PM rejects alarm at 'two-tier' NHS plan

Tony Blair has rejected a warning from his Cabinet Office strategy unit that plans to give the best hospitals freedom from Whitehall control run the risk of creating a two-tier NHS.

Adair Turner, a former director general of the Confederation of British Industry and a member of the prime minister's forward strategy unit, is understood to have cautioned against rapid implementation of plans to create a network of "foundation hospitals".

In a private presentation to Mr Blair before the budget in April, he said foundation hospitals could lure the best staff because they would be free to offer higher pay and less interference. That might make it harder for poorer establishments to recover.

Mr Turner did not oppose the principle of freeing hospitals from central government control, but suggested it should be delayed until the huge sums being invested in the NHS create the extra capacity it needs.

The prime minister had asked Mr Turner to engage in "blue skies thinking" about supply side problems in the health service to parallel the work on NHS finance that the chancellor, Gordon Brown, commissioned from Derek Wanless, a former chief executive of NatWest.

Unlike Mr Wanless, Mr Turner has not written a formal report and does not intend to do so. But he has a sheaf of overhead slides that he uses to persuade the politicians of the virtues of payment by results in the NHS, providing more choice for patients and more incentives for staff.

His thinking is understood to have influenced plans an nounced by Alan Milburn, the health secretary, in April to encourage hospitals to treat more patients from the waiting list by rewarding them with extra cash.

But the prime minister and Mr Milburn dismissed his fears and went ahead with plans for the best state hospitals to become not-for-profit enterprises, competing for patients outside the normal framework of public sector control.

They are planning to name the first foundation hospitals later this year from among those awarded three stars in the latest NHS gradings.

Ian Bogle, chairman of the British Medical Association, last night asked Mr Milburn for an early meeting to voice doctors' concerns that the upgrading of foundation hospitals would turn the rest of the NHS into "a second division service".

David Hinchliffe, Labour chairman of the Commons health select committee, told BBC Radio 4's Today programme: "There are very real fears that we could have a two-tier system arising from the advantage being given to foundation hospitals.

"When it was first mooted by the secretary of state, I was concerned that he echoed very much the language that was being used the Conservative party in the early 1980s when they introduced the internal market."

The prime minister's official spokesman said: "This is about a process of levelling up, not levelling down, and it is about improving standards right across the board." Mr Turner was working closely with the relevant departmental officials.