them, it must be done through primary care trusts.

The question then becomes how to reach the point at which the public understand the nature and the role of primary care trusts. As someone—perhaps my hon. Friend the Member for Westbury (Dr. Murrison)—said from a sedentary position, patients encounter their GPs much more frequently than they do their hospital. During a year, many more patients see their GP than attend hospital. Although we have the physical appreciation of the hospital, if, over time, one wanted to create among patients an understanding of the nature of a primary care trust and the role that it

fulfils, so that they had an impetus towards participation in membership, it would not take long for GPs to create that sense of awareness and impetus in their population. That would depend on GPs being minded to give their support, but I suspect that for an application to be submitted the area's GPs would have to go in that direction.

We do not say that all must become foundation trusts in a particular time frame—or perhaps Ministers do take that view. My view has always been that devolved management must have a degree of organic growth. I am not sure that I subscribe to the argument of the hon. Member for West Bromwich, West (Mr. Bailey), but it can be contemplated. However, even if the hon. Gentleman is right, primary care trusts themselves can hold back because, at this stage, they do not think that the public know enough about them to wish to become members. Ministers, too, can hold primary care trusts back.

The second limb of my argument concerns whether it makes sense to leave them out of the legislation. As far as I can see, if they were left out now, we would need new primary legislation to reintroduce them. From past experience, we know that that can be a significant constraint on the timetable and the development of services to patients if structural change is required.

George Young (Conservative, North West Hampshire)

My hon. Friend will recall that, on Second Reading, the Secretary of State, when pressed on that point, said:

''Down the line, I have no objection whatever to the idea of applying the democratic or foundation principle to primary care trusts.''—[Official Report, 7 May 2003; Vol. 404, c. 705.]

Andrew Lansley (Conservative, South Cambridgeshire)

I do recall that the Secretary of State said that. I also recall that later I asked him similar questions on a different subject, but I shall come to that in a moment.

As my right hon. Friend makes clear, if the Secretary of State was willing to say that on Second Reading, logic tells us to include primary care trusts in the clause and make it possible for those to become foundation trusts. If Ministers are not ready for that to happen, it can be held back using the discretion that Ministers have.

Andrew Murrison (Conservative, Westbury)

We must assume that there is a purpose in not including primary care trusts in the Bill. Does my hon. Friend agree that one reason could be that the Secretary of State, because he is very clever, perceives that control is through the primary care trusts? Given that 75 per cent. of NHS funding goes through primary care trusts, is that a way to maintain control, while, on the face of it, devolving power to foundation hospitals?

Andrew Lansley (Conservative, South Cambridgeshire)

My hon. Friend makes an important point. If Ministers are not minded to accept the amendment, they will have to explain why. I am not by nature someone who is given to conspiracy theories, but the Minister asserted on several amendments that Ministers will not have powers of direction or control and that foundation trusts will have operational and organisational freedom. However, that freedom can be

exercised only to the extent that the foundation trusts are commissioned, and the role of the Secretary of State in directing the commissioning bodies is a powerful one.

Gary Streeter (Conservative, South West Devon)

Does my hon. Friend agree that the Government might be putting the cart before the horse? If a primary care trust were to become a foundation trust with local accountability, democracy and ownership, it would be the unit that buys in services from hospitals and it would not commission services from hospitals that did not deliver high-quality services. That would create gaps in the market for other provision to come forward. One way to control the quality of services in hospitals would be to set primary care trusts free, so we might not have to go down the foundation trust route at all.

Mr. Lansley rose—

Gary Streeter (Conservative, South West Devon)

Just say yes.

Andrew Lansley (Conservative, South Cambridgeshire)

I will say yes to the first half, but not to the second. I see merit in giving operational freedom to hospitals, as distinct from the benefits that would accrue from the additional accountability to patients if primary care trusts had the chance to become NHS trusts.

The structure of amendment No. 103 would allow primary care trusts to be piloted as NHS foundation trusts. We have first-wave foundation hospitals, but the impetus behind the first wave is such that it draws Ministers into the expectation that all hospitals will become foundation hospital trusts. However, I am sure that they would acknowledge that, in practice, piloting some of the changes is important.

If the legislation is changed to allow primary care trusts to become foundation trusts, it may be possible to engage in a pilot study with PCTs—consistent with the Bill—in one or two places, without creating the expectation that all primary care trusts will get there. However, if we take the path of legislating again for PCTs to become foundation trusts, that will imply that Ministers have decided that that is the route for all primary care trusts to take.

There is a further limb to amendment No. 103, but that may have to wait.

Sitting suspended for a Division in the House.

