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Thursday, 3 October, 2002, 08:02 GMT 09:02 UK
Blair denies rift with Brown
Doctor and nurses with patient
Critics fear the new hospitals would pay too much

As Tony Blair urges his party to be bolder in pressing forward public sector reforms, a fierce battle is taking place with Gordon Brown over the future of the NHS.

The Chancellor is fighting a rearguard action to limit the freedom of the so-called "foundation trust" hospitals to borrow money independently of the government - a plan reportedly hatched in the Prime Minister's office.

The essential value and ethos of the public service should remain, but its monolithic provision should change

Tony Blair
Health Secretary Alan Milburn believes he still has the Prime Minister's backing for the plan - and both sides interpreted the Prime Minister's speech on Tuesday as support for their position.

Speaking on BBC Radio 4'sToday programme, the Prime Minister said that both Ministers made valid points, but it was a practical not an ideological issue that could be resolved amicably.

"Both (Ministers) have perfectly legitimate points. The Treasury's concerns over whether public finances would be secure is one that Alan would share. Alan's concern that these hospitals are as free as possible is shared by the Treasury.

"The principles of the foundation hospitals, and the way they will be pioneers in the health service for the future, was agreed at the time of the Budget.

"The essential value and ethos of the public service should remain, but its monolithic provision should change," Mr Blair added.

On Monday, Mr Brown gave a coded warning in his Conference speech that there would be "no playing politics to bypass our fiscal rules".

Later, a senior Treasury official said that Labour should have "no time for off-Budget gimmicks" and said it was "foolish and regrettable" that both sides were briefing against each other at the party conference.

If Mr Brown loses, it will be a rare defeat for the Chancellor who is generally considered to have the last say on domestic policy matters.

Treasury fears

Mr Brown fears that foundation hospitals would be able to bust his public spending limits by going directly to the market to raise capital for expansion.

And he is also worried that they would be able to bid up wages, making it more difficult to control the overall level of public sector spending and undermining his planned three-year wage deals.

Already public sector wages are rising faster than those in the private sector, according to research firm Income Data Services.

Mr Brown has been giving stronger and stronger warnings about the dangers of the approach championed by Health Secretary Alan Milburn.

Last week he said that there would be no going back to the old days "where anybody could borrow... bills were run up in an irresponsible manner, and the government had to be guarantor."

"We can only proceed in a sensible and prudent way and therefore they cannot be reckless borrowing."

High stakes

But the stakes in the battle could not higher.

Foundation trust hospitals are the cornerstone of Mr Milburn's plan to modernise the NHS and devolve power to consumers and staff.

He plans to allow hospitals which have received a three-star rating - mainly teaching hospitals - new financial and operational freedoms later this month, as a pilot for rolling out the scheme nationally.

And Prime Minister Tony Blair appeared to back his plans in his conference speech on Tuesday.

But without the freedom to borrow money to build, and to hire staff at whatever wages they want, the new hospitals will have only limited scope for exercising their new powers.

NHS worries

Behind this battle is an even bigger issue of how to run the NHS.

Many other NHS hospitals are worried that the new foundation trusts will cream off the best doctors and create a two-tier NHS.

"Creation of a small group of autonomous hospitals could undermine collaborative working in the NHS and may do little to tackle existing variations in quality and access to care," said Nigel Edwards of the NHS Confederation, which represents hospital and care trusts.

And the Kings Fund, an influential think tank that backs further decentralisation, also warns that without tighter regulation of hospitals, any plans to decentralise could lead to further inequalities.

They want full decentralisation to the local level, coupled with tougher controls through bodies like the Commission on Health Improvement and the National Institute for Clinical Excellence.

Internal market

Despite his commitment to reform, it is still not clear to many observers whether Mr Milburn believes that the NHS should be run as an internal market - the model promoting by the Tories when they last tried to reform the NHS.

Mr Millburn has created primary care trusts, which from April have had the power to buy services on behalf of patients from any hospital they want.

But it is not clear how far he wants hospitals compete with each other for work - which could drive improvements, but could also increase disparities if bad hospitals were driven out of business.

The NHS has proved notoriously difficult to reform.

It is the prime example of the "institutional bias" Mr Blair has pledged to tackle.

But the devil is the detail, and so far Labour is having as much trouble figuring out how to reform the NHS as its predecessors.

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30 Jun 02 | Health
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