Tuesday 30th June 2026
(2 days, 20 hours ago)
Public Bill CommitteesHealth Bill 2026-27 View all Health Bill 2026-27 Debates Read Hansard Text Amendment Paper: Public Bill Committee Amendments as at 30 June 2026 - (30 Jun 2026)
The Chair
I remind the Committee that with this we are considering the following:
Schedule 4.
Clauses 32 to 34 stand part.
The Minister for Secondary Care (Karin Smyth)
I will start where I left off. Clause 34 addresses the gap by making it clear where responsibility sits, so that there is no doubt about who must produce the final accounts and ensure that they are completed properly, and about how those accounts should be audited. We think this is a proportionate provision to ensure continuity and clarity on how NHS money has been managed during organisational transition. I commend the clauses to the Committee.
Dr Caroline Johnson (Sleaford and North Hykeham) (Con)
Clause 31 introduces schedule 4, which essentially makes series of amendments to other Acts. It amends the Public Finance and Accountability (Scotland) Act 2000 to remove a cross-reference to other categories, and it amends the Audit and Accountability (Northern Ireland) Order 2003 and the Public Audit (Wales) Act 2004 for similar purposes. It also amends the National Health Service Act 2006 by deleting section 62 and schedule 10, relating to the audit of accounts of NHS foundation trusts, to end the old audit scheme.
Schedule 4 amends section 3 of the Local Audit and Accountability Act 2014 so that foundation trusts are now included in the list of bodies that must keep accounts in the standard way, it amends section 4 to specify which documents count as accounts of foundation trusts for the purpose of auditing, and it amends sections 8 and 10 so that the auditor appointment procedure and the auditor panel’s role now cover foundation trusts.
In addition, schedule 4 rewrites section 13 of the 2014 Act so that if a trust fails to appoint a local auditor, it is the Secretary of State’s job to step in. Previously, that was NHS England’s job; clearly, that needs to change, because NHS England is being abolished. The schedule also amends section 21 so that the auditors’ general duties now apply to foundation trusts too, and it amends section 30, relating to unlawful expenditure and activity, and section 32B, relating to the independence requirement, to remove a now-redundant item from the list.
Schedule 4 also amends schedule 2 to the 2014 Act to formally add foundation trusts to the official list of audited bodies; schedule 5 so that the rules on who can be a local auditor now cover foundation trusts too; schedule 6 to remove an outdated segment from the audit practice code rules; schedule 7 to tidy the reporting rules and extend them to foundation trusts; schedule 9 to realign data matching rules that apply to foundation trusts in the new system; and schedule 11, relating to the disclosure of information, to remove a reference to NHS England, which is no longer necessary because NHS England is being abolished. In general, clause 31 aligns the audit process for accounts of foundation trusts with those of standard trusts and integrated care boards.
Clause 32 removes the need for NHS England to maintain a register of foundation trusts and the fees associated with maintaining it. Section 39 of the NHS Act 2006 requires NHS England to maintain a current register of NHS foundation trusts and specifies what must be in that register. Section 50 states that an NHS foundation trust must pay NHS England a fee that NHS England may determine in respect of exercising its functions under section 39, which relates to keeping the register, and section 39A, relating to a panel for advising governors. Clause 32 deletes sections 39 and 50. The explanatory notes say that the requirement to maintain a register does not need to be transferred to the Secretary of State when NHS England is abolished because, the Government argue, the information will already be available centrally, and there is no need for a fee to keep that in place. That seems sensible to me.
Clause 33 enables the Secretary of State to impose limits on a foundation trust’s annual capital or revenue expenditure. Section 42B of the 2006 Act allows NHS England to make an order imposing a limit on the capital expenditure of a foundation trust in a single year. Section 42C sets out that NHS England must publish guidance about the exercise of its power under section 42B, including about the circumstances in which it is likely to make an order and the method it will use to determine the capital expenditure limit. Clause 33 entirely replaces sections 42B and 42C with rewritten sections, with some notable changes. The wording is changed from “capital expenditure” to “expenditure”. The power is therefore widened from capital expenditure limits to limits on any expenditure—capital and revenue. The Secretary of State replaces NHS England as the entity with the power to impose limits, which makes sense, and the subsection requiring an order to specify the trust, the financial year and so on has been removed in full.
The change gives the Government financial control to stop overspending by NHS foundation trusts. I note that in financial year 2023-24, NHS trusts overspent by £1.2 billion, so presumably this is the Secretary of State getting a tighter grip on spending. In some respects that is sensible, but overspending is often due to staffing costs and day-to-day pressures, not capital expenditure, so there is an argument that the capital limits themselves are not sufficient to deal with the problem. Under the new governance model, the Secretary of State has oversight and responsibility for the health service, and financial control aligns with those changes. The new power could prevent one organisation’s failures from undermining the health service’s wider financial position or impacting other providers.
