Section 3: Supplementary payments to NHS trusts and Primary Care Trusts

35.     Section 3 enables the Secretary of State and the National Assembly for Wales to make payments direct to NHS trusts and Primary Care Trusts, outside the existing arrangements for funding such bodies. In particular it enables payments to be made to NHS trusts other than under NHS contracts and to Primary Care Trusts other than under NHS contracts or the provisions of section 97C of the 1977 Act (Health Authority allocations to Primary Care Trusts). This will facilitate direct payments to NHS trusts and Primary Care Trusts.

36.     These supplementary payments may be made through Health Authorities rather than direct to trusts. Under section 16C of the 1977 Act (as inserted by section 12 of the Health Act 1999), the Secretary of State may direct Health Authorities to exercise his powers under the new paragraph 5A of Schedule 3 to the 1990 Act (NHS trusts) and/or section 97C(5A) of the 1977 Act (Primary Care Trusts). The Secretary of State would be able to control how Health Authorities made these supplementary payments to trusts by giving directions under section 17 of the 1977 Act.

37.     Under current arrangements, the Secretary of State for Health makes allocations to Health Authorities under section 97 of the 1977 Act. He can direct that particular sums must be applied for the purpose of making payments to NHS trusts, but such payments are then made under "service level agreements" (i.e. NHS contracts). In relation to Primary Care Trusts, if the Secretary of State attaches conditions as to how sums are to be spent when allocating an amount to a Health Authority, the Health Authority can attach those conditions when allocating part of that amount to a Primary Care Trust (see section 97C(5) of the 1977 Act).

38.     These existing arrangements may not be appropriate for supplementary payments to NHS trusts and Primary Care Trusts, for example where the Secretary of State wishes to make payments to trusts specifically for rewarding their staff performance and/or improving facilities. The section is intended to provide for a more efficient resource allocation route to NHS trusts and Primary Care Trusts for such supplementary payments, that will exist alongside income from NHS contracts or in the case of Primary Care Trusts, Health Authority allocations.

Section 4: Public-Private Partnerships

39.     This section will insert a new section 96C into the 1977 Act to provide for the Secretary of State and the National Assembly for Wales to participate in public-private partnerships with companies that provide facilities or services to persons or bodies carrying out NHS functions. As with various other powers of the Secretary of State under the 1977 Act, these new powers could be delegated to Health Authorities, and through them to Primary Care Trusts, and to Special Health Authorities. The intended first use of this new power is the establishment of NHS LIFT (NHS Local Improvement Finance Trust) which will be set up to invest in primary care premises.

40.     Subsection (1) of the new section 96C provides for the Secretary of State to form or participate in forming companies to provide facilities or services to:

- any person or body providing services, or exercising functions, under the 1977 Act;

- NHS trusts (which exercise functions under the NHS and Community Care Act 1990).

41.     Subsection (2) provides that the Secretary of State may invest in companies providing such facilities or services or provide loans or guarantees or make other financial provision.

42.     Subsection (3) provides that the powers are exercisable irrespective of whether the company also provides facilities or services to other persons or bodies or to persons or bodies, for example pharmacists, whose activities are not solely confined to the NHS.

43.     Subsection (5) makes it clear that the inclusion of section 96C is without prejudice to any other powers of the Secretary of State.

Section 5: Income Generation

44.     The purpose of this section is to enable the Secretary of State and the National Assembly for Wales and other NHS bodies exercising "income generation" powers under section 7 of the Health and Medicines Act 1988 to form, invest in and otherwise make financial provision in relation to companies. Section 7 of the 1988 Act confers powers under which the Secretary of State and the National Assembly for Wales may carry out a wide range of commercial activities, such as the supply of goods and services and the exploitation of intellectual property, in order to increase the funds available for improving the health service. This is subject to the proviso that such activities do not interfere with the performance of any duties under the 1977 Act or operate to the disadvantage of patients. The Secretary of State may authorise bodies established under the 1977 Act to exercise these powers subject to any directions he might give. NHS trusts are given the same income generation powers by virtue of paragraph 15 of Schedule 2 to the NHS and Community Care Act 1990.

