Skip to main content

National Health Service Trust Development Authority (Establishment and Constitution) Order 2012

Volume 737: debated on Monday 28 May 2012

Motion to Take Note

Moved by

That the Grand Committee takes note of the National Health Service Trust Development Authority (Establishment and Constitution) Order 2012 (SI 2012/901).

My Lords, I declare an interest as chairman of an NHS foundation trust and as a consultant trainer on NHS and health issues.

At first sight, these statutory instruments, Nos. 901 and 922, which set up the NHS Trust Development Authority, may appear to be anodyne and uncontroversial. They may seem, for example, as certainly the authors of the impact assessment document believe, to be a necessary tidying-up operation to remedy some of the gaps in the NHS architecture as a result of the Health and Social Care Act. The language of the statutory instruments and, in particular, the impact assessments reminds us of the changed and fragmented landscape that is being created, with new bureaucracy and largely unaccountable quangos in practice.

The Government state in the impact assessment that some of these organisations will be abolished and that their functions will therefore need to be located in another organisation to ensure that the process of reaching an all-provider landscape is achieved that is in line with the Government’s vision for an autonomous NHS free from day-to-day political control. I have to say that I am not sure that we have quite seen that lack of political control yet.

The NHS Trust Development Authority has an important role to play in the NHS as it is constituted under the 2012 Act. It is also part of a series of statutory instruments that we can expect to see in the next few months. I thank the noble Earl, Lord Howe, for his helpful letter of last week that gave an overview of the kind of statutory instruments we can expect. I do not know whether we might, at some stage, get a fuller programme of statutory instruments but it would be helpful if he indicated whether that will appear in due course, whereby we can properly prepare for what will be a marathon parliamentary Session as regards debating those statutory instruments.

The interest in the NHS Trust Development Authority is due to the process under which NHS trusts are to become NHS foundation trusts—a matter of some importance. I was at the Department of Health when the concept of foundation trusts was created, and I now chair one. I am very enthusiastic for them and their governance structure. The fact that chairmen and non-executive directors are appointed by the governors, who in turn are elected by the members, is a very important asset that ensures that these bodies are rooted in the community that they are there to serve. I am very clear that it is right to encourage NHS trusts to become foundation trusts.

The concern that I have, and the key point that I want to put to the Minister, is whether the criteria against which FT authorisation is judged will be maintained in future. I ask that in light of the statistics that appear in the assessment, which refers to the report of the National Audit Office of 1 October 2011, that there were then 139 foundation trusts and that the task of progressing the remaining 108 NHS trusts to foundation trust status was considered by the NAO in October last year as,

“challenging given the ‘tripartite formal agreements’ for 20 NHS trusts show they are not financially or clinically viable in their current form”.

My understanding is that about 50% of NHS trusts’ foundation trust status applications are rejected by Monitor due to insufficiently robust governance. Yet the Government have given very clear signals that they wish to speed up the translation of NHS trusts to become foundation trusts, either by themselves becoming foundation trusts or merging with an existing foundation trust or moving forward in another organisational form.

My understanding is that the Government had a deadline for this of 2014. We discussed this during the passage of the Bill, and I would be grateful if the Minister clarified what the Government’s intent is for a timetable. My concern is that, whether or not 2014 is no longer an absolute deadline, the Government seem very keen for existing NHS trusts to move on into a different status. My concern in the light of past experience is whether this is too much pressure or too quick a timetable, and whether there is a risk of lowering the barrier for authorisation, forcing unwanted mergers or inappropriately involving the private sector. I would be interested in the Minister’s views on this.

I would also be interested in the views of Monitor, the regulator, which has been scrupulous in ensuring a rigorous approach towards authorisation. Any person who has gone through the authorisation process will testify to its rigour. Is Monitor itself happy with the Government’s intentions on the timetable for NHS trusts to become foundation trusts? I remind the Minister, and maybe he could confirm, that at the end of April 16 NHS trusts were in escalation process after missing the milestones in their applications to become foundation trusts. Although I believe that our debate on the Bill may have overtaken what is contained in the impact assessment, I refer to paragraph 19 of that assessment, which says:

“There is a strong expectation that the majority of NHS trusts will achieve FT status by April 2014”.

