Health and Social Care Bill

Public Bill Committee, 24 March 2011.

Mike Hancock (Liberal Democrat, Portsmouth South)

Good morning, Members. Before we start our debates on clause 113, I must comment on the rather radical step taken by Mr Lefroy in moving to another seat without the Chair’s permission. Given that Members all agreed to stay where they were for the duration of the Committee, Mr Lefroy, you might have a job being called today.

Simon Burns (Conservative, Chelmsford)

He has man flu and does not want to spread it.

Mike Hancock (Liberal Democrat, Portsmouth South)

Then he is doing the Committee a service and I apologise. Mr Lefroy, your courage in moving is to be applauded.

Clause 113

Derek Twigg (Labour, Halton)

I beg to move amendment 615, in clause 113, page 102, line 12, at end insert ‘if Monitor so decides.’.

I hope that the Minister will be a little more forthcoming with information today. We think that we have been asking pretty succinct and relevant questions, but the right hon. Gentleman is now becoming known as someone who gives only name, rank and serial number; occasionally, if he is feeling generous, he might talk about his football team, but knowing who that is, I have decided that it is probably best not to raise the subject. However, we hope that he will give us more information today, because the Bill makes the most profound change in the national health service since it was set up and we must have more detail. He keeps saying that the detail is being worked up or that someone else is dealing with the detail, but because of that profound change, it is important that we have a chance to scrutinise the Bill with the facts before us, and that is not the case at the moment.

The insolvency clauses fit with the present Government’s approach to the health service of putting competition first and of having the private sector much more involved and undermining NHS services. That is embodied in the drafting of the clauses. Under the National Health Service Act 2006, the application of insolvency law was voluntary; in the Bill, we have a whole new way of dealing with the law on insolvency, which becomes mandatory. The Minister might want to give us more information about that.

Under clause 113, failing foundation trusts that go bust will become subject to commercial insolvency law. The aim of our amendment is twofold: first, we want to voice strongly our opposition to a measure that is dangerous to the national health service; and secondly, we want the Minister to provide some clarification about the regulations that the Secretary of State will impose with regard to foundation trusts entering insolvency.

The clause has been written to serve the needs of profit making, the market and the private sector. It represents a reversal of the governing principle of the NHS—the principle that puts patient care first and profit margins second. Today, we will return regularly to the theme of the profit margin, rather than the patient, being put first as a result of the Government’s changes. The change between the existing policy and the future one is clear. At present, foundation trusts can voluntarily be placed in insolvency by the NHS through Monitor in its current guise—I stress, in its current guise—but that is a last resort measure that, to date, it has never been necessary to implement. Changing that is the point of the additional powers given in the Bill for competition and for greater involvement of the private sector.

Important to us—I shall come back to this again and again—are early intervention in and support for hospital trusts or other services that get into trouble. The Minister keeps talking about inefficient trusts and services that are not up to the job, but there is a difference between that and wanting a better failure regime. Trusts may get into financial difficulties, but that does not necessarily mean that they are providing poor clinical services. That is a big difference, but under the Bill if a trust becomes insolvent, it goes. Basically, that is what the Bill is saying.

The 2006 Act contains a thorough procedure for early intervention when trusts are struggling financially. It was Labour’s policy when in government that insolvency should be the very last resort, taken only after multiple attempts have been made to reform trusts and return them to financial stability. We are interested to see how the Government want to prevent it from happening in the first place. We see hospitals as part of the wider NHS family, but the Government seem to see them as independent business entities, almost celebrating the fact they are putting a failure regime in place.

We want to ensure that the provisions we put in place in 2006 remain to support hospitals that might get into trouble financially, but still provide good clinical services—indeed, that will be true in most cases. Under our system, even if financial failure ensued it would be dealt with in a planned and careful way to ensure the best solution for the local population. I am not sure how many people in the constituencies of Committee members are aware of how insolvency law applies and how the rules regarding the finances of foundation trusts will impact on the local hospital.

Under the clause, that will no longer be the case; it is no longer Government policy. Had an FT failed under Labour, it would of course have been regrettable and upsetting, but it seems that this Government will celebrate it as a success of market function. That is a big change. On Tuesday, the Minister kept speaking about the failure regime as though it would bring about massive improvements to the health service. I repeat that the present Government will celebrate failure as a successful market function.

Where we had early interventions, this Government have nothing. The Minister has said before that that is not the case, but I wait for his reply to this debate. Where we had a careful strategy to help FTs away from financial difficulties, the Government will leave them to fail. Where we had a careful plan for last resort insolvency, the Government have the driving belief that FTs should be allowed go bust, like commercial organisations. That is a big change. Hospitals are seen as commercial organisations, but we see them primarily as health providers that put the patients’ interests first.

As I said earlier, foundations trusts are part of the NHS family: they are NHS organisations whose job is to improve people’s health for the greater good of the community. Will the community have a say in the future of foundation trusts? I say again that FTs were created and financed almost exclusively with public money. They should be treated as such and not as commercial entities that exist purely for the pursuit of profit. The more people I speak to in the national health service who know about commissioning, the more I hear that the changes brought about by the Bill and the pressures it will put upon commissioners will force them to look at the profit line rather than what might be in the best interests of patients.

To avoid the unacceptable prospect of seeing foundation trusts enter insolvency proceedings, with publicly financed assets being sold off at a much reduced price in an insolvency fire sale, our amendment seeks to ensure that the final decision on whether a trust enters insolvency remains with Monitor. As it stands, the clause operates in the interests of creditors. With our amendment, it would operate in the interests of patients.

Throughout, the clause talks about creditors. That is the difference: we talk about patients, the Government talk about creditors. If that is the reality, it is not surprising that more and more people are becoming worried about the privatisation of the NHS, and particularly about the future of local hospitals. Many hon. Members on both sides of the House have spoken about their local hospitals. We believe that people do not yet understand the detail of what the Bill entails or that the future of local hospitals is under threat because of the changes.

The Secretary of State will have responsibility for setting out the as yet undefined regulations under the clause. Is that yet another example of our being asked to vote on a clause and to trust that the Secretary of State is competent enough to deal with our concerns? Can the Minister provide evidence showing that we should simply trust the Secretary of State to come up with regulations sufficient to address our concerns? That goes back to the fact that the Minister has not been forthcoming with details, which are important if the Committee is to make the decisions it must make. Alternatively, will he once again duck the question because he does not know what the Bill’s consequences will be or, worse, because he is afraid of exposing them?

I return to what Monitor’s chairman said about people’s emotional attachment to their local services. People do have an emotional attachment to their local hospitals. That is not based on a lack of logic; rather, they see the services their hospital provides and they support the hospital. Under the plans in the Bill, however, that does not matter, because hospitals are now much more vulnerable to closure and to having their assets transferred. We will explore that further as we go through the coming clauses this morning and this afternoon. For the avoidance of doubt, Mr Hancock, let me add that, depending on what the Minister says, we may want a short clause stand part debate.

Simon Burns (Conservative, Chelmsford)

I listened with great interest to the hon. Member for Halton. At the beginning of his remarks, he said he was being deprived of information. I think he is being a little unfair.

Derek Twigg (Labour, Halton)

Only a little?

Simon Burns (Conservative, Chelmsford)

I was being polite. At every stage of the Committee’s proceedings, we have sought and we will continue to provide as much as information as we can to answer the points made by Opposition Members. The fact is, however, that sometimes they do not like the answers they get, so they take that as not having had an answer. In other cases, it is a fact of life in Committee that a number of the issues that flow from the Bill will be dealt with through regulation and guidance. Much of that guidance will be open to consultation before its implementation, and it would be premature at this stage to give the information the hon. Gentleman seeks.

The hon. Gentleman spoke as if that were unprecedented or surprising, but it is not, as I have said on numerous occasions. The previous Government’s practice was completely different from that demonstrated in the Bill. The primary legislation they produced was a skeleton; all the powers in terms of what was to be done flowed from that primary legislation and through secondary legislation, which, for valid reasons relating to the cycle, we did not have at the time in Committee. We have sought to redress that problem by putting far more in the Bill, where appropriate. However, secondary legislation, regulations and guidance will still flow from our Bills, just as they did from the Labour Government’s. There is at least the reassurance that there will be consultations before many of the regulations and pieces of guidance are drawn up. I hope that that clarifies the point without stimulating an intervention from the hon. Gentleman.

Let me broadly explain what clause 113 does before moving on to some of the specific points the hon. Gentleman raised in moving the amendment. The clause provides for the Secretary of State to make regulations to apply relevant parts of insolvency and company legislation to foundation trusts for the purposes of rescuing an insolvent foundation trust as a going concern or ensuring an orderly winding-up of its affairs in the best interests of creditors as a whole.

Such proceedings would used only ever as the last resort, and it is important to bear that in mind. The hon. Gentleman asked what will be done to prevent us from getting to the last resort. As is my habit, I will give him great detail in answer to that question.

Derek Twigg (Labour, Halton)

I look forward to it.

Simon Burns (Conservative, Chelmsford)

Good. Such proceedings will be used only as the last resort when pre-insolvency intervention has not succeeded, and only after continued provision of designated services have been secured through special administration. I emphasise that those procedures will be the last resort when intervention by FT governors, commissioners and Monitor has not succeeded in turning around the affairs of a failing provider, and will apply only in relation to non-designated services.

Derek Twigg (Labour, Halton)

The Minister mentions governors. Will he tell us exactly—it is not clear in the Bill—what Monitor’s intervention procedures will be before insolvency? What powers will it have?

Simon Burns (Conservative, Chelmsford)

I will, but will the hon. Gentleman let me make a little more progress, because the answer will be part and parcel of my explanation of how we will ensure that action is taken to avoid the last resort of insolvency?

We think that such powers are vital to ensure that patients should no longer be forced to use, or taxpayers to subsidise, poor-quality, inefficient services or providers. Instead of propping up failing providers, as under the current system, there will be transparent mechanisms for managing provider failure to protect essential services, and to allow commissioners to replace services with high-quality or better-quality options.

The clause binds the Secretary of State to making regulations. We believe that that is the right approach, particularly as long-standing powers to apply insolvency procedures to foundation trusts, which the previous Government introduced, have never been exercised. It would be wrong for the Secretary of State to be required to secure Monitor’s permission to introduce secondary legislation, as the amendment suggests. Indeed, that would undermine Parliament’s role. Moreover, we are not aware of any precedent that would require the Secretary of State to need permission from an arm’s-length body such as Monitor before making secondary legislation in the health care sector. It will therefore not surprise the hon. Gentleman that I do not think the amendment would add anything relevant to the clause.

I will flesh out my argument. The hon. Gentleman referred to insolvency being the last resort, and I totally agree with him: it must be the point of last resort. We expect commissioners to work constructively with providers to try to resolve problems to avoid failure. Monitor will also provide support and intervene before failure, as discussed during our debate on designated services, which I am sure the hon. Gentleman remembers.

I shall give some examples of providers’ actions to prevent failure. A provider will always have a range of actions, including: improving management capability and expertise, appointing directors with experience of turning round health organisations, benchmarking its services and costs against comparable providers, reducing costs and increasing efficiency through targeted cost improvement programmes, and working in partnership with other organisations to share back office functions and services.

Derek Twigg (Labour, Halton)

I suspect we are heading down the same road as we did the other day in trying to obtain answers. The Minister referred to designations. So that the Committee knows and there is no doubt, will he tell us why the intervention powers under the 2006 Act need to be changed, and what can Monitor do under its powers in law to make the foundation trust take action before it goes into insolvency? Will he tell us exactly what those powers are and why they must be different from the 2006 Act?

Simon Burns (Conservative, Chelmsford)

I certainly will. That is what I am trying to do.

Derek Twigg (Labour, Halton)

With respect, the Minister is referring to providers. I am asking specific questions about Monitor.

Simon Burns (Conservative, Chelmsford)

The hon. Gentleman has asked specific questions about Monitor. He also asked what will be done to try to prevent a situation of last resort arising. It is for the benefit and interest of the Committee and those who are following our proceedings to hear the whole package. I am concentrating on actions that can be taken within organisations to try to prevent them from getting to the last resort. When I have finished that section I will move on to Monitor’s regulatory powers, which I think will address the hon. Gentleman’s second point. I have chosen to do it that way around, rather than the other way around, which I get the impression is the way that the hon. Gentleman would like it, but we will get there in the end, so whichever way around it is does not matter. It is important, however, to give the Committee some idea of what we expect will happen to help to ensure that that is a position of last resort.

As I said, we expect providers to work in partnership with organisations and share back-office functions and services. We expect them to improve service quality to attract more referrals. We expect them to apply to Monitor for a local subsidy to the tariff to cover excess costs of delivery in designated services when, despite being demonstrably efficient, they cannot recover their costs—for example, where a provider is serving a very rural community where it is unable to generate sufficient economies of scale. The regulator may also encourage the provider to reduce its costs in designated services where that is practical and possible.

That is the generality of what one would expect providers to be working on if they were beginning to detect problems. The hon. Gentleman asked: what will Monitor do? Monitor, as he knows, has a role in pre-failure with regard to designated services. Monitor will be responsible for supporting commissioners in meeting their duty to preserve access to essential health care services for patients. It will do that through a range of activities, some of which will happen in advance of a failure, some of which will happen as an organisation enters the pre-failure phase, and some as an organisation reaches the point of failure. The provider licence will contain a number of continuity of service conditions that will seek to restrict risky behaviour among designated service providers. The provider risk pool will place financial incentives on providers through the provider levy to reduce their financial exposure by taking steps to reduce their risk of failure. Looking at the operation of other comparable schemes, such as the Pension Protection Fund, those mechanisms have proved to be effective in reducing the overall risk of failure of organisations.

The designated service licence conditions will require providers of designated services to provide information that will allow Monitor to develop a distress regime that tracks providers’ financial well-being and compliance against licence conditions. Should a provider of a designated service breach a licence condition or fall below a certain credit rating, Monitor will be able to trigger a higher level of regulatory scrutiny and intervention by taking enforcement action, through the licensing regime, as set out in clause 90. That could include advice to providers on how to rectify their situation and the ability to require action from providers to address specific issues. It is important to know that such enforcement action is unlikely to include fines, as that would only heighten the financial failure.

The hon. Gentleman went on to ask what role the community has in insolvency proceedings The regulations that will be published will spell out the details of the regimes. However, without wanting to pre-empt the regulation, I can confirm that there will be a consultation stage in special administration where significant changes to designated services are planned. Parliament will have the chance for scrutiny and debate through the affirmative procedure.

Derek Twigg (Labour, Halton)

Just to be clear, will Parliament get the chance to debate measures on each individual foundation trust?

Simon Burns (Conservative, Chelmsford)

No, Parliament will have the opportunity to debate, subject to the affirmative procedure, the regulations that will flow from this part of the Bill to deal with that area of policy. I am glad to clear that up.

The hon. Gentleman said that a trust could be providing high-quality care but still face financial difficulties and go bust. Trusts providing high-quality services would be much less likely to fail, as funds follow the patients. We expect commissioners and Monitor to work with them to control and reduce costs to avoid failure.

The point that the hon. Gentleman made more than once—it was obviously the buzzword message that he wanted to get across—was that the clause puts profit first, which is ludicrous. He does not really mean that, but I understand that he has to go through the motions. However, it is palpable nonsense to suggest that. The previous Government proposed to apply insolvency law to foundation trusts. Our Bill recognises that pure insolvency law would not be appropriate for the NHS, which is why we are proposing a tailor-made special administration regime to protect the interests of patients. Despite the prejudices of some Opposition Members, we are talking about the interests of patients and not of profits.

Liz Kendall (Labour, Leicester West)

Did I hear the Minister say that if this Bill is passed under the Government’s new regime, providers will be less likely to fail?

Simon Burns (Conservative, Chelmsford)

No, I am not saying that at all. We anticipate failure because no one can predict what will happen in the future. We see failure as the last resort and, for the reasons that I have outlined and through the actions of providers and the functions of Monitor, there will be help, assistance and guidance given to providers long, long, long before they might get anywhere near the situation of last resort. Every assistance will be given to avoid the last resort regime. What I would say to the hon. Lady is that if a provider is providing high-quality care, there is less likelihood of failure.

Liz Kendall (Labour, Leicester West)

The Minister says that the trusts will be getting lots of guidance before they fail, but who will provide that guidance? If Monitor is an economic regulator and no longer responsible for regulating foundation trusts, who will provide guidance to the hospitals and trusts to stop them from failing?

Simon Burns (Conservative, Chelmsford)

I came in for an element of criticism from the hon. Member for Halton on this because I decided to do it in the opposite way to the way in which he wanted, but I thought that I had gone into considerable detail as to how help and assistance would be given. I explained what we expected providers to do during the whole process. I gave a whole list of ideas and courses of action that providers could take to seek to minimise the problems.

Liz Kendall rose—

Simon Burns (Conservative, Chelmsford)

The hon. Lady is trying to intervene without even hearing the end of the answer to her previous intervention. Let me just finish answering her first question.

Emily Thornberry (Labour, Islington South and Finsbury)

Tetchy.

Simon Burns (Conservative, Chelmsford)

No, not tetchy. I just want to ensure that, in answer to the hon. Gentleman’s opening remarks, I put it on the record that we are seeking to give as much information and answers to questions as possible. The hon. Member for Leicester West asked about Monitor—its role and what we expect it to do. The role of Monitor—this might anticipate her next intervention—as she knows from our earlier discussions is in ensuring continuity of services, and that applies to all providers and not just foundation trusts. On that basis, I ask my hon. Friends to reject the amendment if it is put to a vote.

John Pugh (Liberal Democrat, Southport)

This makes me quite glad, in a way, that I did not vote for foundation trusts in the previous Parliament, because it is clearly a dangerous road. The Minister of State, Department of Health, my hon. Friend the Member for Sutton and Cheam, might not have voted for foundation trusts in the previous Parliament either, because what we have now are foundation trusts but no choice for a hospital as to whether it does become a foundation trust. Now we have legislation applying to all hospitals across the board, whether or not they have made that rather strange choice.

What the clause does, and the amendment seeks to rectify, is to introduce a new mechanism for insolvency. I am not always assisted by reading the explanatory notes, because they often differ from the way in which the legislation is explained to me in Committee. However, I will use them as a reliable indication of what the clause might do. They say that it is the intention of the Secretary of State to apply as soon as practical

“existing corporate insolvency procedures to foundation trusts.”

I assume that at the moment they do not apply, although in his peroration I think the Minister said that corporate insolvency procedures do currently apply, and the previous Government had arranged for that to happen.

It would be useful for the Committee to have a note—from somebody, if not from the Minister—as to how insolvency law currently applies to foundation trusts and how this set of arrangements differs. We are making a change, and I would like to look at what that change is. All of us are obliged to look at that change. We have to scrutinise legislation, so we have to know what the situation is today and what it will be when the legislation is applied. If we do not know that, we are failing in our duty to scrutinise the legislation.

