The new landscape for foundation trusts (FTs) is very different from the one we see now – or is it? Starting with the terms of authorisation, from the point Monitor becomes economic regulator; there will be no terms of authorisation. Our view is that it is likely that some of the conditions will re-appear in Monitor’s provider licence.
For the first time, FT directors’ duties are to be written into law - but the underlying case law on which the codification is based would probably have applied to FT directors anyway. Governors will have an express duty to hold to account the board members they appoint. The Government’s view (and Monitor’s view for that matter) is that this was implicit in their power to appoint and remove the non executive directors (NEDs).
Even game-changing alterations like removing the concept of mandatory goods and services, repealing the protected property provisions and the private charges cap and allowing FTs to borrow freely, could be undone by a combination of the Monitor licence conditions, the opportunity for commissioners to designate services as essential and the new conditions on public dividend capital. Under the new public dividend capital terms, the Secretary of State will be able to make rules about what activities trusts can undertake, acquiring and disposing of property, mergers and acquisitions. The commentary accompanying the Bill suggests however that the power will be used with a light touch by an arms length banking department within the Department of Health. Whilst one can see the point – FTs have £24bn of your money invested in them – this does feel like a backward step. It is also unlikely that many FT directors will welcome the playing-field-levelling introduction of an insolvency regime and the additional risk of personal liability.
Perhaps the most fascinating changes are those aimed at making the governors a more effective force. The Act encourages governors to take their role seriously (through the statement of their duty to hold the NEDs to account) and starts to give them some of the tools they will need. Governors are to receive all of the directors’ agendas and minutes and the Bill makes no distinction between private and public parts of meetings. If the governors don’t feel they have the information they need about whether the trust and/or the directors are performing their duties, they can formally call on one or more of the directors to come to speak to them. If the governors use this power, it will be reported in the annual report. Significant transactions will need to be approved by the governors. Changes to the constitution will require their approval. FTs have a new obligation to “take steps to ensure” their governors “are equipped with the skills and knowledge they require in their capacity as such”. A new panel is being established by Monitor to provide advice and guidance to governors on whether their FT is in breach of its constitution or the law.
FT constitutions will also need to change to reflect things like the abolition of PCTs, the new statutory name for the Board of Governors (Council of Governors) and the required statements of the principal purpose and significant transactions (not to mention the many references to Monitor).