However, the purpose of foundation trusts is supposed to be that they have greater independence over spending, and the Government have stated that their aim is to create a more devolved and autonomous health system. How does broadening the Secretary of State’s ability to interfere in expenditure devolve power or make foundation trusts more independent? Imposing expenditure limits may control overspending on paper, but it does not address the reasons why it is happening, so limits could lead to a deterioration in the health services delivered by some trusts. What plans does the Minister have to deal with that?
Because the power moves from an arm’s length body to the Secretary of State, interventions could be politically motivated, rather than in the best interests of the NHS. How does the Minister consider that that will be managed?
The power for the Secretary of State to impose expenditure limits at any time during or before the financial year could create uncertainty among trust leadership and undermine long-term planning. If a trust is given a budget for the year, it knows what it has to work with, but if somebody says halfway through the year, “Actually, you are going to have to work with less money than that,” it is very difficult for the board to plan its expenditure, because it is always looking the other way. Why does the Secretary of State need that power? Can the Minister clarify that, if there is a change in the expenditure limit during the year, it will always be revised upwards, and never downwards?
Karin Smyth
I thank the shadow Minister for in general, I think, agreeing that the alignment of many of these processes is quite sensible.
The shadow Minister talked in general terms about financial controls. The Government take financial controls and our responsibility for taxpayers’ money very seriously. As I said last week, from very early on, we were very keen to ensure that there is a grip on NHS finances in order to properly deliver the sort of healthcare that all our constituents deserve. We take that very seriously. There has not been that sort of grip at board level and through the system in recent years. As a result of the measures that we have taken, I think this is the first year in six or more years that the NHS has not gone back to the Department for additional funds to get through the year. The Committee can be assured that financial control is important.
The shadow Minister referred to limits. Of course they are overall limits; the Secretary of State does not go line by line through what a trust spends. I understand the point that people are trying to make to conflate some situations, but of course it is an overall limit.
The safeguards in these provisions are designed to protect foundation trusts’ freedoms and not constrain them, but a foundation trust can enjoy such freedoms only if it is in a well-overseen and stable NHS financial system. By including a backstop for use in exceptional circumstances, clause 33 helps to safeguard public funds and will help the Department to meet its financial obligations, which I think hon. Members understand. It is a usual process for the Department to go through, as anyone who has sat on the Public Accounts Committee will know. Adherence to the departmental expenditure limit creates and maintains the necessary environment for the foundation trust to exist.
Question put and agreed to.
Clause 31 accordingly ordered to stand part of the Bill.
Schedule 4 agreed to.
Clauses 32 to 34 ordered to stand part of the Bill.
Clause 35
Conversion of failing NHS foundation trust into NHS trust
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
Schedule 5.
Clauses 36 to 38 stand part.
Schedule 6.
Karin Smyth
During the process of producing our 10-year plan, we were clear that, as much as we will reward the best performing providers with new freedoms to innovate, we will not hesitate to act on poor performance, and this group of measures deal with just that: action in the event of a failing provider.
Clause 35 and schedule 5 insert new provisions into the NHS Act 2006 to enable the Secretary of State to, by order, convert a failing foundation trust to an NHS trust. This is intended to take place only in the most critical circumstances, and where it is in the public’s best interest for the Secretary of State to be able to direct the trust about how it should exercise its functions, to address safety or other issues at the trust. Foundation trust status should be a mark of good performance, and there must be a mechanism to remove it when performance is seriously deficient. This deauthorisation power will help to maintain the integrity of the reinvigorated foundation trust status and provide an additional incentive for challenged foundation trusts to improve.
The power to make a conversion order can be used where the foundation trust has failed to comply with a condition of its provider licence or with another legislative requirement. In deciding whether to make a conversion order, the Secretary of State must consider various factors, including the seriousness of the failure, the health and safety of patients, the quality of the provision by the trust of goods and services, the financial position of the trust, and the way the trust is being run.
The conversion power is also subject to two additional requirements. First, the Secretary of State must publish guidance about the matters they will consider in deciding whether to exercise the conversion power, including the factors I just outlined. They must consult on any such guidance before its publication. Secondly, where the Secretary of State proposes to use the power, they must first consult the foundation trust in question, any integrated care boards in the areas in which the trust operates, and any other person to whom the trust provides goods and services, and whom the Secretary of State considers it appropriate to consult.
Clause 35, together with schedule 5, also inserts new schedule 9A into the NHS Act 2006, which sets out the immediate consequences of a conversion order. Deauthorising a foundation trust has no impact on the property it holds, the contracts it has with commissioners and other groups, or the terms of employment of employees. These powers set clear organisational consequences for significant underperformance and allow the Secretary of State the freedom to take action to protect patients in extreme circumstances.
Clause 36 contains another critical power to allow action in the case of a failing foundation trust. It allows the Secretary of State to add conditions to an NHS foundation trust’s provider licence where they consider that the trust will breach its licence conditions due to issues with its governance. The clause is a consequence of abolishing NHS England and makes changes to the powers currently held by NHS England under section 111 of the Health and Social Care Act 2012, to confer them on the Secretary of State, with additional consequential changes reflecting the abolition of councils of governors.