It is at least arguable that those NHS trusts that are not foundation trusts are the weaker brethren of the provider community within the NHS. Given the failure rate of 50% and the rigorous process followed by Monitor, it is very difficult to see how all those trusts could become foundation trusts by 2014 unless there were a lowering of the bar or forced mergers. Indeed, the Government’s real aim may be to provide a context in which a great number of NHS providers go to the private sector.

On the relationship of Monitor to the other bodies in the new architecture, if Monitor is unhappy about the pressure being placed on it regarding the process and timetable, what can it do? Can it be overruled by Ministers, the NHS Trust Development Authority or the NHS Commissioning Board? It would be useful to know what the hierarchy of decision-making is in relation to these different bodies.

On how the new structure will aid this process at local level, as ever there are mixed views about the strategic health authorities of old. They played an important role locally, acting as reinholders when the future of non-foundation trusts was discussed and decided. The SHAs were in a position to influence commissioners and to encourage a change of non-executives. They were able to intervene and, when they thought it necessary, to encourage the removal of weak chief executives and other executive directors. In the new set-up where the strategic health authorities will cover much larger areas, and where the local offices of the NHS Commissioning Board will be much more concerned with commissioning, and presumably with holding GPs’ contracts, who will act as the honest broker locally, or is it all to be done by the NHS development authority? If it is to be done by that authority, will it know all the nuances of local circumstances?

I also want to ask the Minister about the impact on foundation trusts if the department’s policy is to force through mergers of non-foundation trusts with them. There are examples of successful mergers but those examples, which are very close to home for me, suggest that it can take a long time, a lot of energy and a huge amount of resources and can have an impact on targets for the foundation trust that takes over the non-foundation trust. What arrangements will be in place to ease the passage of mergers? What will happen to the debt of these non-FTs, because most of them are in financial trouble? How will Monitor deal with the targets? Will there be a breathing space for the foundation trust to get the element of the non-FT that is coming into that trust up to speed?

Is there a risk that the Competition Panel or the OFT might impede what might be seen as a sensible merger in NHS terms? We have seen the recent intervention of the OFT in relation to mergers on the south coast. It would be a matter of great regret if the competition authorities inhibited the sensible rationalisation of NHS organisations and services.

I have questions about one or two other practical matters. Will the Nolan principles of public life apply to the NHS development authority? Will the authority be under a duty of consultation?

The authority’s decisions could have a big impact on the local provision of NHS services, and I would have thought it would be a great pity if the authority were not under an obligation, before it took action in relation to a non-foundation trust, to consult local NHS organisations, clinical commissioning groups, local authorities and health and well-being boards. It would be quite wrong for a national quango simply to intervene in local matters without that being transparent and subject to rigorous public consultation. This is an important body and I do not object at all to its establishment, but we need to know much more about the context in which it is going to work in future. I beg to move.

My Lords, I speak on this Motion and the regulations as a former Health Minister with responsibility for the foundation trust pipeline when FTs were started. I took the foundation trust legislation through this House back in the heady days of 2003, when we sat until about five o’clock in the morning dealing with this legislation, so I have some background in this. After I ceased to be a Minister, I was chairman of a provider development agency in London for a couple of years. We grappled with the issue of trying to get people through the pipeline to FT status without lowering the regulatory bar for the standards that they had to achieve to do that. I make it clear that I am not auditioning for a position on the Trust Development Authority.

I saw the decision to set up the new authority with considerable puzzlement verging on disbelief. We know, as my noble friend has said—I am grateful to him for putting down this Motion and giving us the chance to debate it—that 50% of FT applications fail to satisfy Monitor that they should be accorded FT status. It is worth bearing in mind that to have got to Monitor, they must have been through the department as well and the SHAs. They would not have got to Monitor without going through some vetting process beforehand. So even after that process, 50% of them are failing when they get to Monitor. That is a pretty high failure rate, given that we already have a vetting system.

We need to think a bit about what causes them to fail. The Explanatory Memorandum was rather kind about some of these reasons. The main reasons why they fail, wrapped up in terms like “governance”, is that they do not have a credible business plan in the circumstances that the new foundation trusts will face to be an organisation that is viable and sustainable clinically and financially. Their business plans are often simply not credible. That has been a longstanding problem for many of those that have failed at the stage of going to Monitor. At the root of that problem is the fact that they have tried to put in place a set of service configurations that are not economically or financially sustainable and, in some cases, are not clinically sustainable either.

