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Health Authorities (Membership and Procedure) Amendment Regulations 2011

Volume 731: debated on Monday 31 October 2011

Motion to Approve

Moved By

That the Grand Committee do report to the House that it has considered the Health Authorities (Membership and Procedure) Amendment Regulations 2011.

My Lords, I beg to move that the Grand Committee should consider these regulations, SI 2011/2200. I thought that it would be worth while to have a discussion about these regulations—which I think have now technically come into force—because they will be used, as far as I can see, to establish at least two of the bodies which we know about arising out of the Government’s legislative programme. Indeed, my first questions are: how many more, which and when?

The first instrument concerns the establishment of the NHS Commissioning Board as a special health authority as a result of the legislation that is before the House right now and which we will be discussing in the Chamber tomorrow. The second instrument concerns the establishment of a research organisation as a result of the Public Bodies Bill and the proposed abolition of the Health Protection Agency and the Human Fertilisation and Embryology Authority. I think that the order will also be discussed in due course.

My first question to the Minister has to be this: do the Government have further proposals to use this legislation in order to set up more and new special health authorities, and if so, which ones, where and when? Will we see orders, for example, to establish special health authorities for the new sub-national bodies that David Nicholson keeps referring to? Will those bodies have formal status in legislation and will that be done by order?

I turn now to the substance of the regulations, and while I am not going to take very long, I have some questions to ask. One of the key issues is the removal of the restriction that prevents chairs, non-officers and officer members of strategic health authorities from being appointed to more than one strategic health authority at a time, a rule which I think is entirely reasonable. What has changed so much that a chair could or might want to serve, or indeed where it might be desirable for them to serve, on a special health authority as well as a strategic health authority? Do the Government propose to establish so many special health authorities that that could become a problem? For example, would it be possible for someone to be the chair of a strategic health authority that exists now, a member of another strategic health authority and a member of a special health authority as those bodies emerge? Apart from anything else, I would like to know whether those individuals would be paid for doing all those different jobs, and how much that is likely to cost. Is that envisaged as the purpose of this order?

Moving forward, what happens to the strategic health authorities in this process? Where are all the authorities going to be? Are they going to be sucked up into the sub-national bodies, and are they therefore going to be special health authorities? Is that going to be done slowly or will it all happen in one go in 2013? How will the new chairs and members of special health authorities be appointed, and by whom? Will there be an independent element in what happens in the appointments procedure—will it be open to public scrutiny or will it just be done by the Secretary of State? Will that be on the public record? How much will they be paid, for how many days and what will their jobs involve? Does the Minister expect or envisage that there may be a clash of interests as this policy develops?

As we head towards 2013, special health authorities—these sub-national bodies or whatever they are to be called—may bring forward and carry out the work of the national Commissioning Board. What will happen in those areas where you have members on the sub-national bodies and on the strategic health authorities? There may be discussions between the two about where the policy goes and there may be clashes of interest. I am thinking about things like the developing role of commissioning and the clinical commissioning groups, and the role and powers that strategic health authorities have had in the past to drive forward, for example, stroke strategies or support for cancer networks. Where does the Minister see those? What happens if somebody who had responsibility for them in a strategic health authority now serves on one of the other bodies and there is a clash of interest over where the resources are going and how they will be supported? How could that be resolved? I am thinking in particular about things like failure regime, reconfigurations, training and workforce planning. As the Minister knows, that is an important role of strategic health authorities. Who will be the arbiter if there are those sorts of clashes of interest about the new structures as they move forward? Would it be the Secretary of State or the NHS Commissioning Board?

There are a variety of questions, some of which it may not be possible to answer now, but which will have to be looked at as we move forward and if the proposals to establish more of these special health authorities are carried through with the different roles. I beg to move.

I am grateful to the noble Baroness for tabling this debate on the Health Authorities (Membership and Procedure) Amendment Regulations, and I welcome the opportunity to respond. As she pointed out, we will gather in Committee several more times this week to review the impact of a number of pieces of legislation introduced by the Government and challenged by the noble Baroness.