The clause sets clear expectations for a foundation trust through the licence conditions and provides the Secretary of State with a transparent mechanism to take more urgent, targeted enforcement action to address failures of governance. Should the foundation trust breach any conditions imposed via section 111, the Secretary of State may require it to make changes to the executive directors of its board as necessary, including removing or suspending executive directors, replacing executive directors with interims, and preventing the trust from appointing specific individuals. If the foundation trust fails to take those actions, the Secretary of State may implement the changes.
To reassure the Committee, there are clear safeguards underpinning the clause, which can be used only where there is evidence that failures of governance in the foundation trust will cause it to breach the conditions of its licence. Further, acting under section 111 does not preclude the Secretary of State from using their other regulatory powers, including to require the foundation trust to take steps to address a breach of any condition of the licence, or to accept undertakings from the trust to address the breach.
Finally, the section 111 power was originally granted to Monitor in 2012 under transitional arrangements, as it was anticipated that the power could be withdrawn once governors had transitioned into their roles and could hold boards to account without outside intervention. Over 13 years on, that has proven not to be the case. With the abolition of the foundation trust councils of governors, it makes sense to repeal the provisions under sections 112 to 114 of the same Act that made it transitional.
Clause 37 makes changes to the special administration framework to ensure that it continues to function coherently after the abolition of NHS England. The clause makes focused, technical amendments to the Health and Social Care Act 2012 to amend the framework for establishing a mechanism for financial assistance in cases where a provider is subject to a health special administration order under chapter 5 of that Act. It also amends the Act to remove the duty to establish a mechanism for financial assistance to foundation trusts to which a trust special administrator has been appointed. The duty no longer needs to apply to foundation trusts, because the Secretary of State already has the power under provisions in the NHS Act 2006 to provide financial assistance to NHS foundation trusts if needed.
With the abolition of NHS England, the duty to establish a mechanism for financial assistance for independent providers will be retained and conferred on the Secretary of State. It is worth noting that the provisions related to financial assistance in special administration cases, and chapter 5 of the Health and Social Care Act 2012, which sets out the powers and processes for the making of health special administration orders, have not yet been commenced. However, the amendments made by the clause ensure that the special administration regime can operate smoothly if it is ever needed.
The clause does not create new financial support mechanisms, but ensures that existing ones can be used appropriately in the reformed system. In short, clause 37 ensures that the legal framework reflects the new institutional landscape while retaining the ability to act swiftly to safeguard continuity of services during special administration.
Clause 38 makes changes to the trust special administration framework to ensure that it continues to function coherently after the abolition of NHS England. This clause, together with schedule 6, make targeted changes to the trust special administration process set out in the NHS Act 2006 for NHS trusts and NHS foundation trusts as a consequence of the abolition of NHS England. It also aligns more closely the processes between NHS trusts and foundation trusts.
Trust special administration is, and will remain, a last resort mechanism used only in cases of serious failure. It is used to protect patients, stabilise services and put the organisation back on a sustainable footing. Where deemed necessary, a trust special administrator would be appointed to manage the trust and work with relevant key stakeholders to develop recommendations regarding the organisation and its services.
The amendments made by schedule 6 remove functions that currently sit with NHS England and confer the key decision-making functions on the Secretary of State, who will provide clearer lines of accountability and faster decision making when rapid intervention is required. The amendments also simplify the steps involved in the TSA process, with the aim of improving the speed of intervention and providing transparency. They align more closely the processes for trusts and foundation trusts, and set out a simpler process in relation to the administrator’s draft report, consultation and final report. They also require, as is the case now, that key documents and decisions are published and laid before Parliament. That will help ensure proper and meaningful scrutiny of the TSA process and outcomes. It also helps ensure that affected patients, staff and local partners have the opportunity to engage during the process, while maintaining the balance with the need to deliver timely intervention and secure continuity of safe services.
In addition, the amendments in schedule 6 make changes to the role of the Care Quality Commission in trust special administration. The CQC will be able to recommend that a trust special administrator should be appointed. The Secretary of State is also required to consult the CQC before making an order, ensuring that independent expertise on quality and safety informs decisions and that intelligence on service performance is co-ordinated.
The provisions in the Bill ensure that the process remains fit for purpose, proportionate, and aligned across NHS trusts and foundation trusts. They support faster, more coherent decision making in the most serious cases, with the aim of protecting patients and securing sustainable, high-quality services for the future. Taken together, the clauses provide the necessary tools for the Secretary of State to take proportionate, swift and decisive action in the event of provider failure. I therefore commend these clauses to the Committee.
Dr Johnson
Clause 35 essentially establishes the right of the Secretary of State to convert a foundation trust into an NHS trust in certain circumstances. Currently, section 25 of the NHS Act 2006 establishes trusts and introduces schedule 4 of the same Act, which makes provision about NHS trusts. Section 56AA sets out how additional requirements concerning acquisitions of a trust or foundation trust are to work. Clause 35 deletes section 25(2), which specifies that an order in this context is referred to as “an NHS trust order”, and amends subsection (3), so that no order under section 25—previously no “NHS trust order”—can be made until any consultation that has been prescribed is complete.
