R Unison (Claimant) Monitor (Defendant) (1) The Secretary of State for Health (Interested Parties) (2) Foundation Trust Network
| Jurisdiction | England & Wales |
| Judge | Mr Justice Cranston |
| Judgment Date | 09 December 2009 |
| Neutral Citation | [2009] EWHC 3221 (Admin) |
| Court | Queen's Bench Division (Administrative Court) |
| Docket Number | Case No: CO/1048/2008 |
| Date | 09 December 2009 |
[2009] EWHC 3221 (Admin)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT
Before: Mr Justice Cranston
Case No: CO/1048/2008
Peter Oldham and Stephen Robins (instructed by Unison Legal Services) for the Claimant
Michael Fordham QC and David Pievsky (instructed by Denton Wilde Sapte) for the Defendant
Javan Herberg and Mark Vinall ( instructed by DWP/DH Legal Services) for the First Interested Party
Robert Jay QC ( instructed by Capsticks) for the Second Interested Party
Hearing dates: 2, 3 November 2009
Mr Justice Cranston:
INTRODUCTION
The legal question in this case is the proper interpretation of the phrase “income derived from private charges” in section 44 of the National Health Service Act 2006 (“the 2006 Act”). The context in which these proceedings are brought, however, is a fiercely contested dispute about the future direction of the National Health Service (“the NHS”). In broad outline the issue is the extent to which NHS foundation trusts are able to provide goods and services for purposes other than those of the NHS. Since the issue is highly charged, it is important at the outset to underline that the court must resolve it in a spirit of legalism, where existing rules and principles are applied to this new problem of statutory interpretation and a best fit found.
The parties
The claimant in this case, Unison, is the largest public sector union in the United Kingdom with 1.3 million members, including more than 450,000 healthcare staff employed in the NHS across the whole range of health care provision. As such it has an important input into health care policy. Unison's own approach is that it supports the founding principles of an NHS funded through direct taxation and free at the point of use. While it recognises that as a healthcare system the NHS needs to adapt, it is concerned that NHS foundation trusts are a form of privatisation which undermine the NHS's public service principles.
Monitor, the defendant, is the independent regulator of NHS foundation trusts. The name is a brand name and not contained in statute. Monitor is independent of government and directly accountable to Parliament. Its objectives are broadly threefold: first, it is responsible for assessing NHS trusts in order to decide whether they qualify for NHS foundation trust status; secondly, it provides a regulatory framework which ensures that NHS foundation trusts are well led and financially robust so they are able to deliver quality care and value for money; and thirdly, it supports NHS foundation trust development.
The first interested party is the Secretary of State for Health (“the Secretary of State”). His role needs no explanation. The second interested party is the Foundation Trust Network of the NHS Confederation (“the Foundation Trust Network”). The NHS Confederation is the only independent membership body for the full range of organisations which comprise the NHS. It represents over 95 percent of NHS organisations and also has a growing membership of independent healthcare providers from the public, private and third sectors. One part of the Confederation is the Foundation Trust Network, which undertakes to raise the profile of issues facing existing and aspirant NHS foundation trusts and to improve the influence of its members. In July 2009, 119 of the 121 authorised NHS foundation trusts in England were members.
NHS foundation trusts and the cap
NHS foundation trusts were introduced as part of the government's ten-year programme of reform known as The NHS Plan in 2000. Under The NHS Plan the government have a commitment to increase the scope and range of private sector activity with NHS services by creating independent public interest corporations with foundation status. Under the government's proposals foundation status organisations would have NHS assets transferred to their ownership and control; be granted a licence to operate by an independent regulator; be freed from certain NHS controls; be run on a not-for-profit basis; and be accountable not to the Secretary of State for Health but to a board comprising employers, staff and local residents, some of whom would be locally elected. Foundation status would mean greater freedom to generate income. While they would not be allowed to sell their core assets, they would be allowed to raise finance for new facilities from the capital markets, subject to the government's overall borrowing limits, and to set up joint ventures with the private sector. According to the Department of Health's Guide to NHS foundation trusts, published in December 2002, the top performing NHS hospital trusts would be allowed to apply for foundation status.
