Health Bill (Ninth sitting)

Caroline Johnson Excerpts

Committee stage
Tuesday 30th June 2026 Public Bill Committees

[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schedule 5 so that the rules on who can be a local auditor now cover foundation trusts too; schedule 6 to remove an outdated segment from the audit practice code rules; schedule 7 to tidy the reporting rules and extend them to foundation trusts; schedule 9 to realign data matching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?

[Gregory Stafford (Farnham and Bordon) (Con)]

My hon. Friend is making a prescient point. Has she thought about the word “limits”? To me, it is not clear from the clause as drafted—perhaps it is clearer to her—whether that is an overall limit on capital and revenue expenditure, or whether the clause is saying that the Secretary of State could impose limits on individual line items or departments. The word “limits”—plural—suggests that he or she may be able to do that.

[Dr Johnson]

I do not think the Bill is very clear on that. It says that the Secretary of State

“may by order impose limits on the expenditure that may be incurred by an NHS foundation trust in respect of a single financial year.”

However, it does not say whether that is an overall limit, whether it is for capital or revenue or whether it is a limit on a specific item, so the degree to which the Secretary of State has control is not clear. I presume it is an overall limit and that it is for dealing with budgets, but perhaps the Minister can provide some clarity for my hon. Friend.

Clause 34 requires foundation trusts that have been newly authorised, or that have recently acquired another trust or another foundation trust, to prepare the final accounts for their predecessor trust or foundation trust. It does that by modifying section 36 of the NHS Act 2006 to add new provisions that require foundation trusts to prepare accounts for the final period for which they were an NHS trust, establish that part of schedule 7 and part of the Local Audit and Accountability Act 2014 apply in relation to those accounts, and define the final accounting period. It does the same for section 56AA of the 2006 Act.

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[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.

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[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.

[Dr Johnson]

Clause 39 broadens the Secretary of State’s ability to delegate or jointly exercise health service functions with NHS bodies and local government. Currently, section 7A of the National Health Service Act 2006 enables the Secretary of State to arrange for any of their public health functions to be exercised by relevant bodies, such as NHS England, ICBs and local authorities. Section 65Z5 sets out how relevant bodies may jointly exercise delegated functions, and section 65Z6 sets out how funds may be pooled for such purposes. Section 65Z7 sets out that NHS England may issue guidance for exercising functions under those two sections and that relevant bodies must have regard to any guidance. Section 75 then sets out that the Secretary of State can make regulations to enable NHS bodies and local authorities to enter into arrangements related to the delivery of health functions.

Clause 39 deletes section 7A, removing the separate power for the Secretary of State to delegate public health functions. It amends section 65Z5 to create a wider power that allows the Secretary of State to arrange for any health service-related function in England to be exercised by or jointly with relevant bodies, local authorities, combined authorities, combined county authorities or other prescribed persons. It removes outdated references in section 65Z5 linked to NHS England and updates the wording so that arrangements can be made with a wider range of persons and not just bodies.

Clause 39 also replaces section 65Z6 so that where functions are exercised jointly, the parties can use joint committees and pooled funds. It provides that pooled funds can include payments from relevant bodies and the Secretary of State, and can be used for expenditure connected to jointly exercised functions. It amends section 65Z7 so that guidance on joint working and delegation is issued by the Secretary of State rather than NHS England. It makes consequential amendments to provisions on directors of public health and local authority public health functions, reflecting the removal of section 7A. It also makes consequential amendments to section 75 partnership arrangements and the Local Government Act 1974, again removing references to section 7A.

Once again, it is necessary to move functions to the Secretary of State when NHS England is abolished—somebody else needs to do the work. The changes introduce more flexibility for joined-up working between the Secretary of State and other entities in the health system, which could support integration and the shift to place-based care, with localised approaches to prevention, integration and service planning in line with the Government’s 10-year plan.

However, the power is very broad, relating to any function in the health service. The Secretary of State could arrange for functions to be exercised by or jointly with any person prescribed, which could mean anyone. How will it be possible to determine who is responsible for things that have gone wrong when joint committees are established and funds are pooled? The Minister has spoken a number of times during our sittings about the importance of clear accountability. In the event that the work, funds and activities are pooled, how will it be made clear who is responsible and therefore accountable for the activity that occurs?

Melanie Williams, the then president of the Association of Directors of Adult Social Services, told the Health and Social Care Committee that we spend

“a lot of time debating about who pays, rather than having a conversation about how, in the longer term, we can invest in people’s outcomes to enable better health and wellbeing.”

Is it the Government’s intention to decide the allocation of money for social care and health providers, or that whoever they decide will work together?

The Government have said that this is all about the devolution of power. This morning, we discussed the abolition of integrated care partnerships, on which ICBs and local authorities work together on projects that they choose locally. The Government are now introducing another power that will enable the Secretary of State to direct them to work together on things that he or she chooses. That does not sound terribly like the devolution of power. Could the Minister explain that to me?

I shall leave new clause 26 to the Liberal Democrats. Government new clause 20 ensures that there is a complete list of authorities that may be included. I think some were missing from the first iteration. I just make the point that the more actors there are in the mix, the harder it may be to see who is responsible overall. We also need to discuss how to maintain the balance between clinical need and political priorities in the choice of what healthcare is provided.

[Dr Danny Chambers (Winchester) (LD)]

New clause 26, tabled by my hon. Friend the Member for Oxford West and Abingdon (Layla Moran) and the hon. Member for Worthing West (Dr Cooper), who both sit on the Health and Social Care Committee, would require the Secretary of State to review the arrangements under section 75 of the National Health Service Act 2006 and consider whether to require NHS bodies and local authorities to enter into new arrangements with one another if that is likely to lead to an improvement in how their functions are exercised.

A recurring theme of Health and Social Care Committee inquiries is the impact of financial flows and how they frustrate attempts to deliver truly integrated care—an issue we discussed in earlier sittings. We all recognise that closer arrangements are needed to properly address discharge delays, which directly lead to corridor care or even unnecessary admissions to hospital. It seems that a consensus has been reached, yet the action to back that up is not there. We feel that, through this Bill, the Government are moving away from closer integration.

Melanie Williams, the then president of the Association of Directors of Adult Social Services, told the Health and Social Care Committee that the NHS and local authorities

“spend a lot of time debating about who pays, rather than having a conversation about how, in the longer term, we can invest in people’s outcomes to enable better health and wellbeing.”

She highlighted concerns about the funding of intermediate care and community health services through aftercare under section 117 of the Mental Health Act 1983 and NHS continuing healthcare.

Section 75 of the 2006 Act provides a legal mechanism for NHS bodies and local authorities to pool budgets and jointly commission health and social care services. The Select Committee has heard evidence of positive examples of such arrangements being used to commission integrated services. It also heard that the use of section 75 arrangements is inconsistent.

In October 2023, the Government launched a call for evidence to explore how section 75 could be better utilised to support integration. A summary of responses published in December 2024 identified several areas for improvement, including the need for stronger inter-organisation relationships, clearer governance and financial structures, and better data sharing. The Health and Social Care Committee recommended that the Government expand the use of section 75, including the range of services that it will be used to support.

This Bill is a missed opportunity for the Government to reform or promote the use of section 75 arrangements, or to provide an alternative mechanism that they believe would be more effective in addressing the challenges that funding flows present to the integration of health and care services. That is why the Select Committee suggested this new clause to prompt a review of section 72 and the introduction of guidance to support pooled budgets and jointly commissioned health and social care services.

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[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.