Clause 35 introduces proposed new section 57B into the 2006 Act, “Conversion of failing NHS foundation trust into NHS trust”, which provides the Secretary of State with the power to convert if the foundation trust breaches its licence or other legal duties. The trigger is broad and includes non-compliance with any statutory requirement. The proposed new section requires an order to specify when it takes effect and also requires the Secretary of State, when deciding to issue an order, to consider among other things
“the seriousness of the failure…the health and safety of patients…the quality of the provision by the trust of goods and services…the financial position of the trust, and…the way that the trust is being run.”
Before making an order, the Secretary of State will be required to consult the trust, any ICB where the trust has facilities and
“any other person to whom the trust provides goods or services…whom the Secretary of State considers it appropriate to consult.”
The proposed new section also provides the Secretary of State with the power, when the conversion order is made, to
“terminate the appointment of the chair or any executive or non-executive director”,
and to
“appoint a person to be the chair or an executive or non-executive director”.
It also time-limits the powers to intervene with management to one year after the order is made.
Clause 35 also introduces proposed new section 57C into the 2006 Act, “Guidance about conversion”, which requires the Secretary of State to publish guidance about matters to be considered when deciding to make an order and requires them to consult persons considered appropriate before publishing or revising guidance. The clause removes “NHS trust order” from section 276 of the 2006 Act, “Index of defined expressions”, and updates schedule 4, so that an NHS trust may be established by an ordinary order under section 25 or a conversion order under proposed new section 57B.
Schedule 5 to the Bill inserts proposed new schedule 9A to the 2006 Act, “Conversion of failing NHS foundation trusts”, which provides that, on conversion, the foundation trust’s chair and directors become the initial chair and directors of the new NHS trust, unless they are removed by the Secretary of State under the procedures we have just talked about. The proposed new schedule initially keeps the board the same size, until new arrangements are made. It provides that the foundation trust’s public dividend capital carries over to the NHS trust and that the conversion does not affect continuity of the body —it will remain the same organisation, just with NHS trust status.
The proposed new schedule provides that the trust’s property and liabilities, including criminal liabilities, continue unaffected. It also provides that existing contracts continue and that the trust remains party to them. It clarifies that those contracts do not automatically become NHS contracts under section 9(1) of the 2006 Act, provides that the trust keeps any corporate memberships that it held before the conversion, and clarifies that the continuity provisions do not affect the Secretary of State’s wider powers to make directions.
The Secretary of State will have a direct power to act where the foundation trust has failed—for instance, where there have been patient safety lapses—and there are clear benefits to that. There are also transparency requirements built in: the Secretary of State must publish guidance and consult before issuing guidance or undertaking conversion, and the power to change the management is limited to a year.
However, the last Labour Government said that independence was central to the success of foundation trusts. In 2005, the then Secretary of State, Patricia Hewitt, said:
“We know that independence from central Government control and greater freedoms are giving NHS foundation trusts the opportunity to innovate new approaches to healthcare and healthcare services, for the benefit of NHS patients.”—[Official Report, 7 November 2005; Vol. 439, c. 5WS.]
The challenge with innovations is that, even with the very best intentions and the very best advice, some will work and some will not. If any failure at all is a reason for trusts to be taken over, will that cause them to be shy about innovating, for fear of their independence being undermined as a result? There is a balance to strike, so I wonder whether the Minister will comment on that.
The change also makes it easy for the Secretary of State to convert a foundation trust for political reasons—for instance, because of pressure from local Members of Parliament. That is a positive in some ways and a negative in others. Again, it could have a chilling effect on the very autonomy and innovation that Ministers want to see, so the question is how they think they will balance that.
Edward Argar (Melton and Syston) (Con)
I will endeavour to be relatively brief in my reflections, and I will address, particularly, clauses 35 and 38. I can see a logic to what the Minister proposes in them. On clause 35, we know that foundation trusts face challenges. We saw that writ large with the scandal at Mid Staffs, and in my time as a Minister, several foundation trusts required intervention—maybe not on that scale—or required improvement. I pick on them just because they are in my head—I do not know the situation today. I am looking across at the hon. Member for Ashford, because going back some years to when I was a Minister, East Kent hospitals NHS foundation trust faced some considerable challenges. I am not necessarily saying that that meets the bar for intervention, but foundation trusts have challenges from time to time.
I should also declare an interest: I was born in the forerunner of the William Harvey hospital—the old Willesborough hospital—in the hon. Member’s constituency. I recognise that on occasions foundation trusts get into serious, or less serious but still challenging, circumstances. So I can see where the Minister is coming from, but I have a few questions for her.