On resuming—

Andrew Lansley (Conservative, South Cambridgeshire)

I was just coming to the final limb of the argument in support of amendment No. 103. It will be obvious to the Committee that if the language were changed so that an NHS trust,

''a Primary Care Trust, or any combination of trusts''

were able to make an application, that would mean that PCTs and NHS trusts together could make an application to become an NHS foundation trust. I am motivated in this direction not least by the arguments of the King's Fund. I have great respect for its work, and appreciate its argument that one model for the restructuring of accountability in the NHS could be the creation of a whole health economy foundation

trust. If one were to go down that path, one would need the PCT and the hospital trust to be able to come together to create a single foundation trust. That would be acceptable only in circumstances in which further progress had been made in extending patient choice, which is being contemplated to some extent in ministerial thinking. If that progress were made, we could consider such a model, in particular for urban areas, because it would not be monopoly provision.

At this stage, Ministers are looking for different models of structure to develop the NHS in different places. The structure of the legislation does not at the moment permit either PCTs, or PCTs and NHS trusts together, to respond in accordance with their local circumstances.

There is an alternative, which is addressed in amendment No. 201. The amendment would mean that an NHS trust,

''or combination of NHS trusts'',

may make an application to the regulator. Amendment No. 103 encompasses this amendment, but No. 201 is separated out for a reason.

In some parts of the country, hospitals have come together when NHS trusts have been established to create combined hospitals trusts. I think that one or two of those might be on the list of those that applied for foundation status—certainly, the Bradford Hospitals NHS trust is one that did and it has more than one hospital, and the Gloucestershire Hospitals NHS trust is another. East Cheshire NHS trust was another, but it has not pursued its application at this stage.

It is a consequence of past events that some hospitals have come together to form NHS trusts, and others have stayed as distinct and separate trusts, not part of one organisation. That is a bar to hospitals coming together to create an NHS foundation trust and restructuring themselves locally. My constituency has a particular interest there, because in order to reconfigure its services to respond to patients' needs—I made this point on Second Reading—Addenbrooke's hospital could choose to work with, say, West Suffolk hospital, the Hinchingbrooke hospital in Huntingdon or other local hospitals to create a new structure of services: those at the Addenbrooke's site might focus on the most serious illnesses, while some of the elective surgery and other functions could be redistributed to other sites, making the services more accessible to patients. Patients' needs might well be met more effectively that way.

If Addenbrooke's were to become a foundation trust at a point when the other hospitals had not yet become foundation trusts or, in the fullness of time, they become different foundation trusts, we may be creating barriers. Moreover, we may be creating a curious situation for patients, in which, for example, they are members of the Addenbrooke's foundation trust and, in the fullness of time, they might also become a member of the West Suffolk NHS foundation trust; both would be a hospital to which they might go for different reasons. Although a member of my constituency as a patient might think that those two things were complementary, in practice

the two boards would have no mechanism for taking their decisions together. There would be the co-operation provisions, but they would be separate boards making separate decisions.

With the amendment I am opening up the possibility of NHS trusts thinking hard about the structure of an NHS foundation trust and how it can best serve their locality, sometimes by the reconfiguration of services across several hospitals. The amendment is designed to address that point, without the further complication of primary care trusts at this stage. I hope that Ministers will recognise that this is not intended simply as a probing amendment. It is intended as a serious set of amendments, proposing two options as to how one might proceed. The first amendment, which attracted much support on Second Reading and in Committee debates, relates to the principal of how foundation trusts should be established. The second amendment proposes a practical option in relation to the structure that Ministers are currently considering. It does what they seem to be in favour of—that is, it allows trusts to set up local arrangements that, in their view, are better able to meet the service needs of patients in their area.

Chris Grayling (Conservative, Epsom and Ewell)

I want to say a few things in response to the interesting set of amendments tabled by my hon. Friend the Member for South Cambridgeshire. He has put his finger on one of the clearest issues arising from the structures that have been put in place by the Government under the Bill—that is, that there is a coherent argument to say that the democratic model that is being phased in to the NHS is in the wrong place. It is logical that there should be a debate over whether primary care trusts should enjoy the same rights as foundation trusts, as set out under the Bill. It is an irony that in many ways the primary care trusts themselves will lose freedoms as a result of the establishment of foundation hospitals in the way that the Government have envisaged it. That is because the Government envisage establishing—Ministers will correct me if they have changed those plans—long-term contracts between primary care trusts and foundation hospitals to secure the financial solidity of the foundation hospital trusts, once established. The effect of that will be to reduce the freedoms that primary care trusts enjoy to secure the treatments of choice of their patients. It requires them to follow a fixed balance between secondary and primary care. It will inevitably reduce their ability to move services into the primary care sector, which is ironic because part of the core of the Government's strategy for the NHS, most recently articulated in ''Keeping the NHS Local'', is to begin to move services out of acute hospitals into primary care. If the primary care trusts lose freedoms as a result of the changes, it is not clear how they will be able to do that.

I can envisage that one of the challenges that Ministers will face in the years ahead under the structure they are establishing is a degree of tension between acute and primary care trusts as they seek to implement the strategy outlined in ''Keeping the NHS Local''. There is a clear argument, which merits further debate, that the democratic element of local

NHS structures should relate to the area where decisions are made about care.