In those circumstances, what is the magic dust that the new authority will bring to this set of circumstances that will resolve these problems—and not just over the long term? I will come to the timetable in a minute, which my noble friend eloquently outlined. What is the new ingredient that this authority will bring to the party which is lacking in the present arrangements, which have a 50% failure rate when the trusts reach Monitor? Why and how is a new body going to do things differently? I would like to hear from the Minister what the new ingredients are that we will get from this body that will produce a real improvement in the number of FTs going through the foundation trust application process.

In particular, will it have the authority to push local people on reshaping and reconfiguring services? Many trusts in the 108 that have not made it through the Monitor hoops will fail because they are not going concerns in commercial terms, either clinically or financially. Will the body actually provide the leadership to shift and change the configuration of services at local level to produce more viable applications? Or will it just be a body that pushes for mergers and hopes for the best? The track record on mergers in the NHS is not a good one on reshaping services. They tend to be expensive, difficult to do and time consuming. We need more explanation from the Minister than is in the Explanatory Memorandum about what the new approaches will be from this body that justify setting it up and that will produce change.

I want to say a few words about London in particular. Among the 100 or so trusts that have not made it to FT status are some powerful players with international reputations, such as Imperial College, Barts and the Royal London. These are international bodies that have still not made it through the foundation trust application process. Will the new development trust have the authority to look around in London and answer some questions about why these powerful trusts have not been able to get through the process and satisfy Monitor that they can become foundation trusts?

Turning to a slightly different part of these regulations, I notice that the Government are now required to set up a replacement, in effect, for the NHS Appointments Commission. It is extraordinary that we should have spent time in this House getting rid of the Appointments Commission and then find that we have to set up another health authority to do its job. Why have the Government changed their mind on this? I understood the argument to be that the Health Secretary wanted to ensure that the right and appropriate people were appointed. What has caused the change of heart since the Public Bodies Bill and the department’s own arm’s-length body review to cause them to require these old functions on appointments to be put into this new body, which is a considerably different set of functions from strengthening the FT pipeline?

A couple of areas in the Explanatory Memorandum are very difficult to understand. This issue impinges on the timescales that my noble friend outlined. Paragraph 31 quotes the recent NAO report, which identified 139 foundation trusts established since the 2003 enabling legislation was passed and 108 trusts that have not made it yet. But if we compare that with paragraph 19 of the impact assessment, we find that,

“only by exceptional agreement made after close scrutiny of financial and clinical feasibility will they be allowed to continue in existence past this date”.

That date is April 2014. If we discount the 20 or so trusts that have been accepted by the Government as non-viable as foundation trusts, we are left with 88 trusts that are somehow going either to become foundation trusts by April 2014 or, in the wording of paragraph 19, they will not be allowed to continue in their current existence.

Are the Government saying that they have found some magic gold dust for a new ingredient in the new body that is going to deliver more than 80 successful foundation trust applications within about two years? If not, what are they going to do with the very large number of trusts, it seems to me, which will not have got to FT status? What is going to happen to them after April 2014? I think we really need to know, and in particular the NHS needs to know, what is going to happen to them after 2014 if they have not actually made it through the Monitor system.

I am also puzzled by the performance monitoring functions given to the new body. We know that the Government disapprove of centrally driven targets. However, they seem to have found that there may be something to be said for targets, although they call them requirements, and issues of that kind. However, as I understand the Explanatory Memorandum, paragraph 21 says that waiting times and healthcare-acquired infection rates together with other issues—unspecified—will be areas that continue to help determine whether a trust becomes a foundation trust.

Are the Government going to set out clearly for all concerned the list of requirements in that kind of area—what I would call, in old speak, targets—that trusts are going to have to meet if they are to satisfy the new trust development authority so that they can safely be put forward to Monitor? We need to know—I would be very happy for the Minister to write to us on this—what are the performance monitoring requirements that are going to be a key part of determining whether this authority can satisfy itself that a trust can go forward to Monitor with a good chance of its application being successful.

Finally, I notice in the documentation that there is to be a review of the new body in 2014. That implies that the Government are not terribly optimistic about meeting the 2014 deadline. In 2016, there is to be a review of the new authority. Theoretically, it should be out of business by April 2014, as I understand it, but there seems to be an acceptance that that will not happen. Will the Minister say whether the trust will publish an annual report on its progress and what will happen if, as is likely, it has not completed its job by 2016?

