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Chamber and committees

Meeting date: Thursday, October 28, 2021

Meeting of the Parliament (Hybrid) 28 October 2021

Agenda: General Question Time, First Minister’s Question Time, Point of Order, Offshore Training Passport, Portfolio Question Time, National Health Service Endowment Funds, Covid Recovery Strategy, Points of Order, Business Motion, Parliamentary Bureau Motion, Decision Time


Contents


National Health Service Endowment Funds

The next item of business is a statement by Humza Yousaf on NHS endowment funds. The cabinet secretary will take questions after his statement, so there should be no interventions or interruptions.

14:58  

I am grateful for the opportunity to provide an update to members on the independent review of governance of NHS endowment funds.

In 2019, the then Cabinet Secretary for Health and Sport commissioned the review to consider and provide recommendations on changes that could be enacted to strengthen governance arrangements for NHS endowment funds. The review is being published today. I will summarise the key findings and recommendations, alongside our next steps. Before I do so, it is important to provide some context, both on the need for the review and for the resulting recommendations.

Members will be aware that NHS endowment funds are charities. There are sixteen such NHS-linked charities in Scotland, each of which is registered with the Office of the Scottish Charity Regulator.

The underlying legislation is the National Health Service (Scotland) Act 1978, which gives power to a health board

“to accept, hold and administer any property on trust for purposes relating to any service which it is their function to make arrangements for, administer or provide, or to their functions with respect to research.”

Each charity is therefore a trust. In line with the 1978 act, the charity trustee of each NHS-linked charity is the related NHS health board, which acts as a single corporate trustee. That means that board members of the NHS board also act as trustees of the related charity.

As members will remember, the decision to commission the review was prompted by a report from the Office of the Scottish Charity Regulator in February 2019, following its inquiry into use of endowment funds by NHS Tayside. OSCR found that although charitable assets were used only for the purposes of the charity, which are the same as those of the health board, there was inadequate separation of the interests of the charity and of the NHS board in decision making.

OSCR considered that to be an issue that is inherent in the structure of the charities that have health boards as corporate trustees, and recommended a review of the governance arrangements of endowment funds and of the 1978 act.

Before I turn to the findings and recommendations of the review, I place on record my sincere thanks to the chair, Julie Hutchison, and to the project team, the reference group, the specialist sub-groups and all those who have been involved for the time and care that has gone into the review.

I would also like to pick up on a point that was made by the chair of the review, although it is more of a reflection than a recommendation. In the chair’s words,

“This report shines a light on a particular group of charities in Scotland which deserve to be better known.”

That is reflected in comments from one donor, who observed that people might not know that they can raise and donate funds to their local NHS charity, and that beneficiaries might not know that charitable funds have provided something from which they have benefited.

The review considers governance arrangements. In doing so, it highlights the importance of the work of the charities and provides us with recommendations to support that work in the future.

I now turn now to the findings and recommendations of the review. The review found—as did OSCR—that an “inherent conflict of interest” exists in the structure of the funds. First, that is seen in the dual role of NHS board members, who are also officers of the corporate trustee of the related NHS charity. In those dual roles, they are required to make decisions on how to direct charitable funds, and on managing board finances to deliver required services and to meet the statutory requirement of financial break-even at year end.

I want to be clear that it neither OSCR nor the review found widespread issues with decisions that were being made on use of charitable funds. Rather, as is reflected in the findings, it is the case that the current situation puts health boards in a difficult position and leaves them open to criticism when they make spending decisions on behalf of NHS charities.

It is also the case that, under current legislation, the statutory purpose of the health board and the related charity are the same. As a result, the same item of expenditure could validly be incurred by the health board or by the related NHS charity.

Although there is no legal requirement to do so, in order to address that overlap health boards have established practices to separate core spending from non-core spending—items that are to be publicly funded by the health board and enhancements that are to be funded by the linked charities, respectively. However, there is no legally binding governing document for those NHS charities. It is the lack of separation between the health boards and the related NHS charities that needs to be addressed.

The review makes 28 recommendations to do that and to improve the overall governance arrangements of the NHS charities. The most significant of the recommendations is that the existing corporate trustee should be replaced with a charitable board that would comprise an independent chair and a majority of independent members—which means a chair and a majority of members who are not drawn from the executive or non-executive membership of the related NHS board.

The review also recommends publicly available and legally governing documents for each endowment fund, and the introduction of limited liability for board members of the endowment funds.

