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Fox: Labour should think again on foundation hospitals

Speech in the House of Commons

There can seldom have been a bill whose importance has been as over-hyped as this one.

I know that everything the PM says must now have messianic overtones but to describe this bill as being of monumental historic importance is quite ludicrous.

We first need to see this bill in context.

The language of New Labour talks not about the treatment of patients but of the patient's journey, though from where to where has never been very clear.

Perhaps the more important journey in the context of this debate is that of New Labour itself.

Back in 1997 Labour talked about how :

"Under the Tories …the market system has distorted clinical priorities"

"Labour will end the internal market in healthcare."

"The Tory attempt to use private money to build hospitals has failed to deliver."

Now we have the re-creation of a different internal market and far from abandoning PFI it has been elevated to a neo-religious status.

The Health Secretary himself famously told a meeting of health chiefs that he would, 'come down like a ton of bricks on anyone who has anything to do with the private sector'.

He then oversaw the introduction of the concordat with the private sector and the expansion of PCTs to enable the private sector to tender for NHS work.

How people change.

In June 2001, Alan Milburn told the House that: 'By and large in our country, thankfully, we have one monopoly provider and that is the National Health Service and as long as there is a Labour government in power that will remain the position."

By January 2002, the language had changed. He told the New Health Network that: "This middle ground between state-run public and shareholder-led private structures is where there has been growing interest in recent years. Both the Right…and the Left have been examining the case for new forms of organisation such as mutuals or public interest companies"

It is a welcome conversion, assuming that the actions match the rhetoric.

In the House on 10th April, I asked about the Government's privatisation plans.

I said: "I should like to tell the Government about privatisation. The involvement of the private sector is important. We must 'set the parameters for future partnerships we will need between tax-funding and personal contributions . . . We should be opening up health care . . . to a mixed economy . . . and be willing to experiment with new forms of co-payment in the public sector.' "

The Chief Secretary to the Treasury immediately shouted " That sounds like charges."

Sadly I had to agree that it did sound like charging, but that they were not my words but those of the Prime Minister in his lecture "Where the Third Way goes from here" in February 2003.

Now, ranged against what he sees as these dangerously progressive ideas, and cocooned in his ideological time-warp, is the Chancellor, whom the PM has neither the courage to remove nor the strength to face down. Either directly or through his chief spin doctor, Ed Balls, the Chancellor has regularly sought to rubbish any reforming ideology before systematically emasculating any specific policy proposals. The gap between the Prime Minister and the Chancellor is clear.

The Chancellor said in his speech to the Social Market Foundation in February of this year "in health not only is the consumer not sovereign but a free market in health care will not produce the most efficient price for its services or a fair deal for its consumer".

But the Prime Minister said in his speech at South Camden College that "choice mechanisms enhance equity by exerting pressure on low quality or incompetent providers. Competitive pressures and incentives drive up quality, efficiency and responsiveness in the public sector".

It was into this heady and toxic mix, the battle for the soul and, more importantly the succession, of New Labour, that the idea of Foundation Hospitals was introduced.

The Conservative Party has always been supportive of the concept of Foundation Hospitals as they have developed in, for example, Spain or Sweden. It is a direction an incoming Conservative Government would conceptually feel comfortable with. We do not see them as an end in themselves. They are among a number of building blocks we would use to create a more diverse provision of healthcare, increasingly independent of state control.

It is therefore sad to see the emasculated version of Foundation Hospitals in this Bill.

This is not the programme of a bold reforming Prime Minister, but a timid and pale imitation of what works elsewhere, watered down to pacify the Government's internal critics.

Of course, the radical rhetoric will remain, but sadly the reality will be insufficient change.

This is no reforming lion but the mouse that roared.

As ever, it has been wonderfully spun but it will not be sufficient to turn around the NHS and may well produce the worst of both worlds for the govt.

Their overblown rhetoric will maximise the anxiety about change, but their lack of delivery will frustrate still further voters whose taxes have risen but who have seen no clear benefits.