My Lords, much of what I would like to say has been said by my two noble friends, but I would like to add my tuppenceworth because this is the beginning of some of the very important statutory instruments we are going to consider that will bring the Act into being. I have a few questions for the Minister. The first one has been alluded to by my noble friend Lord Warner: I refer to the creation of a new arm’s-length body, which I thought the Government did not really want to do. I wonder why it was felt necessary to create another arm’s-length body when many of the useful arm’s-length bodies, which some of us thought should not have been abolished, have been abolished, particularly the NHS Appointments Commission, which I will come back to in a moment.

Under point 7.1 in the Explanatory Notes, liabilities and assets are referred to. There is the recurring notion that this new body will take responsibility for those. My noble friend Lord Warner questioned the liabilities, but I am interested in the assets. For example, if an NHS trust is not viable as a foundation trust but a private sector organisation offers to purchase it, merge with it or whatever, what happens to the ownership of its assets—the land, the buildings and the kit? Where do they go? Who do they reside with? Is it the new provider body, whatever that is? I would like some explanation.

Appointments are important. Once the NHS Appointments Commission has been abolished, I cannot see from the Explanatory Notes that there is a guarantee of independence and transparency in appointments to the new bodies or when people in NHS trusts retire and have to be replaced. I am not clear what happens in those circumstances and who makes those appointments. If it is the new authority, which is my understanding, what guarantees do we have of independence, accountability and transparency in those appointments? The reason why I think that is important was alluded to and described much more adequately than I can by my noble friend Lord Warner and is in point 8 of the evidence base, which states:

“To date, 50 per cent of NHS trusts whose applications for FT status are rejected by Monitor fail because they do not have sufficiently robust governance. It is proposed that SHAs will be abolished in 2013, so new support arrangements will be required to support the FT pipeline”.

Do the Government think that, because NHS trusts fail because of their lack of robust governance, by taking control of this issue they will be able to appoint more robust trustees or do whatever it is to ensure that they meet the foundation trust requirement? I have exactly the same question as my noble friend: what is the magic that will increase the success rate from 50% to 100% with the new authority? We need to be concerned on several counts: the accountability, viability and credibility of the new body proposed in these statutory instruments. I am not convinced that what is being proposed meets those requirements.

My Lords, I am grateful to the noble Lord, Lord Hunt, and the two other noble Lords who have spoken because their questions give me an opportunity to clarify what these statutory instruments are designed to do and to say why we believe that they are appropriate.

The NHS Trust Development Authority will play a vital part in laying the foundations for the new health and social care system. From April 2013 it will provide essential governance and oversight of NHS trusts that are not yet foundation trusts to support them in delivering the vision of an NHS consisting entirely of fully autonomous healthcare providers.

Foundation trusts are sustainable, autonomous providers with far greater freedom to innovate, design and deliver services to local communities, and there I believe that the noble Lord, Lord Hunt, and I are in full agreement. Helping every NHS trust to attain foundation trust status is key to creating an environment in which adaptable, sustainable organisations deliver high-quality care and collaborate with NHS and other partners to provide integrated care designed around the needs of individual patients.

The Government’s vision of care delivered in an all-FT landscape means that NHS trusts must either become authorised as foundation trusts in their own right, merge with an existing FT, or move forward in another organisational form. There is a strong expectation that the majority of NHS trusts will achieve FT status by 2014 and that only by exceptional agreement, made after close scrutiny of financial and clinical feasibility, will they be allowed to continue in their present form beyond this date. Supporting the progress of NHS Trusts through the process of applying for FT status is often referred to as “managing the FT pipeline”.

Of course, FT status is not an end in itself but a crucial step in the process by which we can drive up the quality of care and make sure that the services we offer patients are robust, sustainable and of the highest quality. The benefits that achieving FT status can bring patients and communities cannot be underestimated. In doing so, NHS trusts examine their leadership, financial sustainability, quality of service and plans for continuous improvement. It is a mechanism designed to bring all provider services in all parts of the country up to a level of excellence.