It makes further related recommendations on recruitment and training of trustees and on communication, including on-going interaction between the health board and the charity.

I turn to our response to the review and how we will take forward its recommendations. I absolutely accept the review’s recommendations in principle, but there is work to be done on precisely how we take forward the recommendations to ensure that there is appropriate consultation and no unintended consequences, and to ensure that we support our NHS boards through implementation. The legislation that governs the NHS charities dates back to the 1970s. As the review rightly sets out, times have moved on, and so must we.

There are significant sums held in the funds. It is not just the money that we must protect, but the intent behind those funds. Since their establishment, many people have donated to them. Often, the people are friends and family members of loved ones who have received care from the related health board. Some are people who have received care and have donated in order to give back and to support the people and services that supported them in their hour of need, and to improve the experience of others in the future. That has never been more true than it is now, with unprecedented levels of donations having been made to NHS charities throughout the pandemic. As the chair of the review reflects, such charities are

“uniquely placed to play a creative and much-needed role in supporting how we cope with and recover from COVID-19”.

Trustees are required to consider the interests of the charity separately and distinctly from those of the related health board. I fully accept that we need to ensure that structures and governance arrangements safeguard endowment funds and that they support those who are responsible to act in the best interests of the charities at all times. I also accept that the current legislation does not adequately provide for that, and that taking forward the review’s recommendations to separate the people and the purpose of the charity would address the inherent conflict of interests that I have spoken about extensively.

As the review sets out, the creation of an independent board would provide trustees whose focus would no longer be split between the health board and the charity, and would allow the charity to shape its own strategy, which would, of course, be linked to, but be separate from, that of the health board.

Fully adopting the recommendations will require legislative change and will first require the precise mechanisms for that change to be determined. It will also involve significant work for our health boards. It will not necessarily be the quickest process, but we will ensure that it proceeds at pace. Consultation of stakeholders, including OSCR, NHS boards and people who donate to our NHS charities will be required, as will support for our NHS boards in taking forward the changes, when the time comes.

Although the changes will take time, I want to emphasise to members my commitment to improving the governance structures and frameworks for our NHS charities. I will urgently explore what can be done by Parliament now, before legislation is passed—as I hope it will be—to improve governance and accountability on these important matters. Our commitment is one that is shared by, and that we will progress with, our NHS boards and OSCR.

The cabinet secretary will now take questions on the issues raised in his statement. I intend to allow around 20 minutes for questions, after which we will move to the next item of business. It would be helpful if members who wish to ask a question could press their request-to-speak buttons or—if they are joining us online—put an R in the chat function now or as soon as possible.

I thank the cabinet secretary for providing advance sight of his statement.

We welcome the publication of the review. The review was first announced in 2019, with the aim of looking into how health boards use funds that are donated to NHS endowments, following a scandal at NHS Tayside the year before. As the cabinet secretary set out in his statement,

“There are significant sums held in these funds. It is not just the money that we must protect, but the intent behind those funds.”

Therefore, can the cabinet secretary give us concrete assurances that all accounts of the charities will be made public, including income and detailed expenditures? Going forward, will he guarantee that any changes to NHS board endowments will have transparency at their heart?

Craig Hoy asks a fair question. I hope that I was able to give some detail in my statement about what boards are doing now. I can emphasise a few safeguards. All trustees are required to act in the best interests of the charity. They are also required to publish an annual report and accounts and to set out their spending plans and future strategy within those. Those are publicly available and open to scrutiny.

Given how much interest there is in this, I will impress on the chairs and chief executives of boards when I next meet them, as I do regularly, how important it is that any changes that are made in advance of legislation are publicly communicated. That is a reasonable expectation.

The cabinet secretary’s statement should be welcomed. Scottish Labour will take time to consider the range of recommendations that are made in today’s report. The cabinet secretary rightly states that the process will not be a quick one. Will he say when he expects to complete consultations with relevant stakeholders and to bring draft legislation to the chamber? Will he give more detail about who he expects to consult as part of the process? Will he include patients and their family members as well as those with a genuine interest in making NHS trusts work on behalf of local communities?

To answer Carol Mochan’s last question, consultation should of course be with donors, patients, their families, OSCR and the NHS boards themselves.

