Click here for: South Birmingham Community Health Council's response to the DoH publication:
A Guide to NHS Foundation Trusts
Foundation Hospitals

July 2003  I recommend the excellent report on Foundation hospitals published by the Catalyst Trust:  IN PLACE OF BEVAN? which can be found on their website at:

30 April 2003   After several wasted years in which Tory underfunding was perpetuated, the Government is at last putting big money into the NHS.  But it is so obsessed with the need to achieve short-term results like reducing waiting times for non-urgent surgery that it is subjecting the NHS to counter-productive top-down reorganisation imposed under the guise of modernisation and decentralisation.

The latest fad, foundation hospitals, came about after Alan Milburn visited the state-owned but privately-run Fundacion
Hospital in Madrid.  He was impressed when told that Fundacion outperforms government controlled hospitals.  (Local unions suggested this was because the most costly and difficult patients are sent to a nearby fully public hospital and average working hours are 8% longer than normal but, despite this, according to a report in the British Medical Journal, the hospital has since suffered a record 13,000 complaints at a time when its budget was rising at a rate of 13% above state hospitals.)  Milburn wants foundation trusts to “unleash public sector entrepreneurialism and innovation” giving accountability to local communities.  The Government is desperate to justify increased spending on the NHS from taxation, fearing that the affluent middle classes might be tempted to switch support towards more private insurance to get more “choice”.  Yet real choice can only be provided if there is surplus provision, which may be OK for general goods and services but inefficient and massively more costly when it comes to essential public services dependant on highly skilled staff and complex equipment.

Even the BMA has pointed out that foundation hospitals risk replicating the bureaucracies of the internal market in health care that Labour pledged to abolish and so ministers have propagandised that foundation trusts are in line with a co-operative and mutualist tradition.  This is a selective re-writing of history.  Co-operative societies are associations that bring members together for purposes of providing benefits to members and the sharing of profits.  By contrast, foundation hospitals would be hugely complex organisations delivering a public service.  They are supposedly to be locally “owned” but the Secretary of State has not explained how Members can ‘own’ the assets of new PFI hospitals!

Foundation hospitals will operate on a not-for-profit basis and will have a board of governors drawn from a self-selecting "membership community" of residents, staff and service users who have actively opted to become members of the trust.  So far only three star hospitals have been able to bid for foundation status, despite the government’s rating system being based on a limited range of performance indicators that measure quantitative targets such as waiting times and financial performance, not clinical outcomes and quality of care.  To counter charges that they will select who they treat and the services they offer, they will be licensed by a new regulator and required to deliver their existing range of services to national targets and standards, subject to inspection by the Commission for Healthcare Audit and Inspection.  There will be a cap on existing levels of private work and a new mandatory "national tariff" for all health care procedures will ensure that foundation hospitals cannot undercut other NHS hospitals (although this will raise other concerns that standard prices will introduce incentives to compromise on the quality of care).

Foundation trusts will be allowed to keep the proceeds from the sale of land and property, unfairly benefiting hospitals that are asset rich. They will be able to borrow from both the public and the private sector, and will retain any operating surplus they may earn.  Private sector borrowing will be under the control of the licensing regulator, who will rule on compliance with a borrowing code based on the hospital’s ability to service its debt.

In reality, the control on these so-called autonomous bodies by numerous quangos will mean that their “freedoms” will look more apparent than real.  The system is destined to lead to further voter apathy at national and local elections as the public becomes even more confused about where responsibilities lie. 
In any case a hospital is entirely the wrong unit to empower. If Alan Milburn is really serious when he says that the NHS can no longer be run "by a monolithic top-down, monopoly provider" appropriate democratic involvement should relate to all services in a geographical area, logically local councils or potential regional authorities.

Whilst foundation trusts will apparently be forbidden from “poaching” staff, the effect of the first wave of foundation hospitals in a situation of prolonged staff shortage seems likely to boost recruitment at these favoured institutions at the expense of the rest of the NHS.  The three star hospital trust in my own constituency decided to apply for foundation status to get what was described as “first mover advantage”!  We have seen the effect of encouraging consumer choice in schools has been to push the poorest schools into a spiral of decline from which they cannot recover.  Is there any reason to suppose this will not happen with hospitals?