We have here a new mechanism for insolvency, and there has to be a rationale for it. Again, by default and lacking any better guide, I went to the explanatory notes. They say:

“This would assist in ensuring a level playing field between foundation trusts and other providers.”

There is a change that I do not understand, because I have not had it explained to me, but I have a clear rationale for the change: to ensure a level playing field. It is there that my doubts begin. Clearly, there are two sorts of hospital: private hospitals and public hospitals including foundation trusts and others. We are trying to ensure a level playing field between foundation trusts and other providers.

Simon Burns (Conservative, Chelmsford)

Will the hon. Gentleman give way?

Mike Hancock (Liberal Democrat, Portsmouth South)

I will allow the Minister to intervene, because he suggests he has something helpful to say. It will be longer than a normal intervention, but I think it will be appropriate to help the debate.

Simon Burns (Conservative, Chelmsford)

The hon. Member for Southport mentioned what is happening now and what the Bill does. The Committee might find it convenient and helpful if I explained that briefly.

The Bill will replace the failure regime provisions for NHS FTs set out in sections 53 to 55 of the 2006 Act, introduced under the previous Government. Those provisions, which deal with voluntary arrangements, winding up and dissolution, are unworkable, as the necessary secondary legislation has never been made. Those earlier provisions are also largely outdated, given that the provisions were repealed in part by the Health Act 2009. The effect of the repeal is that the provisions apply only to FTs that were not formerly NHS trusts. In practice, no such bodies exist, as all existing FTs were formerly NHS trusts. In their place, the Bill would create an obligation for the Secretary of State to make regulations to apply relevant parts of insolvency and company legislation to FTs, for the purposes of either rescuing an insolvent foundation trust as a going concern, or ensuring an orderly winding up of its affairs, in the best interests of creditors as a whole.

We think it right to set out a broad range of mechanisms that may enable the rescue of a troubled provider, since they may be applied, where appropriate in particular circumstances, to protect the interests of patients, creditors and, importantly, British taxpayers. Applying normal insolvency procedures would not only provide a range of mechanisms for dealing with failure but provide incentives for management to avoid failure in the first place, since they would lose overall control where an insolvency practitioner takes charge and reckless management may be held to account for their actions.

We went into great detail earlier about how we see the role of providers in earlier stages and the role of Monitor. I hope that is helpful to the hon. Gentleman. He also asked whether insolvency law applies to FTs. I can come back on that.

John Pugh (Liberal Democrat, Southport)

I am grateful for that detailed intervention. To be fair, later in the explanatory notes they mention introducing “an effective failure regime,” and I will check with Hansard, but I think the Minister said that the current failure regime is either outdated, inapplicable or needs modification. I do not know how people read things, but most paragraphs have a kind of topic sentence that states what the paragraph is about, and the second paragraph in the explanatory notes on clause 113 states:

“This would assist in ensuring a level playing field between foundation trusts and other providers”.

Mike Hancock (Liberal Democrat, Portsmouth South)

We are talking about the Bill, as opposed to the explanatory notes, and the Minister has clarified what the Bill says.

John Pugh (Liberal Democrat, Southport)

Absolutely; I will restrain my arguments until we reach the clause stand part debate.

Derek Twigg (Labour, Halton)

I thank the hon. Member for Southport for shining some light on the problem that we keep raising, which is that we cannot find out the details. Not only did we find that the explanatory notes on price competition—I will not go into that—actually clarified that the Government were in favour of price competition, even though they said that they were not, but we now find that the explanatory notes on the important area of insolvency do not actually explain it. It is bizarre that we have had a succession of explanatory notes that are supposed to inform the Committee, to make possible the tabling of amendments, debate and scrutiny of the Bill, but the Minister has had to step up to explain what areas of the Bill mean, because the explanatory notes do not. I do not know whether a concern has been raised with you, Mr Hancock, but it is important to do so. In fact, perhaps the hon. Gentleman and I think alike on that. We have highlighted the same areas as those that were raised in the debate.

I want to raise several other issues that I am not sure that the Minister will be able to answer. On consultation, I think he said that the details of regulations for the consultation will be drawn up at a later stage by Monitor.

Simon Burns (Conservative, Chelmsford)

The Secretary of State.

Derek Twigg (Labour, Halton)

Oh, the Secretary of State; I am sorry. Therefore we do not actually know what the details will be. The Minister has made a big thing, particularly during the early stages of the Bill, about how the Government have improved scrutiny and consultation, but that is no good if it does not change the decision. The Government can go on all they like about what they have done. If the Minister’s constituents were clearly overwhelmingly opposed to a local hospital or service going into insolvency, what weight would that have on Monitor’s decision? People care about their local hospitals, so they need to know what that means. Whatever local patients might think, what would the key factor be in Monitor making its decision on insolvency?

Simon Burns (Conservative, Chelmsford)

On the question whether responses to consultations, in whatever shape or form they take, would be listened to, I am tempted to answer in a flip way and say that they will be listened to as much as the previous Government listened to consultations, but I will refrain from that. Of course, responses to any consultation, on any issue, are always listened to carefully. Where they are relevant and make a positive contribution, they are taken on board. We saw that with my right hon. Friend the Secretary of State and the consultation responses that we received to the White Paper, where we subsequently found that we could strengthen and enhance the legislation that flowed from it. The hon. Gentleman has been in the House long enough to know that I cannot prejudge any consultation and give a blanket commitment now that whatever response comes in from a consultation process will affect the decision.

Derek Twigg (Labour, Halton)

I am not sure it was advisable to go down that road. Let me return to what I was saying, which is crucial, because the Government made a big thing about how they are having greater scrutiny and consultation. The chairman of Monitor let the cat out of the bag when he used the words “emotional attachment” to local services. I might be misinterpreting, but he may mean an emotional “irrational” attachment, so we know that Monitor will ignore the wishes of local people because their views are made on an emotional not a rational basis. If the Minister wants to put on record that there will be no closure of hospitals under this Government, I am happy for him to do so, but I suspect that he will not. What the Government are doing will make the closure of local hospitals much easier. Monitor made its position clear—there is an emotional attachment to local services. That is important.

I gave the Minister two examples: the burns unit in the north-west and my local hospital trust, and the Secretary of State or Ministers got involved. They listened to the public view, and, certainly in one case, the public were in favour of what happened and we managed to get a compromise in the other case. The fact is that the Secretary of State will not be involved. Ministers will say, “Sorry, it’s not my problem any more; go and see Monitor.” The Minister said that he would listen to MPs’ concerns, and we are grateful for that.

The Minister mentioned the help given to foundation trusts by Monitor, and made a point about subsidies. I have read the Bill, but again, we are not clear about the details. Can he say more about the criteria for the subsidy, or is it down to Monitor to draw up the criteria? The difficulty is that we are, again, being asked to decide a crucial part of the element to help avoid insolvency on the basis that part of that help might be a subsidy, but we have no idea what the criteria will be. There may be more information elsewhere in the Bill, but I suspect that it will probably be up to Monitor, and we need to know that.

A letter from the Minister putting in black and white the difference between the system under the 2006 Act and now would be useful, so that there is no mistake. Given the pro-competition position and the fact that providers can bring challenges if they think that competition has been interfered with in any way, will the help that Monitor will give to foundation trusts in difficulty that the Minister outlined—subsidy is one example—be challengeable by a provider? Will they be able to challenge the subsidy as being anti-competitive? Is that the case?

The difference is that this regime is more pro-competition and pro-market. The Government have introduced lots of clauses that, frankly, are a lawyer’s paradise in terms of challenge. Can the Minister explain? He may be able to give some reassurance that Monitor’s help, including the subsidy, will not be open to legal challenge. I suspect that I know the answer, but it will be useful to hear what he says.

The Minister says that Monitor will develop a distress regime. We are not sure what a “distress regime” will be exactly. Again, it is the lack of detail that concerns us. If he goes away and gets further information about what it will be and will entail, it would be useful if he would write to us about it. He talked about credit rating; here we go again—the market, credit rating, failure and creditors. That is what the Bill is about, not patient interest, local health services and what the public want. My hon. Friend the Member for Leicester West made an important point on market failure. The Minister may correct me, but I think he said that judgments will be based on whether it is less likely to be a market failure in terms of a foundation trust getting into difficulty. It may be useful for him to confirm that.

I will finish this part with the point that a poor trust will not necessarily get into financial difficulty. To go back to the Government’s view of the world, it might have a greater monopoly in its area. Members who represent urban constituencies may wish to explore this matter further, but the Minister mentioned that rural areas may receive additional support because they do not have as many services around, and as a result there may well be a monopoly, or there will become one. The fact that a hospital trust is financially sound does not necessarily mean that it is a good provider of services. It is a little simplistic to argue that that is the case, and the Minister may want to respond to that point, too.

We have many questions on that subject, and the hon. Member for Southport has also raised some interesting points about that regime.

Grahame Morris (Labour, Easington)

I have a couple of questions for the Minister, which come from our discussions about level playing fields and market distortions, in terms of the failure regime. I am interested to know whether, at least in part, a driver for the related clauses in the Bill is either EU procurement law or EU competition law.

Simon Burns (Conservative, Chelmsford)

I am more than happy to answer the hon. Gentleman’s question quickly. The straightforward answer is no. First, there is nothing in the Bill that changes existing UK or EU competition legislation. Secondly, common causes of financial distress among health care providers relate to such factors as poor management, and/or poor control of costs, and/or poor quality services resulting in fewer patients choosing to use them, and/or inefficient provision. The application of competition law is not a factor. Our proposals create much stronger incentives to address such problems and, in the event of failure, they provide robust safeguards for patients.

Derek Twigg (Labour, Halton)

I beg to move amendment 616, in clause 113, page 102, line 35, leave out ‘Before’ and insert ‘Whilst’.

Mike Hancock (Liberal Democrat, Portsmouth South)

With this it will be convenient to discuss amendment 617, in clause 113, page 102, line 36, after ‘must’, insert

‘have regard to the need for early intervention procedures and’.

Derek Twigg (Labour, Halton)

The lead amendment is a probing amendment, because it may only be about tidying up language. “Before” implies an arbitrary cut-off point for consultation, which could lead to bureaucratic delay in making decisions about regulations for insolvency applications. It is a matter of opinion, but replacing “Before” with “Whilst” makes provision more realistic by ensuring that the consultation and decision-making process go hand in hand—in other words, so consultation happens not only before, but during the process. We would like more information about what the provision means. Again, it is obviously about prevention, but in terms of ongoing consultation, there should not be an arbitrary cut-off point, and nothing more.

The clause states that

“the Secretary of State must consult—

(a) Monitor, and

(b) such other persons as the Secretary of State considers appropriate.”

What will be the extent of that consultation and who will be involved in it? There is genuine concern about having a cut-off point for consultation. If someone followed the letter of the law, that could be the end of discussion.

As we have said before, we do not believe that a hospital should be allowed to go bust without a serious pre-failure regime being gone through to try to turn it around. We have a difference of opinion about the 2006 Act and what the Minister has said. As the Bill stands, hospitals without designated services could just fall over. The first we will hear about them going wrong is when they enter insolvency. The Minister talks about a procedure that could take place, although the detail has not been drawn up by Monitor, but at what point will local people get to know that the hospital is in trouble? The Minister has said that the local population will be consulted, but at what point will they be involved in consultation?

We believe that the Bill will result in too little protection for services. Successful providers will be able to expand as they attract new patients to their services or win new contracts, but some providers will struggle to attract patients to their services or win contracts. That will not necessarily be because they are poor clinical providers; there may be other factors involved. The Minister already used the example of a hospital or services in a rural area, and demographics could play a particularly important part. Such providers will need to restructure their services, and those that are unable to improve on the quality and efficiency may fail. We want to explore the contrast between financial failure and the quality of services.

There is a risk that the proposals could lead to inequalities in access to services or disruption to the continuity of essential services. People may have to travel further to access services. If there is a problem with the delivery of services because of insolvency, we do not know whether there will be a nearby provider that would be able to take over those services or take over the premises of the current provider. We do not have the detail. We believe that the clause reveals the ruthless, sink-or-swim, survival-of-the-fittest competitive economics that is being thrust into the NHS. That was confirmed in Tuesday’s sitting, when the Minister said that the taxpayer will no longer prop up failing or inefficient providers. We explored the thinking behind that under the previous clause.

The Minister has said that the Labour Government did not deal with inefficient and poor providers. We have repeatedly asked him for examples, but he has not been able to provide any, so perhaps he might like to think again. Perhaps Chase Farm hospital might be an example, but lots of hospitals have issues. If we do not have examples, we cannot draw any conclusions about whether what he says stands up to scrutiny.

Page 123 of the explanatory notes states that

“Introducing an effective failure regime would allow for orderly market exit.”

It would be legitimate to ask for whom it is orderly. For the managers? For hospital staff? For patients’ interests? What does the Minister mean by that? What does he mean by an orderly exit? That is another example of the market-oriented language that runs through the Bill.

The purpose of the clause is to facilitate provider exit, by which the Government mean hospitals, departments or other NHS services going bust and closing and private companies coming in instead. That would all happen according to the rule of the market rather than being democratically decided by local people or patients or their elected representatives. People do not like the idea of their local hospital being treated in that way. Although an exit might be orderly for economic purposes, it might not be for clinical purposes. That goes back to the question of the point at which local people will be involved.

We have talked about the health and well-being board and the council scrutiny committee; what role will they have in the process? At what point will they be informed and brought in? The Minister has talked about what a hospital may do and what Monitor may and may not do, but we have not yet seen the details. Monitor will not have the market, if I may use that phrase, on good ways of dealing with the problem and helping the choice. There may be others in the local community with a great deal of health experience, including the health and well-being board and the council scrutiny committee, both of which should be involved. That fits in with the Government’s oft-stated position that the Bill extends scrutiny and consultation procedures. It is important to explore what that means.

I am involved with a foundation trust hospital, and we have always had a great deal of involvement with the local authority. The chief executive attends the scrutiny board meetings and there is quite a lot of openness about issues in the hospital itself. I have mentioned the reconfiguration issues in my local hospital before it was a foundation trust, but it would be useful if the Minister were to address that. For those of us with concerns about the Bill, it is important that the best talent is involved when a hospital is at risk of failure.

The risk of indefinite expensive provision funded from the risk pool needs to be mitigated by obliging the administrator to find an efficient solution quickly, such as working with commissioners to invite tenders from possible substitute providers to find the most cost-effective alternative. Does the Minister have any idea of the time scales? How long will such administrations take? I do not know whether the administrators will have any health background or knowledge, or any knowledge of the health market. It would be useful if the Minister gave us some information on that.

How will the regime be enforced and implemented? To be precise and effective, early intervention has to be at the heart of the regime. Paragraph 737 of the explanatory notes talks about

“ensuring a level playing field between foundation trusts and other providers”.

The hon. Member for Southport raised that important point, too. The Government’s logic is similar to the alleged problems and solutions related to fair playing fields and market distortions in the pricing clauses. To allow private competitors into the market, existing NHS providers have to be downgraded. That is to treat NHS foundation trusts like private companies that can just go bust if they cannot compete in the market. NHS foundation trusts are not private companies. They are NHS bodies and people do not want their local hospital to go bust and be flogged off to satisfy the creditors. We see a lot about creditors in the Bill.

Private hospitals will be allowed to undercut NHS services, taking the most profitable patients and, therefore, putting NHS hospitals at risk. The stability of foundation trust hospitals is important because cherry-picking undermines foundation trusts. It would be useful if the Minister set out which provisions in the Bill stop cherry-picking in the health service. We introduced a safety net to prevent FTs from failing and, if necessary, there was a deauthorisation regime to return an FT to being an NHS trust.

The strategic approach is the big issue. Now, strategic health authorities and primary care trusts take a leading role in planning what health care is needed in a community, which services to close and which to maintain. In last night’s debate in the House, we heard one of the Minister’s colleagues talking about a centre being downgraded, I think, to a minor injuries centre. Obviously the PCT was involved in that decision, which I think was taken yesterday. It is important that such changes are planned and co-ordinated, but instead the market will bankrupt failing hospitals. Under the Government’s proposals, the market will replace a planned and strategic approach.

NHS providers that get into financial trouble, including by building up debts, will not be subject to the proper level of scrutiny or provided with any support. I do not believe that there will be scrutiny—the Minister tried to explain the situation to us earlier, but we are not convinced. The risk of financial failure is no longer a widely shared responsibility within the NHS, which is another big change. There will be no PCTs and no SHAs, and it is accepted that hospitals will go bust and that a court-appointed official will then act as a commercial administrator. GP consortia will also be allowed to collapse financially. It is important that the Minister gives us some information on that.

The Government will let hospitals go bust and services shut down before intervening to keep the hospital going in some form or before breaking it up. Ministers will not intervene in the process; it will be down to Monitor and the market. The Minister might say that Monitor had a role in the previous Government’s system, but the difference is that this Government’s proposed system is market oriented and there is much more risk. A competitive market means more risk, so the Minister needs to address that.

Earlier action to stop disruption to services is essential, and we have discussed that to some extent under the previous clause. Services that are not designated could be shut down by a court-appointed administrator, who will not be required to consult. I am not a competition or insolvency lawyer, so will the Minister tell me what administration of the health service a court-appointed administrator might do? Court-appointed administrators will make decisions on financial grounds, but what will they know about the health service and how it and other health service providers are run?

There is no detail on the failure regime for GP commissioners. It would be interesting to know how the provisions would apply to a failing GP consortium. It could cause serious uncertainty or disruption in commissioning groups that routinely fail. Foundation trusts are an issue, but what will be done about failing GP consortia? We have already discussed GP consortia, but will the Minister say something about them in relation to the clause?

Simon Burns (Conservative, Chelmsford)

I will do so now, if it is in order, Mr Hancock.

Mike Hancock (Liberal Democrat, Portsmouth South)

Let Mr Twigg finish first and then we will discuss it.

Derek Twigg (Labour, Halton)

Will the Minister confirm whether GP consortia will be subject to the insolvency regime? We need to know. If the answer is no, which is what has been indicated, will he explain why?

We are concerned about the way the provisions will seriously destabilise many hospitals, because their activity levels will be subject to increased volatility over short periods. That could undermine the financial position of local hospitals, leading to service lines or entire hospitals shutting, because it takes far longer to reduce costs in line with reduction in activity. Part of the problem with foundation trusts and hospitals is that the fixed costs in hospitals are great; they represent a large part of the hospital costs, so it is more difficult, particularly in response to short-term problems, to reduce them. I am not sure what consideration will be given to the financial stability of foundation trusts and the difficulties involved in reducing their fixed costs. Will the Minister give us some more information about that? Local people are concerned that the Bill’s proposals mean that their hospital could be closed down much more easily than at present.

Mike Hancock (Liberal Democrat, Portsmouth South)

Let me say from the Chair that I think that part of that contribution was appropriate to the clause stand part debate, although the amendment does not refer specifically to it. We must deduce that we have had that part of the debate when we get to clause stand part. I will not permit us to go back to it if we discuss it now.