An important part of this transition is the establishment of a new special health authority, the NTDA. The orders before noble Lords now provide the legal underpinning. The NTDA will be a short-lived, enabling organisation in the reform programme. The authority is important because once the current system of strategic health authorities comes to an end in 2013, the infrastructure to support NHS trusts on their way to becoming foundation trusts, or indeed to support them if they become unsustainable and can no longer function as a foundation trust, will no longer be in place.

The legislative framework set out in the Health and Social Care Act 2012 introduces a new and comprehensive regulatory system, including measures for dealing with providers at risk of becoming unsustainable. The new system will concentrate on protecting essential local services for NHS patients, not on maintaining failed organisations at great and unnecessary cost to the taxpayer. The NTDA will work closely with the whole of the new NHS to ensure innovation and that the very best of clinical practice is brought to bear on the most complex problems. It will work with local communities and their representatives to make the case for change when service reconfiguration is needed to deliver sustainable services.

The NTDA, on behalf of the Secretary of State, will also appoint chairs and non-executive directors to NHS trusts while they continue to exist, and appoint certain trustees such as special trustees and trustees to hold trust property for some NHS bodies. The organisations that the NTDA will take responsibility for cover a wide spectrum of services, including acute hospitals, ambulance services, mental health services and community services. Some are on the cusp of achieving foundation trust status while others face some of the most significant challenges in the NHS, with long-standing financial and operational difficulties to contend with.

It will not be an easy task. That is why the Secretary of State has appointed David Flory, currently deputy chief executive of the NHS and director of finance, performance and operations, as its chief executive-designate, and Sir Peter Carr, former chair of NHS North East SHA and vice-chair of the NHS north cluster of SHAs, as its chair. We are establishing the authority now to give it time to design its operating model, recruit staff and engage in the planning round for NHS trusts for the financial year 2013-14 before it takes up its full operational functions in April 2013.

The establishment and constitution order sets out the central functions of the authority. It sets out the constitution of the authority and the core purpose, which is to provide performance management of NHS trusts, improving clinical quality, governance and the management of risk in those organisations and supporting their development into clinically and financially sustainable providers of health services.

The NTDA will be subject to the Public Bodies (Admission to Meetings) Act 1960 and will be required to hold its meetings in public. The order provides that some staff from the appointments commission will transfer to the NTDA and I assure noble Lords that a communications programme is in place to keep staff well informed. The regulations cover the appointments processes for the NTDA chair, the chief executive and non-executive directors; make provision about the meetings and proceedings of the NTDA; and impose a requirement on the NTDA to make reports to the Secretary of State. The Explanatory Memorandum accompanying these statutory instruments sets out our commitment to review the continued need for the authority after three years of full operation or on completion of the foundation trust pipeline, whichever is the earlier.

I shall attempt to address the questions that noble Lords put to me. It may be helpful if I give an outline of the current position on the pipeline. As at 1 April 2012, there were 144 FTs of 248 eligible organisations. There were 104 remaining NHS trusts. The wider objective is for the vast majority of the remaining NHS trusts to be FTs by April 2014, as I have said, either as stand alone organisations or as part of a new organisational form, including as part of an existing FT. NHS trusts will have planned authorisation dates post-April 2014 only with a nationally agreed plan, which may include new management arrangements.

Tripartite formal agreements for all remaining NHS trusts are in place. These include clear timelines and actions for each individual organisation. The agreements identify the scale of challenge and provide unprecedented clarity on what needs to be done to complete the rollout of the FT pipeline. Where plans are not delivered, NHS trusts are being subjected to escalation actions to intervene as necessary to mitigate the risks of non-delivery. This has already occurred for organisations that have missed key milestones and deliverables set out in their tripartite formal agreements.

The noble Lord, Lord Hunt, pointed out that 50% of NHS trusts in the past have failed at the Monitor authorisation stage, largely due to governance issues. I accept that governance has been an issue in the past. That is exactly why we have been working with the NHS Leadership Academy to develop the board governance assurance framework that all aspirant FTs now have to undertake. The department is also funding governor training to be delivered by the NHS Leadership Academy to publicise the role, attract the right people to act as governors and equip them for the role.

The noble Lord asked whether the criteria against which authorisation is currently judged will be maintained. I assure him and other noble Lords that there will be no lowering of the bar to achieve foundation trust status. The NTDA will have strong expertise in clinical quality and will assess the clinical and financial sustainability of NHS trusts before putting them forward to Monitor’s assessment. We expect the majority of NHS trusts to get through the process.