So let's look at the details for the Foundation Trusts.

The first area of concern is borrowing.

The Secretary of State said in May 2002 that "the intention is that (Foundation Trusts) will have greater freedom to decide what they can afford to borrow and they will be able to make their own decisions about future capital investment". What have they actually got?

They have got a limit imposed by the Regulator, and that limit will be reviewed annually (Section 17). If a Foundation Trust were a free standing organisation in the private sector or the voluntary sector, there would be no-one imposing a limit. Each borrowing need would be reviewed on its merits, and the lenders would decide whether to advance the money. In the private sector limits are negotiated not imposed - at least, they are not imposed on well-run organisations.

And an annual limit is just laughable. What about the longer term security in planning we were promised? What happens if the Foundation Trust comes up with a good idea to expand services during the year? Perhaps a new MRI scanner. The Foundation Trust has to tell its patients that it will have to wait until the following year when the regulator has decided what limit to impose. What kind of freedom is that?

But when it gets its borrowing limit, determined of course by the Regulator, where can the Foundation Trust go for the money? It can borrow money, but it has no freedom over how or where it borrows.

Let's compare this situation with the freedoms in the private sector.

The private sector can create floating charges over its assets. Foundation Trusts are debarred from that (Section 16(5)).

The private sector can enter into asset financing deals. Foundation Trusts have to ask permission from the regulator if the assets are protected property. Will MRI scanners be protected property? Will Foundation Trusts have to get the Regulator's agreement every time they want to improve their medical equipment during a financial year?

But the real damage that the borrowing restrictions will produce lies in the effect the system will have on non-Foundation Trusts.

The Chancellor's emphatic ruling that Foundation Hospitals will be able to borrow only within the NHS budget has confirmed the fears on all sides about what the Bill would actually mean in practice.

The Chancellor has made it perfectly clear that, if any Foundation Hospital wants to borrow more, this will inevitably mean other hospitals getting less. This bill will create a "dog eat dog" culture, in which financial growth in Foundation Hospitals will mean cuts in the budgets of other hospitals, and progress at Foundation Hospitals will inevitably be at the expense of patients elsewhere.

The second real disappointment is the issue of the independent Regulator. Ostensibly this is meant to diminish the influence of central Government on the Foundation Trusts, but:

- the Secretary of State appoints the independent Regulator;

- the Secretary of State can remove the independent Regulator from office;

- the Secretary of State sets the pay and conditions for the independent Regulator;

- he determines the pension, allowances and gratuity for the independent Regulator;

- the independent Regulator must make reports to the Secretary of State as he may require, and a Trust may apply to the Regulator to become a Foundation Trust, but only if the application is supported by the Secretary of State.

Hired, paid, fired and instructed by the Secretary of State.

In what sort of New Labour parallel universe could that ever be truly described as independent?

So the first two elements of Foundation Hospitals overseas, the ability to borrow and the freedom from political interference, are missing in this Bill.

So what about the ability to determine pay and conditions? It is entirely unclear what the scope of these freedoms will be in practice. The Secretary of State has been telling managers that they will "have the freedom and flexibility within the new NHS pay system to reward staff appropriately", but when talking to trades unions, the clear impression is given that any such freedoms will be strictly limited. The position of consultants and GPs remains unclear, as a result of the Department of Health's mis-handling of the negotiations.

And how will these new Foundation Hospitals be run? It's all very simple; let me explain.

Paragraphs 3 to 5 of Schedule 1 set out the minimum eligibility criteria for the membership of a Foundation Hospital.

The members must include individuals drawn from the public, 'the public constituency', and individuals from its staff, 'the staff constituency'. The public constituency may include members who are eligible because they have attended an NHS Foundation Trust Hospital as a patient or carer. No time limit is specified in the Schedule.

Working within the guidelines of Schedule 1, the Government has left it up to each Foundation Hospital to work out how to organise its membership and governance structures.