Mr Burns rose—

Mike Hancock (Liberal Democrat, Portsmouth South)

Bear in mind what I said. If Members go further than the amendments, those aspects of the discussion will be taken out of the clause stand part debate.

Simon Burns (Conservative, Chelmsford)

Thank you, Mr Hancock. That is very helpful.

Although I understand some of the concerns expressed by the hon. Member for Halton about the provisions and I am sympathetic to some of them, the amendments are unnecessary. As I explained in relation to amendment 615 in the previous debate, clause 113 provides for the Secretary of State to make regulations to apply relevant parts of insolvency and companies legislation to FTs. That is for the purposes either of rescuing an insolvent FT as a going concern or of an orderly winding up of its affairs in the best interests of creditors as a whole.

As I understand it, the amendments are designed to ensure that the Secretary of State would not make regulations without having had regard to the need for the other options available—for example, the need for early intervention procedures. I can reassure the hon. Member for Halton that of course the Secretary of State would consider all other options. As I have mentioned on other occasions, such proceedings would only ever be used as the last resort where pre-insolvency interventions had not succeeded, and only after continued provision of designated services had been secured through special administration. We will come to that point in greater detail in relation to a later clause.

A range of other mechanisms are available that could be used to try to ensure that foundation trusts would not reach a state in which the proceedings would be necessary. For example, as we discussed in earlier debates, under chapter 4 of part 3 of the Bill, Monitor will operate a licensing regime for all providers of NHS services. One of the core functions of the licence would be to provide a vehicle for additional regulation to secure continued access to designated services. We expect that to include requirements to minimise financial risk and controls on key assets. Monitor would have the power to intervene in response to risk and to require a provider to take remedial action to address risk and prevent failure, as I said in relation to amendment 615.

Before making regulations under the clause, the Secretary of State would be obliged to consult Monitor and other persons. That would include the health care sector and such other persons as he considered appropriate. At this point, I would like to make it clear that it is our intention that this important secondary legislation will be subject to full public consultation, as I have said before. As a further safeguard and as I have also said before, the regulations will be subject to a parliamentary resolution by way of the affirmative procedure.

When the hon. Gentleman was discussing amendment 616, he said that the word “before” applies an arbitrary cut-off. I hope that I can reassure him on that by saying that no, it does not. What the word “before” means and what it means in parliamentary drafting terms is that it is a standard procedure that consultation happens before regulations are made. I hope that that helps him.

We think that to ensure that the final regulations are robust and appropriate for the health care sector, it is very important for the legislation to be subject to extensive consultation before it is made, rather than during the course of laying and making the regulations as suggested by the amendment. Given the requirements to consult before making regulations, and as ordinary insolvency procedures would only ever be called on as the last resort and once continued access to designated services had been secured, I consider the proposed changes to the clause unnecessary.

The hon. Gentleman raised a number of valid points, which I will address. He asked at what point local people would know that a hospital was in trouble. It is my belief that that will be at an early stage. Through the reports and the meetings of the board of the provider, its governors and commissioners, the new system will be more transparent, so there will be more opportunities than there are under the current regimes for people to be aware at an earlier stage.

The hon. Gentleman also asked what local communities could do in such a situation. Local commissioners can apply to designate services. That might, for example, be likely in rural hospitals where there is no alternative provision. In applying, commissioners will have to consult, as we have discussed at length. The decision about what services are protected by Monitor is locally led, as we have also discussed.

The hon. Gentleman was concerned about whether the process would be orderly, and asked what “orderly” meant. It means that the process must be orderly for patients. It means protecting essential services, delivering realistic available alternatives and making sure that the process is orderly for staff. To recap, it must be orderly for patients, so that we protect essential services, and it must be orderly for staff, so that it is managed well.

The hon. Gentleman asked what the time scale for administration will be. It is always difficult to give definitive time scales, because they can, by their very nature, be nebulous. However, I hope I can reassure him by saying that there is an obligation on insolvency practitioners to act quickly and efficiently. They will consult on whether special administration should be time-limited and whether the period may be extended by Monitor or the court. As I say, however, it is difficult accurately to anticipate such events.

The hon. Gentleman asked whether GP consortia will be covered, even though the provisions specifically deal with FTs. The answer is no, simply because this regime applies only to providers, and, as the hon. Gentleman knows, GP consortia are commissioners. He might have gone on to ask how a failing GP consortium would be dealt with. In anticipation of that question—and to save time, because we are making relatively slow progress this morning—let me tell him that the NHS commissioning board would be responsible for assessing the performance of GP consortia. The Bill includes clear powers to enable the board to intervene where a consortium is failing to discharge its functions or where there is a risk that it will do so.

The hon. Gentleman might also ask what powers the NHS commissioning board will have in relation to failing GP consortia. To forestall a further intervention from him, let me say that its powers will include the ability to request information, explanations and documents relating to the discharge of consortia’s duties or the appropriateness of the areas consortia cover; to direct a consortium as to how it should carry out its functions; to arrange for the board or another consortium to carry out some functions on behalf of a failing consortium for a set period; to appoint a new accountable officer; to vary the constitution; and to dissolve the consortium. I will stop talking about consortia, because you, Mr Hancock, might feel that I am beginning to stray.

Let me now answer the hon. Gentleman’s questions on one final issue, so that he has a full range of answers. He raised a number of issues relating to the role of an insolvency practitioner and he asked who would be an insolvency practitioner, and I think I can be helpful here, too. An insolvency practitioner is a person who is qualified to act as such under insolvency legislation. They are authorised by a range of recognised professional bodies, including some that are authorised directly by the Secretary of State for Business, Innovation and Skills. In general, practitioners are accountants or solicitors who are qualified in examinations, practice requirements and specialised insolvency matters.

The hon. Gentleman could claim, as I think he did, that an insolvency practitioner will not have appropriate knowledge of the health care sector. Insolvency practitioners are used to dealing with failure in a broad range of industry sectors. If a provider fails and pre-insolvency interventions have not succeeded, the insolvency practitioner will take on overall control of the provider. The insolvency practitioner will be able to retain existing management and clinical expertise where necessary, and to employ additional health care experts if needed. The practitioner will be required to fulfil its obligations and duties under the legislation, and more generally will be obliged to adhere to ethical and professional guidance.

The hon. Gentleman also asked, in effect, why we need an insolvency practitioner to run a hospital. It is important that insolvency proceedings should be under the overall supervision of an insolvency practitioner who is experienced in dealing with failure and turnaround, but as I have said, the insolvency practitioner will be able to retain existing management and clinical expertise, where needed, and to take on additional experts if necessary. To answer his question in the spirit in which he asked it, the insolvency practitioner will not run the hospital; as I have said, he will have clinical and administrative health staff to help him. Given that this is a probing amendment, I hope that the hon. Gentleman will consider withdrawing it, as he has had such full and wholesome answers to his questions.

Derek Twigg (Labour, Halton)

I beg to ask leave to withdraw the amendment.

Owen Smith (Labour, Pontypridd)

I apologise for the delay in rising, Mr Hancock; I was musing on the finer parts of the Bill. However, I do not feel that I need to muse terribly long on the clause, because the Opposition understand absolutely clearly what it is about, and the Minister has been extremely helpful in giving it even greater clarity.

John Pugh (Liberal Democrat, Southport)

Tell us.

Owen Smith (Labour, Pontypridd)

I shall. It is simple: it is about introducing insolvency law and companies legislation into the NHS to make it easier to close hospitals. That is what the clause is about; it is crystal clear. In a moment, I will quote extensively from the impact assessment and other parts of the ancillary documents to the Bill to demonstrate precisely what I mean.

Margot James (Conservative, Stourbridge)

Does the hon. Gentleman seriously think that we want to close hospitals in our constituencies?

Owen Smith (Labour, Pontypridd)

I do not imagine for a minute that the hon. Lady wants to close a hospital in her constituency. However, I urge her to read the Bill carefully and understand what it is likely to do. The application of competition will make it far easier for hospitals and the services that they provide to be competed out of existence, and the clause will allow those hospitals to be closed far more efficiently, shielding the closure decision—

Mike Hancock (Liberal Democrat, Portsmouth South)

Order. The problem that I have is that when I read the clause, it does not seem to me to be about closing hospitals. If a problem arises, they will be taken over, but there is no specific reference at all in the clause to closure. The implications do not lead me to believe that the clause heads for the closure of a hospital. We must stick to what the Bill says, rather than what we want to interpret for our own causes.

Owen Smith (Labour, Pontypridd)

Having listened to your ruling, Mr Hancock, I must say that I have a different interpretation, and it is not drawn from thin air, but from reading the impact assessment produced by the Government to explain the Bill’s impact to the public. Paragraph B112 relates specifically to the issue of insolvency, and the application of insolvency law to the NHS. It explains the problem with the way the current regime deals with failure. It says:

“For competition to work effectively, less effective providers must be able to contract or exit the market entirely”.

My interpretation is that to exit the market entirely means closure if it refers to a hospital.

Nick de Bois (Conservative, Enfield North)

I am sure we await the hon. Gentleman’s colourful interpretation with great interest, but may I offer him a little advice? There is great danger in taking one clause in isolation and from that extrapolating a rather vast interpretation of what may or may not happen. At one point, as beautifully and eloquently as he was reading, the way his argument was growing was like listening to “Jackanory”. The point that must be seriously considered is that there is nothing wrong with having the clauses on insolvency, because the process of reaching any such situation has more provisions and safeguards than any business would have. All the processes are designed to protect; there is not the emphasis on failure that he talks about.

Mike Hancock (Liberal Democrat, Portsmouth South)

Interventions will have to be shorter. My co-Chairmen feel more strongly than I do on that subject, but sometimes we push it a bit.

Owen Smith (Labour, Pontypridd)

I thought that was a very helpful intervention, because it allows me to say that I think there is absolutely nothing fanciful about the way I have interpreted this clause or the risks in the Bill. It is absolutely clear, notwithstanding the Minister’s reassurances this morning that it would be the last resort, that there would special administration procedures and that we would never want to reach the point of failure. I fully concede that there are provisions in the Bill to try to stop things reaching that point, but the risk is clear in both the notes and the Bill that the possibility of services failing because of competition will increase. The application of insolvency law and involvement of insolvency practitioners—or asset strippers as they are known in other contexts—coming in to take over a hospital’s exit from the market are very clear risks.

Kevin Barron (Labour, Rother Valley)

My hon. Friend is absolutely right to pursue this. The introduction of competition law, the Competition Commission and the Office of Fair Trading may have different interactions inside the NHS to those we have had for the last sixty years. He is right to bring this matter up. Government Members should sit down and realise exactly what the legislation they are passing does.

Owen Smith (Labour, Pontypridd)

I am grateful to my hon. Friend. As many people here know, he is a longstanding and expert observer of the NHS, and he deserves to be listened to as well. It is not just in the one paragraph of the impact assessment that we hear the Government say that, to work efficiently, competition must allow market exit—meaning closure, because we are talking about hospitals. They go on to explain why applying an insolvency regime addresses the issue we have with inefficient exits from the market, under the terms of the Bill. The impact assessment says,

“To address these weaknesses, it is proposed that an insolvency-based regime is introduced”.

Then, at paragraph B114 it explains why that makes it easier to close hospitals.

10.25 am

Owen Smith (Labour, Pontypridd)

This morning, I was explaining that the purpose of clause 113 is clearly to introduce insolvency and company law into the NHS, to allow a more efficient entry and exit from the marketplace for NHS providers. I suggested that a legitimate interpretation of that was that it would allow—albeit as the last resort, after all the appropriate interventions had been followed—hospitals to close more efficiently.

I was going to say that the second critical piece of evidence—of information—required to interpret the clause in that manner is in paragraph B114 in the Government’s impact assessment for the Bill. It says that to address the weaknesses in the current system, this insolvency-based regime will be introduced so that

“The taxpayer will be protected from political pressure to rescue providers—public funds will not be used to support unviable providers”.

That is extremely clear. The Government are being very open and transparent about the issue, and it is because they have been so open and transparent and the clause is so clear that we are very worried. That worry has been compounded by the Minister’s remarks to the Committee on Tuesday, because it is clear not only that under the clause and the new regime it will be easier to close hospitals, but that the Minister believes that in the past too many hospitals have been propped up when they were unviable.

The Minister of State, Department of Health (Mr Simon Burns) rose—

Owen Smith (Labour, Pontypridd)

Before I allow the Minister to intervene, I would like to quote the words from his own mouth on Tuesday. He said:

“In contrast, too often under the current system have inefficient and poor quality providers”—

I presume that we mean hospitals—

“been bailed out wholesale and at too great a cost. We want regulation to protect services for patients, not…the institutions that provide them.”––[Official Report, Health and Social Care Public Bill Committee, 22 March 2011; c. 916.]

If I am wrong and the Minister does not feel that too many institutions in the past have been unviable but propped up, and if I am wrong and the future provisions will not mean that hospitals are able to close, he should please put me right. However, I suggest that I am right and I ask the Minister to reassure us by telling us which institutions in the past he thinks have been unviable and propped up.

Mike Hancock (Liberal Democrat, Portsmouth South)

A quick response please, Mr Burns.

Simon Burns (Conservative, Chelmsford)

Absolutely, Mr Hancock. I will not drift on to other subjects. I just want to reassure the hon. Member for Pontypridd because he does not understand, or does not want to understand, that the whole purpose of the Bill and the clause is to protect, not close, essential services. I say to him, in the nicest possible way, that if he persists with that student debating style, he might end up, at 65, still travelling on his student bus pass.

Mike Hancock (Liberal Democrat, Portsmouth South)

It would not be in order to discuss that, so stick to where we are on clause stand part and try not to go back over the closures or the unviability of things in the past. The Bill is looking to the future.

Owen Smith (Labour, Pontypridd)

I am grateful to you, Mr Hancock. Of course I would not dream of going back over the issue. I have made my position clear. I will merely say in response that it does not do the Minister great service to offer such a cheap jibe. I have come to expect better of him.

Opposition Members are worried. I fully accept the position of the Minister and other hon. Members that it is not their intention to close hospitals. I fully accept that it is their view that safeguards are being placed in the system that will militate against the closure of hospitals. All I am suggesting is that closure becomes more possible with competition, because some hospitals and providers will be deemed unviable. Under the clause, the insolvency regime makes it physically easier for such hospitals to be closed and such providers to exit the market.

Paragraph B149 of the impact assessment makes it crystal clear that that is precisely what is under consideration. It simply says:

“In the new regulated market, providers will succeed or fail based on their ability to offer high quality, efficient services. Successful providers will be able to expand as they attract new patients to their services or win new contracts. However, some providers will struggle to attract patients to their services or win contracts. These providers will need to restructure their services and those who are unable to improve the quality and efficiency of their services may fail.”

Therein lies the issue at the heart of this morning’s debates and, in many respects, the issue at the heart of the Bill. The Minister believes that competition, in effect, allows resources to be allocated more efficiently in the NHS, as in other markets; that is the Bill’s underpinning ethos. The flip side of that is that in a market where some bits see resources efficiently allocated, other bits fail, and the option for those inefficient bits is exit. That is what will happen, and this insolvency clause makes it easier.

John Pugh (Liberal Democrat, Southport)

I have three brief points. The first is on consultation. The Minister legitimately said that, after the previous Government, consultation has a poor name; the fact that there is consultation gives nobody any reassurance, given its political history. The consultation on the White Paper did not necessarily improve the name of consultation, because it was a consultation about how to do things, not whether to do them. However, we will pass over that.

Secondly, when the hon. Member for Halton discussed the clauses, his key point was that they offer a shell that will be followed by secondary legislation. The Minister adroitly replied that such provisions were exactly what the previous Government had. That is like the argument that we have when an Opposition Member tables a rational amendment, and we say that we are doing exactly what the previous Government did. However, repeatedly doing what the previous Government did is not necessarily a good basis for forward-looking policy. I might be ploughing a fairly lonely furrow, but I think we can do just a wee bit better.

There is quite a good example of that. In the Committee that considered a previous, very contentious bit of legislation—the Mental Health Act 2007—it was clear that a lot of clauses would lead to secondary legislation, which would clarify what those clauses were all about. In Committee, Members pressed for some kind of draft regulation by Report to clarify where the legislation was taking us. That does not strike me as a bad precedent to follow, and the Minister might comment on whether such an arrangement is a distinct possibility, because it would be helpful.

Thirdly, I was grateful to the Minister for setting out the errors in the explanatory notes, because we could all have gone down a sidetrack talking about level playing fields and the intention of the clause being to put Bupa hospitals on the same footing as other hospitals. Clearly, that is obviously nonsense, and the Minister has revealed it as such. There never can be a level playing field, because the Government or some state agency—Monitor or whoever—will, presumably, interfere when a foundation trust starts to get into trouble. We will not do that at all with a Bupa hospital.

In any case, there should not be a level playing field, because a Bupa hospital and an acute hospital are different entities; one is paid for by taxpayers, and we have a public interest and investment in it, while the other is purely a private venture. In any case, the Bill will not treat the two sorts of hospital evenly.

Paul Burstow (Liberal Democrat, Sutton and Cheam)

I am listening closely to my hon. Friend’s argument and I want to make sure that he is clear about the designation regime, which we have discussed. Designation does not apply simply to state-funded and state-based organisations; it also applies to any provider providing a designated service, and a Bupa hospital could have a designated service.

John Pugh (Liberal Democrat, Southport)

I am indebted to the Minister. I did not realise that; I thought that designation was only for traditional A and E departments. It seems that, for example, private-sector establishments can also be designated for whatever purpose. That is an interesting addition to my understanding.

Kevin Barron (Labour, Rother Valley)

I cannot remember when it was, but I have spoken before about mergers. Mergers are made not only with foundation trusts, but with other organisations. It would be interesting to discover what those other organisations are.

John Pugh (Liberal Democrat, Southport)

I clearly need to listen more carefully to the right hon. Gentleman and the Minister in order to put the various pieces together. I would have been enormously assisted if the explanatory notes had been of some help, but sadly they were not.

Owen Smith (Labour, Pontypridd)

Is the hon. Gentleman as surprised as I am at what the Minister said? Was he saying that a private hospital could have part or all of its services designated—that it will be protected from further competition?

Mike Hancock (Liberal Democrat, Portsmouth South)

Order. Dr Pugh, may I draw your attention to the fact that you are taking the Committee to matters not covered by the clause? The question of private hospitals is not relevant. I hope that you will speedily return to our debate.

John Pugh (Liberal Democrat, Southport)

Indeed, Mr Hancock. I was talking about the Minister’s clarification of the explanatory notes about the clause, so I think that I am in order.

Mike Hancock (Liberal Democrat, Portsmouth South)

You might, but I don’t.

John Pugh (Liberal Democrat, Southport)

I bow to your superior judgment, Mr Hancock, but if I am out of order, so are many other members of the Committee—possibly including the Minister. If the same regime for decommissioning hospital foundation trusts is to apply to Bupa hospitals, there will be knock-on consequences in further legislation. However, I do not to want extend the argument, because in addition to having independent hospitals we are now going to have independent state schools, and presumably similar rules will apply to those at some point.