The noble Lord, Lord Warner, asked me what the added ingredient was in the NTDA that will make a difference. I have already alluded to one, which is that the NTDA will have a strong clinical quality presence at the board level, a nursing and a medical director and financial and governance assessment expertise throughout its organisation. As he knows, part of the process of authorisation includes CQC registration. The NTDA will work closely with the CQC and with Monitor on trusts’ readiness for authorisation. We believe that this will be a better and more collaborative and aligned system than that in place at the time that Mid Staffordshire FT was authorised, for example. Essentially, the NTDA will mean a co-location of skills and expertise. With a single national dedicated organisation, we stand the best possible change of delivering the pipeline.

Despite the doubts expressed by the noble Lord, Lord Warner, we strongly expect the vast majority of trusts to become foundation trusts by 2014. Some may not achieve it in their own right but will do so by merger or acquisition by another foundation trust. For some, a more radical solution may be needed, such as a reconfiguration of services in a different organisational form—whether that is to meet demand, accessibility, requirements of quality or value for money. However, as I have said, because the NTDA will concentrate solely on overseeing the NHS trust programme, it has the best chance of seeing this through to a conclusion. Reconfiguration, where that is thought to be appropriate, will be led by commissioners, but the NTDA, through owning the management of the pipeline, will have a key role in identifying where a trust may become unsustainable and in alerting local commissioners to the consequences. In any event, the Government are determined to find solutions that support the continuity of essential services, not necessarily particular organisations, and ensure the exit of inefficient cost in the system. Once all this has been achieved, the NTDA will no longer be needed.

The rationale for setting up the NTDA was questioned. I hope that I have addressed why we believe this to be the right solution. The impact assessment carried out by the department identified the benefits of incorporating the functions that the NTDA will have within one organisation, making the all-FT provider environment easier to achieve. The impact assessment concluded that the benefits outweighed any cost implications in setting up the authority.

The noble Baroness, Lady Thornton, asked about the review of the NTDA in 2016, and rightly suggested that that might mean that not all trusts would become FTs by 2014. She asked whether we would publish an annual report on progress. Yes, the NTDA will publish regular reports to the Secretary of State. We strongly expect that by 2014 the bulk of trusts will have achieved foundation status, but we recognise that it may take longer to resolve the challenges for a few trusts with the biggest challenges. It is therefore sensible to allow some leeway for the NTDA to continue while it is needed.

The noble Lord, Lord Hunt, asked about Monitor’s capacity and the hierarchy of decision-making, as he put it. The NTDA’s technical application assessment process will result in recommendations to the Secretary of State on which trusts are ready for assessment by Monitor, including registration by the CQC. However, Monitor has the final decision on authorising a trust as a foundation trust.

The noble Lord also expressed concern about possible intervention by the OFT or other competition authorities that he feared might inhibit the sensible development of local services. I simply remind him that Monitor will have as one of its important roles that of preventing anticompetitive behaviour and encouraging competition on quality, where that is in the patient’s best interests.

The noble Lord, Lord Warner, asked why the Government had, as he reads the situation, changed their mind regarding the appointments function previously carried out by the appointments commission. While NHS trusts exist, the Secretary of State has an obligation to make appointments of chairs and non-executive directors to these trusts. It seemed to us to be sensible to place that function with the NHS Trust Development Authority. However, one of the reasons why the appointments commission appeared to us to have a finite life and finite utility was the prospective abolition of PCTs and SHAs, which have accounted for the vast bulk of the commission’s work to date. The workload in appointing people to the dwindling number of NHS trusts will clearly diminish over time and we do not think that that makes the case for retaining the appointments commission. It is much more cost-effective to co-locate that function within the NTDA.

The noble Lord, Lord Hunt, asked me whether the Nolan principles of standards in public life would apply. Yes, they will. The NTDA will be a public body that must consult and operate transparently, but in any major reconfiguration there will be joint work with the local and national commissioners for consultation. The circumstances in which they must consult Monitor and the Competition Commission are clearly laid down.

I hope that I have covered the bulk of the questions put to me. To the extent that I have not, I will of course write to noble Lords. In the mean time, I commend these statutory instruments to the Committee.