NHS foundation trusts were introduced by Part 1 of the Health and Social Care (Community Health and Standards) Act 2003 (“the 2003 Act”) and are now governed by Chapter 5 of Part 2 of the National Health Service Act 2006, a consolidating Act. In accordance with The NHS Plan the statute gives them broader freedoms than NHS trusts: under the legislation they have greater financial freedoms, they are not subject to direction by the Secretary of State and they can retain any operating surpluses they generate. Instead of being centrally managed, they are supervised by the independent regulator, Monitor. The legislative scheme is explored at greater length below.
It is because NHS foundation trusts have broader freedoms than NHS trusts that a cap was considered necessary to mitigate the risk that they would focus on private patient activity at the expense of NHS patients. Under the legislative scheme, outlined below, NHS foundation trusts under section 44 of the 2006 Act can be restricted by Monitor in their ability to provide goods and services for purposes other than those of the NHS. Section 44 also requires Monitor to exercise that power with a view to securing that the income of a NHS foundation trust derived from private charges should not exceed a specified cap, referred to as the private patient income cap or PPI cap (“the cap”). The cap is set as a proportion of the total income of an NHS foundation trust. The proportion is not the same for each NHS foundation trust, but is fixed by the proportion of the income which was private patient income in a base year, usually 2002/03.
The dispute in outline
This judicial review was issued on 1 February 2008. At that time, Monitor's approach to the cap included a narrow definition of private patient income, which has since become known as “option 1”. On 18 June 2008, after the proceedings were commenced, Monitor issued a consultation document, about modifying its approach to the cap. Following consultation, on 26 November 2008 Monitor published its decision to change its definition of private patient income from “option 1” to a somewhat broader test, “option 2”. Unison has proceeded with the claim, on the basis that option 2 is still too narrow, and is unlawful as contrary to the test embodied in section 44. The closest definition of the cap to Unison's position is what was labelled option 3 in the Monitor consultation.
Thus Unison contends that Monitor has defined income derived from private charges in section 44(2) of the 2006 Act too narrowly, with the result that NHS foundation trusts have breached the statutory limit on private patient income. Unison submits that this follows from the ordinary meaning of the words of section 44 but that if there is any ambiguity in the statutory language Hansard material also supports its case.
Monitor contends that its operation of the cap has been lawful. In essence it submits that it has a considerable discretion in interpreting and applying the cap. In particular, it contends, the approach to interpretation adopted by Unison would produce a cap fraught with difficulties and impracticalities. This stance is supported by the Foundation Trust Network. While ideally it would want Monitor to return to the less restrictive cap, option 1, it is content to support Monitor's existing approach. The adoption of anything like that advocated by Unison would, in its submission, be both unreasonable and unworkable. It has submitted a number of case studies to support that submission.
The Secretary of State adopts the middle ground between Monitor and Unison. He agrees with Unison that option 2 is an unlawfully narrow approach which fails to include certain types of income which, by virtue of s.44, are properly to be classified as private patient income. On the other hand, his view of the correct test is not as broad as that advocated by Unison. In particular, he does not contend that Monitor was required as a matter of law to adopt the wider option 3 consulted upon by Monitor and advocated by Unison.
BACKGROUND
The manual
Monitor issues an NHS Foundation Trust Financial Reporting Manual (“the manual”) on an annual basis, containing directions as to how NHS foundation trusts must prepare their accounts. It does this pursuant to paragraphs 24 and 25 of schedule 7 of the 2006 Act. It is issued following Monitor's annual review of the relevant accounting practices, HM Treasury's Financial Reporting Manual (“the Treasury Manual”) and a consultation process allowing those affected by the rules to comment on proposed changes or to suggest areas for improvement. Generally the manual has required NHS foundation trusts to follow general accounting standards and those in the...
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