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House of Lords Hansard
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National Health Service Trust Development Authority (Directions and Miscellaneous Amendments etc.) Regulations 2016.
10 May 2016
Volume 771

Motion to Take Note

Moved by

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That the Grand Committee takes note of the National Health Service Trust Development Authority (Directions and Miscellaneous Amendments etc.) Regulations 2016 (2016/214).

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My Lords, in moving this Motion, I should make it clear that, in raising issues around the governance of NHS Improvement, I make no criticism of the relatively newly appointed chairman and chief executive of that body, both of whom have outstanding records and have, I know, much to contribute to the National Health Service. I want to raise two sets of issues: the governance arrangements for NHS Improvement; and, linked to that, the future of NHS foundation trusts.

The Motion and the order relate to the National Health Service Trust Development Authority, which was established, as a result of a special health authority order in 2012, to manage the performance of English NHS trusts with the objective of assisting them to become foundation trusts. In contrast, NHS foundation trusts are regulated by Monitor under a number of pieces of legislation, including the Health and Social Care Act 2012. Therefore, both the NHS Trust Development Authority and Monitor are responsible for overseeing and, where necessary, helping to improve the performance of their respective cohorts of providers —NHS trusts and NHS foundation trusts.

The Government have argued that, in recent years, both the NHS TDA and Monitor have been working more closely together and are increasingly utilising similar interventions with their respective cohorts. Last summer, the Government announced that NHS TDA and Monitor would come together under a single leadership and operating model. As part of these arrangements, they would share a single leadership team—comprising the chief exec, chair and a joint board—with the organisations to be known as NHS Improvement. In addition, safety and quality would be key components of the new arrangements, with the national safety function previously exercised by NHS England being transferred essentially to NHS Improvement but formally exercised by the NHS Trust Development Authority.

This seems to be a complex governance arrangement, and no one should underestimate the challenge for NHS Improvement, which has to manage a complex range of functions and accountabilities. Monitor’s duties, as economic sector regulator and its role in ensuring the regulation of foundation trusts, remain risk based and proportionate, in line with the “earned freedoms and autonomy” accorded to the foundation trust model. Alongside that, the function of the NHS TDA in supporting and offering oversight for NHS trusts is equally important in the current, challenging financial climate. Then there are NHS Improvement’s new duties to improve trusts and integrate the safety function formerly hosted by NHS England.

The governance structure is therefore complex. NHS TDA and Monitor remain separate institutions—one a special health authority and the other an organisation established in statute and subject to extensive provision in primary legislation. Indeed, the Health and Social Care Act 2012 contains no less than 85 clauses relating directly to Monitor and about 85 days were spent in your Lordships’ House debating them. There is no clause relating to the NHS Trust Development Authority because it is a special health authority, yet it seems to be the principal vehicle by which functions are to be transferred to NHS Improvement.

NHS Improvement is itself subject to no legislation, but a board using its name as a banner will oversee both the NHS TDA and Monitor with the same executive team and operating procedures. My understanding from what has been said is that, in statute, Monitor and the TDA will continue to have their own boards but these will have identical membership and meet as one NHS Improvement board. They will also continue to publish separate annual reports alongside an aggregate report from NHS Improvement. To all intents and purposes, NHS Improvement will operate as one board, with one set of staff and operating procedures, but the legislative provisions under which it operates will be quite separate for NHS foundation trusts and NHS trusts.

I ask the Minister how realistic it is to expect staff to work under a single operating procedure, given the hugely different legislative provisions relating to foundation and non-foundation trusts, unless the market and competition provisions in the 2012 Act are effectively ignored. The King’s Fund, in its analysis of the planning guidance for 2016-17, has said that it effectively spells the end of the emphasis on competition and the principle of autonomy.

Linked to this is the question of the future of NHS foundation trusts. In effect, if FTs and non-FTs are treated in the same way, overseen by the same board, the same members of staff and the same operating procedures, what on earth is the point of being a foundation trust? What will happen to non-FTs that were in the pipeline to gain FT status—what is the point of them applying? I raise this question as an unashamed supporter of the concept of NHS foundation trusts. I think they were the right approach and I am convinced that their governance model, whereby the board is accountable through the governing body to local members, has many advantages.

The noble Lord, Lord Prior, was a distinguished chairman of a very successful foundation trust, and I had a similar experience. While, having been the chairman of a board, I can say that meetings of the governing body were not always comfortable, I thought it was a strength that the board had to account to local people for its performance. Of course, that is not the situation for non-foundation trusts but, if I were now the chairman of a non-foundation trust, I could not see what advantage there would be to me in becoming a foundation trust, because essentially the economic regulator would manage my trust in the same way as it would a foundation trust. At least, that seems to be the implication of the regulations and the changes made to NHS Improvement.

