NHS foundation trusts

The rudiments of the government's current strategy for the NHS are set out in the white paper Delivering the NHS Plan.¹ This contains a commitment to maintaining a general tax based system, universally available and free at the point of use, and also sets out an ambitious agenda for supply side reform. A central component of this agenda is the creation of a whole raft of new institutions designed to set, monitor, and ensure national service standards—for example, the newly created Commission for Healthcare Audit and Inspection. At the same time, selected local organisations are to be given greater freedom and devolution of decision making power. This is referred to as a process of earned autonomy. The concept of earned autonomy represents an attempt to combine some of the advantages believed to flow from devolved decision making (including flexibility, innovation, and local responsiveness) with the retention of a commitment to NHS principles and national standards. One of the first vehicles for developing this approach will be NHS foundation trusts. What are these and how can they be expected to work?

It is difficult to be precise about the form that foundation trusts will take. The first ones are not due to be set up in shadow form until July 2003, and they will not become fully operational until after the appropriate legislation is passed in April 2004.² The twists and turns in health policy over the past five years and a tendency for policy to be set as the need arises mean that current plans are almost certainly liable to modification and revision, if not abandonment.

Notwithstanding this uncertainty, official statements indicate that hospitals that are currently performing at the highest standard in terms of the NHS performance ratings—that is, three star trusts—will be able to apply for foundation status.³ If successful, they will be offered greater freedom and independence to manage their affairs, although they will still be firmly within the NHS. Specific additional freedoms that have been cited include retention of revenues from land sales, freedom to determine their own investment plans and raise capital funds, and the scope to offer additional performance related rewards to staff.² By placing foundation trusts outside direct line management and control from Whitehall, ministers expect to stimulate a wave of local entrepreneurship and innovation. New governance arrangements will ensure that they are locally owned organisations and pursue public sector values, but that they operate in a business-like way.

Despite the apparent newness of this approach, we have been here before. The proposals for foundation trusts are strikingly similar to the proposals for NHS trusts originally introduced through the Thatcher government's internal market reforms in 1991. Devolution of decision making to the local level and new freedoms over pay and conditions and capital spending were important elements of those reforms too.⁴ The subsequent history of that period, with its failure to deliver the freedoms promised for NHS trusts, offers some clear lessons for the foundation trust proposals. Most notably it became clear that the requirements of public accountability meant that the Department of Health imposed an increasingly restrictive regulatory structure.⁵ According to some commentators, the potential benefits of NHS trust status failed to be realised because the incentives were too weak and the constraints too strong.⁶

These concerns are already being echoed in terms of foundation trusts. Apart from the well known problems associated with the closure of failing hospitals—when access to services for local people is an important requirement—financial failure would bring a new set of problems. As foundation trusts are a form of not for profit, public interest company, the Treasury would ultimately be responsible for their debt in the event of insolvency. Fears of trust spending sprees for which the Treasury would ultimately be responsible but over which it would have little control are understandably making it lukewarm about the idea.⁷ A rigorous selection process for foundation trust status may minimise the prospects of failure, but the current performance management ratings to be used in this connection are imperfect and subject to large year on year changes. It is far more likely that each set of emerging problems associated with greater autonomy will be dealt with through tighter regulation.⁸

This is the crux of the problem. Those who believe that there is a case for greater separation of local healthcare provision from central control⁹,¹⁰ are inevitably confronted with an NHS legacy of centralised command and control that has proved stubbornly resistant to change. Despite claims to the contrary, the emphasis on national standards and accountability set out in Delivering the NHS Plan suggests that this is still an important part of the ministerial mindset. In the long term, genuine freedom from Whitehall may well come more from the growth of independent providers (both profit and not for profit), within a more pluralist system, than from the tortuous process of setting NHS trusts free.