Regarding Ms Mochan’s substantial question, it would be wrong for me to suggest a date today. She asked when she could expect the Government to bring forward draft legislation. It may be that we can make those changes alongside other legislation that we are already considering, such as reforms to charity law. We may be able to make that change; I cannot say for sure. If we are able to do that and to have the relevant consultation in advance of legislation, that would speed up the process. I can promise Ms Mochan that we will do that as quickly as possible, because I understand how important the issue is to all concerned.

To follow on from Craig Hoy’s question, can the cabinet secretary outline how a statutory incorporation route for endowment funds would stop any repeat of issues such as those with the Tayside fund?

I could not entirely hear Stuart McMillan; I think that he was asking about statutory incorporation, which is one of the review’s recommendations. I think that that would help, particularly with issues of conflict of interest. That is one area in which I want to consider whether we can take the recommendation forward or achieve its outcomes through another route. For example, it might be possible to set up new NHS charity boards as Scottish charitable incorporated organisations, rather than as statutory corporations. There are benefits to both routes. The core of the recommendation, as I said in my statement, is to help us to deal with inherent conflicts of interest.

Until recently, I was on the board of NHS Grampian. I have seen at first hand the valuable work that is done by endowment funds. Does the cabinet secretary have an estimate of how much the changes announced today will cost the endowment funds? That will mean charities having less money to spend on patients and staff. Would chairs and board members be paid? Will new members of staff who go to work for those charities be subject to NHS terms and conditions?

Douglas Lumsden is right to raise those issues. That is why we must take some time to work through them. I would not want any NHS endowment fund to be reduced because of changes that we make. The Government will look at how we can fund health boards to absorb those costs, as opposed to taking costs from endowment funds. That is not why people give money to NHS endowment funds. That is a reasonable point.

I cannot yet give a definitive answer to Mr Lumsden’s second question. That is why we want to consult all relevant stakeholders.

It is clear that the serious governance flaws stem back to 1978 and the UK Government legislation of that time that enshrined the conflict of interest. I note that the cabinet secretary said:

“Fully adopting the recommendations will require legislative change and it will first require the precise mechanisms for that change to be determined.”

I have a couple of questions. Can the cabinet secretary give any further guidance on that further legislation and any challenges around it? Furthermore, is he issuing interim guidance to boards regarding the conflict of interest, or is he relying on the OSCR report?

Those are both very important questions. On the first question, I will not rehearse what I said to Carol Mochan, but we will look to see whether there is another legislative avenue that we can use to move this forward at pace, as opposed to introducing completely new primary legislation.

On the second question, it should be said that, since the issues first surfaced in relation to NHS Tayside, it has absolutely been the case that NHS boards have looked at their own governance and accountability processes and made changes themselves. It is also important to note—I am sure that the member has this impression—from the OSCR report on the NHS Tayside issue that there were not widespread issues with the conduct of trustees. In fact, OSCR said:

“The picture that has emerged from our analysis is generally positive and encouraging, and we hope this will help reassure existing and potential supporters of these charities. By and large, the NHS endowments charities in Scotland have appropriate charters, operating instructions, policies and terms of reference in place.”

Those documents exist. Of course, where they need to be updated on the back of the review, my expectation would be that NHS chairs and boards look thoroughly at the review and make the appropriate changes if necessary.

Public confidence in NHS charities is vital and we must learn the lessons of what happened at NHS Tayside. I recognise that the review by Julie Hutchison is a key part of that.

I am sure that we were all inspired in the first lockdown by the fundraising efforts of Captain Sir Tom Moore. NHS Scotland boards received a share of £4.4 million of that fundraising money, which shows the importance of endowment funds. Although the public might not know much about them, they have likely supported them and would want to see the money well spent.

I welcome the cabinet secretary’s intention to accept the recommendation to create independent boards of trustees to governance charities. Does he agree that those boards must be more representative of patients and family carers? What steps will he take to ensure that boards are representative of the communities that they serve?

Again, that was a set of very good questions. On the first point that Paul O’Kane raised, that suggests to me that people still have confidence in our NHS endowment charities—that is why they have donated record sums, inspired by the likes of the late Sir Tom Moore and others.

On Paul O’Kane’s substantial question, that is an issue that I have raised with NHS boards. As he would imagine, they all have equality policies that they follow. If I can be frank with him, I would like to see progress being made quicker and faster, although our boards absolutely have at their heart equality—and not just racial equality, which I know has been an interest of this Parliament recently, but representation right across the protected characteristics.