45.     Subsection (7A) would be inserted into section 7 of the 1988 Act so as to provide for the formation of, investment in and making of financial provision in relation to companies where that was calculated to facilitate, or be conducive, or incidental to, the exercise of income generation powers.

46.     Subsection (7B) defines "companies" and makes clear that the inclusion of the new subsection would be without prejudice to any other powers of the Secretary of State.

Terms of employment of health service employees

Section 6: Terms and conditions of employment by certain health service bodies

47.     This section provides for the Secretary of State and the National Assembly for Wales to make regulations and give directions to certain health service bodies about the terms and conditions on which they employ staff and generally in connection with matters concerning the employment of staff. The NHS Plan makes a commitment to modernisation of the NHS pay system to deliver better, fairer awards for staff. This new power is designed to ensure that NHS bodies implement changes to terms and conditions of staff approved by the Secretary of State.

48.     Subsection (1) amends paragraph 10(1) of Schedule 5 to the 1977 Act to provide for Health Authorities and Special Health Authorities to pay their officers such remuneration and allowances, and employ them on such other terms and conditions, as they may determine subject to any regulations made or directions given by the Secretary of State or the National Assembly for Wales. Paragraph 10(1) is also amended to provide for regulations or directions to make provision with respect to any matter connected with the employment of an Authority's officers. Subsection (2) replaces paragraphs 8 and 11(2) of Schedule 5A to the 1977 Act to the effect that Primary Care Trusts may pay their officers such remuneration and allowances, and employ them on such other terms and conditions, as they think fit but subject to regulations or directions by the Secretary of State or the National Assembly for Wales about those matters or otherwise in connection with the employment of such officers. Before making any such regulations the Secretary of State or the National Assembly for Wales are required to consult representative bodies. Subsection (3) makes similar provision in relation to NHS trusts.

Scrutiny of Health Service provision, Patient and Public involvement and Independent Advocacy - Background

49.     The Government believes that patients and the public should have a much greater role in the development and operation of the NHS. Chapter 10 of the NHS Plan set out the Government's proposals for enhancing patient and public influence and for introducing local democratic scrutiny of the NHS through local authority overview and scrutiny committees.

50.     Sections 7 - 12 make provision for this strengthened patient and public consultation and involvement in the operation of the NHS. Local authority overview and scrutiny committees will scrutinise the NHS including decisions on NHS reorganisations and service change. Independent complaint advocacy services will be provided across the country to assist patients in making complaints about health services. NHS bodies will have a statutory duty to make arrangements with a view to securing that the public are involved in and consulted on the planning of NHS services and decisions affecting the operation of those services.

51.     The new arrangements are to be complemented by a new non-statutory arrangement, Patient Advocacy and Liaison Services (PALS). PALs will be new trust-based services able to assist and support patients. They will be able to provide information and resolve problems and difficulties. It is intended that they will be situated in or near main reception areas of hospitals and act as a welcoming point for patients and carers. The PALS will also advise patients on how to access independent advocacy to support their complaints.

Local Authority Scrutiny of Health Service Provision

Section 7: Functions of overview and scrutiny committees

52.     This section provides for local authority overview and scrutiny committees to exercise new functions in relation to the NHS and NHS bodies. In particular, it enables such a committee to review and scrutinise the operation of the health service in its area.

53.     Local authority overview and scrutiny committees (OSCs) are to be established under section 21 of the Local Government Act 2000. These committees are part of the arrangements for local authorities under Part II of that Act. Under these arrangements, local authorities may establish an executive to perform particular functions and to implement the plans and policies approved by the authority. The executive may take one of four forms -

• an elected mayor and cabinet executive consisting of 2 or more councillors;

• a council leader and cabinet executive consisting of 2 or more councillors;

• an elected mayor and an officer of the authority appointed as the council manager;

• such other form as may be prescribed in regulations made by the Secretary of State.

54.     An overview and scrutiny committee is a committee of the authority made up of councillors who are not members of the executive. The committee's functions are to review and scrutinise the decisions and other actions of the executive or the authority itself, and to make reports or recommendations to the authority or executive with respect to the discharge of functions by the executive or authority. In addition, the committee may make reports and recommendations to the authority or executive on matters which affect the authority's area or its inhabitants.