First, we recognise that although foundation trusts can get into bother, so too can NHS trusts. NHS trusts can underperform, have safety issues or have financial or other performance issues. I am interested to hear the Minister’s reflections on why she believes that removing foundation status and the organisation becoming an NHS trust will necessarily solve those problems, when many NHS trusts can have equally significant challenges. I would welcome the Minister’s reflections on that.
In terms of whether a conversion was to take place—if the Secretary of State determined that that was expedient and it met the criteria—what would the timescales and process be if, further down the line, a foundation trust wished to reapply for its old status, having previously converted to an NHS trust? Would that be possible, and how would it work? I suspect that there would be a significant number of hurdles to get over to prove that it had achieved that status. I would welcome the Minister’s reflections on that point.
Finally, on clause 38, what the shadow Minister, my hon. Friend the Member for Sleaford and North Hykeham, touched on gives me a little cause for concern. Essentially, this appears to be a further centralisation of powers in the Secretary of State’s hands, particularly with the changes to the role of the CQC. It effectively downgrades the CQC’s power as the independent regulator in these matters. Instead of the CQC being able to initiate the appointment of a TSA where, on safety grounds, they consider it to be necessary and the criteria met, that power will sit with the Secretary of State, who will be required to consult the CQC, but it will seemingly lose its ability to take that initiating step irrespective of what they have seen in any inspections. I would be grateful if the Minister addressed and potentially reassured me on those points.
Karin Smyth
As people who have been listening will know, this is a chunky set of clauses on some technical details. Let me broadly pick up some of the key points.
I want to be very clear about deauthorisation and our seeking to establish, essentially, a more dynamic model. As I said, the coalition Government repealed the legislation on deauthorisation in the 2012 Act. Although other regulatory levers exist to manage poor performance, we are using two core arguments. First, converting foundation trusts into NHS trusts will enable the Secretary of State, if needed, to intervene further through their power of direction over NHS trusts. The Secretary of State will therefore be able to focus on the patient and public interest over preservation of providers’ statutory freedoms in cases of serious failure. I hope that that addresses some of the points that have been raised. Secondly, having a more dynamic environment with the potential for deauthorisation in such cases, and the consequent loss of statutory autonomy, may act as an incentive for challenged foundation trusts to improve, and it would show that there are consequences.
As I think the hon. Member for Sleaford and North Hykeham knows, the usual processes exist for managing performance across various aspects of the provider. They will continue. This is for exceptional circumstances. As I said, this is about maintaining a more dynamic model than the one we have. The purpose behind her questions about continuous service—the purpose of having a range of failure powers—is to ensure continuity of care for patients and the public. The analogy with general practice does not hold; this is a very different set of circumstances. But, obviously, she raises an important point about public concern relating to the service’s provision, and I assure her on that. We need to make sure that we diagnose the situation, provide the trust with support and assess which toolbox is most applicable.
The CQC can recommend that a trust special administrator should be appointed where it is satisfied that there is a serious failure to provide services of a sufficient quality, and it must provide a report on the safety and quality of services following the appointment of an administrator. The Secretary of State must also consult the CQC before making an order to appoint a trust special administrator.
Question put and agreed to.
Clause 35 accordingly ordered to stand part of the Bill.
Schedule 5 agreed to.
Clauses 36 to 38 ordered to stand part of the Bill.
Schedule 6 agreed to.
Clause 39
Joint working and delegation arrangements
The Chair
With this it will be convenient to discuss the following:
Government new clause 20.
New clause 26—Arrangements between NHS bodies and local authorities: duty to review—
“(1) The Secretary of State must conduct a review of the effectiveness of arrangements entered into by NHS bodies and local authorities under section 75 of the National Health Service Act 2006 (arrangements between NHS bodies and local authorities).
(2) In conducting the review, the Secretary of State must consult—
(a) NHS bodies,
(b) local authorities, and
(c) any another person that the Secretary of State considers it appropriate to consult.
(3) Having conducted the review, the Secretary of State must consider whether the power to make regulations in section 75(1) or the power to issue guidance in section 75(6) of the National Health Service Act 2006 should be exercised in order to improve the effectiveness of arrangements under that section.
(4) The Secretary of State must lay before Parliament, and publish, a report of the review.
(5) The report of the review must explain whether the Secretary of State decided to exercise the powers in section 75(1) and (6) of the National Health Service Act 2006 and the reasons for that decision.
(6) The Secretary of State must comply with the requirements of this section before the end of the 12-month period beginning with the day on which this Act is passed.”
This new clause requires the Secretary of State to conduct a review into arrangements under section 75 of the National Health Service Act 2006, and to consider whether to require NHS bodies and local authorities to enter into arrangements with each other if this is likely to lead to an improvement in how their functions are exercised.
Karin Smyth
Government new clause 20 and clause 39 both look to strengthen joint working arrangements across the health system. Clause 39 is part of the architecture of the Bill that allows the delegation of functions from the Secretary of State to NHS bodies, local authorities or other relevant organisations. The clause builds on the existing delegation powers in section 65Z5 of the National Health Service Act 2006, which already allow NHS bodies to delegate functions and pool resources with one another and with local authorities or other relevant bodies on a voluntary basis. It is a well-used voluntary power that enables systems to develop joint working and ensure that health functions are carried out by the most appropriate body or groups of bodies. The result is stronger integration, with better joint working between NHS and local government, and services better tailored to meet local needs.