I return to the key point. The Minister sensibly explained that the Bill will give us a serviceable and manageable regime for closing hospitals in place of an outdated, inapplicable and almost unworkable regime. One does not need to be terribly bright to draw the logical conclusion that it will be easier to close hospitals as a result. That is the inevitable conclusion. In supporting the clause, one has to go with the inference, and I see no point in pretending different. However, that is not necessarily the intention; the intention is to put in place a regime.

The Minister is on record as saying that the present scheme is unworkable and outdated, and that it cannot be applied when closing foundation hospitals. The Government are putting in place a model that can be used. Moving from a model that cannot to a model that can will make the process easier, and the fact should be acknowledged.

Clause 114

Clause 115

Derek Twigg (Labour, Halton)

I beg to move amendment 618, in clause 115, page 104, line 21, leave out ‘licence holder’ and insert

‘foundation trust or the Secretary of State’.

Mike Hancock (Liberal Democrat, Portsmouth South)

With this it will be convenient to discuss the following:

Amendment 619, in clause 115, page 104, line 24, leave out ‘licence holders’ and insert

‘foundation trusts or the Secretary of State’.

Amendment 620, in clause 117, page 106, line 15, leave out ‘to another licence holder’ and insert

‘to either another NHS foundation trust or the Secretary of State’.

Amendment 621, in clause 117, page 106, line 19, at end insert

‘to another NHS foundation trust or the Secretary of State’.

Derek Twigg (Labour, Halton)

I do not intend to take long on this amendment; I just want some more detail. The provision refers to the transfer of a going concern to another licence holder. The Bill changes the current legislation by allowing a transfer to any licence holder, which could mean a private sector organisation.

We have a number of concerns, including how Monitor will view such a transfer. I know that its view could depend on the scale and size of the services involved, but will Monitor try to get an NHS foundation trust to take over the work? That may not be possible, of course, because there might not be a NHS foundation trust nearby, but that probably does not matter in this day and age, in that the management could be done elsewhere. Does the work have to go out on a tender basis to both private sector and NHS providers, and what would be the criteria behind such a decision?

If the local accident and emergency unit and its supporting services were designated—we would want to protect them from bankruptcy—they could be handed over to a private sector provider. The buildings, the estate, the accommodation and the equipment would obviously be being paid for by the taxpayer; they were run by the foundation trust and they would be part of the wider NHS family. How would the ownership system work with regard to such property if the work was transferred to a private sector licence holder? What would be the consequences of that? Is it right—the Opposition do not think so—that state-owned property and equipment should be transferred out in such a way?

If a failed foundation trust is handed over, it appears that a private company would physically own the hospital. I am sure that not many of the public are aware of that or would support that. I come back to the point that I made in the previous debate about the wider NHS family, which all work together to support each other and put in different management systems, although it all still remains under NHS ownership. Will the Minister expand on that and tell us how the system will work and whether there is a difference between designated and non-designated services in respect of this clause?

Simon Burns (Conservative, Chelmsford)

The objective of any health special administration would be to ensure the continuity of designated services, and would be achieved either by turning around a failed provider so that it was able to exit health special administration as a going concern, or by transferring designated services and associated assets to another provider or a number of different providers. As we have already discussed, the priority would be to achieve the former, but if that was not possible it might be necessary to transfer essential services and associated assets to another local provider to ensure continuity of care.

Amendments 618 to 621 would mean that when a provider of designated services —a foundation trust or a private company—failed and a going-concern rescue was not feasible, the services could be transferred only to a foundation trust or to the Secretary of State. That would not be in the patient interest for two reasons. First, if there was no alternative foundation trust within easy reach, the service would close, even if a local willing provider or voluntary sector provider that was providing high-quality care was prepared to take on the delivery of the designated service. I cannot see how it would be in the patient interest to prefer closure over the continuation of the service.

Derek Twigg (Labour, Halton)

It does not necessarily follow that the other foundation trust would have to be nearby. There is a hole in the Minister’s logic. He seems to say that all the services have to be transferred to another foundation trust rather than be managed on the present site by that trust. Will he clarify that?

Simon Burns (Conservative, Chelmsford)

What I am saying is that if it was not possible for another foundation trust to provide the service on the failing concern’s premises, it would not be viable to have it carry it out on its own site, if that was too far away geographically.

Derek Twigg (Labour, Halton)

I just want to be clear. Part of our concern—I am sure that the Minister will come on to this—is about who ends up owning the estate, the equipment and the buildings. Is it clear that Monitor should consider allowing the services to continue at the present site, even if they are managed by a foundation trust some distance away, and should that be a first priority?

Simon Burns (Conservative, Chelmsford)

No. The overarching priority is to guarantee the continuation of a designated service, because services are designated for the sole purpose of ensuring the continuity of their supply. Another foundation trust could provide the designated service, but it would be more in the patient interest to find a local provider rather than simply to box the service into another FT, which might be some distance away. The service could either move physically to another provider’s site, or another provider could come to the failing FT’s site to provide the designated service. The crucial thing, in the best interest of patient care, is the continuity of the designated service. I hope that that has helped the hon. Gentleman.

Secondly, the amendments would mean that another foundation trust or the state might have to take on designated service provision when a private company had failed. That would represent a nationalisation of failed private providers, could be an incentive to private providers to take excessive risks, and would not be a good use of taxpayers’ money. That might well be an unintended consequence of the amendments, but it is important to consider it.

The hon. Gentleman asked how Monitor would determine—on what criteria—to whom the assets were transferred. It would be for the special administrator, working with Monitor, to determine whether assets would be transferred, and to whom, to protect patients’ interests, because it is those interests that are paramount. For those reasons, I hope the hon. Gentleman will consider withdrawing the amendments.

Derek Twigg (Labour, Halton)

I want to be clear. The answer that came back from the Minister’s civil servants implied that it would be preferred if a local provider took over. The point was made earlier and we fully understand the argument on that. My point related to a situation where there was no local NHS foundation trust, so clearly the only people able to take over would be in the private sector or a social enterprise.

Simon Burns (Conservative, Chelmsford)

Or another foundation trust.

Derek Twigg (Labour, Halton)

I am saying if there was not one locally. Does the Minister want to clarify? He said to me that the preference is to have a local provider. I was making the argument that it is not crucial that a NHS foundation trust has to be local to be able to manage the site. My point is about how much effort there is on keeping the service and providing it in the current buildings and estates, rather than transferring it somewhere.

Mike Hancock (Liberal Democrat, Portsmouth South)

I am happy with what the Minister said. He did give an explanation, and I am sure Hansard will bear that out. It would be helpful, however, if he repeated it.

Simon Burns (Conservative, Chelmsford)

I do not think that there is any difference between us. We would not want the designated service to be transferred to another FT miles away, but there would be nothing to stop another FT miles away providing the designated service on the site of the failing FT. That is what I have been trying to say, and I hope that that has helped.

Derek Twigg (Labour, Halton)

I thank the Minister. I want to be clear because this is an important point. We have a view that the Government want to take capacity out of the NHS and would like to see private providers given the responsibility. Again we do not have an answer, although the Minister mentioned that the administrator would have to make a decision. Will he clarify the following? Due to insolvency law, the administrator can transfer the whole estate and equipment to a private provider, if that is the decision. That private provider would then own it, rather than the state or the NHS.

Simon Burns (Conservative, Chelmsford)

The answer to that straightforward question is that that would happen only if it were in the best interests of continuity of services in the interests of patients.

I want to make something clear, so it is not misunderstood. The estate and equipment would have to be sold, not given. That is fundamental, particularly in the light of past representations of what I have said by Opposition Members.

Dan Byles (Conservative, North Warwickshire)

May I intervene, Mr Hancock?

Mike Hancock (Liberal Democrat, Portsmouth South)

You have the floor.

Dan Byles (Conservative, North Warwickshire)

Some of the mutterings from Opposition Members are interesting. The Minister made it clear: only if it is in the best interests of patients. The mutterings seemed to suggest that, even if it is in the best interests of patients, the very idea is abhorrent. That makes me wonder whether ideology is being put ahead of the best interests of the patients. Surely the best interests of patients must be the No. 1 priority for all of us.

Derek Twigg (Labour, Halton)

I beg to ask leave to withdraw the amendment.

Clause 116

Clause 117

Emily Thornberry (Labour, Islington South and Finsbury)

I am so sorry, Mr Hancock, but I need to go outside. May I get through the locked doors to get my notes?

Mike Hancock (Liberal Democrat, Portsmouth South)

Okay. It is not like you to be caught short. [Interruption.]

Emily Thornberry (Labour, Islington South and Finsbury)

I beg to move amendment 161, in clause 117, page 106, line 21, at end insert—

‘(e) for the transfer of staff from an NHS foundation trust or company subject to a health special administration order to another licence holder.’.

Mike Hancock (Liberal Democrat, Portsmouth South)

With this, it will be convenient to discuss the following: amendment 162, in clause 117, page 106, line 21, at end insert—

‘(4) Any regulations made under this section for staff transfer schemes shall make provision which is the same or similar to the TUPE regulations.

(5) In this section, “TUPE regulations” means the Transfer of Undertakings (Protection of Employment) Regulations 2006 (S2006/246).’.

Amendment 163, in clause 136, page 117, line 40, at end insert—

‘(c) to consult with the staff of the NHS foundation trust and their representatives on transfers of staff, implementation of new contracts or other changes that could affect working practices.’.

Amendment 164, in clause 137, page 118, line 33, at end insert—

‘The board of directors must consult with the staff of the NHS foundation trust and their representatives on transfers of staff, implementation of new contracts, or other changes that could affect working practices.’.

Emily Thornberry (Labour, Islington South and Finsbury)

Thank you, Sir, for your indulgence. I am afraid that amendment 161, although it is very important, does not deserve the melodrama that I have just built around it. I apologise to the Committee for that. [ Laughter. ]

The point of these amendments is clear to everyone who reads them. They would explicitly enable health special administration regulations to include provision for the transfer of staff, at the same time ensuring that staff transfers under those regulations are covered by the Transfer of Undertakings (Protection of Employment) Regulations 1981 and 2006 protection. That would bring the clause more in line with the protection that may be given to primary care trust staff. These are extremely important amendments and it would be surprising if the Committee were to oppose them.

Simon Burns (Conservative, Chelmsford)

I agree with the hon. Lady that these are important considerations. While I am not able to agree that the amendments should be made, I hope that I can explain why they are not necessary. Amendments 161 and 162 seek to provide for health special administration regulations to include provisions for the transfer of staff from an NHS FT, or company in special administration, to another licence holder. We agree that that is an important issue. As I have said, our preferred outcome of a special administration would be to rescue the organisation as a going concern. Staff transfers would be required only where that was not possible and would be subject to TUPE regulations wherever applicable.

We do not, however, consider the amendments necessary, because the Bill already makes provision for the transfer of the undertaking of an FT, or part of that undertaking, in clause 115. Clause 117 makes further provision about those transfer schemes, which include the powers to transfer rights and liabilities, which can also cover those under a contract of employment. The important protections for staff, including TUPE regulations, are already provided for under employment law. As a further safeguard, the regulations to be made to implement the health special administration regime, including transfer provisions, would be subject to consultation. Furthermore, the regulations would be subject to affirmative resolution. Both Houses of Parliament would have an opportunity to consider specific proposals for regulations, including any provision that might be made in the regulations for staff transfers.

I can sympathise with some of the principles behind amendments 163 and 164. It is right that the interests of NHS staff should be represented within NHS FTs and that staff should have an opportunity to have their say in decisions that affect them and to contribute their ideas. However, the NHS FT model already achieves that. Staff members are an integral part of the governance of each and every NHS FT in the country, and the Bill builds on that mutual approach. It actually strengthens the voices of staff members and governors by giving the council of governors greater powers and by promoting the transparency of NHS FTs to the people that they serve. The Bill both retains the existing statutory powers of and implicit duties on governors and gives them new powers. Such powers include powers to approve mergers, acquisitions, separations and other significant transactions, to approve amendments to the constitution and to call a director to attend a special general meeting to obtain information about a trust’s performance. At the same time, the NHS constitution pledge to involve staff in decisions that affect them remains in place, and, of course, employment law already applies to staff of all providers offering NHS care.

As the amendments are unnecessary and could have the unintended consequence of imposing needless and excessive requirements on FTs, I ask the hon. Lady to withdraw them.

Tom Blenkinsop (Labour, Middlesbrough South and East Cleveland)

We have already discussed the potential process for speeding up the winding up of a foundation trust hospital that goes under, and the Minister has said that the preferred option is to bring someone else in to take over that trust and run it. In the gap in between, the terms and conditions of workers, if they are made redundant following the trust’s becoming insolvent, are vulnerable, and we could be getting rid of people on reduced terms and conditions until the preferred person comes in. I just wanted to highlight a certain element of employment law, particularly as FTs could be treated as enterprises.

Simon Burns (Conservative, Chelmsford)

If the hon. Gentleman is referring to our recent debate, I was discussing how another FT could continue to provide the designated services on the failing FT’s premises. That was the debate that we had. On his second point, I do not share the hon. Gentleman’s analysis of the situation, because what I said during my remarks is watertight, gives assurances and, in effect, backs up what the amendments are seeking to do by showing that the protections are already there.

Emily Thornberry (Labour, Islington South and Finsbury)

I have listened to what the right hon. Gentleman has said and appreciate that this is a technical area of the law. I do not want to put the matter to an unnecessary vote, but the Hansard report of his comments will be read carefully and the matter may be brought back in another place. I beg to ask leave to withdraw the amendment.

Clause 128

Clause 129

Derek Twigg (Labour, Halton)

I beg to move amendment 622, in clause 129, page 113, line 35, leave out ‘a financial year’ and insert

‘the two financial years immediately’.

I will be brief. Subsections (8) and (9) require Monitor to recalculate the amount payable where providers request a recalculation because they believe that the amount has been miscalculated as long as the request relates to the current year. We think that may be too narrow. In view of the changes that have taken place as a result of the Bill, the last financial year should also be taken into account to ensure longer-term financial arrangements. For example, if Monitor levies an incorrect amount on a provider on 20 March 2015, the provider may only realise that one month later, in April 2015. Why is it so narrow, given that a new system is being brought in?

Simon Burns (Conservative, Chelmsford)

I will be as brief as I can, as I know the Committee wants to make progress. Part 3, chapter 7 of the Bill would give Monitor the power to establish effective financial mechanisms to support the operation of the health special administration regime, which has the objective of ensuring the continuity of designated services in the event of a provider insolvency. It would enable Monitor to collect money from providers of designated services and commissioners of those services to invest in those financial mechanisms.

A health special administrator appointed to a failing provider of designated services would be able to apply for additional funds from the financial mechanisms to help cover the costs of ensuring the continued provision of designated services until the failing provider was restructured or a new provider could be found. Funds from the financial mechanisms could only be used by the health special administrator to cover operating costs during health special administration associated with ensuring the continuity of designated services. That includes any indemnities for the health special administrator and other relevant persons in respect of liabilities incurred, or loss or damage sustained in connection with the exercise of the health special administrator’s powers and duties; any costs associated with ensuring the continued operation of designated services; and the costs associated with restructuring the provider to ensure a sustainable future for the designated services. Those restructuring costs might include, but are not limited to, renegotiation of service contracts and restructuring of debts or payments that are made to a new operator to establish a viable provider.

Clause 129 requires Monitor to calculate the amount that each provider must pay to the risk pool, and to notify the provider of that amount and when it will become payable. The clause allows for the amount payable to be adjusted if a provider has designated services for only a proportion of that financial year. The clause also allows for the amount payable to be adjusted if Monitor judges that the risk of a provider failing has changed since its original determination. That means in practice that a provider may pay less if its risk of failure reduces, or that it may pay more if the risk of failure increases.

Providers would be able to apply to Monitor to recalculate the amount payable if they believe that the amount has been miscalculated. Subsection (9) ensures that an application will be valid only if it relates to the amount that is payable in the current financial year. That restriction is necessary in order to allow Monitor to make accurate and robust forecasts of the funds that it will require for the present time period, which would be considerably harder if it had to consider adjustments for prior time periods.

Amendment 622 applies to that recalculation provision. I believe that the amendment is an attempt to improve the provision by increasing the restriction on providers’ ability to go back to previous financial years’ levies and ask for recalculations on levies that they have already paid. The amendment is not necessary, however, as the current drafting of the clause already restricts the application for recalculation to that financial year’s levy. For that reason, I ask the hon. Gentleman to consider withdrawing his amendment.

Derek Twigg (Labour, Halton)

I beg to ask leave to withdraw the amendment.

Clause 130

Simon Burns (Conservative, Chelmsford)

I beg to move amendment 413, in clause 130, page 114, line 33, leave out ‘in its opinion’.

I will be brief, because this is a minor and technical amendment to sharpen the drafting of the legislation. The words “in its opinion” in subsection (6)(b) are not necessary, because the subsection already requires Monitor to make a determination on what it must exclude from a review.

Clause 133

Clause 134

Clause 136

Liz Kendall (Labour, Leicester West)

I beg to move amendment 639, in clause 136, page 117, line 28, at end insert ‘and instead insert—

‘(3) At least one member of the council must be appointed by a Commissioning Consortium for which the corporation provides goods or services.

(3A) At least one member of the council must be appointed by the appropriate local Health and Wellbeing Board.”.’.

We are now moving on to the changes to foundation trusts. The clause concerns the changes to the role and appointment of foundation trust governors. Subsection (2) removes the requirement that at least one member of the board of governors, or council of governors, as the Government intend to rename it, should be appointed by the primary care trust, because the Government intend to abolish primary care trusts.

The amendment seeks to ensure that at least one member of a council of governors is appointed by a commissioning consortium to which the foundation trust provides services, and that at least one member is appointed by a relevant health and well-being board. The purpose of the amendment is clear. If we want to support the integration of services across community, primary and secondary health services and across health and social care, it would be extremely beneficial for foundation trusts to have a governor appointed by one of those bodies, just as foundation trusts currently have to have someone appointed by a primary care trust. We ought to see such improved collaboration and joint working.

The appointment of at least one member of the council by the local health and well-being board would help to improve democratic accountability. There would be accountability not only to patients, but through the democratic process. I am sure the Minister will say that that is something that the Government are keen to achieve.

Paul Burstow (Liberal Democrat, Sutton and Cheam)

So that I do not begin by disappointing the hon. Lady, she is absolutely right, the Government do want to achieve that. Through the Bill we will further strengthen the system to encourage integration across health and social care and between community, secondary and tertiary services. This is an essential part of how we ensure that patients’ experience of health and social care is improved, and that we drive the continuous improvement that we wish to see in the NHS.

Looking at amendment 639, which relates to the composition of the council of governors of an NHS foundation trust, I certainly sympathise with the intention behind it, and I support greater transparency and accountability in the governing of foundation trusts. That is why the Bill includes robust provisions to increase the transparency and accountability of foundation trusts to their governors, staff members, patients and the public. That is why we have proposed that foundation trusts should be free to include any organisation they choose on their council of governors so that they can tailor their governance arrangements to suit local circumstances.