I believe that the combination of these statutory instruments provides security to hard-working NHS staff to maintain the continuity and quality of services that patients need at a time of considerable pressure. We cannot forget that the NHS has been challenged to make up to £20 billion in savings over the next three and a half years, which will be reinvested back into front-line patient care. Alongside this, we are seeking to move to a more autonomous and locally accountable patient-centred NHS, focused on improving outcomes for patients. That is the background although—in reply to the points made by the noble Baroness at the beginning of her speech—I make it clear that this order has nothing directly to do with the establishment of the two special health authorities, the NHS Commissioning Board Authority and the Health Research Authority, as special health authorities. We will debate both tomorrow.

The effect of the Health Authorities (Membership and Procedure) Amendment Regulations 2011 is to allow the clustering of strategic health authorities and to provide greater flexibility among the non-executive and executive community to take up other board level posts in the health sector during the transition period. The 10 strategic health authorities have been clustered into four: NHS North of England, comprising North East, Yorkshire and the Humber and North West; NHS Midlands and East, East Midlands, East of England and West Midlands; NHS South of England, South West, South Central and South East Coast; and NHS London, which will simply encompass the existing strategic health authority.

That does not change the current structure of the NHS. There are still 10 strategic health authorities with the same boundaries which exist as legal statutory bodies. We have just simplified the governance of the strategic health authorities in order to sustain structural stability and reduce management costs. To do that, the Government are using powers that exist in legislation previously scrutinised by your Lordships' House. The correct procedures were followed in making appointments to the new clusters which complied with both the Commissioner for Public Appointments’ code of practice and employment law, as appropriate. The posts are time-limited and will be disestablished when strategic health authorities are abolished—if the Bill goes through the House and becomes law—on 31 March 2013.

Each cluster board now comprises a chair, up to eight non-executive directors, four executive directors with voting rights and up to five other non-voting executive directors who lead and scrutinise the decisions of each of the constituent SHAs within the cluster. Clustering SHAs, as we have already done with PCTs, supports the delivery of the £20 billion NHS efficiency savings through significantly reducing the cost of NHS administration—a commitment of both this and the previous Government. The creation of SHA clusters is a step towards that. PCT and SHA management costs increased by more than £1 billion since 2002-03, a rise of more than 120 per cent. It would not be possible to make savings on the scale required while retaining the administrative superstructure of PCTs and SHAs.

In addition to the pressing needs that I have outlined, the Government have a responsibility to ensure that the transition to the new system of working in the NHS—subject to the passage of the Bill—supports the integrity of the health service, as well as continuity of accountability and minimised disruption to those working hard to deliver and maintain high-quality services on the front line.

In the current system, SHAs have a key role to play in ensuring the quality and safety of services, in driving performance and delivery, including safeguarding the cash limit and in responding to the QIPP challenge. SHA managers have done a commendable job in delivering that agenda. That is in part why the Government's response to the Future Forum report extends the life of SHAs to the end of March 2013. Until then, SHAs will retain their statutory responsibilities and remain accountable for delivery and transition. Given the context of major change, with new leadership starting to take up roles in the system, it is critical that strong SHA leadership teams continue in place to provide the right focus on delivery and ensure effective accountability.

Clustering provides resilience and alignment for the future. Already, a number of senior posts in SHAs are either not filled or are being covered through interim arrangements. That is not sustainable for a 17-month period, and the position is likely to deteriorate further over time. The risk posed by SHA atrophy is therefore too great, and clustering for greater collective resilience over the next 17 months is an essential response.

Sir David Nicholson has announced that the initial sub-national arrangements of the NHS Commissioning Board will mirror the geographical footprint of the SHA clusters. To give the board a greater sense of having a stake in the future, there is a strong argument for moving early to future geographical footprints. The Government are moving swiftly with those arrangements, drawing on the lessons learnt from PCT clustering, which show that once a decision to cluster is made, it is better to implement the changes quickly. It is also important to embed these arrangements before winter to reduce the impact of the extra operational pressure that the health service is put under at this time.