Community decision making should be setting priorities about services in local health care purchasing; it should be deciding the priority between, for example, an additional focus on mental health care, orthopaedic care, stronger community-based services, or strengthening acute-based services. With the foundation hospital structure alone that will not be possible. If there were greater community participation in primary care trusts and other kinds of NHS trusts, people would be afforded the opportunity of having a stronger say in decision making about the allocation of health care resources in their community. The range and portfolio of services would not then simply be decided within a hospital.

Evan Harris (Liberal Democrat, Oxford West and Abingdon)

On the theme that the hon. Gentleman is pursuing, does he recognise that that is exactly what happens in social services, despite the constraints on local authorities? Not only can local people vote for a programme to be provided under different proposals put by various parties, but the local revenue-raising powers, limited though they are, can be used to ensure that extra priority is given, without having to take social services from another vulnerable group in order to fund it. Does the hon. Gentleman think that there is merit in that, and would that be transferable in any circumstances to health care commissioning?

Chris Grayling (Conservative, Epsom and Ewell)

One of the great dilemmas faced by many social services departments is that their freedom to manoeuvre is constrained by statute. There are many parts of the country in which decision making has to be skewed one way or another, because central Government diktat requires it. Local authorities do not enjoy the freedom to make decisions without their having to make especially difficult financial decisions that may have an adverse effect on the elderly, for example, through substantial council tax increases. I suspect that that line of argument is not entirely in line with the nature of the amendments, so I will avoid being drawn too far down that road.

My hon. Friend the Member for South Cambridgeshire made an interesting point about the combination of trusts. It is conceivable that ambulance and acute trusts may move closer together in future to ensure a more seamless and effective delivery of services and a better allocation to the correct place in the NHS of patients who summon an ambulance. At the moment, there are frictions in the NHS between accident and emergency trusts and ambulance trusts over the admission of patients. It is conceivable that in future there will be much greater collaboration between, and possibly even the unification of, hospital and ambulance trusts to create a seamless system for the handling, admission and treatment of patients coming through the emergency access channels into the NHS.

I commend my hon. Friend on raising an important issue. The Government should leave the door open. There is an important point about the Bill effectively excluding the extension of the foundation principle in the NHS, without the need to come back to the House

to discuss the matter further. It is not necessary to have an additional piece of legislation to allow the Government to extend the foundation model if they wish; all they have to do is leave the option open in the legislation. Like my hon. Friend, I am interested to hear the response of Ministers, especially after the comments of the Secretary of State on Second Reading. I would like to hear something about how the Government envisages the foundation model developing further in the NHS and why the Bill does not permit that in a managed way.

Evan Harris (Liberal Democrat, Oxford West and Abingdon)

I should be grateful if the Minister could confirm that if a PCT were to seek foundation status, that further legislation would be needed. That was not discussed in detail on Second Reading. It was implied that that was a question for later and that it was necessary to start with NHS hospital trusts. Can the Minister help to curtail the debate by clarifying that that is the case? It is a reasonable question. Clause 4(1) deals with an NHS trust that makes an application, and clause 5(1) states that an application may be directed by

''persons other than NHS trusts''.

That seems to cover all options.

A PCT could be considered to be either an NHS trust—although I do not believe that it is in law—or something other than an NHS trust. When I first saw the hon. Member for South Cambridgeshire's amendments, I thought that they were not necessary because that matter would be dealt with under clause 5. I hope that the Minister will put me out of my confusion on that matter. The explanatory notes to clause 5 state that

''This clause allows persons other than NHS trusts'',

which I assume to mean PCTs,

''to apply to set up an NHS foundation trust. They may only do so with the support of the Secretary of State.''

We know what we think about that matter. The explanatory notes continue:

''This allows organisations that are not currently part of the NHS such as charities and voluntary sector organisations to become involved in the establishment of a new NHS foundation trust.''

That does not preclude that explanation. It applies to PCTs. Perhaps there is some clarification on that matter.

George Young (Conservative, North West Hampshire)

I was hoping that the Minister would provide the hon. Gentleman with the answer. The answer lies in clause 1, where a foundation trust is defined as an organisation that provides goods and services. As a PCT does not supply goods and services, it is excluded by clause 1.

Evan Harris (Liberal Democrat, Oxford West and Abingdon)

I am grateful to the hon. Gentleman for his response, as we always are. PCTs provide goods and services. They are providers of primary care. Under GMS and personal medical services no goods and services are more direct than primary care. Will the Minister curtail that part of the debate by clarifying that issue?

John Hutton (Labour, Barrow and Furness)

I wish it were in my power to curtail the debate but I do no think that it is.

Andrew Lansley (Conservative, South Cambridgeshire)

It is an important debate.

