Health Committee

6 May 2003 No 21, Session 2002-003

FOUNDATION TRUSTS-  Report published

EMBARGO 00:01 a.m. Wednesday 7 May 2003

David Hinchliffe, Chairman of the Committee, said:

"This has been a difficult inquiry for the Committee, on which a full spectrum of perspectives on these issues  is represented. The proposals for Foundation Trusts are also extremely broad and technically complex, and are developing day by day, meaning that even in the short time between our report being agreed and being published Government thinking on some of these policies may have changed.   Nevertheless I am very pleased that as a Committee we were able to find a lot of common ground in our analysis of the Government's proposals, and I hope the report is able to shed light on these proposals and make a useful contribution to debate on this issue.

The debate about equity and two-tierism is already well trodden. Although we recognise that the NHS is not currently a level playing field, but has many layers of performance, we have not had any evidence during the course of this inquiry to reassure us that the introduction of Foundation Trusts will not entrench inequalities still further. The Secretary of State told us a level playing field would be created within four to five years but I find the logic behind the statement unconvincing. As trusts will have to achieve 3-stars in order to qualify for Foundation status, how can we be confident that non-Foundation trusts will improve their performance that dramatically and quickly when, as the report notes, the performance of approximately 70% of trusts in the star-ratings system either remained the same or fell between 2001-2002? If Foundation Trusts, through their increased access to resources, are able to develop their services in a way that lowers waiting times or improves quality, GPs and patients will choose to use their services rather than those of poorer-performing local hospitals.  As money follows patients, poorer performing hospitals will see their revenue streams dry up and will have even less to invest in improving services, locking them into a downward spiral of poor performance. We heard evidence from the Chair of University College London Hospitals Trust who fully expected that Foundation status would enable his trust to attract patients from other hospitals. The report is clear that this is not acceptable:

"We believe that the introduction of Foundation Trusts, coupled with increased patient choice, has the potential to alter the distribution of hospital services ... early implementers of Foundation status will attract more resources, as well as perhaps attracting more and higher calibre staff, which given current shortages in many professions may be at the expense of other worse performing hospitals.  The potential for inequity posed by Foundation Trusts therefore needs to be addressed".

I have long been a strong advocate of introducing democracy into the NHS, and I welcome efforts to get local people involved in running their health services.  However, for me possibly the most damaging part of these reforms is that they will channel patient involvement enthusiasm and loyalty onto an acute hospital, undermining the step change we have seen in recent years away from acute care, towards exploring primary care and community based options. This will be only compounded by the enhanced status and resources Foundation Trusts will attract."


The Health Committee has published its report on Foundation Trusts, coinciding with the Second Reading of the Health and Social Care (Community Health and Standards) Bill. Political opinion remains divided over many of the fundamental questions underlying the Government's proposals for Foundation Trusts, and these broad issues will be the subject of considerable debate as the legislation necessary to introduce Foundation Trusts is presented to Parliament. Rather than attempting to anticipate these discussions, this report instead concentrates in detail on the practicalities of the policies set out in the Government's Guide to Foundation Trusts. The report examines two key issues: will the proposed changes bring about improvements for patients who are treated by Foundation hospitals? And what implications will the proposed changes have for patients being treated in the rest of the NHS?

Exploring the potential impact of these proposals on the rest of the NHS, the report concludes that as the proposals stand, they pose a threat to the equity of service provision, one of the founding principles of the NHS:

While we welcome the Government's aim to ensure 'a level playing field' within the NHS, we feel that the Secretary of State may be being too ambitious in assuming that it will be possible to introduce Foundation status to all NHS trusts within four to five years.  During the time that star ratings have been in operation, the record shows that the performance of 70% of trusts either remained static or fell.  Early implementers of Foundation status will attract more resources, as well as perhaps attracting more and higher calibre staff, which given current shortages in many professions may be at the expense of other worse performing hospitals.  The potential for inequity posed by Foundation Trusts therefore needs to be addressed.

The report argues that the introduction of Foundation Trusts, has the potential, in some areas at least, to lead to wage inflation and aggressive poaching of staff:

Our evidence suggests that in local health economies where trusts, PCTs and other health organisations have close and well developed working relationships, the introduction of Foundation Trusts may be less likely to result in wage inflation and aggressive staff poaching.  However, in areas where links between local partners function less well, and in areas of high mobility and workforce shortages, for example London, we believe that these problems may emerge.

The report expresses concerns that using star ratings as a 'one way' gateway to Foundation status could give rise to serious contradictions within the NHS performance rating system, and that current proposals lack adequate incentives for Foundation Trusts to maintain or improve their performance. The report recommends that if these proposals go ahead, Foundation status should be piloted with all trusts in a given geographical area, to help to evaluate how the system would operate in the long term. If these reforms are introduced, steps will need to be taken to prevent the introduction of Foundation Trusts from undoing the recent shift in emphasis from secondary to primary care, and  stronger safeguards will be needed to ensure continued co-operation between the primary and secondary care sectors.

The report notes that many of the representatives from prospective Foundation Trusts who gave oral evidence to the Committee were in support of the extra freedoms and the new governance arrangements proposed in the Foundation Trusts model. The report argues that changes that would need to be made to current proposals if they are to bring about genuine improvements for NHS patients who are treated by Foundation Trusts. Care will need to be taken to ensure that new accountability arrangements do not leave Foundation Trusts more encumbered with bureaucracy than their predecessors. It is inappropriate to leave the determination of systems for democratic accountability entirely at the discretion of individual NHS trusts, as this could lead to a system of patient and public involvement that is fragmented, confusing and inequitable. Equally, if Foundation Trusts' Boards of Governors are to wield real power, it is imperative that their relationship with PCTs, including how disputes will be solved, is established on a transparent national basis. Foundation Trusts will also need to be better integrated into the national system for Patient and Public Involvement than is currently being proposed.

Notes for Editors

1. The Chairman of the Committee will be available for interviews and can be contacted by journalists on 07789 933 495.

2. See Press Notice 1 for the Terms of Reference for the this inquiry

3. Between 6 February 2003 and 6 March 2003, The Committee took oral evidence from the leaders of a range of NHS trusts in Teesside, Bradford, East Anglia and London; from experts in social ownership and patient involvement, including the Co-operative Union, Mutuo, the Democratic Health Network and the Association of Community Health Councils; and from the Rt. Hon. Alan Milburn MP, Secretary of State for Health.

4. Confidential advance copies of the report, which will be embargoed until 00.01 on Wednesday 7 May, will be available on Tuesday 6 May between 12.00 noon and 13.00 from the reception desk at Westminster House, 7 Millbank, London SW1.

5. Advance copies of the report will also be made available to the Press from the Press Gallery, House of Commons at Noon on Tuesday 6 May.

6. Volume 2 of the Report, which will contain the Minutes of Evidence and Appendices, will  be published on Wednesday 7 May at 11:00.  Please note there will be no advance copies of this volume and no circulation from the Committee Office

7. Please present this Press Notice as identification; a signature will be required.