Foundation Trusts

What are Foundation Trusts?

‘Foundation Hospitals’ or ‘Trusts’ are hospitals that are run by NHS Foundation Trusts – a particular type of NHS body introduced by the Health and Social Care (Community Health and Standards) Act 2003.

Foundation Trusts differ from mainstream NHS Trusts in a number of ways: firstly, they have greater freedom to decide how to meet local health obligations; secondly, they are intended to be more directly accountable to local people; and thirdly, they are authorised and regulated by a separate Independent Regulator of NHS Foundation Trusts – Monitor – which was established in January 2004.

In all other respects, Foundation Trusts have the same responsibilities as NHS Trusts. However, they have a different legal basis, as independent ‘Public Benefit Corporations’.

An NHS Foundation Trust is a semi-autonomous organisational unit within the NHS and thus has a greater degree of independence from the Department of Health.

All Foundation trusts remain part of the NHS and continue to provide free care at the point of delivery.

Focussed around devolving power to local people through a new form of social ownership or control, foundation hospitals have similarities with other mutual organisations such as co-operative societies and housing associations.

Addenbrooke’s Hospital in Cambridge became a Foundation Trust in 2004.

The origins of Foundation Trusts

The NHS Plan published by the then Labour Government in 2000 proclaimed the Government’s commitment to relaxing centralised control of the NHS as a means of improving services and providing greater choice to patients.

According to media reports at the time, the then Labour Health Secretary, Alan Milburn, was said to have been influenced by a 2001 trip to the Spanish hospital of Alcorcón in Madrid.

Although this Madrid hospital was built as part of the Spanish Health System, its governance included local government, trade unions, health workers and community groups.  The hospital’s operations were run by a private company that was exempt from some of the rules imposed on state-owned hospitals, including the ability to negotiate its own staff contracts.

In 2002, the UK Labour government fleshed out its policy in relation to Foundation Trusts through a document, ‘Delivering the NHS Plan: next steps on investment, next steps on reform’. The legal basis for Foundation Trusts was provided by the Health and Social Care (Community Health and Standards) Act 2003.

In the autumn of 2003, a pre-selected group of 29 applications by Trusts for Foundation status went forward, 24 of which the Government was supporting. The first Foundation Trusts began to function in April 2004.

Upon the introduction of the new foundation status, existing NHS Trusts were then able to apply to become Foundation Trusts. The Secretary of State and the Independent Regulator considered the application and the ability of the Trust to better fulfil its responsibilities to the public in the proposed new form.

Dismissing concerns around a two-tier system being introduced into the health service by the creation of Foundation Trusts, the last Labour Government said that it hoped to see all NHS Trusts become Foundation Trusts within five years.

In 2010, Andrew Lansley, the incoming Health Secretary for the new Conservative – Liberal Democrat coalition government made it clear that the government believed Foundation Trusts were “an excellent idea, only part realised”.

Under the Health and Social Care Act which received Royal Assent in March 2012, all remaining NHS Trusts were expected to obtain foundation status by April 2014.

In 2019 there were 151 NHS foundation trusts in the United Kingdom.


Central to the Labour government’s original plans with Foundation Trusts was the concept of ‘earned autonomy’ – the idea that a Trust that performed well could ‘earn’ additional powers and funding. Among the extra powers earmarked for Foundation Trusts were powers to borrow money and decide on capital investment, powers to enter into contracts, and powers to diverge from national pay settlements.

There was also a new ‘payment by results’ funding system to replace the ‘block settlement’ arrangements for Trusts, which came into force in April 2004 for Foundation Trusts, to be implemented incrementally for the rest of the NHS.

Opponents of Foundation status claimed that the extra powers and separate funding system for Foundation Trusts would lead to the new Foundations prospering at the expense of other Trusts. They argued that the policy would widen the gap between the best NHS bodies and the worst, by rewarding the best-performing Trusts, and particularly by giving them the power to pay staff more than the rest of the NHS. The way to improve the NHS, these opponents argued, was by improving the levels achieved by all, rather than by favouring the high-performing few.

Similarly, it was suggested that permitting Foundation Trusts to select their own local clinical priorities would lead to closures of expensive units, disposals of assets and other unwanted changes to services.

Concerns were raised that giving Trusts freedom to borrow and spend in line with their own priorities would result in the build up of large deficits and debts, underwritten by the Government.  In 2019/20 the NHS Improvement Accounts showed that 53 foundation trusts were indeed in deficit, albeit that number had halved from some 107 in the year before.

Supporters of Foundation Hospitals meanwhile argue that the new freedoms given to foundation trusts  ensure that they are better able to respond to local health priorities, free from Whitehall interference and the “dead hand” of central bureaucracy.


“The Health and Social Care Act gives you – as an NHS foundation trust – genuine operational independence to determine how best to meet the needs of your commissioners……….The Act prevents the Government – or anyone else in the NHS – from discriminating against you in favour of the private sector….

“The Government’s ambition is to ensure all providers of NHS-funded care – both within the NHS and outside it – are genuinely free from political interference to focus on how best to treat their patients, free to design their services according to what their commissioners want and free to continuously improve the quality of their services.”

Health Secretary Andrew Lansley; letter to NHS Foundation Trust chief executives – April 2012