John Hutton (Labour, Barrow and Furness)

It is a very important debate. I want to confine my remarks to my response to it, rather than intervene at that point. The difficulty I have is that both the right hon. Member for North-West Hampshire and the hon. Member for Oxford, West and Abingdon are partly right. Primary care trusts are not solely commissioners, they are providers. In relation to the provider aspects of PCTs, they are broadly within the scope of the Bill. The commissioning function clearly is not. I hope that answers the hon. Gentleman's point.

Evan Harris (Liberal Democrat, Oxford West and Abingdon)

I am pleased that the Minister is talking about the provider function. We have tabled an amendment on clause 5—which is not in this group—that clarifies the issue, and which would allow other bodies such as PCTs to become public benefit corporations, provided that they do not commission services.

The Minister says that that amendment is not necessary because of clause 1, and that PCTs would fall under clause 5, despite the fact that the explanatory notes do not specify that. Some of the hon. Member for South Cambridgeshire's points would not apply in that respect. I would be interested in the Minister's full exposition of that point. It is useful that we now know that. We might have saved time if we had understood that point at an earlier stage. We will wait to hear what the Minister says on that matter.

The other point that I will make concerns issues relating to the commissioning and providing sides. I was delighted to hear the hon. Member for Epsom and Ewell say that to a certain extent—I am quoting him broadly, not exactly—democratisation is occurring first in the wrong place. That is because of the importance of the commissioning role in the NHS, as the hon. Member for South Cambridgeshire stated. If nobody is interested in commissioning, other than in cases where there is a monopoly suppler and the split between commissioner and provider is not working well—that is an internal market, even if the Government deny that—the commissioners have the upper hand.

In another debate the Under-Secretary stated that commissioners have a powerful hand in that matter. That is why it is important that democratisation takes place on the commissioning side. However, I do not believe that giving foundation status is the best way to go about that; if democratisation is needed on the commissioning side, the best way to provide it is by holding elections to a public body, whether it be a health board or a local authority, or having revenue-raising or tax-varying powers so that the priorities that the hon. Member for Epsom and Ewell talked about could be met. He makes the fair point that council tax is not a pleasant tax for older people. There is an alternative, which I shall not go into at this stage, and that is local income tax.

We would like the democratisation to apply to the commissioning side of PCTs, but the mutual aspect of foundation status could easily apply to the primary care services provided by a PCT. We envisage PCTs

returning to being providers and advisers of the commissioners.

To a certain extent, the hon. Member for West Bromwich, West did not exactly recognise the truth, although I partly understand where he was coming from. The services that most people use, see first, use most frequently, are most local and most useful to them are GP services. It is true that, as the hon. Member for West Bromwich, West said, if someone was asked whether they would be more interested in running their local hospital or their local PCT, they might opt for the former because of the over-concentration on acute services and secondary care services. However, in reality, we all have a duty and a role to raise the status of primary care, so that when people think about the NHS in their area, they think about GP services as much as they do about their hospital.

Adrian Bailey (Labour/Co-operative, West Bromwich West)

I am quite happy to take the point that people use GP services more than the hospital, but PCTs are not just about GP services. It is a different body. If we are to enthuse people about participating in health provision, it is better to start with the service that they understand and identify with most readily. I still think that that amounts to the hospital.

Evan Harris (Liberal Democrat, Oxford West and Abingdon)

I understand the hon. Gentleman's point, but I would argue that more people have direct experience of general practice. As far as the provider of service is concerned, PCTs should not be seen as anything other than a way for providers to get together to provide a service. In my view—this is why I did not support the establishment of PCTs, as the record will show—in the early provision, PCTs should not have been confused with the commissioning role that will be best placed with a democratically based, and not a more democratically based, organisation.

I have half-sympathy with the hon. Gentleman, in that we would welcome finding a way of ensuring that the non-commissioning functions of primary care trusts were available for mutualisation, or them becoming public benefit organisations, rather like housing associations, in a way.

However, I think that two stages are required: first, the commissioning function must be split from the providing function, and secondly, as a priority, there must be a democratisation of the powerful, responsive, accountable commissioning function. Then we can consider the issue. That is what we Liberal Democrats have always wanted to happen before we get involved in the detail of exactly what shape the mixed market in providers will take. It is more urgent to sort out the commissioning side. Part of this debate is academic, because the Minister may pursue the course that he hinted at earlier, under which clause 5 would apply to the provider side of the role of PCTs.

It is for those reasons that we do not support the proposal of the hon. Member for South Cambridgeshire, but I thank him for the clear way that he set it out, and for the interest that he has taken in the importance of ensuring that the primary care side of the NHS is not forgotten in our debates.

George Young (Conservative, North West Hampshire)

I am particularly interested in amendment No. 106, which brings primary care trusts within the enfranchising part of the Bill.

Once again, I pray in aid the report of the Select Committee. So far, whenever I have tabled an amendment that is based on a Select Committee recommendation, it has been dismissed with a wave of the hand by the Minister—the last time, a few words were said on amendment No. 200.

Page 49 of the Select Committee report states:

''We also recommend that the Government considers a wider democratic option for trusts, including PCTs, to consider with or without the freedoms associated with the current foundation model.''