The noble Baroness asked a number of specific questions. First, she queried the provision allowing SHA chairs and non-executives to sit on the board of a special health authority. Schedule 2 to the Health Authorities (Membership and Procedure) Regulations 1996 lists those special health authorities of which chairmen and members of SHAs are not disqualified. In order to provide for greater flexibility among the non-executive community to take up other board level posts during the transition period in the health sector, the regulations have been amended to allow chairmen and members of SHAs to sit on any special health authority. Any individual conflicts of interest issues will be dealt with as they arise.

The noble Baroness asked about the appointments process. The decision by the NHS management board to cluster the 10 SHAs into four resulted in the existing substantive postholders being potentially at risk of redundancy. During a restructuring exercise it is normal to establish a ring-fenced selection pool in order to conduct a limited competition exercise. All substantive SHA chief executives were invited to apply. Recruitment to the SHA cluster executive-director posts followed a limited competition exercise similar to the appointments exercise conducted for the cluster chief executives. As I said, during a restructuring exercise this ring-fenced selection pool idea comes into play. Again, all substantive SHA executive directors were invited to apply for those posts.

Executive directors of SHAs fall within the remit of the same pay framework as SHA chief executives, the very senior managers—VSM—pay framework. Under the current VSM pay framework, the basic pay of each director is based on a percentage of their chief executive salary. Each of the SHA cluster roles represent a substantial increase in size, complexity and responsibility for each executive director. Therefore, no one will receive a pay increase for doing the same job.

To the extent that I have not answered the noble Baroness’s questions I would be happy to follow up this debate in writing. She asked how many special health authorities will be established. I apologise for missing out an answer to that. One key change being introduced through the current Bill is to prevent special health authorities being established ad infinitum. Instead, they will be time limited. If there is a case for them existing permanently, they must become non-departmental public bodies, as we are doing for NICE, for example, and the information centre.

The noble Baroness asked about conflicts of interest. I hope that I have partially covered that. Should there be a potential conflict of interest between members of SHA and special health authority boards in developing policy, that matter will be looked at as and when the situation arises. She asked whether appointments would be open to public scrutiny and whether pay would be made public. Appointments must comply with the Commissioner for Public Appointments’ code of practice. The Appointments Commission, to which the Secretary of State delegates SHA appointments, asked the commissioner to make these appointments, and that the appointments should be approved. All the remuneration arrangements are in the public domain. This is, in short, about increasing flexibility as we move through the transition.

The noble Baroness asked about the regional offices of the NHS Commissioning Board. I believe that I have covered the point about the regional arms of the NHS Commissioning Board. However it chooses to organise itself, those will all be part of the same organisation. They will not be separate authorities, as SHAs are at the moment.

I think that that covers the majority of the noble Baroness’s questions. I hope that noble Lords are reassured about the sense of these arrangements, which are important in providing resilience to the NHS, in providing assurance to those who are working hard to maintain and deliver healthcare to those who need it and in reducing administrative costs. However, I look forward to any further questions that noble Lords may choose to ask me.

My Lords, first, I apologise for not being present for the opening part of the debate. I have just a couple of questions to put to the Minister. The first relates to the appointments to these very large bodies. Four bodies now cover the whole country, which is half the number of the Anglo-Saxon Heptarchy of some centuries ago; they cover very wide geographical areas. I wonder whether the noble Earl can indicate what steps are being taken to strike a geographical balance for the executive and non-executive appointments so that local knowledge across these very wide regions is reflected to the best degree possible—it is of course not completely possible, given their size—in the new arrangements.