55.     Subsection (1) confers on some of these committees the additional functions of reviewing and scrutinising health service matters and making reports and recommendations to NHS bodies on such matters. These functions will not be conferred on all overview and scrutiny committees; the provisions only apply to committees of county councils, county borough councils in Wales, unitary authorities and London borough councils (see subsection (2)). These are the authorities that also hold responsibility for social services. District Councils will be able to contribute to the scrutiny of the NHS through joint arrangements with the authorities set out above (see section 8).

56.     The detail of how the committees are to operate and the matters which they may review and scrutinise are to be set out in regulations under subsection (3). HAs would be required to consult OSCs on major service changes and Chief Executives of local NHS bodies will be required to attend OSC meetings at least twice a year. It is intended that overview and scrutiny committee functions will include referring contested proposals for major service changes to the Secretary of State on the grounds of process and merit. A new Independent Reconfiguration Panel is being established to advise the Secretary of State on proposals referred to him in this way and its membership will include clinicians, patient representatives and NHS managers.

57.     OSCs will scrutinise not only health services, but also social care services provided or commissioned by NHS bodies exercising local authority functions under arrangements under section 31 of the Health Act 1999 (see subsection (5)). OSCs may scrutinise local authority social services under the existing provisions of the Local Government Act 2000.

Section 8: Joint overview and scrutiny committees etc

58.     This section allows the Secretary of State (or, in relation to Wales, the National Assembly for Wales) to make regulations which provide for joint overview and scrutiny committees of two or more local authorities; it allows for a number of different options. It enables the Secretary of State and the Assembly to make regulations providing for local authorities to form joint OSCs, for a local authority to delegate the NHS functions of their OSC to an OSC of another local authority, and for district council OSC members to be co-opted on to county council OSCs as voting members.

59.     Subsection (2)(a) allows for two or more authorities, which can include district councils, to form a single overview and scrutiny committee to scrutinise health organisations. Where a district council joins with a county council, the scrutiny is the county council's responsibility, and the county council will therefore remain in the lead. These joint arrangements may also include local authorities operating "alternative arrangements" under regulations under section 32 of the Local Government Act 2000. "Alternative arrangements" do not involve the creation of an executive for the authority, but they will provide for the establishment of a committee to undertake scrutiny functions similar to those carried out by an overview and scrutiny committee under section 21 of the Local Government Act 2000.

60.     Subsection (2)(b) provides for two or more authorities whose OSCs have responsibility to scrutinise the NHS to give the lead to one OSC so that it exercises the others' functions in relation to health scrutiny. Under this provision, a county council and district council could arrange for the district OSC to undertake the county council OSC's responsibility of scrutinising health services in the district. This approach may be appropriate where a localised service is being considered, for example a particular PCT.

61.     Subsection (2)(c) provides for a county council to co-opt one or more district council OSC members onto its own OSC; the county council may also co-opt district council OSC members when that county is part of a joint scheme with another OSC.

62.     Subsection (3) allows regulations relating to the joint arrangements to set out the circumstances and conditions under which joint schemes can be established. District council involvement in the joint scheme arrangements will be set out in regulations; the lead will always be with local social services authorities. Regulations and directions may also under subsection (4) provide for the circumstances where authorities will be required to put in place joint scheme arrangements.

63.     The regulations that relate to the normal arrangements for scrutiny and review of the NHS by OSCs will also apply to the scrutiny and review of the NHS where there is a joint scheme in operation.

Section 9: Overview and scrutiny committees: exempt information

64.     As local authority committees, overview and scrutiny committees are subject to section 100A of the Local Government Act 1972, which provides that councils and their committees must be open to the public except to the extent that they must be excluded under section 100A(2) (where certain confidential information may be disclosed) or may be excluded under section 100A(4) (exclusion by resolution of the council or committee, if certain "exempt information" may be disclosed). The categories of exempt information are set out in Schedule 12A to the 1972 Act. Section 9(2) of, and Schedule 1 to, the Act extend the categories of exempt information, where an overview and scrutiny committee is dealing with NHS matters. As with the categories of exempt information in the 1972 Act, the Secretary of State may add to, or remove provisions or otherwise amend the list by making an order (section 9(4) and (5)).

