Ownership Matters in Foundation Trusts

Creating “the largest and most vibrant social enterprise sector in the world” particularly by giving more freedom to Foundation Trusts is a key objective of the policy blitz known as Liberating the NHS (in England).   Mr Lansley has also said FTs would have ‘characteristics’ of social enterprise, implying for some that they might not be the genuine article after all.

The Social Enterprise Coalition is concerned by this. Peter Holbrook SEC’s CEO said “There needs to be greater understanding of the differences between these two organisational forms and the different roles they can play as part of the landscape for healthcare in England.”

How right he is.

A worrying shift of emphasis

Mr Lansley’s vision seems to be moving more towards an employee-ownership model. The White Paper says as much.

“As all NHS trusts become foundation trusts, staff will have an opportunity to transform their organisations into employee-led social enterprises that they themselves control, freeing them to use their frontline experience to structure services around what works best for patients.”  . . .   “We will consult on future requirements: we envisage that some foundation trusts will be led only by employees; others will have wider memberships. The benefits of this approach will be seen in high productivity, greater  innovation, better care and greater job satisfaction. Foundation trusts will not be privatised.”  (Liberating the NHS, para 4.21)

There’s the rub.  It comes down to an ownership question: who are the owners of a Foundation Trust?  We always thought it was the citizens, patients and staff members who sign up (register) as Members and acquire voting rights to elect Governors who represent their interests to the Board and management.  Guidance setting up FTs was very clear: “The members of an NHS Foundation Trust will, collectively, be its legal owners. This is a real and not a paper exercise in social ownership. As such the rights of membership will therefore confer some limited but real legal responsibilities.”

Mutuality models vary on the ownership question.  A GP co-op as a employee-owned mutual is one thing; a Foundation Trust controlled solely by the people whose livelihoods depend on it is several magnitudes different and not in the public interest.  Mr Lansley is failing to distinguish between types of mutal ownership and that has big implications.

Building new Mutuals

Currently FTs are “public benefit corporations”  – an elusive and self-defining status that suits the fluid reform environment into which they were launched.   In theory there is nothing to stop them becoming CICs (community interest companies) – though that would give them two regulators  in the shape of Monitor and the CIC Regulator which is probably not desirable.  They could of course turn themselves into big mutuals (they are halfway there now but with an indirect election model).

Exploring this is the subject of the NHS Alliance’s latest policy paper Building New Mutuals from Foundation Trusts. The Alliance rings an alarm bell: “A potential move to employee-led organisations was never the intention of the Health and Social Care (Community Health and Standards Act) 2003 that created foundation trusts.” Other well-placed commentators such as Paul Corrigan have also spotted that doing this would be a significant shift in the FT  governance model.

Much could be improved in FT governance

There are a number of things that could be improved in Foundation Trust governance without handing the whole enterprise over to the staff and cutting off control by the community who use the service.   These include:

1. The idea that the same person chairs the Board and the Governors should go for starters as Governors must be able to elect their own leader from amongst their number.

2. There should be much more direct contact between Members and Governors.  The Alliance would go further still in democratic control: “why not have public elections for NEDs on foundation trust boards, not just for the governors? Many large co-operatives – comparable in employment numbers and financial turnover with foundation trusts – do just that.” That sounds sensible since we are not now to have direct elections to soon to be phased out PCT Boards and so far there is little enthusiasm for putting lay people on new commissioning consortia which may not even have “boards”  in any formal sense.  We will return to that subject in a later post.

3. Governance can reflect constituencies for voting, eg staff members should be able to vote directly for their own NED on the Board

4. NEDs should elect their own Board chair

5. Board accountability should be to Governors on behalf of Members for continuing involvement and engagement with strategic planning and other internal governance requirements and also to Monitor for efficient running of the business.

Members in the lurch

We share the fear that the White Paper’s vision for FTs would leave community and patient members as owners in the lurch as well as introducing governance muddle.  Our concern is that the logical conclusion of employee-ownership and control of Foundation Trusts –  despite Mr Lansley’s assertion that they will not be privatised – could actually lead to FTs leaving behind any public control at all – in essence privatisation with a social enterprise face on it.   This is the contradiction at the heart of the “John Lewisisation” of public services – who owns them? It has nothing to do with getting better outcomes, increasing staff engagement and incentivisation or customer friendliness –  all very desirable.  It is about keeping public control and accountability of publicly-owned assets.

A number of FTs have healthy financial surpluses. Removing the private patient income cap will see these rise.  These could be used to buy out their assets.  If FTs had become employee-owned and controlled by that stage to the exclusion of community and user owners,  it would amount to an exit from public accountability.  We do not want to see that happen.

A mutual future

The NHS Alliance points a timely signpost towards the future of Foundation Trusts.  We support making Foundation Trusts into big mutuals so long as membership and majority ownership are strongly rooted in the community and the users they serve.  That is the best partnership arrangement staff members who also have a stake in ownership can have in ensuring that they too are fully engaged with the enterprise for the community’s as well as their own benefit.   The concept of mutuality is sufficiently dynamic to achieve both objectives.


  1. Roy Lilley says

    here’s the next step. ‘Members’ in what ever form, get perks. A private room, a different menu, free car parking, over night stays for relatives and when that is not enough, ‘Fast-Track’ services to jump the queue. Oh, and what about a ‘Top-Up’ membership for drugs that are not normally available. If FTs are in it for the money, and they have to be, we can’t stop it happening.

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