The second question relates to the issue of scrutiny and the extent to which, if at all, the new bodies will be subject to the scrutiny of local authorities’ health scrutiny committees under the existing framework. I am not sure the extent to which they would want to pursue that, but there may be cases when they would, and of course geography may play some part in that. It would certainly be welcome if the Minister could be clear that, in principle, the new SHAs, pending the creation of the new special health authorities, will be subject to the scrutiny process.

Perhaps I may take this opportunity to ask the Minister a couple of questions as well. I am grateful to the noble Baroness, Lady Thornton, for raising this issue with a statutory instrument.

I am delighted to hear that some form of the SHAs will continue in the interim period—I think that they have, on the whole, done a very good job—and that there is a real sense that they can continue to play a significant part in the transition. It looks very much like, with the clustering, we are making a clear transition from where we are to where we are going. I, for one, would not object in the least to their remaining like that.

I have a couple of questions for the Minister. The first is whether he envisages that the regional offices of the NHS Commissioning Board—which, admittedly, we have not yet passed through Parliament—are likely to be very closely aligned to where the strategic health authorities are. Obviously, there is a lot to be said for continuity.

The noble Earl also mentioned the need for flexibility, on which we could not agree more. Perhaps I may ask specifically whether one could raise the question of March 2013 not being a final date. There has, as we know, already been some softening of the original timetable as a result of the Future Forum and the listening exercise, which I think was broadly very much welcomed, partly because it enabled the new system to keep some of the quite distinguished and very experienced staff from the past. The noble Earl had the kindness to say that one of the problems is how one maintains experienced and well qualified staff. The more the transition can copy the strategic health authority structure, the more likely it is that we will be able to retain some of those very qualified and experienced staff. We know that quite a few of them have been lost and that the NHS could do with not more being lost. Is there any prospect of greater flexibility about the timetable, which was strongly supported by the Future Forum?

The second question is a more specific one about SHAs. As the noble Earl knows, SHAs have a large part in education and training, which is still a major area of uncertainty until the education and training legislation comes forward. Under Regulation 2.2 of the 1996 regulations, there was a specific commitment that where a strategic health authority contained medical or dental schools, a member of the authority would come from that background. They specifically stated that he or she should come from the background of education in the medical or dental school that was part of the strategic health authority. Will that be respected in the new circumstance? That would clearly be helpful in addressing future education and training issues.

My last question is a broader one about the Government’s feeling that there was no need for an impact assessment. I confess that I am a little worried about that, because the clubbing together of membership has certain possible impacts. Lastly, as the noble Baroness properly mentioned the issue of the involvement of HealthWatch, will there be an insistence that at least one member of the cluster should be someone with a background on the health and well-being boards—in other words, representing the HealthWatch interests—in the decisions of the new cluster groups?

Let me say loud and clear that all of us regard the cluster groups as a good development; I did not want to quarrel with that. Our questions cluster around the cluster, rather than concerning the cluster itself.

My Lords, I will add to the points raised hitherto. I welcome the emphasis on continuity, but I wonder whether there is an opportunity to think whether we are closing the door completely on appointing new non-executive directors. We are moving into a new world with a new mindset and culture. If we are going to retain non-executive directors currently in situ in SHAs, will that opportunity be lost? I should like that to be clarified.

We must not lose sight of the fact that these are enormous organisations geographically. From one end of Cornwall to the other end of Kent is further, distance-wise, than from London to Edinburgh. There are issues about representation on boards. There must be complete understanding of the different issues in metropolitan, rural and urban settings. That will be critical for any board.

Also, does the noble Earl have any figure for what the savings in management costs might be? I seem to remember that when this was done for PCTs and they were all enlarged to become coterminous with local authorities, management savings were promised but not delivered. What is the size of the savings that we hope for? Have the Government factored in the risk with all of this?

My Lords, I am grateful to noble Lords for their questions, which I will try to deal with in order. The noble Lord, Lord Beecham, asked about the extent to which the new bodies will be subject to local authority scrutiny. There is no change to the existing arrangements for scrutinising SHAs. All 10 SHAs still exist. They must meet their duties as set out in legislation.

