SHA Policy on Foundation Hospitals 2003

Written Evidence from the Socialist Health Association to the Health Select Committee February 2003


A national health service that is democratically accountable at all levels is a priority for the SHA, and the foundation trust concept appears superficially attractive through its association with co-operation, mutualism and local democracy. The SHA therefore welcomes the government’s recognition of the need to increase democratic accountability within the National Health Service, but believes that foundation trusts as outlined in the guidance is a not the way to achieve this.

The SHA understands the government’s desire to get out of direct, day-to-day involvement in running every part of the NHS. However, the SHA believes that it is ill advised to introduce independence from central control at the level of the most successful acute/specialist NHS hospitals. The Secretary of State has it within his power to distance Whitehall from day to day involvement by changing behaviours and shifting the balance to the Strategic Health Authorities that were created to be the local headquarters of the NHS. The SHA believes this should be the preferred route to decentralisation, in particular because this would be more compatible with the forthcoming devolution of government to Regional Assemblies.

The SHA has also always held the view that prevention and improving public health is the way to better health and health care – the pursuit of community initiatives that stress a reduction in inequalities, encourage healthier lifestyles, and tackle social and economic exclusion. An emphasis on preventive work, partnerships particularly with local government and around community safety, and more resources for primary care and preventive initiatives should be the government’s priorities, not giving pre-eminence within the NHS to the acute and tertiary sector.

A better way forward

If the political interest is in democratic accountability, then a hospital is the wrong unit to empower. This is a return to the pre 1948 system of voluntary hospitals, when the thrust should be to empower primary care.

If the local population is to have a truly democratic voice in the NHS, it follows that this should be in its Primary Care Trust, which has an interest in local services and relates to a defined geographical area. A PCT with a democratically elected Board of Governors can be held to account for its planning, providing and commissioning decisions by a local electorate. Elections to the Board of Governors of the PCT would be a straightforward matter, conducted at the same time as local government elections and based on the same constituency of electors.

Foundation trusts as proposed cannot be held truly to account by any bodies other than the Independent Regulator and the Commission for Health Improvement and Audit. NHS Strategic Health Authorities are hardly mentioned in the The Guide to NHS Foundation Trusts, although they would be a more accessible and obvious source of performance accountability for local people than a distant Regulator bound by a tight and limited remit.

The SHA contends that there is a distinction between local citizens achieving influence through democratic civic elections to local government, and patients and users gaining influence through Patients’ Forums and other voluntary sector mechanisms. Staff also need to influence governance, but this should be through systems of worker participation and trade union involvement. The governing body structure of foundation trusts confuses all these different interest groups.

The SHA is also concerned at the proposal to introduce the foundation trust concept first at the most complex trusts, such as major teaching hospitals and tertiary centres with very wide catchment areas. Where is the thinking about the implications for medical student and other clinical training?

At the moment, hospital care is not delivered with equal excellence throughout the land. This is reflected in the performance measures and star system allocated to NHS trusts. However, citizens pay for a National Health Service and have the right to receive consistently high standards of care no matter where they live. Any reform to the hospital sector of the NHS should, therefore, be directed to ensuring that all hospitals offer the same consistently excellent standards of care.

This could be achieved by offering greater local flexibilities to all hospitals, particularly in determining local clinical priorities, reinforced with extra support for struggling hospitals and with the resources, money and capacity going where they will achieve maximum improvements. The government’s target for hospital care should be to tackle the current multi-tier delivery of acute health care until there is a single-tier of uniformly excellent health care matching the national standards to which the government is committed. The potential foundation trust hospitals could be given greater freedom and yet be kept within the NHS by a system that granted successful hospitals more autonomy.



The SHA believes that the proposal for “democratic stakeholders” will be unworkable in the context of a big hospital because of the lack of a genuine catchment area. Neither is the analogy with co-operative societies a good one. Co-operative societies tend to be bottom-up organisations. The foundation trust will be a top-down organisation.

The requirement to register for membership will not draw in people from hard to reach groups, while the more politically aware “establishment” groups will be over-represented. The proposed time frame for establishing the first foundation trusts will also make it extremely difficult for them to attract a truly representative local membership.

Furthermore, the interests of the local population, often very deprived in the case of many teaching hospitals, may well conflict with those of patients attending specialist units who come from further away. Where local people dominate stakeholder boards, they could quite rationally decide to close down expensive regional services and divert resources to meet local needs. Conversely, if specialist patients came to dominate the Board, the local purpose of the hospital could suffer. In other instances, small single-issue groups could capture control of the Board of Governors.

The SHA is also concerned at the proposal to allow hospital trusts to identify the boundaries of their own membership community, which could be drawn quite arbitrarily and possibly even partially. No other democratically accountable organisation determines its own constituency. This proposal could seriously undermine the government’s undertaking that the trusts will be community owned and locally accountable.