The future of the NHS should be about developing whole systems, not isolated institutions; about building networks across professional and institutional boundaries, not creating new barriers; about sharing IT and information, not reducing connectivity, and about getting more people treated in the community and in primary care, not sucking them into hospitals.  The danger with the reforms is that they do exactly the opposite and will return us to the fragmentation of the pre-NHS era and render public services ripe for privatisation and exposure to GATS rules that open up public services to takeover by foreign corporations.

It is not surprising that foundation hospitals have received more support in Tory circles than they ever will from Labour!

Acknowledgements to the Socialist Health Association



back to top



South Birmingham Community Health Council

Response:  DoH publication: A Guide to NHS Foundation Trusts


1                Consultation

1.1         The DoH Guide was issued in December 2002.  It was not sent to CHCs and was first seen by SBCHC in January 2003.  The government did not consult CHCs on the principles of the creation of Foundation Trusts and, so far as we know, did not publicly consult other NHS stakeholders, political parties or local government.

1.2         Paragraph 7.7 of the Guide says, inter alia, that Preliminary Applications must address “stakeholder support.”  Somewhat contradictorily, paragraph 7.6 says that the application “will not require consultation with local stakeholders, staff or the public.”

1.3         It is difficult to see how “stakeholder support” can be obtained without asking for it, i.e. consulting.  The CHC is proceeding on the basis that we are entitled, as the statutory representative body for patient and public interests in our area and therefore a major stakeholder, to express a view on the Guide and any application which may follow.

2                Constant NHS Reorganisation

2.1         The NHS has been periodically reorganised by governments of different complexions over many years.  This now seems to have become an annual way of life.  The NHS Plan, which was said to be a ten-year plan, was produced in July 2000.  Many of its components, with the exception of the notorious Chapter 10 (which abolished CHCs without consultation) were widely welcomed.

Nevertheless, in 2001, Modernising the NHS: Shifting the Balance of Power  was produced.  This abolished Regions and introduced Strategic Health Authorities.  Additionally, Primary Care Trusts (PCTs) were introduced on the basis that government policy was for a primary care-led health service.

2.2         In 2002, proposals for Foundation Trusts were advanced.  Even if the principle of Foundation Trusts was thought to be helpful in improving healthcare, they represent yet more reorganisation, disruption and uncertainty.  Is the apparently enhanced status of Foundation Trusts compatible with a primary care-led service?  We doubt it.

We believe that health service management, staff and patients would like to see measurable improvements in healthcare: more doctors, nurses, other health professionals and beds, not constant structural reorganisation.

This reorganisation will divert management time away from management delivering better healthcare, create more bureaucracy and create more employment for the noncaring professions – the management consultants, lawyers, accountants, valuers, and public relations advisers - rather than the caring professions, who are needed and who are valued by patients and members of the public generally.

3                Bureaucracy, Independent Regulator and Diversion of Management Time

3.1         An office of Independent Regulator is to be created.  This Regulator will have powers inter alia to issue licences and monitor (para 1.21), receive reports and information (para 1.31), and consent to disposal of assets (para 3.18).

3.2         A panel of experts drawn from inside and outside the DoH will have to assess second stage applications.

3.3         “Applicants are to be given financial support during the second stage application phase to free up resources to undertake the work to develop a business plan for the first 5 years as a NHS Foundation Trust” (para 7.13).

3.4         Outputs of Foundation Trusts will need to be agreed with PCTs under legally binding service agreements (para 4.5).

3.5         The above are some illustrations of

·         Greater bureaucracy and less understandable health structures to patients and the public,

·         Greater employment of the noncaring professions, to the likely detriment of healthcare.

4                Freedom from Whitehall Control

4.1         The Secretary of State in his Foreword to the Guide says that Foundation Trusts will have the “freedom to improve services for NHS patients without interference from Whitehall.”  This freedom is also referred to in paras. 1.12 and 1.14.  Although this “freedom” appears attractive on the surface, we are concerned that it will conflict with the principle of a truly National National Health Service.

4.2         The Secretary of State seems to be referring to freedom from having to respond to an excessive number of prescriptive central demands, guidance, reporting arrangements, and targets.

The answer surely lies in the government’s hands – namely, fewer targets and less earmarking – but for all trusts, not just Foundation Trusts.