With the abolition of NHS England and the new functions of the Secretary of State, it is right that the Secretary of State should have the flexibility to delegate their health functions appropriately and efficiently under a voluntary arrangement, as and when necessary. We would not want to exclude the Secretary of State from joint working arrangements, if joint working would bring benefits to patients and the public. The power is therefore purposefully broad to allow that, including allowing the Secretary of State to delegate to a range of public bodies, establish joint committees and pool funds. It also allows the Secretary of State to issue guidance to relevant bodies about the use of their powers under sections 65Z5 and 65Z6.
This proposal is not, however, a means to avoid accountability. Accountability for any function delegated through this power remains with the person delegating it whereas liability rests with the person to whom the function is delegated. Accountability, as opposed to liability, means that the body delegating a function must provide oversight for how their functions are carried out and ensure that any issues are dealt with. Ultimately, the Secretary of State will continue to be accountable to Parliament for the health service in England, including any delegated powers. I am sure that Parliament will relish holding all Ministers to account.
Building on our ambition to support greater local partnership working, as set out in our 10-year plan, we have tabled Government new clause 20 to strengthen section 75 of the NHS Act 2006 by providing much greater scope for combined authorities, combined county authorities and the Greater London Authority to use these arrangements. Section 75 currently supports flexible voluntary partnership arrangements, including the pooling of budgets between NHS bodies and local authorities. These arrangements are a critical tool in supporting local collaboration and ensuring more joined-up working within systems.
The new clause looks to strengthen the section 75 guidance-making power. At present, that power only covers consultation and applications for consent on section 75 arrangements. The Government’s new clause will extend the guidance power so that it can cover all aspects of section 75, helping us to support the wider and more effective use of partnership arrangements. For those reasons, I commend new clause 20 and clause 39 to the Committee.
The Chair
I do not think that the Minister addressed new clause 26, so does she wish to do so now? [Interruption.] She need not worry about it, I am told.
Gregory Stafford
I want to touch briefly on clause 39, Government new clause 20, and new clause 26, tabled by the hon. Member for Oxford West and Abingdon in her role as Chair of the Health and Social Care Committee.
I recognise the intention behind clause 39. Greater collaboration between the NHS, local authorities and other public bodies has the potential to improve the co-ordination of services and deliver a more integrated approach to population health, which I think we all welcome. However, it sits slightly uncomfortably with other clauses we have debated that appear to draw local authorities and the NHS further apart. In this case, it looks like they may be brought together.
As the clause expands delegation and joint working powers, I would be interested to understand from the Minister where the oversight and safeguards for accountability for spending the joint budgets would sit. Would it be with the NHS, local authorities or somewhere else? We hope that everything goes well, but if services fail or financial problems emerge, the public deserve to know who precisely is accountable for those budgets. As I have said in debates on numerous other clauses, I continue to be concerned by the broad powers that the Bill gives to the Secretary of State. I have the same concerns about this clause.
On Government new clause 20, bringing health services and wider local government functions together is really important, particularly where combined authorities have responsibilities that affect the wider determinants of health. However, once again, I am concerned about the fact that the new clause further complicates an already crowded accountability landscape. As more functions are delivered through pooled budgets and joint arrangements, it becomes harder to identify who is responsible for outcomes, spending decisions and—hopefully not, but potentially—service failures. I welcome the flexibility, which I think has value, but it must be balanced with transparency and democratic accountability. I am not convinced that the new clause gets that right.
On new clause 26, as I have said before concerning amendments and new clauses that have come from the Health and Social Care Committee, it is often difficult to get entire agreement on these things because of the cross-party nature of the Committee. Therefore, new clauses and amendments that come out of the Committee are in some ways aspirational, rather than ones that hit the nail on the head.
The new clause suggests that the Secretary of State carry out a review of how effective section 75 arrangements are—the hon. Member for Winchester outlined evidence that in some cases, the use of section 75 arrangements has not always been effective—consult NHS bodies, local authorities and anyone else considered appropriate; consider whether existing powers should be used to improve those arrangements; publish a report and lay it before Parliament; explain whether the Government intend to use their powers to change regulations or guidance and why; and complete all that within 12 months of the Bill passing, which I think is a reasonable timeframe.
Section 75 arrangements already play an important role in bringing together health and social care. It is reasonable to ask, as the hon. Member for Winchester did, whether they are delivering the benefits in the most effective way possible. I would potentially say that this proposal does not go far enough. The new clause would require a review, a consultation and a report, but would not require any action to follow that. The Secretary of State need only “consider” whether existing powers should be exercised and explain the reasons for any decision. If the review identified significant weaknesses, there is no obligation in the new clause, as far as I understand it, to implement those changes.