The sheer bureaucracy of the whole membership and electoral process appears very complex and costly, and will divert significant resources away from health care. The examples given in the Guide for ensuring a properly representative Board of Governors are also extremely cumbersome and probably unworkable.

The SHA also has concerns about the ownership of the foundation trust. The stress in the Guide is that foundation trusts will remain firmly within the NHS. However, time will tell whether this status could be sustained in the face of a strong legal challenge, given the mutual model of ownership. The SHA fears that it may become possible for a Board of Governors to vote to de-mutualise its hospital by selling it on to another mutual or to a PLC.

A different concern is that if it can be demonstrated that foundation ownership status is not robustly public, then the trusts could fall within the terms of the General Agreement of Trade in Services (GATS) agreement. Public services are exempt from the GATS provisions. Private services are not. If foundation hospitals become freestanding entities, they might be perceived as competing with private hospitals, but not on the same level playing field. If that situation arose, then the government could be obliged to remove subsidies and NHS benefits from the foundation trusts.

The financial regime

Increased freedom to borrow is cited as another benefit of foundation trust status. However, this will mean that borrowing is driven by hospital status rather than clinical need. Furthermore, the SHA suspects that the foundation trust pot of capital is likely to be greater than that available to other hospitals, undermining the access of more needy hospitals to capital. If access to NHS capital is a problem, foundation trusts are not the solution.

Foundation trusts with surplus estate in areas with high property values will also have an opportunity for windfalls denied to the rest of the NHS. However, profits from asset sales should be shared across the NHS and applied where they are most needed, not retained within one locality. Similarly, the ability of foundations to invest their own surpluses independently will result in small scale, piecemeal returns and deny the NHS the ability to maximise returns on aggregated investments.

Employment, education and training

The SHA fears that, having got rid of the debilitating effects of the internal market, the government now proposes to re-introduce competition through the foundation trust concept. Setting up foundation trusts in the phased manner that is proposed will ensure that struggling NHS trusts never get the chance to succeed. This is a diversion from the NHS’s primary purpose, as a national system, to deliver The NHS Plan.

The introduction of the first wave of foundation hospitals in a situation of prolonged staff shortage is likely to boost recruitment at a small number of institutions at the expense of the rest of the NHS, making it even more difficult for other hospitals to succeed. Staff poaching is inevitable. Any attempt to prevent this will fall foul of employment law.

The duty on foundation hospitals to exercise their freedoms in a way that does not undermine or damage the rest of the NHS is an impossible and meaningless goal. Competitive local pay will also transfer resources from health care into collective bargaining processes. It will become a recipe for divisiveness, competition and the institutionalisation of a multi-tiered acute health care service.

The government’s priority at this time should be to increase capacity across the board, not to facilitate unfair competition for scarce staff resources.

Additional accountability requirement under the Health & Social Care Act 2001

The Guide says that foundation trusts do not need to set up Patients’ Forums as they will be held to account through the commissioning process. However, it is up to the Commission for Patient and Public Involvement in Health to establish Patients’ Forums, not the trusts. The suggestion that foundation trusts do not need Patients’ Forums also seriously undermines the new system of patient and public involvement in health even before it is fully up and running.

In the event that Patients’ Forums are not set up at foundation trusts, it is unclear who, other than the Regulator and CHAI (infrequently), will monitor the day to day services delivered by the trust, unless that role is given to the Forums of all the commissioning PCTs.

It will not be possible for the PCTs themselves to hold the foundation trust to account through the commissioning process. PCTs will be required to sign long term, binding contracts with foundation trusts as the trusts will depend on these contracts to allow them to borrow on the open market. It is therefore unrealistic to suppose that PCTs can enter into expensive legal wrangles with the trust whenever they feel that contractual obligations are not being met.

Neither would the PCTs be able to hold the trust to account by taking those contracts elsewhere. Local people want to be treated in their local hospital. PCTs are anyway constrained in their purchasing power, and small PCTs commissioning services from a major teaching hospital are not equal members in that partnership.

There is also concern that where a decision by a foundation trust to vary its regulated services is contested by an Overview & Scrutiny Committee, reference is only to the Independent Regulator and not, as is the case of all other trusts, to the Independent Reconfiguration Panel (unless referral is made by the Regulator).

The SHA also notes the likely reduction in the role of the Strategic Health Authority, and fears the loss of an informed and coherent overview of a local health economy.

Breach of licence – provision for the Independent Regulator to intervene

In the event of foundation trusts being established, the SHA believes that an Overview & Scrutiny Committee should also have the power to trigger an intervention by the Independent Regulator, particularly where they provide services on behalf of a local authority.


The SHA is committed to the NHS. It is also committed to extending democratic accountability to the whole of the NHS. The SHA feels this will be better achieved by seeking greater involvement by local government in the governance of PCTs, which have a local population responsibility. The strength of the NHS is that it is a national, value-driven not-for-profit-service, and this strength should be retained at all costs.