I have seen an intimation that, following these regulations, there will be no further pieces of legislation in relation to operating procedures. I ask the noble Lord, Lord Prior, why that is and whether he can assure me that, with the same group of staff and the same board, the autonomy and independence of foundation trusts, as opposed to NHS trusts, will be respected. I also ask him how this then relates to the development of the strategic transformation plans at local level, which on any reading also signals to me that we are moving back to a planning model of the health service. Again, it would be very interesting to get the Minister’s comments on that. Above all else, I hope that he can reassure me that the Government are still committed to the model of foundation trusts, particularly regarding the strength that it brings to local autonomy and governance. I beg to move.

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My Lords, I have no intention of detaining the Committee, as I agree with everything that the noble Lord, Lord Hunt, has said. I look forward to hearing the Minister’s reply. I am particularly concerned that a very complex system of governance will not produce transparency and accountability, and I look forward to reassurance on that score.

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My Lords, that was a short intervention from the noble Baroness. I was very struck by the noble Lord, Lord Hunt, saying that, when the 2012 legislation went through Parliament, it took 85 days and 85 of the Bill’s clauses dealt with Monitor alone. I am afraid that that is part of the response that I shall give him today. We did not have 85 days—or maybe 165 days, if we take into account the TDA and the restructuring—because matters are too urgent. However, the noble Lord is right to bring this issue up today, because I do not think that there has been enough scrutiny around Monitor, the TDA and NHS Improvement.

Responding to the points that he raised about foundation trusts will perhaps in part answer both questions. The distinction between foundation trusts and trusts has been eroding over time—there is no question about that. The roles of Monitor and the TDA were becoming more duplicated over time. It is interesting that, when David Bennett was at Monitor, he saw the need to develop an improvement agency within Monitor, almost mirroring the TDA. Simply being a financial and economic regulator was clearly not enough at a time of such huge stress and pressures within the system.

However, there are two other important factors that I should mention. At the time, I agreed that the principle of foundation trusts—I think it was called “earned autonomy”—was absolutely right, as was the governance structure, with clear accountability through locally elected and appointed governors to the local population. But when the King’s Fund says that what we now have is the end of competition and autonomy, it is partly right. Using competition as a means of driving improvement through the NHS has been tested almost to destruction. It started back in 2005-06, with the new Labour Government and ISTCs, foundation trusts and the like. Increasingly, we are of the view that competition has a role to play but a pretty limited one, and we cannot rely upon competition—or the market, if you like—to drive the kinds of improvements and change that are needed within the system.

There has also been another development, which the noble Lord touched on, which is the sustainability and transformation plans and the new models of care. These are largely the harbinger of vertical integration and a system approach to delivering healthcare to the population, rather than a series of individual, more atomised organisations like foundation trusts. So, in a sense, the concept of the foundation trust and a governance structure that is accountable to the local people is still the right one, but it should probably be at the system level rather than at the individual organisation level. You can read the direction of travel from the five-year forward view through to the STP process that is now under way and, indeed, the formation of NHS Improvement. It is a move away from autonomous, individual organisations—by and large, acute hospitals—driving the agenda to one in which the system as a whole, including social care and local authorities, is involved. Those are three fairly big changes that are now running through the development of the NHS.

If I may go back to where the noble Lord started, the regulations made a number of changes to the TDA’s underpinning legislation. These changes were made in order that the two organisations would be able to work together under the operational name of NHS Improvement, which would in turn improve the way in which the NHS provider sector is supported and regulated, drive improvements in the care that people receive and arrest the deterioration in the financial position of the sector. That really recognised what was happening. There was a general feeling, probably shared by the noble Lord, that somehow Monitor had remained much as it was when it was set up—an economic and financial regulator—at a time when the whole system was under such stress that it required a completely different role.

Under the regulations, Monitor and the TDA were not abolished or dissolved, and NHS Improvement has not been established as a new entity in primary legislation. Indeed, it was never the intention that these regulatory changes would establish a statutory basis for NHS Improvement. Rather, NHS Improvement is the operational name given to the collaboration between Monitor and the TDA, whereby they pool resources and administrative functions in order to reinvigorate the support and regulatory offer to trusts and foundation trusts. Both organisations continue to be underpinned by their respective legislative frameworks, with distinct statutory functions and legal powers. They will continue to be held to account by Parliament, the Secretary of State and the Department of Health.