I agree that the new clause is well-meaning. It has some good recommendations, and I hope the Minister takes on board its sentiment, but it probably does not have the teeth and the power to make it an effective part of the Bill.
Karin Smyth
I got a little confused at the end, but I think the Opposition generally accept the power in this clause. The hon. Member for Farnham and Bordon contended that this Bill and previous amendments to it will drive local authorities and the NHS further apart; just to have it on the record, I do not accept that that is true at all. Section 75 of the National Health Service Act 2006 and the work that we are doing on this further highlights the effect of some of the things that we are trying to do.
The hon. Member for Winchester raised new clause 26. I have sympathy for the intention behind the new clause. We all want health and care services to work closer together, as I have said repeatedly, and we agree that the partnership framework under section 75 of the National Health Service Act 2006 is a useful tool for doing so. While I understand the new clause, it is not necessary. The Department can review the section 75 framework without needing legislation, and indeed it has already done so. The Department carried out a review of section 75 in 2023, as has been said. Since then, we have continued to consider how these partnership arrangements can best support health and care integration.
The new clause would risk duplicating ongoing work. Furthermore, that work is not a one-off exercise but an ongoing process of learning and improvement across the country, and we want something that is responsive and flexible enough to respond to changes in health and care services and to the changing needs of people who use them. For that reason, I do not consider requiring a single statutory review to be the most effective approach.
Hon. Members raised important issues about clarity of accountability and responsibility. To reiterate, the legislation is clear: the legal responsibility or liability for a function being carried out properly rests with the receiving party; however, the delegating party is accountable for that function being carried out, and they must know how it is being carried out and make sure that any issues are addressed. The hon. Member for Sleaford and North Hykeham rightly alluded to one of the examples that we are exploring around section 75, which is how it might support key priorities in delivering neighbourhood health, to make absolutely clear and sure that we bring services closer together.
Both spokespeople outlined a quote from Melanie Williams of ADASS. Although I do not know the whole context of the quote, I understand the frustration of colleagues in social services and this whole area as it is one that I worked in myself. I understand the issue, but it is slightly different because it concerns the what, rather than the how, of what is being discussed. Section 75 is part of the how. We want to make this easier for people who are trying to do the right thing, and these provisions, which I commend to the Committee, do just that.
Question put and agreed to.
Clause 39 accordingly ordered to stand part of the Bill.
Clause 40
Consolidated accounts
Question proposed, That the clause stand part of the Bill.
Karin Smyth
We know that robust finances are an essential part of the health service. The financial accounts related to the NHS are of keen interest to His Majesty’s Treasury and indeed to Parliament. The Government are especially mindful of the keen interest of the Public Accounts Committee in this area. Under current arrangements, NHS England prepares a set of financial accounts for all NHS trusts and foundation trusts, and that is audited by the National Audit Office. That is the point at which the National Audit Office conducts its oversight of NHS providers, with that feeding into the National Audit Office’s assurance over the Department of Health and Social Care group.
The financial accounts for integrated care boards are currently included in the NHS England group accounts, which are presented separately and audited by the National Audit Office. With the abolition of NHS England, the Government intend to reduce central administration costs, so financial reporting needs to be proportionate while balancing stakeholders’ keen interest in financial information related specifically to the NHS. Clause 40 therefore replaces the current consolidated accounts of NHS providers with a single set of consolidated accounts for the NHS covering its trusts, foundation trusts and integrated care boards. That consolidated account will continue to be audited by the National Audit Office.
We believe that bringing the accounts together in this way will assist the public, Parliament and the National Audit Office in scrutinising NHS expenditure. Although it is not covered by the clause, it is important for the Committee to be aware that there will be no change to the current requirement for the Department to publish a Department of Health and Social Care group annual report and accounts that will consolidate the NHS accounts with the core Department and other group bodies—for example, its arm’s length bodies.
However, the Government recognise that only reporting figures for the NHS in the overall Department group would reduce transparency compared with the current structure of NHS financial accounts. The clause therefore seeks to prioritise high quality audited financial accounts information being made available while balancing against administrative costs, both of which are important to the Government.
Clause 41 amends the Secretary of State’s existing power to create a scheme allowing NHS bodies to pool funds to cover property losses and legal claims arising from their healthcare activities. They ensure that when liabilities arise, whether from damage to property, negligence or other claims, there is a clear and consistent mechanism through which those liabilities can be managed and resolved. In doing so, they protect the financial stability of the NHS. The clause updates the legislation for the new landscape by removing NHS England from the arrangements and ensuring that responsibility for administrating the schemes rests appropriately with the Secretary of State.
Although the clause is targeted and technical, its effect is essential in that it ensures continuity and legal clarity and continued effective operation of arrangements that underpin confidence and functionality across the health service. Clause 42 is a necessary technical and structural change that supports the new statutory framework following the abolition of NHS England. It removes provisions in the NHS Act 2006 and the Health and Care Act 2022 that relate specifically to NHS England’s funding and financial responsibilities, which will no longer be required once NHS England ceases to exist. The clause avoids duplication and confusion and ensures that financial accountability is clearly defined in the post NHS England system. Under the reformed framework, the Department is responsible for the overall funding of the NHS and for national financial assurance, while integrated care boards and providers continue to operate within defined statutory financial duties and controls.