Therefore, its view is that they should be brought within the framework of the Bill.

Paragraph 168 states:

''Equally, to ensure a genuine level playing field across the NHS, the needs of mental health trusts, ambulance trusts and primary care trusts must all be taken into account.''

I agree with what my hon. Friend the Member for South Cambridgeshire said at the beginning of this debate. In a sense, the Government are democratising the wrong body. If we had gone back to the model that we had 30 or 40 years ago, where the budget went from the Department of Health to the local hospital, which then decided what services would be provided, there would be some validity in doing what the Government are doing—making the hospital accountable with regard to the needs of the local community. However, in between times, we have had the split between the purchaser and the provider, and it is the provider rather than the purchaser that has been exposed to the new forms of social governance.

The situation has been made worse by Ministers using careless language: they have implied that what they are doing will alter the services that are being provided locally. In his foundation hospital speech of 30 April, the Secretary of State said:

''By all means let us debate NHS foundation trusts but let us do so on the basis of what the policy is rather than what it is not. Greater local freedom, real local ownership, genuine staff involvement to give more responsive services and ensure community needs are better met.''

The more responsive services are a matter for the primary care trust.

On Second Reading, the Secretary of State admitted:

''Primary care trusts will continue to have the power to use their resources as they see fit.''—[Official Report, 7 May 2003; Vol. 404, c. 711.]

Therefore, it is the primary care trusts rather than the foundation trusts that will shape the services that the community gets. That is why I have a lot of sympathy with the argument, which was deployed on Second Reading by many Labour Members, that the primary care trusts rather than the hospitals should be exposed to democratic accountability.

In response to that, the Secretary of State has shifted his position as he has come under pressure. That was particularly the case during the debate. I have to hand the quote that I used when I intervened

on my hon. Friend the Member for South Cambridgeshire. The right hon. Gentleman said:

''Down the line, I have no objection whatever to the idea of applying the democratic or foundation principle to primary care trusts.''—[Official Report, 7 May 2003; Vol. 404, c. 705.]

Given that that is the Government's policy, it is odd for legislation to go through that precludes that. We have the perverse position whereby a hospital trust that does not want to become a foundation trust will have to do so because they all must do so within a certain period, but a primary care trust that would like to enfranchise itself under this process is not allowed to do so. If one wants to make the NHS more accountable to local people, why does one have legislation before the House that ensures that a PCT cannot become democratically accountable?

Therefore, I have a lot of sympathy with amendment No. 106. It would preserve the flexibility that the Government want. Under clause 5, it is not possible to apply to become trusts unless applications are supported by the Secretary of State. If it is the Secretary of State's view that these are fragile organisations that are not quite ready for that, he can simply not validate an application under clause 5. However, it would be sensible and avoid primary legislation if we were to agree to amendment No. 106, or a similar one.

The view of the Select Committee, a number of Labour Members on Second Reading and many Opposition Members should be accepted: to do so could save the Government some time in a few years.

John Hutton (Labour, Barrow and Furness)

Again, I find myself in the position of welcoming this debate and congratulating the hon. Members who have spoken.

The hon. Member for South Cambridgeshire started his argument from the point at which I should start mine: a sensible position. He does not want the Bill to create further barriers between different parts of the NHS, and nor do I. For reasons that I shall outline, that is not what the Bill will do. He does not want the Bill to act as a deterrent to planning and proper strategic development across the NHS; it will not do so.

The right hon. Member for North-West Hampshire said that I had dismissed out of hand the Health Committee's report, but I have not. We hold that Select Committee in the highest regard, and we will carefully consider its report on NHS foundation trusts. On several occasions, the hon. Gentleman invited me—tantalisingly—to respond to certain recommendations in the report. With the greatest respect, he knows that it would not be appropriate for me to pre-empt the Government' response to the report. He might be delighted to hear my thoughts on the subject, but he will have to contain himself until the appropriate moment; wisdom and light will then shine upon him, and we will all be happier individuals as a result.

George Young (Conservative, North West Hampshire)

Is the Minister seriously saying that we will debate the Bill, even though the Health Committee has produced a report with a number of recommendations to which the Government will not respond until after the Bill has left Committee?

John Hutton (Labour, Barrow and Furness)

It is true that the Government's response to the report will not be made until the Standing Committee is over.

Jim Dowd (Labour, Lewisham West)

One of the reasons why the timetable of the report was so tight vis-à-vis Second Reading was the delays in getting the report out because of the deliberative sessions. It could have been out much sooner, and the Government's response could therefore have been produced before Second Reading, but the Committee's deliberations made that impossible.

John Hutton (Labour, Barrow and Furness)

I am grateful to my hon. Friend. I am sure that many of us, including myself, would have liked to have listened in on those deliberations.

