When Parliament created the concept of NHS foundation trusts in 2003, it was creating something that had never existed before in the NHS or in English law: a public benefit corporation membership-based, quasi-democratic vehicle, arm's-length from Whitehall, with the financial freedom to behave more like a business and the constitutional independence to act autonomously for the benefit of the people it served.

It was, deliberately and by design, not an NHS trust. 

The Health Bill proposes to change all of that. If it passes as drafted, foundation trust status will survive as a label on the door whilst almost everything behind the door is dismantled. The proposed changes are so fundamental that the question must be asked: does foundation trust status mean anything anymore? And in some respects, does it now mean less than being an NHS trust?

Health Bill goes beyond 10-Year Health Plan

We knew, based on the 10 Year Health Plan, that Councils of Governors would be removed. The Health Bill does this and more. Both Councils of Governors and members are removed. The proposed changes to schedule 7 of the National Health Service Act 2006 (NHSA) are sweeping. No membership. No constituencies. No governors.

With the removal of the Council of Governors comes the removal of the governance functions that were vested in governors. Decisions that previously required Council of Governors approval have either been removed entirely, most notably board appointments and transaction approvals, which no longer require governor involvement, or have been transferred to the Secretary of State. Increases to non-NHS income, for example, which previously required governor approval, will under the Health Bill require Secretary of State approval. While the membership is removed, a vestige of public accountability remains in the form of the trust being required to present its annual audited accounts at a public meeting each year. 

The Secretary of State will be responsible for the appointment of the chair and non-executive directors with the power to suspend and remove them. Just like an NHS trust, the leadership of an NHS foundation trust will now be subject to direct control from the centre. Further direct control can be exerted through the new section 42B which broadens the Secretary of State’s power to impose expenditure limits and sections 57B and 57C, together with the new Schedule 9A, which give the Secretary of State the power to convert a failing NHS foundation trust back into an NHS trust by order.

What this means for NHS foundation trusts

Foundation trust status, in other words, is no longer a permanent achievement. It is a contingent status, held at the pleasure of the Secretary of State's assessment of performance. This has material governance implications: boards and trust secretaries of foundation trusts need to understand that their corporate form is now reversible in a way it was never intended to be.

Perhaps most importantly for governance professionals within NHS foundation trusts, changes to an NHS foundation trusts constitution will now require approval of the Secretary of State. In many ways this represents less governance flexibility than an NHS trust, whose standing orders must meet legislative requirements but do not require external approval to change. Foundation trusts will need to consider how they will practically manage this shift. 

Browne Jacobson’s suite of template governance documents for foundation trusts already reflect our recommendation that the constitution is a streamlined document, with standing orders for the Board contained in a separate corporate governance manual. We will be updating these documents to take into account the expected changes if the Bill becomes law. Trusts will need to consider whether it is possible to pre-approve these changes before that date.

A change that may have received less attention but which has real practical significance for foundation trusts operating in groups is the extension of the Local Audit and Accountability Act 2014 to NHS foundation trusts on the same basis as it applies to NHS trusts.

Foundation trusts that operate within group structures have previously been able to use the constitutional flexibility available to them to establish audit committees in common with a single joint chair. That flexibility may no longer be available under the new regime. Governance professionals in those organisations should review their current arrangements promptly to assess whether changes are required and, again, whether it is preferable to make any necessary constitutional amendments before the Bill is enacted.

More government intervention on the way?

The trust special administration regime, used in practice on only two occasions in its history, for South London Healthcare NHS Trust and Mid Staffordshire NHS Foundation Trust, remains in the NHSA, amended by Schedule 6 of the Health Bill. The Secretary of State takes over the functions previously exercisable by NHS England within the regime, and the trigger provisions are amended.

The fact that this regime has been retained and, in some respects, strengthened, alongside the new conversion power and the new intervention powers over ICBs, prompts a legitimate question: is the government signalling that it intends to use these intervention tools more actively than has been the case historically?

One final point worth noting is that the concept of the Advanced Foundation Trust does not appear anywhere in the Health Bill. It remains a policy construct rather than a legislative one. 

The public benefit corporation form survives in name. In substance, it has been hollowed out. What remains is a constituted statutory body accountable almost entirely upward to the Secretary of State. An NHS foundation trust will, in future, be no more independent of ministerial control than an NHS trust.

Browne Jacobson's expertise

The Health Bill represents a fundamental shift in the constitutional and governance landscape for NHS foundation trusts. If you are a board member, trust secretary, or governance professional seeking to understand what these changes mean for your organisation (whether that is reviewing your constitution, updating your governance documentation, or assessing whether to make amendments before the Bill is enacted) our specialist governance for health team is here to help.