Published: 01/04/2004, Volume II4, No. 5899 Page 14 15
On the day that the first foundation trusts go live, Paul Smith explores the origins of the flagship health policy of Labour's second term
On Tuesday, 16 January 2001, the health secretary was hauled before the Commons despatch box to explain how dead bodies came to be stored in a chapel of rest at Bedford General Hospital.
A photograph in a local newspaper two days before had then been brought to a wider audience by The Daily Telegraph.
By the time Alan Milburn stood to speak, the chief executive of Bedford Hospital trust, Ken Williams, had 'stepped down', seemingly in response to orders from on high. Mr Milburn reassured the Commons that falling on his sword was 'the right thing' for Mr Williams to have done.
But the health secretary was privately furious. The year before, the government had announced the biggest-ever increases in funding for the NHS.Now Mr Milburn was under attack again. And a growing awareness that the NHS was too large and complex to be governed by Whitehall was exacerbated by his having to take the flak for one hospital's failings.
A government insider described that moment as 'the high-water mark' in government's relations with the NHS. The NHS plan had set out, the previous July, a blueprint for devolved power and principles of earned autonomy.
The bodies-in-the-chapel saga brought home, as nothing else had done, the urgent need for the government to cut the chains of command, control - and blame - linking it to the service.
One former colleague says: 'For Alan [Milburn] it was simply the realisation that we could no longer micro-manage the NHS... We had reached the point where Alan had understood that he could simply not push the buttons and wait for things to happen. The buttons were being pressed and in some cases nothing was happening.'
But an NHS which had been used to command and control appeared unnerved by the prospect of freedom. Senior government sources tell HSJ they canvassed leading figures in the NHS on three occasions in search of radical ideas but were disappointed.
One says: 'It was utterly unimaginative. They were talking about fiddling around at the margins - obsessing about monthly returns and the rest of it. This was a chance to rethink the whole relationship with the department, to be radically different.'
But through meetings with chief executives of three-star trusts, a demand for freedoms began to emerge. Crucial was the desire of trusts to be freed from key national targets.
A few months later, in November 2001, the concept of a new type of hospital - released from the shackles of the state, or the first step towards privatisation, depending on your politics - took its first steps in public. Mr Milburn went on a high-profile trip to the Fundaci¾n hospital in Alcorc¾n, Madrid, a privately run hospital governed by local representatives.
Two months later, Mr Milburn told an audience of key NHS modernisers at the New Health Network that he proposed to establish a new generation of foundation hospitals, run as independent organisations, in a reform that would redefine 'what we mean by the national health service'.
But beyond the word foundation - taken directly from the Spanish model - the policy at that point had no further substance, according to one DoH insider.
None of the details had been fleshed out, and there had been no discussions about whether foundations could pay staff more than NHS rates or get special borrowing freedoms.
Nonetheless, by May of the same year, four trusts had expressed enthusiasm for being part of the policy's first wave, due to go live a year later.
In September, the policy came under concerted attack. Former health secretary Frank Dobson weighed in, claiming that Mr Milburn was attempting to seize 'Tory territory'. In a speech to Labour Party members in Bristol, he said foundations would create a two-tier NHS in which a few elite hospitals succeeded at the expense of the rest.
At the DoH, officials and ministers were confident that such arguments could be won. But Mr Milburn was also running up against the Treasury and the concerns of chancellor Gordon Brown. The issue was the borrowing freedoms.
The DoH wanted the new trusts to borrow off the government balance sheet, unencumbered by Treasury control, but the Treasury feared the trusts would rack up debts knowing that the government would bail them out.
The issue came to a head in spectacular style at the Labour Party conference in October when the row went semi-public, with the national press full of embarrassing details of the infighting between two of the biggest departments in Whitehall.
A week later, Downing Street announced that a deal had been struck: the health secretary lost his way on borrowing off the balance sheet but gained - apparently in the face of Treasury opposition - an independent regulator.
Dr Stephen Dunn, then an economist at the DoH strategy unit, downplays the loss of the borrowing freedoms, which he says were never an end in themselves.
But Andy McKeon, then DoH director of policy and planning, and lead on the foundation policy at the time, sees Mr Milburn's loss as a significant blow to the policy as it had been envisaged.
The managing director of health at the Audit Commission tells HSJ: 'It was important for the policy. It was one of the central freedoms that foundation trusts would gain. The Treasury came to the view - I think worried by what had happened at Railtrack - that there would be no risk for the private lenders. That if something did go wrong, would we [the DoH] have the strength to stand aside?'
But he believes the creation of a role for the independent regulator was a significant win.
Mr McKeon says: 'You need someone to act to protect the public interest, who was going to intervene if something went seriously wrong, who was going to act with executive powers. There was a feeling that if all these things were being done by Alan Milburn, what real change was there?'
Once that deal had been brokered in October 2002, and publication of the DoH Guide to NHS Foundation Trusts had followed soon after, a number of key decisions were taken which would define the policy far more sharply than later parliamentary battles.
The number of private patients a trust could treat would be capped, and pay and conditions would be restrained by Agenda for Change, effectively preventing foundations offering higher pay rates than the rest of the NHS.
For chief executives looking to embrace new freedoms, the original - albeit vague - vision was seriously compromised.
Mr McKeon, who had the lead role in drawing up the policy proposals, insists the DoH was not panicking in the face of swelling political opposition.
'There was no sense of panic - the borrowing issue had already been resolved.'
And what of the cap on private patients? 'I think for Alan [Milburn] it was one of those things that could have gone either way and in the end we decided to introduce the cap.'
He doubts whether it was ever logical - given that the taxpayer would be paying for the majority of services provided by foundation trusts - that trusts could sit outside DoH targets.
But the guidance was less specific about the governance arrangements for trusts. To opponents of the policy that looked like a core weakness.
Stakeholder councils (later to be known as the board of governors) were proposed. They would be drawn from staff, local primary care trusts and voluntary groups, with half elected by a foundation trust membership made up of former patients and the local population.
In the government, special advisers like Paul Corrigan and key supporters like Ed Mayo, then director of the New Economics Foundation, had been talking about mutualism and new localism for some time.
Senior government sources suggest the credibility of this movement was 'borrowed' in an attempt to sell the foundation policy to its political and academic opponents.
By March 2003 the political temperature was rising, and some sudden compromises emerged.
Mr Milburn told the Commons health select committee that the policy would not lead to a two-tier service: in fact, his expectation was that all trusts could become foundations within five years.
The foundations legislation began its parliamentary journey in May, and was batted back and forth between the Lords and the Commons until November.
It came under attack on three fronts: Old Labour MPs led by Frank Dobson saw the policy as elitist, the Liberal Democrats felt the community elements were weak, while the Conservatives worried that local governance efforts would restrict the freedoms of those people managing trusts - a concern shared by some trusts.
Yet when the legislation at last completed its passage through parliament on 20 November, the most significant concession was a 12-month moratorium on new foundation trusts, allowing an assessment of their impact on the rest of the health system.
Today - one year behind schedule - the first wave of foundation trusts will be launched.
One chief executive of an applicant trust suggests that the development of the policy has been a bruising but educational experience for all involved. Originally keen to embrace the freedoms envisaged under the policy, he became cynical when it became clear that trusts might find themselves swapping one set of masters for another.
Now he believes local accountability and freedom from the centre are two sides of the same coin: 'Foundation status for us was about the freedoms.Now I see the memberships as an opportunity. When I start getting hassled by politicians or ministers or the department I can turn round and tell them to bugger off.'
This is an abridged version of a longer article on the development of the foundation policy. For the full version, see www. hsj. co. uk