The right hon. Gentleman quoted various paragraphs of the Select Committee report, and, in response, I am giving the Government's view on those issues that are pertinent to the Bill. I am not dismissing the contents of the report, but nor is the report influencing our debate or shaping my responses. As the hon. Member for South Cambridgeshire made clear, the Health Committee felt that the Bill should address the issues that he raises. I shall respond to those particular points, and, in the process, cast light on the Government's view on some aspects of the report.

I shall treat amendments Nos. 201 and 202 together because they relate to combinations of NHS trusts applying for NHS foundation trust status. I shall also deal with the wider point of primary care trust applications for foundation trust status. Without running through the history and background to the Bill, in a nutshell we are establishing a new form of governance for NHS trusts that is independent of Whitehall control. That is one part of the wider programme of system reform that is needed to deliver our strategy in the NHS plan.

The Bill is not designed to be a backdoor route to large-scale service reconfiguration, which must be considered properly in the context of wider policy development. As my right hon. Friend the Secretary of State made clear on Second Reading, the Bill envisages one NHS trust becoming one NHS foundation trust. Anyone reading the Bill will see that we have clearly set out that process in part 1. The Secretary of State also made it clear that different configurations might be considered, although he rightly counselled caution. Our top priority is to ensure that NHS foundation trusts work before we move to adopt different models.

Any configuration would have to take place according to current arrangements before an application could be made to establish an NHS foundation trust. There needs to be consultation, not only on a proposal to apply for NHS foundation trust status—I shall come to that when we consider clause 6—but on the whole package, including the proposal to merge two NHS bodies. The organisations involved would need to satisfy the consultation provisions in clauses 6 and 7, the regulations on consultation for dissolution of NHS trusts and section 11 of the Health and Social Care Act 2001. Section 11 places a duty on NHS bodies responsible for services to involve and consult patients and the public on the planning of services, their development and proposals

for service change, and on decisions that may affect the operation of those services.

Further, under regulations made under section 7 of the same Act, NHS bodies that are considering a proposal for a substantial development or a variation of their health services must consult the overview and scrutiny committee of the relevant local authority.

I will translate that into plain English: I need to do so for my own purposes, let alone anyone else's. During the course of discussions within local health economies, it is possible for more than one NHS acute trust to come to the view that they wish to apply for NHS foundation trust status, and that they wish to do so as part of a programme of bringing together the provision of acute services in the locality. Under the Bill, it is possible to do that. However, there is a difficulty.

Because of the way in which the Bill is constructed, the process of NHS acute trust merger will have to run in parallel or coterminously with the application to establish an NHS foundation trust. The provisions about authorisation in clause 6 make it clear that the independent regulator of NHS foundation trusts can only authorise the trust that applied for foundation trust status to be a foundation trust. I am sure that the hon. Member for South Cambridgeshire can see the difficulty. Two acute trusts are applying separately, but with the intention that at the end of the process there will be an acute trust merger and that the merged trust will become an NHS foundation trust. Under the Bill, only the merged trust can be authorised to become an NHS foundation trust, so the merger would have to precede the authorisation under clause 6.

That might not be the process that the hon. Gentleman wants, and I share some of his frustrations about it. I do not want unnecessary bureaucracy to come out of this legislation. However, it is clear that we cannot look at this subject only in terms of the Bill: we have to look at it against the background of the wider legislation on NHS trusts, including that on trust mergers. An acute trust merger would be a significant service change, so there would have to be a process of consultation about it. We cannot escape that. If that is part of the process of more than one NHS trust wanting to become an NHS foundation trust, it will have to be gone through.

Andrew Lansley (Conservative, South Cambridgeshire)

I do not wish to put barriers in the way of configuration, and I accept that that would need proper consideration through all the mechanisms of the independent panel, the regulator and so forth, but there is something that I still do not understand. If, for example, a first wave foundation trust wished at a subsequent stage to add by way of merger other acute trusts or smaller hospitals in its area which themselves wanted to apply to be foundation trusts, I cannot see how the Bill allows that to happen. Does the regulator have the power to entertain a subsequent application to become part of a pre-existing foundation trust from other NHS trusts?

John Hutton (Labour, Barrow and Furness)

I will have to take legal advice about that from my officials. Perhaps we can return to the matter at a later stage of our proceedings?

I think that this is the question that the hon. Gentleman is asking: if there is a pre-existing NHS foundation trust that, having had a process of consultation with other acute trust advisers, wants to merge its services with those of existing trusts that are not NHS foundation trusts, would there then need to be a separate NHS foundation trust application to the regulator? I will have to get back to him on that, as I do not want to risk misleading the Committee.

Chris Grayling (Conservative, Epsom and Ewell)

Before the Minister moves on from reconfiguration, can I ask him to address the question of the reconfiguration of services that would result from the ''Keeping the NHS Local'' strategy, and the relationships between PCTs and foundation trusts in such a situation?