Section 10: Application to the City of London

65.     The Local Government Act 2000 does not provide for the Common Council of the City of London (the local authority for the City) to establish an overview and scrutiny committee. This section makes it possible for the Common Council of the City of London to set up a committee which mirrors the functions of the overview and scrutiny committees in relation to the scrutiny of the NHS. Subsection (2) applies sections 7(3) to (5) and 8 and 9 and Schedule 1 to the committee that is set up. Subsection (3) of section 10 applies the provisions of section 21 of the Local Government Act 2000 (overview and scrutiny committees) to a scrutiny committee established by the Common Council, with modifications to reflect the fact that the Common Council will not have an executive under Part 2 of that Act.

Public involvement and consultation

Section 11: Public involvement and consultation.

66.     Section 11 confers on each Health Authority, Primary Care Trust and NHS trust a new statutory duty to make arrangements with the aim of involving patients and the public in the planning and decision making processes of that body, in so far as they affect the operation of the health services for which the body is responsible. In relation to Health Authorities, this would cover both the hospital and community health services for which they are responsible and the family health services provided by practitioners in their area.

Independent advocacy services

Section 12: Independent advocacy services

67.      Section 12 imposes a new duty on the Secretary of State to arrange independent advocacy services for people who wish to complain about the service they or someone they care for has received from the NHS. Advocacy is to be independent, so far as practicable, by being provided by a person or body other than the person or body against which the complaint is being made, or the person or body investigation or adjudicating the complaint (see subsection (5)).

68.     PALS will play an important role in informing patients of the availability of independent advocacy services and how to access them. However PALS will not control access to independent advocacy, and patients will be able to access them directly. Independent advocacy services in each area could be commissioned and/or provided by the local authority (under section 2 of the Local Government Act 2000) or by other persons or bodies.

69.     Under subsection (2) independent advocacy services will be made available when a complaint is being made using the hospitals complaints procedures or when complaining to the Health Service Commissioner for England or Health Service Commissioner for Wales. The Secretary of State may by regulations extend the scope of the procedures covered by the advocacy service. A possible extension could be complaints made to one of the regulating professional bodies (e.g. General Medical Council), or which give rise to disciplinary proceedings against a member of staff. Subsection (4) allows the Secretary of State to further extend these arrangements as he sees necessary to provide assistance to individuals in connection with complaints about health services.

Intervention powers

Section 13: Intervention orders

70.     Management of the NHS will move to a system of earned autonomy. Good performance will be rewarded and failure tackled swiftly and effectively. Section 2 provides for the performance payments that will help underpin this new system. Section 13 provides for new intervention powers to provide a sanction against the most serious and persistent failures. Early identification of poor performance through performance management and the new Traffic light system, backed up by support from the NHS Executive Regional Office and the Modernisation Agency should mean that performance can be improved in most cases without resorting to formal intervention orders.

71.     The purpose of this section is to enable the Secretary of State to intervene in an NHS body (Health Authorities, Special Health Authorities, Primary Care Trusts and NHS trusts) where he has concerns about the management of that body, its ability to perform its functions adequately (for example, to deliver health care to the required standard) or where there has been a one off catastrophe. This new power will complement the performance fund in delivering the NHS Plan commitment to drive up performance in the NHS.

72.     Section 13 inserts new sections 84A and 84B into the 1977 Act. Section 84A enables the Secretary of State to make an intervention order in respect of a Health Authority, Special Health Authority, NHS trust or Primary Care Trust. Subsection (1) sets out the test that must be satisfied before he may intervene using such an order. The test would enable the Secretary of State to intervene if he was satisfied, for example, that an NHS trust was failing to provide health services to an adequate standard. The Secretary of State would however not be restricted to intervening where there was a failure to provide adequate health services; he might also intervene where the body concerned is not being properly administered or managed. The Secretary of State must also be satisfied that the form of intervention provided for under these new provisions is appropriate; for example, he may be satisfied that temporarily replacing the board of an NHS trust, is the appropriate way to ensure that the body's performance is substantially improved.