Clause 42 plays an important housekeeping role, providing legal clarity and underpinning a more transparent and coherent financial framework that is fit for the NHS future operating model. I therefore commend the clause to the Committee.
Dr Johnson
Clause 40 prepares for the preparation of the annual accounts of NHS trusts and integrated care boards. Existing legislation in section 65Z4 of the NHS Act 2006, “Consolidated accounts for NHS trusts and NHS foundation trusts”, requires NHS England to prepare a set of accounts every financial year and consolidate the accounts of all the trusts and NHS foundation trusts. The Secretary of State can give directions about the content for methods and principles, and the accounts must be accompanied by reports or other information as directed by the Secretary of State. A copy may be sent by NHS England to the Secretary of State and the Comptroller and Auditor General. The latter must then examine and certify those accounts before sending a copy to the Secretary of State and NHS England, and NHS England must then lay a copy of the consolidated accounts and the Comptroller and Auditor General’s report before Parliament. That is how it works at the moment.
Clause 40 rewrites section 65Z4 and the duty to prepare the consolidated accounts every financial year moves to the Secretary of State, and the list of what gets consolidated now includes the ICB accounts. The power to give directions to NHS England about accounts is removed, which is fair enough because there would be no need for it, as the Secretary of State is now preparing them and NHS England will cease to exist. The requirement for the accounts to be accompanied by such reports or other information as the Secretary of State may direct has been removed. The accounts go straight to the Comptroller and Auditor General, who reports back only to the Secretary of State. At the end, the Secretary of State lays the accounts before Parliament. The changes are necessary owing to the abolition of NHS England.
I want to ask about the consolidation, including the ICB accounts, which was not there before, and what impact that will have. Will the accounts be sufficiently detailed so that it is possible to disaggregate that information if people are interested in doing so?
Clause 41 changes which NHS companies can be covered by the scheme that meets certain losses, legal claims and liabilities. Currently, section 71, “Schemes for meeting losses and liabilities etc of certain health service bodies”, of the NHS Act 2006 enables the Secretary of State to establish schemes to meet the losses of NHS England, ICBs, trusts, the National Institute for Health and Care Excellence, the CQC and several other bodies. The list of bodies includes
“(ha) a company formed under section 223 and wholly or partly owned by the Secretary of State or NHS England”.
In the new legislation, clause 41 rewrites paragraph (ha) so that it is
“a company formed under section 223 other than by an integrated care board by virtue of section 223A”.
That narrows the scope of the liability scheme by preventing ICB-created companies from automatically gaining protection, presumably to encourage ICBs to manage risk responsibly.
Gregory Stafford
I wish to carry on the point that my right hon. Friend the Member for Melton and Syston has just raised. He rightly says that there is a transparency element to this, so that the public and any other interested party can look at the individual accounts of an ICB or a trust. Going further than that on the technical elements, my understanding is that NHS England’s own guidance notes suggest that consolidation does not just bring accounting under one set of accounts, one umbrella or one document. Within that accounting, however, adjustments and eliminations of transactions between NHS bodies can happen. Therefore, the aggregated figures do not necessarily reflect the financial reality of individual organisations.
I understand why that might be entirely appropriate from an accounting point of view, but it can make it harder for external observers to understand exactly where the pressures are coming from, where they are concentrated and, in a world where we want accountability, who should be held responsible for addressing them. That is all I need to say on that point.
Karin Smyth
I am pleased that, in an outbreak of cross-party agreement at 3.20 pm on a Tuesday, I completely agree with the comments made by the hon. Member for Farnham and Bordon and the right hon. Member for Melton and Syston. It is a point that I made myself: the ability of Members of Parliament and the public to understand the granularity relating to their local providers and ICBs is very important for transparency and accountability. I hope Committee members recognise that I have tried to drive much more transparency in that system. They are absolutely right that that is separate from this clause, and we will continue to expect providers and ICBs to do that; I hope that addresses that point.
To add further clarity on the wider point the clause deals with, the consolidated accounts we prepare include some analysis by different types of body. That will mean separate information about NHS providers being included in the document, such as a summary of income and expenditure. Separately, providers and ICBs will continue to publish accounts so that people can look at those. The Government will listen to any feedback from users to adapt the nature of this content in future years after the initial publication, recognising that this is a new development following the abolition of NHS England. We are also mindful that too many separate publications add to administrative costs and risk losing focus. The intention is to have transparency at the local level, building that up to do something more sensible and cost-effective that is also transparent at national level. I commend the clauses to the Committee.
Question put and agreed to.
Clause 40 accordingly ordered to stand part of the Bill.
Clauses 41 and 42 accordingly ordered to stand part of the Bill.
Ordered, That further consideration be now adjourned. —(Emma Foody.)