John Hutton (Labour, Barrow and Furness)

There is absolutely nothing in the Bill that makes the ''Keeping the NHS Local'' strategy impossible to deliver. Service reconfiguration will be dealt with in the way that already applies to non-NHS-foundation trusts and, under the Bill, service reconfigurations will need to go through the oversight and scrutiny committees of the local authorities and then be referred up to the regulator for him to decide. In the process, the independent regulator can refer such a decision to the independent reconfigurations panel, which will consider the guidance and ''Keeping the NHS Local'' in coming to a view.

Steve McCabe (Labour, Birmingham, Hall Green)

I detect a mood of support in Committee for the process. I hear people saying that we do not want to be unnecessarily restrictive, given that the purpose of the measure is to give people a chance to be innovative, to use capacity in the best possible way and expand it, and to be more responsive to patient needs. However, when my right hon. Friend the Minister described the situation, it sounded as if he himself was acknowledging that the process is unnecessarily rigid and complex under the Bill, in terms of achieving the combination that we are seeking.

As the Minister is going to seek legal advice to answer an earlier point, will he also consider whether there is a way of simplifying the process, so that we can achieve the ends, on which there is some consensus? Will he report back on that?

John Hutton (Labour, Barrow and Furness)

Yes, I will certainly do that. However we get there, and whatever adjustments we might want to consider, one thing is reasonably clear: if acute trusts wish to apply jointly to become a foundation trust, we will end up with one NHS foundation trust. There will have to be a way, facilitated through one process or another, whereby the several trusts become one.

Steve McCabe (Labour, Birmingham, Hall Green)

And the simpler the better.

John Hutton (Labour, Barrow and Furness)

Yes, that is absolutely right, but whichever way we cut it, a proper process will need to be followed, and that process is already set out in existing legislation for an acute trust merger. Of course, I do not want an overly bureaucratic process; I eschew that approach altogether. However, we must

enter into this discussion with our eyes open, and must realise that, however we care to look at it, this is quite a complicated legal and organisational process. I want to find the simplest way through it.

I tell the hon. Member for South Cambridgeshire and the Committee that there is an obvious way for the several acute trusts to do that—they can go through the merger process and apply to be established as an NHS foundation trust. That is perfectly possible. Nothing in the Bill precludes that from being a way forward. I suggest to my hon. Friend the Member for Birmingham, Hall Green (Mr. McCabe) that that is perhaps the simplest way to cut through the problems.

Obviously, such decisions will, in the first instance, be taken locally—and rightly so. However, I enter a precautionary note: if we are talking about multiple acute trusts coming together to form one large super-trust, we must remember that the wider we cast the net in terms of acute trust reconfigurations, the further we are moving in a difficult direction. We would probably be taking the foundation trust further away from the local communities that we are considering. The hon. Member for South Cambridgeshire might think about a Cambridgeshire-wide NHS foundation trust. We start from a large pool of potential operations.

Steve McCabe (Labour, Birmingham, Hall Green)

I understand what my right hon. Friend is saying, but surely what he describes would have to be approved by both the regulator and the Secretary of State. It is highly unlikely that he would agree to a super-trust that takes away from local areas, as the purpose of the scheme is to give freedom at local level.

John Hutton (Labour, Barrow and Furness)

I agree absolutely. I am sorry if I am labouring the point, but my hon. Friend has, in his characteristic way, helped me out significantly; we need to consider the matter in context. How big an issue will it be for the NHS in the immediate and medium-term future? I do not think that it will be the big issue on how we take forward the policy on NHS foundation trusts. The model that we had in mind when we set out on this path was the single NHS trust applying to be, and becoming, the new NHS foundation trust. If one considers the first and second waves, that is how the model will develop.

However, I agree with the hon. Member for South Cambridgeshire, in that I do not want to put an artificial break on discussions about the best way that local services can be put together. Those discussions should always take place locally. If a combination of acute trusts wants to go down the route that the hon. Gentleman says they might want to, I would not want to get in the way of that, and neither would my right hon. Friend the Secretary of State.

I am grateful to my hon. Friend the Member for Birmingham, Hall Green for giving us a bit of context. I have said to him, and the Committee, that we will look carefully at the procedures to ensure that they are the most streamlined that we can develop and devise, and if there is a need to come back with changes on Report, we will consider that.

There is a way forward, as I suggested to the hon. Member for South Cambridgeshire, through a merger and the merged trusts applying to become an NHS

foundation trust. If there is one obvious way through the difficulties, that is probably it. With respect to the hon. Gentleman, his amendments Nos. 103 and 106, which would allow primary care trusts, or groups of trusts, to apply for NHS foundation trust status were of more substance.

The right hon. Member for North-West Hampshire was, as always, correct in his intervention on the hon. Member for Oxford, West and Abingdon. The model set out in the Bill was designed with provider organisations in mind. The Bill requires that the principle purpose of any NHS foundation trust is the provision of NHS services. That is true in clause 1(1), to which he referred, and in clauses 5(2)(a) and 14(2). As the Secretary of State made it clear on Second Reading, we have no objection in principle to applying democratic or foundation principles to primary care trusts. However, we want to do that carefully at the right time. We have started the process at the logical place, which is, as my hon. Friend the Member for West Bromwich, West has made repeatedly clear in effective interventions, with NHS hospitals.