This could be achieved administratively, rather than the bureaucratic, legalistic measures proposed, which carry additional problems which we will come onto.

5        A Two-Tier Service

5.1         The major concern and argument against the creation of Foundation Trusts is that it will result in a two-tier health service and a worsening of the existing ‘postcode lottery.’

5.2         If the government believes that the “increased financial freedoms” referred to in para. 1.35 are of benefit to Foundation Trusts, it is a necessary corollary that the converse must also be true, i.e. non-Foundation Trusts and their patients will be disadvantaged.

5.3         Foundation Trust status is only open to trusts which achieve 3-star status in the NHS Performance ratings.  Many of these will be teaching hospitals, which already have advantages over non-teaching hospitals, arising particularly from university funding of additional staff, who are usually of greater experience and expertise.  Surely the objective should be to improve all hospitals to 3-star status?  If selective advantages are to be applied, it would seem more logical to put additional resources, whether financial, managerial or clinical, into the currently disadvantaged hospitals.

The present proposal is equivalent to hospitals giving preference to health checks on apparently healthy people, rather than to treating and caring for the sick.

5.4         One of the suggested freedoms for Foundation Trust hospitals is “They will be able to recruit and employ their own staff, with flexibility to offer new rewards and incentives” (para. 1.13).

If Foundation Trusts, such as University Hospitals Birmingham NHS Trust, for example, pay certain grades or disciplines of their staff more in order to poach them from the surrounding health economy, how will this benefit healthcare as a whole in a city like Birmingham?

Could it not reduce care standards at the Royal Orthopaedic, Women’s, Heartlands and City Hospitals?

The NHS has spent at least five years negotiating Agenda for Change (para. 6.6).  We do not know whether the trades unions will give it final approval, but presumably, eventually agreement will be reached.

Why is the government giving Foundation Trusts encouragement to negotiate different local pay systems, thereby undermining that which it has just been a party to creating?

5.5         One of the effects of such a two-tier system will be that patients treated at non-Foundation hospitals may believe, rightly or wrongly, that they are receiving second-class treatment.  Star ratings are based on government-set targets which are almost entirely quantitative, numbers and percentages. The quality of services, arguably more important, may be very different.

5.6         In the light of all the foregoing, we cannot accept the claim in para. 1.13 that there will be a framework to guard against two-tier healthcare.

6        Membership of Foundation Trusts, Ownership of Assets, Financial Regime

6.1              Eligibility for membership is open to people who live in the local area (defined as its “membership community” in para. 2.6).  The Guide goes on to say in para. 2.7, however, that “There will, however, be a requirement that the membership community must include people living in the area covered by the local authority in which any of the facilities run by the Foundation Trust is located.”

In the case of UHBT, which is a major regional specialist centre, this seems to mean the entire one million population of Birmingham, plus an undefinable proportion of neighbouring districts of Worcestershire, Warwickshire, several Black Country boroughs, and even parts of Shropshire, Herefordshire and Staffordshire.  Can this really be true?  Para. 2.7 goes on to say “The policy is about inclusion, rather than exclusion.”  This would appear to lay any attempt to restrict the “membership community” open to legal challenge.

Is it really expected that hundreds of thousands of people will register?

We believe that it will be more likely to be hundreds, rather than hundreds of thousands, leading to massive exclusion from involvement in the decisions taken by and for a Foundation Trust.

6.2              If our assumptions prove correct, the Trust could easily be taken over by political, religious or community groupings which choose to engage in mass recruitment to the membership of the Trust’s register.

6.3              The membership will be self-selecting.  If the objective is “social ownership, where health services are owned by and accountable to local people, rather than to central government,” as stated in para. 2.2, the ownership should be transferred to the local authority, representing the entire community, not to a self-selecting group likely to be a small minority.

6.4              The importance of the points made by us in 6.2 and 6.3 above is enhanced when we learn that “the members of an NHS Foundation Trust will become its owners, taking on responsibility for their local hospitals from national government” (para. 2.3) and that “The members of an NHS Foundation Trust will, collectively, be its legal owners” (para. 2.15).

NHS assets built up from taxpayers’ money over generations will be handed over to a potentially small minority of the population.