My Lords, I am not completely clear that the Minister answered my question about independence. The point is that the appointments commission enjoys widespread public confidence in the way that it goes about its business of appointing people. If that function is to be taken into the new authority within the department, how will the Government ensure public confidence in its independence and integrity, even if there is a dwindling number of appointments? I do not think that he answered that question.

I apologise. The rules surrounding public appointments will of course still apply, particularly those relating to open competition. The continued existence of those rules and their implementation should give the public confidence that this system will be open and unbiased.

My Lords, like other noble Lords, I thank the noble Earl, Lord Howe, for his response. I prayed against this statutory instrument in a genuine spirit of seeking information. I agree with the Minister about the importance of foundation trust status. I have no problem at all with the Government wishing to see NHS trusts becoming foundation trusts as soon as possible; that is absolutely right. Equally, I have no problem about the establishment of the new authority, and I commend the Government on the appointment of David Flory as the chief executive and Sir Peter Carr as chairman. Sir Peter has been a long-standing chairman in various guises in the health service going back more than 20 years. I suspect that he may well be chairman of this authority for a little longer than the department thinks at this moment.

There is genuine puzzlement about how these trusts—more than 100 of them—are to become foundation trusts by 2014. The fact is that many of them are facing great problems, mainly financial. They may have a PFI scheme that is expensive and which the local system is unable to afford without consequences on the rest of the system or, as my noble friend Lord Warner said, it may be tied up with very difficult reconfiguration issues.

I noted that the intention is that the role of the appointments commission regarding formal appointments, and the role of the SHA in encouraging people to move on if they feel that there are issues regarding governance, will now fall to the new authority. I know that the wording used by Monitor is always about governance. With respect, though, that is just a phrase that it uses; the real issue is usually money or reconfiguration. However much you remove the current boards and put new people in, they will still have to wrestle with these very hard financial issues. The fact is that we are talking about the trusts that have found life pretty difficult in the past few years. It is getting tougher. The demands in relation to the efficiency and cost-improvement programme are now likely to go on beyond three years to perhaps five, on at least an average of 5% CIP per trust if not more—some trusts this year are aiming for up to 9%; there was at least one trust with a 9% CIP programme. Life is very tough indeed. There is no let-up on quality; trusts are under the microscope with regard to their staff ratios. So there is genuine puzzlement about how in two short years these trusts, which are facing momentous problems, are going to be brought to the table in relation to foundation trust status.

There is real concern that the bar will be lowered and that because of the imperative on the Government’s part to assure that there are no non-FTs left on the books after 2014 except in exceptional circumstances, one way or another there will be messy mergers and that Monitor in the end will be forced to agree to FT status, or the private sector will be brought in inappropriately. That remains a matter of great concern.

On the question of mergers, I echo my noble friend Lord Warner. The history of mergers in the health service has not been a happy one—rather like much of the private sector. In the case of my own trust, it is reckoned to have taken four years for a merger to recover from taking over a failing trust. The cost has often been to the existing successful organisation in terms of management time, energy and the amount of money that has to be shored up into the failing organisation. One should not underestimate the huge costs that there can be in a merger. It is all very exciting to start with—we are seeing announcements made about billion-plus mergers that seem to be becoming the fashion—but we should not underestimate the tremendous challenges faced there.

The Minister mentioned the OFT. Yes, Monitor has a role in relation to anticompetitive behaviour and in encouraging integration. If, as a result of the NHS Trust Development Authority, it decides that there can be some neighbouring trust where a merger is sensible and where it runs with the reconfiguration of services, I hope that the OFT is not going to wade in, because I think that we would probably find that that acted against the best interests of the NHS.

The Minister mentioned, too, that the Appointments Commission process will come into this new agency. I am sure that we would all wish to pay tribute to the tremendous work of the NHS Appointments Commission. However, as someone who is now asked to chair panels for non-foundation trusts, I have never come across a more bureaucratic approach to the appointment of non-execs as that used by the commission. I hope that the new authority might take an opportunity to introduce a little common sense into that process.

I echo the point raised by my noble friend Lady Thornton. We are concerned that this might be used inappropriately as a way of privatising parts of the provider part of the NHS. Her point about assets is an important one, and I hope that the Minister might consider writing to my noble friend on that point.

This has been a good debate. The concerns that we have raised are shared widely in the NHS, and I hope that it will give the Government a little pause for thought. We wish the new body well in its new responsibilities. I beg to move.

Motion agreed.