PCTs are new, embryonic organisations that are not yet ready to go through that stage of change. If and when we decide that that should be so, we will need to bring forward specific, separate legislation. The right hon. Member for North-West Hampshire has bemoaned the perpetual revolution in the NHS—the constant organisational change. I say to him that about half of the primary care trusts in England are barely a year old. It is fair to give them time to develop and mature.

Primary care trusts could not become NHS trusts for the reasons I have set out. That does not, however, rule out consideration on a case-by-case basis of whether it would make sense for a provider arm, or an element of the primary care trust, to establish partnership arrangements with an NHS foundation trust. For example, it might even be possible under clauses 4 and 5—ahead of the application process—for a service reconfiguration to be planned with that end in mind. The provider elements of a primary care trust might merge with the acute trust and the new acute trust would apply to the independent regulator for foundation trust status.

Evan Harris (Liberal Democrat, Oxford West and Abingdon)

The Minister was speaking very quickly when he listed the areas in which he felt that an existing primary care trust that provides and commissions would not qualify. He referred to clause 1, but I do not think that it is contained in that clause. I may be wrong. There may be another relevant area. However, the primary or predominant purpose of the provider has to be provision, rather than commissioning. Although I understand that the Government and the Secretary of State would resist a PCT applying, I am not clear whether it would need additional legislation. When the Secretary of State feels that the time is right, given the pressure on parliamentary time, could not the Secretary of State say that clause 5 applies to a PCT, at least in terms of its provider function?

John Hutton (Labour, Barrow and Furness)

With respect, the hon. Gentleman may not have heard me. Perhaps I was speaking too quickly. I apologise to the hon. Member for Oxford,

West and Abingdon and to the Hansard reporters, who always have a job of work to do when I speak.

The point I am trying to make is this. Under the terms of the Bill—clauses 1, 5 and 14—the principle purpose of the applicant for foundation trust status has to be the provision of NHS services. That could not be said to be the principle purpose of a primary care trust. The hon. Gentleman should look at clause 14 if he has any doubts about that. He might also consider clause 1(1), which makes it clear that the provision of NHS services is the principle purpose of the NHS foundation trust.

Primary care trusts, which have a commissioning role and some elements of the provider responsibility, do not meet that condition. Under the Bill as currently drafted, primary care trusts in commissioning roles would not be eligible to apply for foundation trust status. I am trying to make it clear to the Committee that the provider elements of a primary care trust could, under clauses 4 or 5—depending on how the application proceeded—be eligible to form part of a joint application with an NHS acute trust to become an NHS foundation trust. That is entirely sensible.

This has been an important debate. The hon. Member for South Cambridgeshire has hit on an important issue of principle. As my right hon. Friend the Secretary of State has made clear, we have no objection to the concept of applying foundation trust status to primary care trusts. The issue is when, not whether. The question is whether the Bill is the right model for the Government structure to use. Those are issues that still need to be resolved.

It does not make sense at the present stage in the development of primary care trusts to passport them into the legislation in the way that the hon. Member for South Cambridgeshire is suggesting. There is a way through his concern about joint applications from several acute trusts. Perhaps it is not the best and most streamlined piece of engineering. We will have a look at it to see if there is any way in which it can be improved.

On balance, many Labour members would take with a pinch of salt the Opposition's new-found passion for democratising the NHS, which has now manifested itself in the desire to find a way of democratising primary care trusts. I do not recall such a desire appearing in any official policy document produced by the Conservative party in all the time that I have been a Health Minister. I readily acknowledge that I do not trawl the internet for that sort of material. Perhaps when the hon. Gentleman responds, he will point out to me the document that identifies the new-found passion for democratising the NHS, and we look forward to that.

Andrew Murrison (Conservative, Westbury)

I am grateful to the Minister for giving way on that point, because I should be fascinated to know where in the 2001 Labour manifesto foundation hospitals were mentioned.

John Hutton (Labour, Barrow and Furness)

I can point out to the hon. Gentleman that there are several parts of my party's manifesto that I read—although I am not sure that he did—

where we talked about increasing the representation of the public on the boards of NHS trusts. That is what the Bill will do. Obviously, the hon. Gentleman has had some sort of episode, because he usually follows our procedures very carefully.

It has been a longer debate than I should have preferred, although many important issues have been raised. I have an open mind on the point that my hon. Friend the Member for Birmingham, Hall Green has raised, and I share the general direction of travel in which the hon. Member for South Cambridgeshire wants us to proceed. The question is what vehicle, what procedure and what legal platform we choose. It does not make sense at the present time to go down the road that the hon. Gentleman is inviting the Committee to take.

The rest of the debate is in Hansard.