Foundation trusts are not homogeneous; community foundation trusts or ambulance trusts may wish to have different people on their council of governors than acute trusts. We need to ensure flexibility so that they can tailor their governance arrangements. Rather than specify more and more compulsory governors, we feel that, beyond the absolute minimum requirements, decisions on the composition of the council of governors are best left to local discretion. Some foundation trusts may wish to invite voluntary sector partners on to the council of governors, others may want one or more commissioners on the council; in any case, public and patient governors -would remain the majority.

As the hon. Lady knows and has indicated, health and well-being boards are part of the local authority. Placing a duty on them to make an appointment to the foundation trust council would duplicate an existing local authority duty, which will continue, and which gives the local authority flexibility over the most appropriate representation. It is also important to recognise that health and well-being boards are about influencing commissioning decisions, rather than supervising individual provider organisations. As we discussed when we debated part 5 of the Bill, while individual commissioners would remain responsible for their commissioning plans, the role of health and well-being boards would be to create an overarching framework within which the plans are developed.

Requiring health and well-being boards to make appointments to foundation trusts would require the board to be involved in the governance of some providers while not having that type of influence over others—for example, any provider that is not a foundation trust. That could involve community interest companies of the sort established as part of the spin-out of community services from PCTs, which started under the last Government and continues under this. The requirement would therefore raise questions of fairness and equity between providers, and also go significantly beyond the original role of health and well-being boards, which were widely supported during the consultation.

Clearly foundation trusts should continue to engage commissioners; the hon. Member for Leicester West is absolutely right about that. That relationship is very important in order to understand what commissioners want, so that they can respond in the best interests of patients. Consortia have influence by virtue of their commissioning decisions and contractual arrangements, and it would continue to be in the interests of foundation trusts to involve commissioners appropriately. We have not imposed foundation trust representatives on consortia, nor do we seek to impose consortia representatives on foundation trusts. If foundation trusts decide that they want representation from other bodies in their governance structures it is up to them; the Bill provides for greater autonomy in the way that foundation trusts operate.

Steve Brine (Conservative, Winchester)

Is it the Minister’s view that there is a good likelihood—let us put it that way—that the council would wish to involve commissioners from the GP consortia that it wants to sell services to? Given that it wants them to be interested in buying its services, does the Minister expect that it is likely it would put them on the council?

Paul Burstow (Liberal Democrat, Sutton and Cheam)

The clause—as do those which we will discuss shortly—makes the responsibilities of governors much clearer and more transparent. It clarifies the purposes of these organisations and makes them visible to both the communities they serve and the governors, so that what they are meant to do is much clearer. The clause also clarifies what they are meant to do in terms of framing their constitution. This matter will not be left to one side, unconsidered. In future, as part of the process of reviewing constitutions, governors would have to consider whether they wanted to include the possibility of membership of commissioners in the constitution. However, the question of commissioners being involved with providers on the design of appropriate care pathways is not necessarily best solved by membership as governors of the body. It is dealt with in a host of other ways and through other relationships, not least the clinical relationships between clinicians in the trust and clinicians in the consortia. I hope that the hon. Lady is reassured, and that she will not press her amendment to a vote.

Liz Kendall (Labour, Leicester West)

I also hope that foundation trusts will seek to involve GP commissioning consortia and health and well-being boards in a host of ways, not least, as I hoped they would, through the council of governors, because that is the overarching body with responsibility. There is a strong argument to say that it would be in the best interests of foundation trusts to ensure that the body that has overall responsibility for that trust includes the people it has to work with. I only wanted to have those statements put on the record, so I beg to ask leave to withdraw the amendment.

Liz Kendall (Labour, Leicester West)

I beg to move amendment 640, in clause 136, page 118, line 4, at end insert—

‘(2) The Care Quality Commission must make provisions to ensure that the governors of a public benefit corporation are equipped with the skills and knowledge they require in their capacity as such.’.

Subsection (5) requires foundation trusts to ensure that governors are equipped with the skills and knowledge they need to carry out their duties. Such duties are set out in subsection (4):

“(a) to hold the non-executive directors individually and collectively to account for the performance of the board of directors, and

(b) to represent the interests of the members of the corporation as a whole and the interests of the public.”

Those provisions are welcome, because they provide clarity and spell out, in detail, the role of governors, showing that the line of accountability goes from the council of governors to non-executive directors, who themselves have to hold the board of directors to account. It is useful to have such details in the legislation.

The Foundation Trust Governors Association represents about 3,000 governors across England. It believes that the provisions do not go far enough in establishing how the effectiveness of governors will be assessed on an ongoing basis. As hon. Members know, I have raised the point several times that, as Monitor loses its responsibility for foundation trusts, the governors of foundation trusts are where the buck stops in terms of responsibility for them. Ensuring that governors are inducted and trained by their foundation trust is absolutely critical to the overall effectiveness of their governance, so that needs to be assured on an ongoing basis.

The amendment would give the Care Quality Commission a responsibility to assess the effectiveness of foundation trust governors, as Ofsted assesses the effectiveness of school governing bodies as part of its school inspection regime. The amendment attempts to provide some kind of proportionate outside check or balance on foundation trusts. Organisations go through a rigorous process to become a foundation trust and to ensure that they have the governors in place. Anyone who has worked with such trusts as they do that knows that it is a rigorous process. The argument, however, is that assessment needs to happen on a continuing basis. It does not need to be over-burdensome—Ofsted, at least once every five years, I think, looks at the effectiveness of how school governors run their schools. The amendment allows for the CQC to take on a similar role for foundation trusts. It is an important and not over-burdensome requirement, which would be helpful for foundation trusts. Without removing their independence, it would provide some reassurance to patients and the public that the body responsible for running these trusts is, at the very least, effectively trained and has the right skills.

Paul Burstow (Liberal Democrat, Sutton and Cheam)

I certainly have some sympathy with the points made, and I welcome the hon. Lady’s appreciation of how the clause has been drafted to ensure that there is greater visibility for the wider public of the governors’ responsibilities. It is clear that we listened to the responses to the White Paper. We made some significant changes, which were reflected in the Command Paper and are now in the Bill.

Amendment 640 relates to provisions on the council of governors and the NHS foundation trusts and concerns who is responsible for ensuring that the skills are there to perform the role effectively. I agree with the hon. Lady’s point about the need for good induction and ongoing training.

We agree that foundation trust governors must have adequate support to fulfil their role. Governors already play an important role, and it will be even more important in the future. They will be responsible for holding their board of directors to account as representatives of their foundation membership—the public and staff of the foundation trust.

It is equally important that there is clarity about who in the system is responsible for ensuring that governors are fully equipped for their role. If the same responsibility is placed on the Care Quality Commission, which is the effect of amendment 136, we run the risk of having a situation in which it is no longer clear where responsibility lies and we end up weakening rather than strengthening the responsibilities. We want it to be beyond doubt that this is a responsibility of the organisation itself—that it sits with the directors to ensure that they are providing the necessary support and ongoing development so that governors can fully discharge their responsibilities. It would be a great pity if this clear responsibility on foundation trusts, as set out in clause 136, were to be diluted. Foundation trusts themselves are best placed to identify the skills and knowledge of their governors and to make the arrangements to achieve that—whether by providing training or information themselves or by buying it in from other suppliers—and supporting governors to take up the opportunities available to them. Transferring this responsibility to the Care Quality Commission would allow foundation trusts, effectively, to blame someone else if things go wrong.

Foundation trusts are best placed to help governors focus on specific issues affecting their own organisations. Governors will continue to need information from a variety of sources and on a wide range of issues, including governance, clinical quality and finance and local priorities and needs. Foundation trusts will be able to help them access that.

I understand the wish to involve the CQC. There will be increased emphasis on quality of patient service, but CQC’s important role as a quality regulator of providers of service is to provide assurance that the care is being delivered safely to patients and people using the services and meets the standards set out in registration regulations. The CQC should not be distracted by being drawn into discussions about the governance of boards or organisations.

The hon. Lady talked about the Foundation Trust Governors Association. We are certainly aware of the need to provide support for foundation trust governors. We are working with the Foundation Trust Network, the Foundation Trust Governors Association and Monitor, in its current role as foundation trust regulator, to see how best that can be achieved. Although the intention is one that we share and understand, the means that the hon. Lady is suggesting is not the right way to achieve that, so we resist the amendment.

Jeremy Lefroy (Conservative, Stafford)

I shall be extremely brief. I support the idea behind the amendment, which is that it is vital that foundation trust governors have training. Our experience in Mid Staffordshire clearly shows what an important role governors have, and they must be supported. They are elected and may have great skills, but not necessarily all the skills that such groups might need. It is vital that they obtain skills by the most professional means possible. The Minister says that we would not want to constrain how it is done or make it too bureaucratic. Perhaps the Department could consider some kind of qualification or specific course for governors that is of a higher order than what is currently available, such as that mentioned by the hon. Lady, so that they are trained in the best possible way. I note that the impact assessment mentions provision for funds to be made available for such training. Will the Minister assure us on that point?

Paul Burstow (Liberal Democrat, Sutton and Cheam)

As I said, we are working closely with the Foundation Trust Governors Association, the FT network and Monitor on these issues, and I would be happy to update the Committee as work progresses.

Jeremy Lefroy (Conservative, Stafford)

I am grateful for that reassurance.

The role of governors of foundation trusts is extremely important. As the hon. Lady said, the buck stops with them. Society should value that role, supporting all who undertake this responsibility as best we can.

Liz Kendall (Labour, Leicester West)

The Minister is right to say that we want to be clear about the responsibility of foundation trusts to ensure that governors are trained effectively and have the right skills and experience, and I would not want any amendment to muddy the water. In all seriousness, however, my real concern is that we need some kind of periodic outside check, not one that is over-burdensome, to be sure that the governance of foundation trusts is effective. The amendment tries to ensure that the matter is dealt with in the same way as Ofsted deals with the governance of schools. It is an important outside check and balance.

The wording of the amendment may not be as tight as it should be, but I shall press it to a vote because I want to record the Opposition’s concern. I ask the Minister to think again. I shall say more about the subject on clause stand part, but I hope that we are not faced with another situation like that in Mid Staffordshire in years to come. If it happens, members of the Committee will have some responsibility for not taking the opportunity to put these checks and balances in place.

Liz Kendall (Labour, Leicester West)

I wish to make some points that follow on from comments made during our discussion of amendment 640.

There are real concerns about removing Monitor’s role in regulating the foundation trusts. It currently has the ability to step in if a foundation trust does not have the necessary governance arrangements to prevent or deal with a whole range of problems: it can direct trusts to do things, stop them from doing things and require them to add individuals to or remove individuals from trust leadership. All NHS trusts have to become foundation trusts by April 2014, and although Monitor will retain some regulatory powers over some of the most challenged trusts during a transition period, from 2016 all foundations trusts will be on their own. That is a major change, and it is important that we discuss it.

The need to ensure that foundation trusts have governors with the necessary skills and experience will be even more important in the future. The NHS faces its tightest ever funding period, and will be under huge pressure to maintain and improve quality of care at the same time as making efficiency savings worth £20 billion. If the Bill is passed, the NHS will have to do that within a much more competitive environment, with many more providers challenging foundation trusts and the services that they offer. Also being abolished are the strategic health authorities, which have the ability to step in and help to prevent trusts and foundation trusts from starting to fail. Many hon. Members will know that.

We also need to be aware that there will have to be many more governors, because all hospitals, mental health trusts, ambulance services and community services will become foundation trusts, and they will all need governors with the necessary skills and experience to have the ultimate responsibility for very complex organisations. As we all know, Dr David Bennett is the new head of Monitor. He told a recent meeting of the Westminster health forum:

“It is a very, very major step up for the governors of these trusts and one thing we would say is that we think a lot of thought and effort needs to go into how we make the governors of these foundation trusts ready to take on that extra role.”

I want to illustrate that point by giving an example. Government members of the Committee are not concerned about using specific examples and I hope that the hon. Member for Stafford will bear with me, as I realise that he knows far more about these issues than I do. Nevertheless, I want to highlight some of the key issues and challenges that have emerged from both the independent inquiry and the public inquiry into Mid Staffordshire, although the public inquiry has not yet reported. I have very carefully read the evidence that has emerged from both inquiries so far and it is important that we are aware of some of these issues about governance, because they are very pertinent to the clause.

I want to use these examples not because I want to suggest that the problems in Mid Staffordshire are widespread. Far from it—I know that there are a huge number of foundation trusts with very strong governance arrangements, and excellent working between governors, directors and non-executive directors, with rigorous scrutiny and challenge. Nevertheless, it is important to understand what can happen if the governance of an FT is not strong or effective, and I want to highlight just a few points from the Mid Staffordshire case.

The independent inquiry, which took place before the public inquiry, clearly found that the governors of the Mid Staffordshire trust struggled to provide effective oversight of the trust. Witness M11, as she is referred to, had been a chaplaincy volunteer at Cannock for several years. She stood for election as a governor after there had been some very poor care of her father before he died. She told the inquiry that, despite the very high volume of paperwork involved in the role of governor, it was not clear to her what the position involved. That is why I am grateful that there is some more clarity in the Bill about the role of governors.

Witness M11 said that, in her view, the information that was provided to the meetings of governors was “not truthful”—that was the phrase that she used. On mortality figures, for example, she said the governors were simply told by the directors that there was a coding problem and that it was a very complicated situation. She said that the directors did not go through those figures in detail with the governors. She felt that governors were not encouraged to express their views or opinions, or to challenge the board. She also said that the governors were often told, when they asked questions about something, that it was an operational, not a strategic matter. But of course, if someone is going to understand strategic challenges they often have to understand the operational detail.

It was hard for the governors of the Mid Staffordshire trust, but the non-executive directors also said that they experienced problems in getting the right information from the directors of the trust. The executive summary of the independent inquiry into the trust said:

“It was noted that the non-executive directors recruited by the Trust were on the whole inexperienced in NHS board positions. While this may be inevitable in a relatively small trust”—

We should not forget that, as we move forward, it is the smaller trusts that are becoming foundation trusts—

“it does give rise to a need to call on more training or outside assistance.”

My final point is about what the public inquiry into the Mid Staffordshire trust has said about GPs so far. Although the Minister has not yet made this argument, one of the arguments for GP commissioners is that they will hold foundation trusts to account for the services that they provide. It is obviously at the heart of the Bill that GP commissioners will drive those changes. I want to read the opening statement, dated 9 November, from Tom Kark, the counsel to the public inquiry:

“The inquiry team has made repeated attempts to engage the local GP consortium with the work of this inquiry. The inquiry team has written directly to local surgeries. Unfortunately, until last week that effort had produced very little response, even from those who frequently referred patients to the trust and who must have something relevant to say of their own and their patients’ experiences, both of care and complaining…In short, the serious and global nature of the concerns about the trust do not appear to have been picked up by the surgeries…The extent to which general practitioners are in a good position or not to identify concerns at the local hospitals is of particular significance to this inquiry, bearing in mind the proposals for GP-based commissioning to take a far more front line role in the NHS.”

I do not think that the oversight of foundation trusts can be left simply up to governors themselves, when we know it is a huge challenge with all NHS trusts becoming foundation trusts—or to GPs. Dr Ian Wilson, one of the GPs who gave evidence to the public inquiry, said on 18 January that,

“committed GPs are very, very busy people and to try and keep a grasp of all of the changes that are going on and to make sure that you are on top of all aspects of what you should be doing as a professional is very, very difficult.”

I urge the Minister to think again about how we ensure effective governance over trusts to make sure that the very real problems in Mid Staffordshire are not repeated.

Jeremy Lefroy (Conservative, Stafford)

I thank the hon. Lady for that good summary of a lot of the evidence from both the independent inquiry and the ongoing public inquiry. Clearly, as there is a public inquiry, we cannot draw too much until Robert Francis has published his report. I want to come to that later. Hard cases make bad law. If it were simply one instance of a trust that had problems with its governance and all other trusts around the country were in good shape, we could say that it was a problem for Mid Staffordshire and not something that we should be too concerned about from the legislative point of view. However, I do not believe that is the case. The hon. Lady is perhaps too generous to trusts around the country as I think there are more hard cases than we realise at the moment. Therefore it is important that, as legislators, we look closely at this.

I want to highlight the danger of the transition, which the hon. Lady has already mentioned. As I understand it, and the Minister will correct me if I am wrong, once the Bill is enacted, Monitor will no longer be responsible for the monitoring of existing foundation trusts. It will still have the responsibility for the approval of new foundation trusts, but not for the monitoring of existing foundation trusts.

Paul Burstow (Liberal Democrat, Sutton and Cheam)

Just to be clear, all foundation trusts will come under the licensing system that we have been discussing, so they will be subject to the same conditions that would apply to any provider. So there will be monitoring in the context of their licence obligations.

Jeremy Lefroy (Conservative, Stafford)

I am most grateful for that. It gives some comfort although I suspect, given the number of providers compared with the rather small number of foundation trusts at the moment, the extent to which Monitor will be able to oversee that and the amount of work that it will be able to do on each one will probably be less than at the moment. That is not necessarily a bad thing, but it means that the onus is very much on the board, as many Members have already pointed out.

At the moment we have this transition between the consideration of the Bill and eventually, if Parliament wills it, its enactment, and the Francis inquiry, which is an incredibly significant inquiry. It is probably one of the most significant inquiries into the health service in decades. I welcome the fact that the Minister has already given an assurance that all the recommendations made by the inquiry will be taken fully into account and, where necessary, put on a statutory basis.

We do not know how long that interim period will last, but what transition arrangements will there be? The proposals and recommendations of the Francis inquiry could be quite radical. I know that Sir Robert Francis is taking a particular interest in both the independent and public inquiries. Is there a way in which the recommendations—particularly on governance, as that is key—can be brought forward, or indicated, so that they could even be incorporated into the Bill? If that is not possible, will the Minister give an assurance that there is a way in which they could be very rapidly implemented? As we know, waiting for a second Session Bill could take a couple of years, and I do not think we have that amount of time.

That is all I wish to say. I believe the question of timing and transition is very important, particularly in the area of governance, where we place so much emphasis on foundation trusts.

Paul Burstow (Liberal Democrat, Sutton and Cheam)

I thank my hon. Friend the Member for Stafford and the hon. Member for Leicester West for their important points. They go to the heart of how we ensure that the system put in place by the Bill is entirely about delivering the best possible results for patients: safe, quality care. That is at the heart of the vision and purpose of the legislation.

I will try to address several of the key points. First, I will reflect quickly on the objective of moving NHS organisations to foundation trust status. This is not the first time that such an objective has been set, but it is the first time that it has been set so clearly in statute. It was set by Alan Milburn in 2003, when the aspiration was to achieve it by 2008. That was revisited in 2007, with the view taken that it should be achieved by 2010. Those dates have been missed. We have been ensuring that we learn from the experience of the previous Government in not achieving those deadlines, and that we proceed in a way that secures the patient interest, which is to have well delivered quality care that is value for money for the taxpayer. That is in a context, as the hon. Lady rightly said, of a tight but none the less significant financial settlement for the NHS, which the Chancellor confirmed in yesterday’s Budget statement. That, alongside what is now called the Nicholson challenge, provides an extra year for the NHS to respond to the quality, innovation, productivity and prevention programme initiated by the previous Government, which this Government are committed to carry through.