Schedule 1 requires each Foundation Hospital to have a Board of Governors. Paragraph 6 states that the public and staff constituencies should elect representatives from their constituencies to the Board of Governors. Paragraph 7 states that representatives of the public constituency must be in the majority.

So how will it work? Who can stand? Who can vote? What will the constituencies be?

Take, for example, the Bristol Royal Infirmary. If it applies for Foundation Hospital status, how will this local governance work? It takes patients from my constituency, Weston Super Mare, Kingswood, the four Bristol constituencies, Northavon and South Gloucestershire. Presumably, anyone who had ever been a patient could stand or vote and anyone who had ever been a carer for anyone who had been a patient could stand. It serves several PCTs, so presumably anyone within those PCTs could vote. Doctors from outside the area might refer, so they and their patients could stand and vote. And this could be repeated for all the three hospitals in the city. Chaos times three.

Who on earth will determine the electorate, because it's not in the Bill? Who will organise the elections, who will pay and how much will this all cost? No-one will have time to treat or be treated because everyone will be running for election.

And there are two further issues that concern us.

The first is the relationship with the private sector, which seems utterly at odds with the Government's stated intent.

Clause 15(2) states that the proportion of income a proposed NHS Foundation Trust can derive from private charges may not increase from what it is now; although the wording may be purposefully vague. Subsection (2) reads 'the duty is to be exercised, in particular, with a view to securing that the proportion of the total income of the NHS Foundation Trust in any financial year derived from private charges is not greater than the proportion of the total income of the NHS trust derived from such charges in the base financial year.'

This means that, for instance, if a foundation trust borrowed to install an MRI scanner and wanted to sell any extra time available to the private sector it would be unable to do so but any private provider could sell such extra capacity to a foundation trust. Is that really what was intended?

The final issue relates to eligibility. At first only 3 Star Trusts, perhaps a dozen, were to be eligible on the basis that only they would have the necessary management skills. From the outset, the Conservative Party called for all Trusts to be given the opportunity to take part. So pressure increased the number to around thirty.

Then came the accusations of a two tier system, and the Government announced that all trusts attaining 3 Star status would be able to join.

Finally, this week we heard that all Trusts would be able to take part within 5 years, as they would all have reached 3 Star status by then, and that the Government was to give management an extra £200 million to help them.

What a charade! Why not simply dump the pretence of the star rating criteria, admit that all Trusts should take part, and consider each on its merits now.

As with all Bills, there are elements that will have support from across the House, such as the single regulatory body the Conservatives have been calling for since the Government's reforms began. But even here, while we welcome the extension of CHAI, we believe that it is not sufficiently independent of Government, and will seek to significantly alter this in the House of Lords if this bill is given a Second Reading.

We wish to explore further the ideas of recovery of charges, which we think is flawed, and issues on dental care.

The Conservative Party believes that healthcare should be much more responsive to the individual wishes of patients as consumers. We believe that politicians should be taken out of the running of the NHS. We believe in greater diversity of provision and greater freedoms for health professionals to utilise their skills, free from the target culture that is suffocating the service now.

I have long wanted to see this country adopt the successful methods being used abroad to produce better health outcomes than we have in the UK. We wanted real Foundation Hospitals with real freedoms, to borrow, over pay and from Government.

There are some who urged us to say how much we support this bill as a tactical measure to maximise rebellion on the Labour backbenches.

We will not do that.

It is a Bill that fails to give the real reform we need.

Foundation hospitals cannot borrow freely.

They cannot set their own pay and conditions.

They will be run by a Regulator entirely controlled by the Secretary of State.

They will be governed by undefined people, elected from undefined constituencies by undefined voters.

They will still be subject to suffocating Government targets through the star rating system.

The emasculation of borrowing powers will create a dog eat dog culture.

And they will worsen the bureaucratic nightmare that now exists.

This is a wasted opportunity.

Money will now be spent without the necessary reform.

Hopes and morale will be dashed.

The Government should have the courage to think again.

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