Public to be offered £1 shares in new foundation hospitals

The public will be able to buy a slice of their local foundation hospital for just £1, under a government Bill published yesterday. The £1 shares will confer ownership of the trust on the shareholders, who will have the right to vote in the election of their governing board.

But this is not an investment opportunity designed to appeal to refugees from the plunging stock market, and shareholders will not be able to sell the assets of their trust or trade their shares.

The measure, set out in the Health and Social Care (Community Health and Standards) Bill, will create a new form of public ownership, and is intended to devolve control of the NHS to communities and increase democratic involvement in running local hospitals.

Alan Milburn, the Health Secretary, said: "This Bill is about strengthening the link between local communities and local health services. Within four or five years every NHS hospital will be able to become an NHS Foundation Trust. They will be owned and controlled by local people with hospital governors directly elected from communities."

To become shareholders in the NHS, members of the public will have to live within the local area served by the hospital or have been a patient at the trust. A health department spokesman said: "This is about creating a new form of public ownership. In order to have a proper change of ownership there had to be some device by which members of the trust signalled that they owned it.

"It could be as little as 1p, but there has to be some real connection between the members and the organisation. Otherwise, it's a paper exercise. You can't just say Trust A has half a million members. There has to be a real thing that people have joined."

A total of 32 NHS trusts have applied for foundation status and the successful applicants will be announced later this year. However, some hospitals are sceptical over the extent of the promised freedoms and some have applied simply to avoid missing out later. As one chief executive said yesterday: "You can't win the lottery without buying a lottery ticket."

Ministers, facing a backbench rebellion by more than 100 Labour MPs worried about the creation of a two-tier NHS, have toned down their claims that foundation trusts will stimulate enterprise and innovation, and have instead focused on their role in decentralising and democratising the NHS.

Hospitals will not compete on price – they will all operate to the same NHS tariff – but they will compete on speed, quality and convenience. John Hutton, a Health minister, said: "Those hospitals which can do more will get more. That is not market competition, it is patient choice. There will be incentives for greater activity, helping to expand the capacity of our healthcare system."

They will have limited freedom to offer rewards and incentives over and above national pay rates, but the independent regulator to be appointed to monitor their activities will step in to prevent them poaching staff. The regulator will also set their borrowing limits and cap their private work at existing levels.

Gill Morgan, chief executive of the NHS Confederation, said democratising the NHS carried the risk that foundation trusts could be held hostage by local interest groups. "But the counter argument is that you will have a group of local people who understand the issues and can act as advocates. It might make sure we can have a more informed debate at a local level," she said.