I understand that there may be a concern that, by not setting NHS Improvement on a statutory footing, clear governance may be lacking—this is the issue that goes to the root of the noble Lord’s concerns. I echo his comments that the leadership at non-executive and executive level in NHS Improvement is of a very high calibre. Both the chief executive and the chair of NHS Improvement are well aware of the need to put in place robust governance arrangements. Under their leadership, a substantial exercise is under way to recast the board and executive structure of NHS Improvement to fuse the business of the two organisations much more effectively in practice. From my discussions with the chairman and chief executive, I think that that is happening. Clearly, Rome was not built in a day, but they are making very substantial improvements and progress. There is now one board which is effectively running NHS Improvement.

A significant amount of NHS Improvement’s business will not need separate governance or decision-making, such as in the case of challenged providers where all trusts, regardless of their composition, deserve access to the same level of support and advice. Having said that, in cases where separation is appropriate and the specific functions of either main organisation are being exercised, such as TDA’s role in appointments or Monitor’s competition function, this will be transparently articulated in all relevant documentation.

NHS Improvement’s detailed governance arrangements are in the process of being finalised, as is its new single oversight framework. The arrangements will be fully and transparently set out in rules of procedure and standing orders, which will be publicly available for consultation in the summer. Also, the formal accountability framework documents in place for both Monitor and the TDA, which set out how the department will hold them to account and more generally how we will all work together, are currently under review. It is intended that a revised joint framework document, as well as a formal remit letter establishing NHS Improvement’s objectives, will be published in the summer.

I should repeat that NHS Improvement will be accountable directly to Parliament, the Secretary of State and the Department of Health’s principal accounting officer for the discharge of Monitor’s statutory regulatory functions and to the Secretary of State for the specific functions of the TDA.

Speaking more generally, we see NHS Improvement more as being essentially an improvement agency holding trusts to account and giving them help and support to achieve high levels of performance rather than being purely a regulator, which is I think how Monitor was originally established. Clearly, the role of the foundation trust that the noble Lord mentioned in his speech is going to change over time, but I can assure him that the benefits of foundation trusts, through the clearer accountability and earned autonomy, will still be very much a part of the future.

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I thank the noble Lord, Lord Prior, for his response. I certainly understand the need for speed and the erosion over time of the distinction between foundation trusts and non-foundation trusts. I also agree with the Minister on the issue of competition. The past years have shown that while it can play a role, that role should be limited, and I have no objection to that, nor, indeed, to the extended remit of improvement. That is something which has been missing from the regulatory apparatus and it is to be welcomed.

I would like to make a couple of points. First, the Minister said that we are moving locally to system-level leadership and development. I am sure that that is right, but I hope that local accountability will be borne in mind. I have just had responses to a number of Questions for Written Answer that I tabled about accountability in the sustainability and transformation plans. As the Minister knows, they have to be in by 30 June. We know that they will all say that the acute care footprint will be reduced by so many hundreds of beds—to be honest, this has all been done before—and they will then say that there is going to be heroic demand management and, somehow or other, there will be miraculous developments in the community. But they will not have ownership locally because, essentially, they are being top-down led. At some point, they will have to go through formal consultation procedures and I believe that, unless there are some powerful forms of local accountability, they will run into trouble.

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I think that the noble Lord has put his finger on it. If the STP process is just another top-down-led system redesign, it will not have any teeth to it. But what has happened in Manchester, for example, is that there is clear local leadership and accountability, which mean that some of the really difficult decisions that have not been taken for generations are now being addressed. There must be effective local accountability and governance around the STPs.

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The other area, which I have raised with the Minister before, is in relation to clinical commissioning groups. First, the creation of federations of GPs makes the model unsustainable in the long term, because in some parts of the country the electoral body for the GP members of CCGs will be almost coterminous with the federations. Clearly, there is a conflict of interest in that. Secondly, there is still an issue about the accountability of CCGs. If ever one needed a governance structure that made them somehow locally accountable, the foundation trust model would provide some answers which I hope that the Government will look at.

My final point is on what legislation will be in the Queen’s Speech. Clearly, from all that the Minister has said, much of the 2012 Act is defunct in practice. We are moving to a planning model, and the Act is very different from that. The longer that this goes on, the more need there will be at some point for some legislative change, because at the moment people in the health service are at risk. They are essentially being asked to develop a system-led planning model, but that is challengeable because the Act is very different from that. I believe that at some point it will be challenged. The Government may not want to have core health legislation debated, but at some point that will have to be done. I also remind him that we still have a draft Law Commission Bill and I am hoping that, at the very least, we will see a short form of that announced in the Queen’s Speech.

This has been an excellent debate and I am very grateful to the noble Baroness, Lady Walmsley, and the noble Lord, Lord Prior.

Motion agreed.