73.     Section 84B sets out the effect of an intervention order and the different forms the intervention may take. The first form of intervention (subsections (2) and (3)) is that members of the body concerned (i.e. the members of Health Authorities, Special Health Authorities and Primary Care Trusts, and the Chairman and directors of NHS trusts) may be suspended or removed from office, and new individuals appointed in their place. The members of a body are responsible for how that body is managed; by replacing existing members with the new members, it will enable changes to be made in the way an individual body is managed. Under these provisions, the Secretary of State has a wide range of options: he may remove all the members, or only some; he may suspend members from all their board duties, or only in respect of some duties.

74.     The second form of intervention (subsection (5)) will enable the Secretary of State to require an NHS body to make arrangements for some other person or body to perform that NHS body's functions. Alternative expressions of interest will be selected from an approved list. Although the functions were performed by that other person or body, the NHS body would remain legally responsible for that functions - for example, an NHS trust would retain overall responsibility for managing its hospital and providing services. The Secretary of State may also direct how functions are to be performed so as to achieve particular objectives. These two forms of intervention may be combined (see section 84A(3)).

75.     Sections 84B(7) and (8) provide that the Secretary of State's intervention order may disapply or modify any legislative provision relating to the membership or procedure of the body subject to intervention. The purpose is to ensure that the intervention can operate effectively where the Secretary of State removes or suspends board members, and substitutes replacements. The replacements need not be the same number as those replaced. The nature of intervention is that it must be prompt and that the Secretary of State must be able to adapt the intervention to the particular local circumstances; it may not be practicable or appropriate to find an identical number of replacements. If the number of members is different, the existing rules which govern the number of members the body must have, or about the numbers of members which must be present at the meetings of the body, may be inconsistent with the new membership arrangements implemented by an intervention order. In addition, as the method of appointing those replacements and the length of time they remain in office are to be determined by the intervention order, the rules about appointment of members and tenure of office may require modification. The Secretary of State will only be able to disapply or modify provisions about membership or procedure, and will be able to do so only where he considers that it is appropriate (for example, in order to ensure the intervention order operates effectively). The provision for disapplying or modifying provisions will be limited to the particular body concerned and to the period during which the intervention order is in force.

76.     Section 84B(9) allows the Secretary of State to include in the order supplementary directions to give full effect to an intervention. He may wish to make more specific directions about how the intervention should work. For example, he may wish to ensure that the body makes staff or other assistance available to the replacement members or the third party to which functions have been delegated. These directions are akin to the directions which the Secretary of State may give to NHS bodies under section 17 of the 1977 Act.

77.     Section 20(2) provides that intervention orders under these provisions are not statutory instruments.

Abolition of Medical Practices Committee and National Health Service Tribunal

Section 14: Abolition of Medical Practices Committee

78.     Section 14 abolishes the Medical Practices Committee ("MPC"). (Section 15 transfers the function of declaring GP vacancies to Health Authorities). This section should be considered alongside section 1, which provides for Health Authority allocations to be determined with reference to both their general allocations and Part 2 general expenditure in their area. This is intended to provide a new resource based method of control over the distribution of GPs and is intended to ensure that Health Authorities with a shortage of GPs will now be given sufficient allocations to attract more GPs. The result of this is intended to be a more equitable distribution of GPs.

79.     The MPC is constituted under sections 7 and 34 of the 1977 Act. Its main function is to control the distribution of the general practitioner workforce in England and Wales. Essentially it controls the numbers of general medical practitioners wishing to provide GMS in Health Authority areas. This function will be taken on by Health Authorities , so Section 14 provides for the abolition of the MPC. Sections 7 and 34 of the 1977 Act are therefore repealed in Schedule 6 to the Act.

80.     Subsection (2) provides for the transfer to the Secretary of State of all property, rights and liabilities relating to the MPC including certification regarding the sale of medical practices. This includes certification relating to the sale of goodwill.