That programme is about ensuring that health care resources are allocated to delivering the best possible results for patients. It is about asking whether we are necessarily delivering care in the right place. For example, it is about ensuring that care for people with long-term conditions and co-morbidities is increasingly delivered in community settings. It is also about ensuring that unscheduled care is reduced and that more appropriate interventions are provided. There are inevitable changes to the way in which services are provided to deliver that agenda, which is one shared throughout the Committee. Both this Government and the previous one see it as essential to changing the services that are there to meet patient need.

In response to the challenge about governance rightly made by the hon. Lady and my hon. Friend, the clauses try to elevate the status and profile of a governor’s responsibility, and make that clear to governors, directors and others with an interest. That is a very serious and important responsibility. As the legislation is enacted, we will see that responsibility become even clearer. That is why the clause does a number of things. First, the clause defines the role of the council and the governors more clearly than ever before. They will have a duty to hold the directors of the foundation trust to account and to represent the interests of the membership and the public. Secondly, it gives governors a new power to challenge and question directors about the performance of the organisation at a special general meeting.

While the new duty and power will be a relatively small legislative change, it has a big cultural impact. The hon. Lady referred to the inquiry, and recommendation 9 identified a cultural issue. It is partly about training, but it is also about attitude and behaviour. The Francis report highlighted several failings of the board of directors at Mid Staffordshire, including the recruitment of inexperienced non-executive directors, who failed to fulfil their role. Directors were complacent and isolated themselves from outside influences. The provisions in the clause aim to open the board up to greater influence from outside, not least from governors and the membership. Our reforms ensure that directors cannot hide away from those outside influences. That is an important assurance that I can give to my hon. Friend and the hon. Lady.

The hon. Lady also asked about the role of GPs, but if we talk about it solely in terms of “GPs” and not GP commissioning consortia, we would be misdirecting ourselves. We are discussing the role of a public body—a commissioning consortium—that is led by GPs. That body will have clear responsibilities about its contractual relationships with providers, including foundation trusts, which it must ensure that it is fully and completely undertaking. The NHS commissioning board will be undertaking assessments of such consortia to ensure that they are discharging their functions properly.

Dan Byles (Conservative, North Warwickshire)

I am not saying more than what other hon. Members have already said, but this is a hugely important issue. When I sat on the board of the mental health trust, in the aftermath of the Mid Staffordshire events we regularly discussed how we could be sure that something like that was not happening at our trust. The Mid Staffordshire board sat down every month and looked at all its indicators, at its dashboard, at all the targets that it had been set and whether it had ticked all the boxes, but we know what was happening out in the wards. As a board, we fundamentally reassessed how we gathered information and how we interacted with our partners, both within the trust and externally. This is a hugely important issue, and I am reassured greatly by what the Minister has said.

Paul Burstow (Liberal Democrat, Sutton and Cheam)

Indeed, one of the points made in the report was that there had been a corporate focus on process at the expense of outcomes. That was a key failing, which the Bill is trying to change. We want to shift the focus more decisively on to outcomes.

We are placing the onus on governors, but we are not excluding other actors, such as GP commissioning consortia. Taken together, the provisions significantly strengthen the internal governance of foundation trusts. They make them more accountable to their governors, and as a result foundation trusts will be more responsive to the interests of their members and the communities that they serve. The provisions respond to the feedback that we received during the consultation on the White Paper, particularly from our discussions with the Foundation Trust Governors Association and the Foundation Trust Network. For those reasons, I hope that the hon. Member for Leicester West and my hon. Friend the Member for Stafford are reassured.

We are obviously in the middle of an inquiry at the moment. It is entirely right that hon. Members are following it closely, as are the Government, but until the inquiry has ended, drawn its conclusions and made its recommendations, we cannot respond and cannot commentate as it goes along. That could misdirect the Committee and result in our making poor judgments.

Clause 137

Liz Kendall (Labour, Leicester West)

I beg to move amendment 642, in clause 137, page 118, line 32, after ‘maximise the’, insert ‘health and other’.

The amendment is straightforward and seeks that other benefits, as well as health, are taken into account when directors determine whether a foundation trust is a success. That would ensure that the key determinant of the success of a foundation trust could not be interpreted as its financial success.

Paul Burstow (Liberal Democrat, Sutton and Cheam)

I sympathise with the intention behind the amendment. The Government fully support a focus on improving health care outcomes, as I have said, which is at the heart of what we are trying to achieve in the Bill. That is why we are making foundation trusts more autonomous and removing existing constraints, leaving them free to focus on innovation and improving health care outcomes for patients.

The principal purpose of all foundation trusts, set out in existing legislation, is:

“to provide goods and services for the purposes of the health service in England.”

The director’s general duty is to promote the success of the foundation trust while maximising benefits for members and the public. The amendment seems to be intended to ensure that directors promote the success of the corporation in order to focus primarily on improving health benefits for the public and members, as opposed to any other benefits. By implication, however, that is already the case, because of the definition in existing legislation, which the Bill does not repeal.

The benefits referred to in the director’s general duty are likely to be related to health, improved quality of care, more efficient services and better integration of care, which I think all Members on both sides of the Committee want. Maximising the benefits for the members and the public might also be about promoting the long-term sustainability of the organisation—a concern echoed in the Committee. The Bill is about ensuring that we have thriving, successful organisations, but inevitably it has to provide for those rare circumstances where organisations do not succeed. There is no need to state explicitly in the Bill that the benefits are likely to be health benefits. The amendment is therefore unnecessary and does not add anything.

Alongside the principal purpose are other safeguards to ensure that foundation trusts act appropriately. Because they are statutory bodies, they cannot distribute any surplus externally, which means that any surplus or profit must be reinvested in the organisation. I hope that the hon. Lady is reassured and does not press the amendment to a vote.

Liz Kendall (Labour, Leicester West)

I beg to ask leave to withdraw the amendment.

Liz Kendall (Labour, Leicester West)

I beg to move amendment 641, in clause 137, page 119, line 30, at end insert—

18D (1) The board of directors must meet in public.’.

Clause 137(4) requires the board of directors to send a copy of the agenda of a board meeting to the council of governors before they hold the meeting, and to send the minutes to the council as soon as is practicable afterwards. That is a welcome legislative change as a way of trying to provide more information for governors. As I have said, that is extremely important because it is not possible to hold the board of directors properly to account without the information that is needed to scrutinise its work. However, as the Foundation Trust Governors Association says in its written evidence to the Committee, it is

“unclear how this information will be shared with governors if Board of Directors’ meetings are held in private as in many trusts this sort of information is not shared on the grounds of confidentiality.”

The amendment would ensure that the board of directors meets in public.

The Foundation Trust Governors Association understands that there will be confidential and sensitive matters that will need to be discussed by the board of directors in closed sessions, but the association believes that that could be addressed by splitting board meetings into a part 1 and part 2 arrangement. In part 1, the board of directors would meet in public, and part 2 would be held in private. The scope of the part 2 meetings would need to be carefully assessed to ensure its appropriateness and foundation trusts would need to establish a process for reassuring their governors that the items in the private, part 2 sessions really need to be there and to provide an outline of why they are there.

The Foundation Trust Governors Association believes that that could be done through the work of the lead governor and says:

“it is important for the probity and local accountability of the FT that the Part I of the meeting is clearly the discussion and decision-making forum for the Board of Directors…If FTs are to fulfil their remit of being accountable to their communities rather than Whitehall, public scrutiny of the Board of Directors’ meeting is essential.”

The association cites the Local Government Act 1972 as a precedent, and states in its memorandum to the Committee that section 100 of that Act says:

“A meeting of a principal council shall be open to the public except to the extent that they are excluded”

under an arrangement similar to a part 1 and part 2 meeting. The majority of the association’s approximately 3,000 members agree with that, and feel that without access to their directors’ public meetings, they cannot properly discharge their duties.

Paul Burstow (Liberal Democrat, Sutton and Cheam)

Again, we share the intention behind the amendment, which flows logically from some of the findings and recommendations of the Francis inquiry in that we need to foster a culture of openness and a general belief in the practice of transparency in FTs’ operations. My concern about the amendment is that its approach is to add to the Bill a provision about having meetings in public. The hon. Lady referred to the equivalent situation in local authorities. I will refer directly to Mid Staffordshire by way of example.

Starting with the local authority context, I do not know how many colleagues on the Committee have served in local authorities over the years, but those who have and have been members of majority groups will know that those groups often have meetings before a public meeting in which they discuss the business and come to a collective view on how to proceed. That is a part of local authority practice that goes back many years. They then discharge the formal part of their business in a committee. A concern that emerged during the Francis inquiry and led to its recommendation 8 echoes that: the inquiry report highlighted the lack of openness in the Mid Staffordshire NHS Trust as a contributing factor to a culture there that was not conducive to providing good patient care. However, that lack of openness predated Mid Staffordshire becoming a foundation trust.

At the moment, foundation trusts are not under a statutory obligation to meet in public. In the past eight years and on the three occasions when health legislation has been before the House, Governments have not taken the view that there is a need to open up the committees of foundation trust boards in that way, so the hon. Lady’s proposal is novel. It is important to bear in mind that the Mid Staffordshire organisation was an NHS trust, and although such trusts are under a statutory duty to meet in public, discussions and meetings there took place in private so, in that sense, the statute does not give the comfort that the hon. Lady seeks. We have to find other ways really to ensure that governors have the ability to scrutinise, call to account and do everything we discussed under clause 136.

Emily Thornberry (Labour, Islington South and Finsbury)

I am interested to hear the Minister’s argument about why bodies that make important decisions on behalf of the public should not meet in public. Although there might always be caucusing in advance of meetings, just as justice needs to be seen to be done, so does proper democracy. That major decisions can be made behind closed doors when there is no reason to do so is an odd position for the Minister to argue, given his party’s history and its commitment to local democracy.

Paul Burstow (Liberal Democrat, Sutton and Cheam)

I am almost stunned. The hon. Lady was, of course, a member of the previous Parliament and, therefore, would have been in the House when the 2009 legislation was considered. There would have been ample opportunity for that concern to be addressed at that time, but it was not. The view seems to have been that it was entirely appropriate for such matters to be dealt with in a way that was considered by the organisation itself to be appropriate. The point, which we discussed under clause 136, is that we want to ensure that a foundation trust’s governing document, its constitution, is the place where such issues are worked through.

On behalf of the FTGA, the hon. Member for Leicester West asked how governors would find out there is a meeting and how they could obtain the papers. Directors must send governors the agenda in advance of a meeting, and if governors are not told of any meeting, they can challenge the directors at a special general meeting. There is, therefore, a transparent route by which the material, the papers, the agenda and the minutes are sent to governors. There is no way that that would be hidden simply because directors do not meet in public.

Steve Brine (Conservative, Winchester)

I have listened carefully to the arguments of the hon. Member for Leicester West and the Minister. Although the Bill does not state that directors must meet in public, does he agree that it does not state that they must not?

Paul Burstow (Liberal Democrat, Sutton and Cheam)

Most certainly it does not. It is permissive: it allows the foundation trust to organise its governance arrangements in the way provided for in the Bill.

Steve Brine (Conservative, Winchester)

The Minister may not be able to answer this, but is it his experience that existing foundation trusts, on the whole, do so?

Paul Burstow (Liberal Democrat, Sutton and Cheam)

The practice varies. There are foundation trusts that meet in public and there are foundation trusts that do not. The Bill makes it much more in the purview of governors to challenge and debate such issues with their director colleagues and, if necessary, call directors to account on them, too. The Bill moves the arrangements significantly in the right direction toward a framework that is much more transparent and accountable than the one we have inherited.

Daniel Poulter (Conservative, Central Suffolk and North Ipswich)

Does the Minister agree that there are certain issues, perhaps to do with commercial sensitivity or staffing, that may require a certain amount of confidentiality, at least at some stages of discussion, and that flexibility is needed on whether meetings are held in public or in private; but that overall we are moving towards much greater transparency and, ultimately, there is transparency at the end of all of the processes?

Paul Burstow (Liberal Democrat, Sutton and Cheam)

Yes. That was a perfectly formed question, and I am happy to give a clear, straightforward yes in answer. Those are the reasons we do not think the amendment is necessary. We believe the changes we are making to the governance arrangements of foundation trusts are a significant step in the direction that all Members want to see. We should not be attempting to fetter the organisations that we want to be more autonomous, as we would by making the amendment.

Liz Kendall (Labour, Leicester West)

I thank the Minister for his reply. I tabled the amendment because the majority of the FTGA’s 3,000 members believe that it will help them to do their job. That is not an argument that I have created from thin air—not that I create any of my arguments from thin air. It is what the FTGA’s members have said they want to help them do their job properly.

The Minister used the phrase that I am somehow seeking comfort that everything would be fine. That is not what I am doing. I absolutely believe that the way to change the culture of an organisation is through building relationships and trust and by working with common values towards a common goal, so that scrutiny is seen as helpful, not an attack. The FTGA has said that the amendment help to change the culture. Although some foundation trusts might meet in public at the moment, it does not happen everywhere.

Steve Brine (Conservative, Winchester)

I have a lot of sympathy with the hon. Lady’s argument. I understand that the FTGA said to her that the amendment would help its members to do their jobs, but there nothing to stop them doing what the amendment states to do their jobs. I am sure that that the members of the new FT in my Winchester constituency will be putting a great deal of pressure on governors, who will also be members of the FTGA in due course, to hold their meetings in public—their Member of Parliament will certainly be doing so. There is nothing to stop them doing what they need to do and I do not know why the FTGA is asking Parliament to, dare I say it, lead them by the hand down that path.

Liz Kendall (Labour, Leicester West)

The hon. Gentleman makes a good point, and I am sure that governors up and down the country will make a similar point, strongly, to their trusts. In response to the point made by hon. Member for Central Suffolk and North Ipswich, as I have said, I understand that there may be sensitive issues that cannot be discussed in public, which is why, as the FTGA itself has said, the meetings could be split into two parts. I say to the Minister that although this may not have been done before, things can always be improved. I am trying to be positive and helpful—on this occasion.

I only wanted to put it on the record that holding meetings in public to enable governors to have that information is very important. I beg to ask leave to withdraw the amendment.

Clause 139

Liz Kendall (Labour, Leicester West)

I beg to move amendment 643, in clause 139, page 120, line 11, at end insert—

‘(1B) If the public benefit corporation is an NHS foundation trust, it must keep separate accounts for —

(a) income derived from private charges, and

(b) income derived from services provided for the purposes of the NHS.’.

Mike Hancock (Liberal Democrat, Portsmouth South)

With this it will be convenient to discuss the following: amendment 644, in clause 141, page 121, line 32, at end insert—

‘(ad) if the public benefit corporation is an NHS foundation trust—

(i) a breakdown of the total income derived from private charges and from services provided for the purposes of the NHS, and

(ii) information on how the level of income derived from private charges impacted the services provided for the purposes of the NHS.’.

Amendment 645, in clause 141, page 121, line 37, leave out subsection (3).

Liz Kendall (Labour, Leicester West)

Amendments 643 and 644 are designed to make it clear to FTs that they need to have clear and separate accounts relating to the income derived from charges for private patients, and the income derived from NHS services. In a later clause, we will discuss removing the cap on private patient income, and I am sure that there will be a vigorous, lively discussion then. The amendments seek to place a clearer, more formal requirement on trusts for their accounts to be kept separately for the two pots of income, which is often best practice in some foundation trusts. The proposals would ensure that foundation trusts are very clear about how much money is coming in from the private sector and how much from the NHS, and clear about not allowing any subsidy between the two.

Amendment 644 would ensure separate reporting in an annual report of transactions relating to private patients and NHS patients. If the Government want a level playing field, I am sure that they would agree to the proposal.

Amendment 645 is on a different topic, so I am not sure why it has been placed in this group, but I shall speak to it anyway. It would remove subsection (3) which would give the Secretary of State the ability to determine the content of foundation trusts’ annual reports, and importantly, the power to repeal a foundation trust’s obligation to detail in its annual report the steps that it has taken to ensure that its membership is representative.

A number of questions arise. If the Government believe in the independence of foundation trusts, why does the Bill give the Secretary of State the ability to determine the content of their annual reports? It seems very peculiar that the Government want to set them free in many aspects, apart from determining the content of their annual report.

John Pugh (Liberal Democrat, Southport)

Regarding amendment 643, I would have thought it would be quite natural, in decent accountancy terms, for foundation trusts to give the different sources of income, although I grant that NHS accounts are not as transparent as one might wish. If the Government had this power they could—paradoxically—insist that the private and public revenue streams are separately accounted for.

Liz Kendall (Labour, Leicester West)

Now, of course, the grouping of the amendments becomes clear. There is a series of issues here. What is the best way to require foundation trusts to have very clear accounting arrangements? Is it to give the Secretary of State a power to determine the content of the annual report that he does not have to exercise? Or is it to put the requirement clearly on the face of the Bill, as the Government say they are doing with many other aspects of their reforms? It is important that foundation trusts show that they have taken steps to ensure that their membership is representative of the people that they serve. That is a basic requirement. I would like the Minister, at the very least, to explain the anomalies in the approaches that the Government are taking on these points, and I look forward to hearing him.

Paul Burstow (Liberal Democrat, Sutton and Cheam)

I will start with amendment 643. We agree absolutely with the hon. Lady’s point that there should be separate accounts for private income. However, the amendment is not necessary to achieve our shared goal, and indeed it could prove to be ineffective or unduly restrictive. Monitor already requires separate reporting and, as we said in the Command Paper response to the consultation on the White Paper, we accept the arguments for requiring foundation trusts to produce separate accounts for their NHS and private services. We consulted, listened, understood, acted, and we are now fulfilling that in this legislation.

As hon. Members know, clause 150 repeals the private income cap for foundation trusts, who tell us that the rigid and arbitrary cap is in fact damaging the NHS. We want to release the creativity and innovation of foundation trusts to benefit NHS patients. In short, we want foundation trusts to be able to earn additional income to improve services, like other providers. We will come on to some of the arguments about the cap when the hon. Lady speaks to her amendments on that, but when it comes to the issue of separating the two items we are at one.

Liz Kendall (Labour, Leicester West)

I am glad that we agree on the principle. Could the Minister tell me where the Bill requires those two separate funding streams to be accountable? I may well have missed it in this large Bill, but if he could tell me where that is I would be very grateful.

Paul Burstow (Liberal Democrat, Sutton and Cheam)

In effect, we copy over the existing power that Monitor has into this legislation, and provide for it to be exercised by the Secretary of State.

Liz Kendall (Labour, Leicester West)

I do not understand. Monitor is to lose its powers to regulate foundation trusts, so how will it ensure that they keep these separate accounts?