6.5              In par. 2.12, the government seems to acknowledge some of the potential risks of such a step by saying that the membership “does not have the power to determine that the NHS Foundation Trust should be wound up, merged with or taken over by another organisation.”

It goes on to say: “This is an important lock both on the sort of ‘de-mutualisation’ that has occurred in the building society sector and on any future threat of privatisation.”

The problem with this lock is that it only locks in or out the members of the Foundation Trust.

Since our understanding is that one parliament cannot bind another, this ‘lock’ can easily be unpicked by a future parliament’s passing an Act to abolish the ‘lock.’

Recent examples of legislation or policy being rapidly overturned are the poll tax and current plans for increased ‘top up’ fees in higher education.

It will, therefore, be very easy for a government with an overall majority to ‘de-mutualise’ or privatise Foundation Trusts.

6.6              Whilst paras. 2.3 and 2.15 envisage transfer of ownership to the Foundation Trust members, we are conscious that UHBT intend to have a new hospital built under the Private Finance Initiative (PFI) by 2008.  The private consortium which builds the hospital will be its owner for at least the contract term, probably 30 years.

6.7              We are interested to note that the ‘freedoms’ to be extended to Foundation Trusts will not be extended to considering alternatives to PFI.   Para. 5.22 says “It is essential, therefore, that the NHS reform agenda does not inhibit continued growth in the Private Finance Initiative market for NHS organisations.”



7       Conclusions

SBCHC does not support the creation of Foundation NHS Trusts on the following grounds:

7.1              Consultation  The lack of consultation with stakeholders, including CHCs, by the government nationally and UHBT locally on any of the key issues.

7.2              Constant NHS Reorganisation  The government should, in our view, stick by the 10 year NHS Plan of 2000, instead of revisiting it every year.  NHS staff should be allowed some peace to concentrate on improving patient care both quantitatively and qualitatively.

7.3              The Diversion of Management Time and Increased Bureaucracy  Senior management time would be best spent improving patient care, rather than completing Foundation Trust applications.  These create jobs for the noncaring rather than caring professions.  Money spent on the additional bureaucracy of the Independent Regulator and other support mechanisms would be better spent on employing the caring professions.

7.4              Freedom from Whitehall  This could be achieved administratively rather than legislatively.  It is, after all, from government targets and prescriptions that Foundation Trusts are planned to be freed.

7.5              The Creation of a Two-Tier Service  If there are advantages in some of the freedoms being proposed for Foundation Trusts, they should be granted to others.  If they are not, we will have a two-tier service, which will undermine patient confidence in non-Foundation Trusts.

7.6              Membership of Foundation Trusts and Ownership of Trusts  The proposals seem impracticable, given the huge number of eligible members.  This is particularly true in conurbations like Birmingham and regional centres like UHBT.

It is, in any event, wrong to vest ownership of huge public assets in what is likely to be a small, unrepresentative minority of the population, answerable only to government.

The government’s ‘lock’ on de-mutualisation or privatisation is effective only until such time as the government might choose to change it.


The CHC will communicate this response to the Secretary of State, UHBT, SB PCT, BBC HA, and other NHS stakeholders, including other CHCs, UHBT staff trades unions, Birmingham City Council Health & Social Services Overview & Scrutiny Committee, local MPs, and other interested parties.

12th February 2003



South Birmingham Community Health Council

Response to application by University Hospitals Birmingham NHS Trust (UHBT) for Foundation Trust status.



1                UHBT, as a three star trust, is eligible to apply to become a first wave Foundation Trust.  A Preliminary Application would have to be submitted by February 2003 and the Second Stage Application by September 2003.

2                At a specially convened meeting with CHC members on 10th February 2003, the Chief Executive, Mark Britnell, confirmed that a proposal to make a Preliminary Application would be put to the Trust Board on 20th February.   In a wide-ranging discussion of issues concerning how foundation status fitted into the strategic development of UHBT, he confirmed that the application was to safeguard their tactical interests in the light of changing government policy.

3                In view of the CHC’s rejection of the national policy of creating Foundation Trusts, SBCHC does not support any application made by UHBT.


12th February 2003

click here for a copy of: A Guide to NHS Foundation Trusts


back to top

Home | Advice Bureaux | Policy Issues | Local Issues