The foundation trust model: death by a thousand cuts 

For more than a decade, staff across the NHS toiled in the pursuit of foundation trust status. Monitor’s tests were unforgiving, but the prize was worth fighting for: freedom from the grasp of government and a brand that stood for quality and professionalism.

Those days seem long behind us. The foundation trust pipeline dried up as NHS funding was hit by the economic downturn. This, along with a series of changes to government policy, has eroded the freedoms that foundation trusts fought so hard for.

It is now increasingly difficult to describe a clear distinction between foundation trusts and NHS trusts, with foundation trusts subject to greater central control than at any time in their history. The new NHS planning guidance published in December 2015 and recent letters from national bodies to trust chief executives hammer the final nails into the coffin.

If this is a memorial, let us pause to reflect on the concept of foundation trusts and their initial promise. Alan Milburn’s White Paper of 2002, Delivering the NHS Plan, pledged to liberate foundation trusts from central control so that they could innovate and improve patient care. They would be free to determine their own pay, to retain surpluses and to decide how to use their assets. Rather than looking to the Department of Health for guidance, they would be accountable to their communities in a more patient-centred NHS.

Foundation trusts may have been an initiative of Labour under Tony Blair, but they were enthusiastically adopted by the coalition government in 2010. Andrew Lansley’s White Paper, Liberating the NHS, promised again to release NHS providers from central government micro-management and to increase foundation trusts’ freedoms to create the largest social enterprise sector in the world.

But in practice the model was under threat from its conception. Foundation trusts inhabited a precarious halfway house between the public and private sectors: independent corporations on paper yet entirely dependent on the state in reality – for funding, capital investment and bailouts when things went wrong (the original plan to create an independent NHS bank was discreetly abandoned).

It was never going to be easy for a single payer and monopoly providers to maintain an arm’s length, contractual relationship. In the private sector, such close mutual dependency often ends in merger (see Klein’s famous case study on General Motors’ acquisition of Fisher Body). For its part, the Office for National Statistics was never convinced that foundation trusts were really autonomous companies and actually kept them on the public balance sheet.

Those tensions were apparent from the start. In theory, foundation trusts were supposed to be subject to powerful local governance by their members. In practice, the Department of Health and regulators played the main role in determining their priorities and overseeing their performance. Monitor could end a chief executive’s career; foundation trust governors could not. So the leaders of many foundation trusts continued to look upwards to Whitehall for direction, rather than inwards and outwards to their staff and their communities as had been envisaged.

Nevertheless, some successful foundation trusts retained a meaningful degree of autonomy throughout the 2000s. Organisations such as Salford Royal or the Royal Marsden – who hit key targets and balanced the books – rarely felt the regulators’ stick. Conversely, those who breached Monitor’s terms of authorisation could expect a ratchet of increasingly invasive intervention, from requirements to develop sustainability plans to the replacement of board members.

That compact crumbled as the financial situation deteriorated. Government pushed prices below any reasonable level. Cash-strapped commissioners withheld funding. And large swathes of the foundation trust sector found themselves in breach of Monitor’s financial rules and subject to intervention, not through any fault of their own in many cases, but because of the gap between funding and the real cost of services.

The planning guidance and associated communications from the national bodies dispel any remaining illusions that foundation trusts, even the handful who are still in good financial health, are autonomous organisations. The planning guidance officially re-establishes a planned economy (as was always the case for the trust sector) where money is moved around local NHS organisations to ensure their sustainability.
It is now clear that all foundation trusts, even those with good finances, must accept control totals for capital expenditure. So that last remaining freedom, the right to decide what to do with their surpluses, has been lost. Meanwhile, the national bodies are micro-managing the details of how foundation trusts deliver services more than ever before, to the extent of directing them on staffing cover and annual leave planning.

The NHS veers between centralisation and decentralisation with alarming speed but dull predictability. Fundamental features of our tax-funded system pull government and providers into a hierarchical relationship. But dissatisfaction with public sector hierarchies – their unresponsiveness and inability to innovate – is never far from the surface. Hence the stream of policy papers promising, and failing, to set providers free.

Command and control from Whitehall may appear to some the only realistic course in the current crisis. But what are the chances that it creates the next Salford Royal, Frimley Park, Southcentral or Jönköping?

• Read our briefing on what the planning guidance means for the NHS