Paul Burstow (Liberal Democrat, Sutton and Cheam)

I was about to say that the ability to direct or issue guidance about separating accounts remains; it is who exercises it that changes. The ability to issue that direction remains within the legislative framework that we are providing. It is simply that Monitor will not be the body that exercises that in future. If the hon. Lady wishes, I can provide her with further clarification. That is the purpose. There is provision and it is maintained: it is just who exercises it that changes.

I can understand why amendment 644 was tabled. The ambition is to ensure that we have a fair playing field for providers so that we can deliver the best possible results for patients in terms of services. While the ethos and the values of foundation trusts provide a powerful protection for NHS services, I want also to see clear reporting on private income and to ensure that foundation trusts can be held to account. Amending clause 141 would not have the intended effect of increasing transparency about the impact of private patient work on the NHS.

The first part of amendment 644 would require the annual report to duplicate information contained in the annual accounts; the accounts and report are published together so that is unnecessary. As I have said, clauses 139 and 140 will allow requirements on separate accounting for NHS and private income to continue and we are committed to ensuring that that happens. This information would be available to foundation trust governors and our proposals to strengthen the role of governors would give them the power to take steps if private income was not helping the trust to fulfil its principal purpose. I will later highlight some of the benefits of that.

The second part of amendment 644 is unnecessary and again, due to the precise definition, potentially unhelpful and restrictive. Foundation trusts are likely to want to use the opportunity of their annual report to explain the role played by any private income, but we do not dictate that or set out the details in the Bill. As I have said, the principal purpose of a foundation trust is already set out in primary legislation. It is to provide goods and services to the NHS in England. The governors’ role, therefore, is to hold the board of directors to account for its performance and that is being made more explicit. The board’s role will be clearly defined as promoting the success of the organisation in the interests of its members and the public. So governors would hold the board of directors to account for fulfilling this principal purpose. In summary, foundation trusts are already subject to the scrutiny that the hon. Lady quite rightly says is necessary.

It is right that the Secretary of State should not have any kind of operational control over foundation trusts. That is a view that has developed in policy terms over a number of years. Such interference would run entirely counter to the purpose of our reforms on the provider side. Our reforms give foundation trusts greater autonomy so that they are free to focus on improving outcomes and being more responsive to patients and to innovate. Before I say why amendment 645 is not needed, let me briefly explain the important role of annual reports. Annual reports will be increasingly important as a way of providing summary information to governors and to the public about foundation trusts. It is important that in the short term the contents of annual reports are able to evolve and develop so that they can be of most use to governors of foundation trusts and the public.

Amendment 645 misunderstands the purpose of a vision in clause 141. The Secretary of State would only take on the power to determine the contents of foundation trusts’ annual reports if and when greater certainty about them could be provided by setting them out in secondary legislation. That is the point. It is only at the point that we think there is clarity and certainty and we have a perfect annual report that such a power would be taken. Then it would be dealt with through the processes of secondary legislation. Our intention is that this power for the Secretary of State would not be commenced immediately or, indeed, in the near future. For the moment we think that Monitor’s role in specifying the content requirements of foundation trusts’ annual reports is very important. It helps to ensure that the annual report can continue to become ever more useful to governors and the public. The powers proposed for the Secretary of State could not be used arbitrarily to impose operational controls on foundation trusts. For those reasons I hope that the hon. Lady has been reassured and will withdraw her amendment. If not, I will urge my colleagues to resist them.

Liz Kendall (Labour, Leicester West)

I am grateful to the Minister for his reply. There was one bit of it that I did not understand. Would he therefore write to me to clarify that the Secretary of State has the power to require foundation trusts to keep those separate accounting streams? I raise that because any foundation trust that does not, could be subject to challenge from competitors in the independent sector, who may think that they are not facing a fair playing field, if a foundation trust is using its private patient money to subsidise its NHS services. That is a real risk. Having very clear accounts that show that there is not that cross-subsidy would be important to protect those FTs.

Paul Burstow (Liberal Democrat, Sutton and Cheam)

Perhaps I can save the ink on a letter, and give the answer now. Monitor currently has the power to require that clear separation. With the Bill, we are repealing Monitor’s role in that regard. That responsibility will come back and sit with the Secretary of State. The assurance that I have given the hon. Lady and the Committee is that we intend to exercise that power in the same way, so as to ensure that accounting of private income is separate from that of the taxpayer.

Liz Kendall (Labour, Leicester West)

I would urge that requirement to be used possibly more than Monitor has done. I am not sure that every FT always does that. If there is a suggestion of cross-subsidy between private and public, FTs could open themselves to challenge from the private sector. I would urge the Secretary of State to use that power more often than Monitor has in the past. On that point, I beg to ask leave to withdraw the amendment.

Dan Byles (Conservative, North Warwickshire)

On a point of order, Mr Hancock. I do not think you were in the Chair at an earlier sitting when concern was expressed as to whether tweeting and the use of iPads were allowed. The Committee might be interested to know that an hour ago, the Procedure Committee announced that iPads are allowed and that tweeting is permitted from the Chamber, provided it is done with decorum.

Mike Hancock (Liberal Democrat, Portsmouth South)

Order. Unfortunately, the decisions of the Procedure Committee only have effect if they have been endorsed by the whole House. Until they have, nothing changes.

Derek Twigg (Labour, Halton)

Further to that point of order, Mr Hancock. The Minister might want to make quite a lot of tweets about what his leader has just said on a microphone. There might be quite a lot of tweeting at the moment, given what has just come over the wires regarding what the leader of the Liberal Democrats and Deputy Prime Minister has said that was picked up by a microphone.

Mike Hancock (Liberal Democrat, Portsmouth South)

We all eagerly await that.

Emily Thornberry (Labour, Islington South and Finsbury)

Further to that point of order, Mr Hancock. I am concerned about a possible misunderstanding about the use of hand-held mobile phones. I cannot quote chapter and verse, although I am prepared to look it up, but I am sure that the rules have been changed so that mobiles can be used. I gave evidence and that was the effect of it. I remember speaking to the Speaker who said he would change the rules.

Mike Hancock (Liberal Democrat, Portsmouth South)

I read with interest the comments made by the Chair on Tuesday. That seemed to be a fractious meeting for some reason. The situation is clear: you can use them but they are not to be used as aid during the presentation of a speech. That is quite clear. I personally have no problems with anything that has gone on in this Committee. Well—[ Laughter. ] That is probably a bit of an exaggeration. Nevertheless, I have seen nothing that would warrant the Chair doing anything other than to suggest that the Committee was well run and Members had responded to the Chair’s lead. That is all that needs to be said on that matter.

Liz Kendall (Labour, Leicester West)

I have an important point regarding clause 139, which makes changes to the accounting requirements of foundation trusts. As the explanatory note outlines, from 2011-12—the financial year starting in two weeks’ time—foundation trust accounts

“will move within the Department’s accounting boundary…and will be fully consolidated into the Department’s resource account.”

It continues:

“As the Department must produce its accounts in accordance with HM Treasury guidance… foundation trust accounts would also continue to be consistent with HM Treasury accounting guidance.”

As a result,

“the requirement for foundation trusts to lay accounts before Parliament independently”

will be removed, and

“the route of accountability for the spending of these organisations will be through the Department’s resource account.”

Paul Burstow (Liberal Democrat, Sutton and Cheam)

The group of Government amendments that we moved earlier reinstate the duty of foundation trusts to lay a copy of their accounts, and any auditor’s report, before Parliament.

Liz Kendall (Labour, Leicester West)

I thank the Minister for that, but I want to make a point on the bigger issue of accountability to Parliament for the spending of public money. I want to alert hon. Members to the fact that there is still a degree of confusion around how Parliament will, in the phrase often used by the Public Accounts Committee, “follow the pound.” I refer hon. Members to the meetings of that Committee on Tuesday 18 January and Tuesday 25 January, when evidence was given by David Nicholson, the chief executive of the NHS and future chief executive of the NHS commissioning board, and Una O’Brien, the permanent secretary at the Department of Health.

On Tuesday 18 January, the Chair of the Public Accounts Committee, my right hon. Friend the Member for Barking (Margaret Hodge), asked Sir David:

“So in the new world, when they’re all foundation trusts, where will the buck stop?”

He replied:

“The buck stops in the foundation trust.”

On Tuesday 25 January, when asked to clarify again the accountability for finances in the new world, David Nicholson said:

“Well, I’ll be accountable for the totality of the commissioning spend.”

Una O’Brien said:

“I have…overall stewardship of resources voted by Parliament to the Department of Health.”

The Chair then asked:

“Where does the buck stop?”

Una O’Brien replied:

“It absolutely stops in the Department.”

As a member of that Committee said, this is all a bit confusing. I want to ask the Minister who is responsible for taxpayers’ money, so that Members of Parliament can hold them to account for the money that we vote for the NHS to spend. Are FTs responsible, or is it the NHS commissioning board, or the Department of Health?

Paul Burstow (Liberal Democrat, Sutton and Cheam)

Perhaps I can start by setting out what the clause is about. Following the changes in the Constitutional Reform and Governance Act 2010, foundation trusts will move to within the Department’s accounting boundary under the cross-Government clear line of sight initiative, so that it is easier for Parliament to understand Government accounts. The clear line of sight initiative requires that foundation trusts’ annual accounts are consolidated into the Department of Health’s accounts from 2011-12. The Department needs, therefore, to be able to specify the form, content and timing of foundation trust accounts. We have discussed some of that already.

The direct answer to the hon. Lady’s question about who accounts for the use of public money is, as we indicated in discussion on the amendments that we moved earlier, that foundation trusts will continue to be responsible for laying their own accounts before Parliament. Their accounting officers, therefore, will be accountable for those accounts. The NHS as a whole, through the NHS commissioning board and its accountable officer, will be accountable for the moneys for which it is directly responsible and for which it accounts to the Department. The Department will be responsible, with its accounting officer, for accounting for the consolidated accounts. I hope that that has answered the hon. Lady’s question; it is the most direct answer, I hope, that she has had for a while—[Interruption.] Sorry, I did not mean that. I withdraw that unreservedly, and I have said so on microphone, Mr Hancock. That was a regrettable comment; I meant from me, of course, not from any of my right hon. or hon. Friends in this Committee.

I hope that the hon. Lady has the answer that she wanted. I will not read out the rest of the script, because I do not think that it addresses her question. With that, and with an apology to the Minister of State, Department of Health, my right hon. Friend the Member for Chelmsford, for any misunderstanding, I will sit down.

Clause 143

Kevin Barron (Labour, Rother Valley)

I do not want to delay the Committee, but I thought that I ought to try to ensure that we clarify the intention of clause 143 regarding the

“Power to make provision about voting”.

The explanatory notes for clause 143 state:

“This clause inserts a new paragraph into Schedule 7 to the NHS Act. This would give the Secretary of State, in light of new decision-making powers for foundation trusts in subsequent clauses, a regulation-making power to alter the associated voting arrangements for directors, governors and members of foundation trusts provided for in this Bill.”

Two examples are then given:

“the Secretary of State could, for example, change the size of a majority required for approving mergers or for making changes to the constitution of a foundation trust, or specify that such a majority should be of those eligible to vote as opposed to those actually voting.”

That seems pretty clear on the face of it, but the powers could presumably ensure the opposite of what is suggested in those two examples. I am not saying that that is the case, and I do not want to scaremonger in any way, but we ought to give the Secretary of State such powers only if we really deem it necessary.

I want to draw the Committee’s attention to clause 153, which would be affected by clause 143. Clause 153(2) states quite clearly:

“An application under this section may be made only with the approval of more than half of the members of the council of governors of each applicant.”

I do not know exactly what that means, because we are giving massive powers to the Secretary of State to move the majority around, which may be very necessary in mergers and acquisitions—I would probably argue that that is the case; maybe two thirds ought to be able to take such decisions—but we are saying in the Bill that it has got to be a majority. Will the Minister tell us exactly where the power lies: in regulation or in what is in the Bill? I hope that he can clear this matter up. If he does not, it seems to me that if we take the wording in the Bill, which states that it is a simple majority—not even of those in attendance, according to the explanatory note—at least we know where we stand. If regulation can ride roughshod over the simple majority mentioned in clause 153, maybe we should not give the Secretary of State the power under clause 143 to determine the matter by regulation.

We have been talking most of the afternoon about foundation trusts: their shape, who should be on them, what powers they should have. The Government consistently talk about the localism of decisions in the Bill, but they are leaving powers in the clause for the Secretary of State to bring in by regulation something—we know not what—that will affect mergers, acquisitions, separations and dissolutions. I hope that the Minister can reassure the Committee. The power that we are about to give the Secretary of State could ride roughshod over what many of us thought was to be the real decision making in our health service, done by GP consortia and the local trust delivering the services.

Paul Burstow (Liberal Democrat, Sutton and Cheam)

I hope that I can give the right hon. Gentleman all the reassurance he seeks. He has perfectly described what we intend to do—that is, to create increasingly independent organisations, able to focus on the interests of their patients and the public and deliver ever better services.

It is worth saying that the regulations in the clause are given effect only by affirmative order, open to a lot of scrutiny by the House. The clause enables the Secretary of State for Health to amend the new voting arrangements—just the new voting arrangements—provided for in the Bill. That is to ensure that the arrangements could be modified if necessary in the light of how they are working in practice. Part 4 introduces a range of new voting arrangements for members, governors and directors of foundation trusts. Those arrangements are important measures to strengthen, quite rightly, the internal governance and to place genuine responsibility on foundation trusts to enable them to become more autonomous and accountable to their local population. I will get to the point, but I think it important to develop the argument first, if the right hon. Gentleman will forgive me.

The Bill would allow a foundation trust to change its constitution if a majority of the governors and directors voted to approve the amendment. Governors would have the power to approve mergers, acquisitions and separations on a majority vote. Members could approve certain constitutional amendments on a majority vote. The power in the clause will enable the Secretary of State to modify the provisions if necessary. For example, he could make regulations changing the size of the majority needed to change the constitution from a simple majority to a two-thirds majority—I think the right hon. Gentleman suggested that might be in order—or he could require a majority to be a majority of all those entitled to vote, as opposed to a majority of those actually voting.

We are confident from our discussions with stakeholders that the voting arrangements we have provided for in the Bill are robust and would prove effective in practice. They strike a balance between the appropriate accountability and not having unnecessary bureaucracy that could impede the organisation’s operational effectiveness. We do not, therefore, expect to use the power. However, it is prudent to ensure the necessary changes could be made to respond to unforeseen or exceptional circumstances. In order to ensure proper parliamentary scrutiny, these matters will be dealt with by an affirmative resolution of both Houses of Parliament. I hope I have reassured the right hon. Gentleman that the provisions are necessary.

Kevin Barron (Labour, Rother Valley)

Nice try, but as the Minister just pointed out, it is the Secretary of State to whom we are giving the power to alter the voting patterns, not foundation trusts. The Secretary of State will have the power to bring in regulations to direct foundation trusts on what they can and cannot do. The Minister has not answered my question. Clause 153, which will be affected by clause 143, refers to a majority, not even the majority in attendance. What takes precedence: something in the Bill, which will become law, or a regulation that the Government propose?

Paul Burstow (Liberal Democrat, Sutton and Cheam)

Clearly, unless the Secretary of State, on the basis of advice and in the exceptional circumstances I just referred to, believes there is a need to amend the arrangements using the power in clause 143, of course clause 153, which sets out the requirement of a simple majority, would be the operative clause in the future.

Kevin Barron (Labour, Rother Valley)

So it could be that foundation trusts, under clause 153, need a simple majority for mergers, acquisitions, dissolutions or separations. On that basis, I am unhappy about giving the power to the Secretary of State. I just do not know where it goes. If the Bill requires a simple majority, why are we giving the Secretary of State the power to alter that? Presumably he cannot alter it, and I am misinterpreting what the Minister has said.

Paul Burstow (Liberal Democrat, Sutton and Cheam)

I have just given examples of where the Secretary of State might determine that the majority should shift upwards, in light of experience and the representations he might receive at some point in future on how the provisions we will go on to discuss are working, in terms of votes on mergers, acquisitions and separations. That is what the clause will provide for. FTs will be able to specify higher voting thresholds when framing and approving their constitution if they wish to do so; the Bill provides for the minimum amounts.

Kevin Barron (Labour, Rother Valley)

I thought the Minister said that what is in the Bill will take precedence, and if there is a simple majority, as stated in clause 153, it cannot be overridden by regulation.

Paul Burstow (Liberal Democrat, Sutton and Cheam)

The Bill provides, if one likes, the de minimis; a foundation trust, when framing its constitution, could go further. That is the point I made to the right hon. Gentleman.

Clause 148

Derek Twigg (Labour, Halton)

I beg to move amendment 623, in clause 148, page 127, leave out line 26.

I am conscious of the time. Obviously, we want to spend some time on some of our amendments, but I will move through them as fast as I can. The clause deletes a safeguard that was included in Labour’s National Health Service Act 2006. Under the existing legislation, foundation trusts are authorised by the regulator. That authorisation directs some of the particular services that a foundation trust will supply as part of the existing planned and integrated health care service. The authorisation, which is an important part of our legislation, also designates certain trust property as protected on the grounds that it is necessary to provide services for which the foundation trust is authorised. That property might, for example, be a hospital building or specialist health facility.

The Bill sweeps away the wider system of authorisation by making all NHS secondary providers foundation trusts and removing the need for authorisation to include specifications of particular services that must be provided. Instead, foundation trusts may provide whatever services are economically viable in the new health care market. Presumably the Government will say that the provision is part of removing the wider system of authorisation.

Under the 2006 Act, the foundation trust could not dispose of any property designated as protected in its authorisation without the permission of the regulator. That measure is a safeguard against, for example, a foundation trust selling off vital assets—which, after all, have been paid for by the public purse to provide public services—to plug short-term deficits or create a surplus. The measure acts as a disincentive for borrowing irresponsibly against publicly owned assets. It is one of a number of asset locks designed to ensure that public or community assets remain in public or community ownership for the use of the wider public.

Unfortunately, that does not seem to be accepted by the Government, who have created numerous ways in the Bill—and in other policy areas for that matter—in which public or community-held assets and services may soon end up being owned and run by private companies, as we discussed this morning. That is driven by profit rather than the public interest, or in this case the interest of the national health service. The wider system of authorisation may have been swept away, but retaining the measure would at least provide a safeguard for foundation trusts that have protected property.

Paul Burstow (Liberal Democrat, Sutton and Cheam)

I understand why the Opposition have raised the point—we all want to be confident that patients’, taxpayers’ and public interests in foundation trust properties are protected. I hope to reassure the hon. Gentleman that the amendment is unnecessary because there are already strong safeguards built into the new regime that the Bill creates.