Policies are in place, but I am challenging boards to make sure that they are more representative. Paul O’Kane is right that the new boards that are created for charities must be representative, but we do not need to wait for those charity boards to be set up before we can see what we can do with the current structures that are in place. In short, we can do more and probably go faster in this regard.

As the cabinet secretary has noted, huge funds have been donated to NHS charities during the pandemic. We also know that our boards are under intense pressure, including financial pressure, so what safeguards are in place to ensure that the funds are used as they were intended to be used?

Of course, our funding of the NHS is at record levels, and we will continue to ensure that it is funded adequately, given the pressures that it is currently under.

I spoke to some of the safeguards when I answered Craig Hoy’s questions. It should be said that, as I mentioned in my statement, all trustees are required to act in the best interests of the charity. That is the first and primary safeguard, but they are also required to publish an annual report and accounts, which have to set out in detail the charity’s spending plans. Of course, those are publicly available and open to scrutiny. Those are the safeguards that currently exist.

On the back of the review, my expectation will certainly be that each NHS board looks in detail at the review, and if it has to update its procedures and governance structure, it should absolutely do that.

We have heard several times today that, in 2019, NHS Tayside was forced to give money back to the endowment fund following allegations of mismanagement. Can the cabinet secretary confirm that no other Scottish health board has been required to return money to the endowment fund on the same terms?

Certainly not that I am aware of.

Given the pressure on NHS boards for remobilisation, is the cabinet secretary confident that the timescales for the recommendations being taken forward can be met?

That is a fair question, because we all know and debate regularly in Parliament just how under pressure our NHS boards are. This is an issue of extreme importance and therefore I expect urgency to be attached to the recommendations. As a number of members have said, this is about public confidence. While boards remobilise, I would expect there to be some pace and urgency around the recommendations and, as this will involve legislative change, I will do my best to ensure that there is pace and urgency on the part of the Government, too.

Apologies for being late—I have experienced what all Glaswegians are experiencing at the moment, which is severe delays on ScotRail.

NHS-linked charities have given valuable equipment that I personally have benefited from in hospitals, and I thank all those who have donated equipment. One of the recommendations is that each charity should put in place a code of conduct to provide guidance and set expectations on board behaviours. What is the timescale for putting those codes of conduct in place, who will review them before their implementation and will they vary from health board to health board?

That goes back to my answer to the member’s colleague Douglas Lumsden and other members, which was that we will need to take a bit of time to work through the recommendations and consult the appropriate individuals. However, there are already codes of conduct relating to our current public appointments, including appointments to NHS boards, which we expect board members to abide by. We will ensure that the codes of conduct are absolutely robust.

On who we will consult, as I said in response to questions from a number of members, we will want to talk to as wide a group as possible. However, I perhaps left out clinicians. It is important that those who are working in our health service, such as Dr Gulhane, are consulted on all these matters, including a code of conduct.

Among the recommendations of the review are that NHS-linked charities should put in place induction training for all charity trustees and that the need for on-going training and support should be considered. Such training and support will be an important step towards widening access and ensuring a more diverse membership of NHS-linked charity boards. I appreciate the cabinet secretary’s earlier answers to Paul O’Kane and Douglas Lumsden, but what measures, such as paying trustees and implementing training, will the cabinet secretary employ to ensure that our boards are more representative of lower socioeconomic backgrounds, ethnic minority backgrounds and disabled people?

As I said to other members, I cannot provide absolute specifics, because we will take some time to review the recommendations. However, the points raised by Gillian Mackay are exceptionally important. We know from a number of people, particularly in our diverse groups in society, that there is not the appropriate training and capacity building. There are perhaps financial disincentives for members of diverse groups to get involved in boards such as NHS-linked charity boards. Those are all important issues on which I will take time to reflect, because, as Paul O’Kane and others have said, our boards should be as reflective as possible of the societies that they represent.

Can the cabinet secretary outline what steps have been taken to improve the management of the funds in advance of the recommendations being taken forward?

I can probably be relatively brief, because I have probably already answered the question in response to a couple of members, Since the issue first surfaced, all boards have looked at their own internal processes and governance relating to the issue. Changes have been made, but probably the most important safeguard that we have in place is that the spending plans are published and open to scrutiny.

A range of steps have been taken by boards since the NHS Tayside issue in particular surfaced. If I can give some reassurance to Ms Roddick, my expectation would be that NHS boards will look urgently at the review to see whether their processes and governance need updated and, if so, to do so at pace.