The noble Lord also made a good point about geographical representation, geographical balance and the spread of local knowledge. What we tried to achieve with the ring-fenced competition, to which I referred, across the geographical boundaries of each cluster was to arrive at a point where we had as much geographical representation as was practicable. The chairs of individual SHAs who were not appointed as cluster chairs were invited to become vice-chairs so that corporate knowledge could be preserved.

My noble friend Lady Williams asked whether we envisage regional offices of the NHS Commissioning Board being aligned with strategic health authority outposts. We expect that the national arrangements of the NHS Commissioning Board will mirror the geographical footprint of the SHA clusters, as I made clear in my earlier remarks. That continuity was very much in our minds when the clusters were created. Sir David Nicholson announced that the initial sub-national arrangements of the board will mirror the footprint of the clusters. In addition, discussions are under way with existing and emerging national bodies to ensure alignment on sub-national geography, to give our teams a greater sense of having a stake in the future and thereby to reduce the risks to current delivery. There is a strong argument for moving earlier to future geographical footprints and giving as much early assurance as we can to the teams where that is possible and appropriate.

My noble friend also asked whether the date of March 2013 was set in stone. It is a final date. It is important that we do not have double running. The board and clinical commissioning groups will take on their commissioning responsibilities in April 2013, and we believe that it is important that PCTs and SHAs do not continue beyond that date. To have a confusion of responsibilities would be a retrograde step, although I understand my noble friend’s point. It is worth bearing in mind that we have already amended our plans for the termination date of SHAs as a result of the work of the Future Forum.

I will have to write to my noble friend on her question about the role of the SHAs in education and training, and in particular whether a member of an SHA cluster will automatically come from a medical education background. I am sorry that I cannot answer now.

My noble friend Lady Jolly asked about the management cost savings that we expect from the changes. She asked whether we had factored in risk. The reduction in the number of non-executive posts will result in savings of around £367,000 per year. It is worth pointing out that the overall calculation is difficult because some people who were members of SHA boards and who have not been accommodated on the cluster board have reverted to roles within SHAs, so although they are not any longer on an SHA board, they are still performing useful tasks at a managerial level. Therefore, it is not possible to correlate the drop in the number of board members with a saving. However, we are clear that annual savings of a significant amount will be achieved from this exercise.

I thank the Minister, and everyone else, for taking part in this short but extremely useful debate. The Minister started out in his introduction by saying that this is all being done in the context of the £20 billion Nicholson challenge. However, I am certainly not convinced that setting up double structures will help the delivery of that particular challenge. I accept that there has to be some clustering of strategic health authorities because, as the Minister said, the clusters are a response to atrophy and, I would add, demoralisation among the staff. On the one hand, everyone who has spoken said what valuable institutions strategic health authorities are and what a valuable job they do. On the other, there is an acknowledgement from the Government that there is a danger of atrophy here. As the noble Baroness, Lady Jolly, said, that poses risks. Those risks need to be addressed.

I will read what the Minister said, but I am still unclear whether the clusters will cease to exist in 2013 or whether they will become the national Commissioning Board’s sub-national instrument for delivery. Perhaps we will need to address that question tomorrow when we look at the NHS Commissioning Board. The issue of conflict of interest is potentially real and the Government will need to think about it as the process moves forward. When two mechanisms are in place for delivering healthcare in an area, conflicts of interest will need to be looked at. The noble Baroness, Lady Williams, raised some important points, particularly about HealthWatch. As I listened to her I thought, “I wish I had thought of that myself”—as I usually do when she speaks.

I am still not sure about the accountability of the national Commissioning Board. We will address its accountability at a national level, but I am also worried about the accountability and transparency of the clusters were they to become the sub-national boards for the national Commissioning Board. That is a bigger issue than we can possibly deal with here, but I am adding them, as it were, to the agenda of issues to be addressed as we move forward.

Motion agreed.