Monitor’s new economic licensing regime will ensure that property needed for the delivery of essential NHS services designated for additional regulation will be protected. Clause 69 sets out the Government’s proposals for the designation of services—I recall that we spent a significant amount of time on Tuesday analysing that clause. Monitor will be able to use its licensing powers to protect assets for services that commissioners regard as essential to the delivery of NHS services. The licensing regime will protect patients more effectively than the current legislation. Monitor can protect the property needed for the delivery of essential services by all providers, including foundation trusts, charities—this comes back to the point made by my hon. Friend the Member for Southport—and others in the independent sector. The protection can include Monitor’s approval being required for the disposal of property needed for the provision of essential NHS services.

We also want to protect taxpayers’ investment in foundation trusts in a much more transparent way than has been the case until now. The previous Government gave foundation trusts the freedom to sell their assets—I stress that point. We want to be sure that property sales do not lessen the value of that investment—the interest that we, the taxpayer, have. We propose to create an operationally independent investment management function to protect the taxpayer’s investment. That function will manage the taxpayer’s investment in foundation trusts and clause 148(7) will give it powers that it can use if necessary to prevent a foundation trust from disposing of property.

We are also increasing the local oversight of foundation trusts by legislating to ensure that, for the first time, governors can have a role in approving significant transactions. That would increase public scrutiny and accountability and ensure that transactions have local support. For those reasons, the amendment is unnecessary.

The Bill provides for more explicit and transparent safeguards than those in the legislation passed under the previous Government. There will be strong safeguards in the system that will ensure that the property needed for the delivery of essential services is protected, irrespective of the provider. There will also be strong safeguards to protect the taxpayer’s investment in foundation trusts. Finally, governors will need to be satisfied that significant transactions are in the best interests of their local population. I therefore ask the hon. Gentleman to consider withdrawing the amendment. If he chooses not to, I urge my colleagues to resist it.

Derek Twigg (Labour, Halton)

The difference between this Government and the previous Government is that we are moving towards a market-oriented health service, where competition will be king and profit will have an increasing role to play, not just with private providers but with NHS commissioners, who will need to ensure their viability. That is why I tabled the amendment, but I beg to ask leave to withdraw it.

Clause 150

Derek Twigg (Labour, Halton)

I beg to move amendment 624, in clause 150, page 128, leave out line 20.

Mr Hancock, for the avoidance of any misunderstanding, we want a short clause stand part debate to explore wider policy issues, so I will try to keep my comments to the detail of the amendment and widen them later on.

The clause greatly worries the Opposition. The investment that the Labour Government put in, the massive reduction in waiting lists and the improvement in waiting times had an impact on the private sector. Our view is that this Government’s proposals, not just in the Bill but on funding, will lead to much greater pressure of demand on the NHS, so we might well see, as we have before, an increase in the private market share and opportunity for the private market to take advantage of what is happening in the NHS. It is against that background that I move the amendment.

We believe it is wrong to lift the private patient cap. The organisations that became foundation trusts are NHS organisations—they have NHS buildings, NHS equipment and NHS-trained staff. Their principal purpose, which the Bill does not repeal, is to provide services for NHS patients. Removing the private patient income cap would lead foundation trusts to change from being NHS organisations that treat some private patients to being the same as a private provider that can also treat NHS patients. That is a key part of our argument: what the Government propose would change the nature of foundation trusts in terms of the number of private patients they treat. That is not what patients or the public want; it is unwise and unnecessary and the Government have no mandate to make such a fundamental change. That is not what any of my constituents voted for—nor yours, I am sure, Mr Hancock.

If the Government presented a cohesive argument for the remedy of anomalies and inconsistencies within the system, we would of course give it our full consideration, but that is not what the clause does. Instead, it makes a wholesale change to the system that Labour introduced. Removing the cap would fundamentally, and perhaps fatally, alter the fabric of the NHS. If the Government truly wished to explore the possibility, they should have at least conducted widespread consultation, first nationally on the principal, and then in every locality where a change is proposed. I am quite sure that local people in areas with foundation trusts would have a very strong view on what the Government are proposing in one line of the clause. The policy, set out in just one line, would make a massive, fundamental change.

If the patient cap was removed, the door would be open for a foundation trust to generate as much income as possible from private patients. When budgets become tight, as they undoubtedly will given the policies and cuts that we will see from the Government and the cost of the reforms, foundation trusts will be encouraged to increase income generation as soon as they become more dependent on private patients. As opposed to being an additional source of income for foundation trusts, that could become the lifeblood of some, particularly when the impact of competition is felt and if the Government give help to private providers to deal with “distortions in the market” as laid out in the impact assessment.

Additionally, elsewhere in the Bill we see the role of European Union competition law. The impact on foundation trusts, whose services will increasingly fall under those rules, must not be underestimated. In the Select Committee on Health sitting on Tuesday, I understand that the Secretary of State was at best unsure how EU law could impact on the NHS. If so, our concern is even more pressing. Without a cap, the nature of foundation trusts begins to shift, and they change from being predominantly NHS providers to being something else. A key part of our argument is that without a cap, they become more like undertakings, which implies that EU procurement law will penetrate far further into the system.

Paul Burstow (Liberal Democrat, Sutton and Cheam)

Will the hon. Gentleman indicate, for the benefit of the Committee, what percentage of private income might turn FTs into undertakings?

Derek Twigg (Labour, Halton)

Let me put the question to the Minister this way—

Simon Burns (Conservative, Chelmsford)

Answer the question.

Derek Twigg (Labour, Halton)

No, this is important. If the Minister can give us evidence that his proposals will not lead to the situation I have just described, I will sit down and listen to what he has to say. The point is that there is no useful information or detail. The obvious logic is that the proportion will continue to creep up, and as the Minister said, as time goes by, EU and UK competition law will become more applicable to the health service in this country—[ Interruption. ]

Mike Hancock (Liberal Democrat, Portsmouth South)

Order. I do not think it is for Ministers to ask colleagues who are not in government questions. It should be vice versa.

Derek Twigg (Labour, Halton)

I take your ruling, Mr Hancock. What the Minister has not done during the debate—

Paul Burstow (Liberal Democrat, Sutton and Cheam)

On a point of order, Mr Hancock. I want to be absolutely clear on your ruling. When Members speak to amendments, is it not in order to ask them questions that might help us to interpret and understand the amendment’s purpose?

Mike Hancock (Liberal Democrat, Portsmouth South)

Anything is in order if it helps the flow of the debate. I think, however, that it is a little invidious for you to ask a question and then, when a Member chooses not to answer it, to go on about it with your colleague while the Member is still trying to make a point. You would not like it, I do not like it, and I am sure that nobody else likes it.

Derek Twigg (Labour, Halton)

Thank you, Mr Hancock. Given what the Minister has said, it would have been helpful if he and his fellow Minister of State had also taken that view on the many occasions when we have asked for detail to allow us to consider the implications of their policies. Given that they keep telling us that that information is not available, such comments are a bit rich coming from a Minister.

I look forward to hearing the Minister’s account of the Government’s logic, details of why they are proposing the change, and information on whether the health service will become susceptible to EU law to a greater extent. That is the key point. There is massive concern about that. There are many reasons why my colleagues and I will vote against the proposals if the Minister cannot convince us, and I doubt that he can.

Owen Smith (Labour, Pontypridd)

I offer my hon. Friend my full support for the amendment. The clause is an important part of the Bill, because lifting the cap clearly risks changing the ethos underpinning NHS trusts. They have traditionally been not-for-profit bodies that are not concerned about the bottom line and making money. There is a clear risk that if that cap is removed, the temptation—or necessity in times of economic constraints—might be to look for activities that the trust can perform that are revenue generating, but are perhaps not in the best interests of patients. That may not happen—trusts may not pursue such avenues—but the change raises the possibility that it could be a real temptation, and if it is, it could negatively change the priorities of NHS trusts.

I have one simple question for the Minister. Have the Government, in considering the impact of the change, conducted any sort of assessment or review that gives them evidence of what proportion of the revenues received by NHS trusts in future might be derived from private patients or private activities in public hospitals? If he has not undertaken that analysis and so cannot provide us with some insight into what he thinks the level is likely to be, he should have done.

Paul Burstow (Liberal Democrat, Sutton and Cheam)

I will start with the point that the hon. Member for Halton started with. According to the Opposition’s emerging narrative, competition will apply to the NHS once the Bill becomes an Act. That is nonsense. The Bill does not apply competition for the first time. Competition has increasingly been applied over many years. Many of the actions, policies and Acts of the previous Government made it more applicable.

Derek Twigg (Labour, Halton)

From what point will competition increasingly apply?

Paul Burstow (Liberal Democrat, Sutton and Cheam)

The point I have just made, and the hon. Gentleman should read Hansard, is that competition already applies: it has applied in the past; it will apply in future; and under previous Labour Governments it became increasingly applicable. That is apparent in their recognition that the Co-operation and Competition Panel, to which my hon. Friend the Member for Southport has referred, was needed; independent treatment centres; the extensive use of the private finance initiative, and many other examples.

Debbie Abrahams (Labour, Oldham East and Saddleworth)

I wonder whether the Minister has read the recent British Medical Journal article that states that, under the application of new competition rules, Circle is expecting

“to challenge a primary care trust’s decision to restrict the volume and range of services under the commercial contracts for NHS elective surgery.”

Paul Burstow (Liberal Democrat, Sutton and Cheam)

The point is that competition law already applies. I need to be careful, Mr Hancock, because I am having a clause stand part debate on a clause that we have already debated, but I want to deal with the initial point raised by the hon. Member for Halton. We reject his narrative: the Bill is not intended to do what he has described.

As for the questions posed by the hon. Member for Pontypridd, he has invited me to walk into a hall of mirrors, with all the distortions one would find there, in the way he has described the Bill. He said that this is such an important change that it surely would necessitate public consultation. The Government agree with him, which is why we consulted in the White Paper. We asked the question and we published the responses from many organisations under the heading “Freedom to earn private income” on page 119 of the Command Paper. To quote one of the respondents, the Royal College of Psychiatrists

“argued that mental health FTs need flexibility to provide social care and other health-related services, and that ‘capping [private] income…limits the scope for [Mental Health] FTs to be innovative, entrepreneurial, and address breadth and quality of care in partnerships with others’.”

The college was one of many organisations that responded to say that lifting the cap was necessary, which is why the Bill does that.

We know that the proposal to repeal the private patient income cap has provoked strong views, which have been voiced in Committee. Some people are concerned that foundation trusts would stray from their fundamental NHS purpose, but that concern is misplaced. What we want for NHS patients is the best possible care from the best possible providers. To achieve that, foundation trusts have told us that they must be freed from unnecessary constraints, including the private patient cap.

Removing the cap is about allowing foundation trusts to earn more income to improve, expand or support NHS services. If foundation trusts are to innovate and to drive sustainable improvements in outcomes and efficiency for the NHS they must be free from an outdated, unnecessary and blunt legal instrument that locks them into maintaining income from private charges at arbitrary historical levels.

Under the current arrangements, several NHS trusts have been dissuaded from going into the pipeline to become foundation trusts because of the constraints of the cap, which is an historical cap, imposed at one point in time. For example, Great Ormond Street hospital has privateincome today of 7.8%; Imperial College Healthcare NHS Trust—4.6%; and the Robert Jones and Agnes Hunt Orthopaedic and District Hospital NHS Trust, 4%—the list goes on. There are many NHS organisations that, unencumbered by the cap imposed on foundation trusts, are generating private income, which they are reinvesting into their NHS purpose for the benefit of NHS patients.

I will give one other example of a foundation trust where that frankly bogus argument is exploded completely. The Royal Marsden earns the most income from private patients: it has the highest private patient income cap in the country, fixed at nearly 31% of its total patient income, yet that trust has been consistently rated by the Care Quality Commission and its predecessor bodies as a top-performing NHS provider. It has not strayed from its NHS purpose. It has used that money to deliver better results for NHS patients, which is what our proposal is fundamentally about.

The reasons for removing the cap are compelling. First, the rule is unfair, with a few foundation trusts having much higher caps and hence much more flexibility than the majority. Indeed, all foundation trusts are constrained compared with NHS trusts, which do not have a cap on private income in the first place. Secondly, the cap is detrimental to NHS patients because a substantial and growing part of the NHS provider family is hampered from bringing in additional funding to support their core NHS work. That includes some of our internationally respected providers, which wish to generate overseas earnings.

Thirdly, the cap’s legal definition is highly restrictive and, frankly, absurd. It includes not only treating private patients, but joint ventures and activities such as sales of technological developments and drugs to private health care providers. Foundation trusts have said that the position is highly undesirable as they cannot widen services to the NHS through innovative partnerships with other providers. Fourthly, we do not want foundation trusts to be at a disadvantage relative to other providers to which no such restriction applies.

Let me try to reassure the Committee about the robust safeguards that will ensure that foundation trusts protect and prioritise investment in NHS care and resources. In essence, that is the concern that Opposition Members have about the provision. First, NHS commissioning consortia and the commissioning board will be responsible for ensuring that NHS patients are offered prompt and high-quality care and that good use is made of NHS resources, whoever provides care, through robust contracts and arrangements.

Secondly, the principal legal purpose of a foundation trust is and would remain the provision of goods and services to the NHS. The Bill will put directors under an explicit duty to promote the success of the organisation with a view to maximising benefits for its members and the public. Failure to pursue the principal purpose will mean that a foundation trust is breaking the law and would be liable to face the legal consequences. Thirdly, foundation trusts cannot distribute services externally, so all proceeds from non-NHS work will continue to be reinvested in the organisation. Fourthly, the Bill promotes greater transparency and public scrutiny of foundation trusts, strengthens their governance arrangements and introduces economic regulation.

To support public scrutiny, we will use the powers in the Bill to ensure that the accounts of foundation trusts identify NHS income and private income transparently. We discussed that issue earlier. Governors elected by the public and NHS staff will be responsible for holding directors to account on their duty to promote the success of the organisation with a view to maximising benefits for members and the public. They will have new powers to help them to do that, and they will retain the ultimate power to remove the chair and the non-executive directors.

For all of those reasons, and for the simple fact that Monitor, as the economic regulator, has a duty to promote and protect the patient interest, I hope that Members are reassured and that we can lift the cap so that the improvements to public services can continue along the lines that many foundation trusts have said are necessary.

Derek Twigg (Labour, Halton)

Let me first take the consultation issue raised by the Minister. He might want to tell us when that consultation took place.

Paul Burstow (Liberal Democrat, Sutton and Cheam)

The consultation was on the White Paper, which was published in July last year. It concluded in October and the results were published in the Command Paper in December.

Derek Twigg (Labour, Halton)

We know the Bill was published much later.

Simon Burns (Conservative, Chelmsford)

Obviously.

Derek Twigg (Labour, Halton)

That is the point, if the Minister would wait for a minute. I remember the Government saying that all those people agree in principle with the Bill; when the Bill was published, however, they all suddenly melted away—and then lots of concerns and issues were raised, including this one. That is the difference.

People now understand what the Bill is about and what it is going to drive through, even to the extent that the Government have got into trouble over their pricing, competition and designation policy. People did not know the consequences. It is against that same background that they are making this change. They are pressing for competition. There will be more competition. I keep repeating that the Minister of State said that the laws will increasingly be applicable to the NHS. So there will be more competition. That is being done differently from how we did it. We did it in a controlled way for particular purposes. The Government eventually want unfettered competition in the NHS. That is what they want.

We can look at some of the detail and refer to the impact assessment—page 61, paragraph B153:

“In removing the PPI cap, it is assumed that FTs wishing to generate additional private sector income can do so from three different sources:

• existing independent sector private patients (privately insured or pay-as-you-go)

• additional non-EEA overseas private patients (whom otherwise would not have been able to be treated in England due to the caps);”

That is the one through which they propose significantly to extend the number of overseas patients who can be treated in the NHS. It is interesting that the policy is to try to stop the number of overseas students coming to this country given that now the Government want to increase significantly the number of non-EEA private patients coming from abroad. I do not know where that leaves us in terms of capacity. The impact assessment also states:

“patients who would have otherwise been treated on the NHS but for whom reduced private prices (due to increased competition) now makes private treatment just affordable.”

That is in the Government’s own words. They said before that there would not be more competition—that we were making that up. In brackets they have put “due to increased competition”, and they say it makes private treatment “just affordable”. That is the difference—in their own words in their own impact assessment, they have been caught out.

On a wider point, we need to look at this in the context of Government funding because that will obviously impact on foundation trusts. There will be a drive to get as much income as possible when foundation trusts lose services and cannot make the income due to demographic changes. That is all because they have to look at waiting lists and times and to delay operations due to financial problems, and what I am saying is all in that context.

This week, the British Medical Association said:

“NHS cuts and the drive for competition will leave hospitals unable to fund entire departments, the Chairman of the BMA’s Consultants Committee has said.”

He went on to say that

“in order for competition to be meaningful, it must be possible and accepted that some organisations will fail…Simple to understand…but devastating in its effects upon a cash-limited health service forcibly opened up to commercial competition.”

That is where the nub lies, and how the situation differs from that of the Labour Government. We put money in to reduce waiting lists and get more people seen and treated. That is not what will happen under this Government’s proposals.

I think that top-down targets are pretty important. The Government keep telling us that they will not have them, so we believe that waiting times will go up. If they go up, it benefits the private health sector and impacts on the hospital. The Minister needs to look at that position. In terms of capacity, why would hospitals not want a vast increase in their share of the private sector in order to maintain themselves? Why would they not want to do that? How would it affect services?

A number of years ago in my constituency, we found that some consultants in my NHS trust spent more time treating private patients than NHS ones. I am not saying that that necessarily would happen, but there is a risk that hospitals and foundation trusts might decide to shift the balance to maintain themselves and their stability. That would impact on the resources and facilities that we use for NHS patients. We could have private patients coming in the front door, while NHS patients queue at the back door waiting for operations. That is the concern.

I finish by reiterating the following point to try to get across to the Minister that the difference between when the Labour Government were in power and now is that the Bill promotes competition and brings in private providers to a much greater extent. The policies that the Government are pursuing today put hospitals at risk. We have already discussed the serious concerns during our deliberations on the Bill, and they come not only from the Opposition side, but from the Government side in some areas. There is significant concern among many health organisations, trade unions and representatives of doctors and nurses throughout the health service. It is not only the Opposition who have these concerns.

Mr Burns rose—

Derek Twigg (Labour, Halton)

The Minister wants to intervene and he may give us some information.

Simon Burns (Conservative, Chelmsford)

I do have some information, but the shadow Minister might not like it. Can he confirm that when the legislation that brought in private use of the NHS was originally introduced in 2002, he supported Tony Blair and Alan Milburn’s proposals as a Minister? He changed his mind and voted in a different Lobby only when a section of the Labour party fought so hard against it that Tony Blair and Alan Milburn were forced to compromise. His view changed only because he went with the payroll to support the revised policy.

Mike Hancock (Liberal Democrat, Portsmouth South)

Mr Twigg, you are probably eager give your side to rebut that, but it has no bearing on what we are discussing. What people did in the past is one thing. It might be a matter for debate, but it is not a matter for analysis this afternoon. Let us move on.

The rest of the debate is in Hansard.