Alan Milburn yesterday moved to head off a backbench rebellion, saying he would like all NHS hospitals to achieve independent foundation status to avoid creating a two tier NHS.
The health secretary has come under fire from more than 100 MPs who fear his plans to give freedoms to some hospitals will form an elite and recreate the Tories' internal market.
Yesterday Mr Milburn said he was writing this week to all two star trusts asking them to consider applying for NHS foundation status in the next bidding round this summer. Thirty two hospitals have applied in the first round.
The Treasury yesterday went out of its way to insist it did not oppose the idea of foundation hospitals as long as their borrowing powers remained on the government balance sheet. Treasury sources denied they they were questioning Mr Milburn's willingness to stick by the strict borrowing limits agreement brokered with Downing Street in October.
Gordon Brown and Mr Milburn have been at odds over public service policy, even if some of the rivalry is exaggerated by leadership ambitions.
Some party modernisers accused the chancellor's acolytes yesterday of behaving like "chumps" in their efforts to denigrate Mr Milburn.
Giving evidence to the health select committee, Mr Milburn said the freedoms being given to NHS hospitals represented a far reaching and fundamental change. "We are very clear about the end objective," he said. "It has never been my view that this policy should apply to an elite group."
Some senior rebels, including the science select committee chairman, Ian Gibson, said they would welcome this, even though the same universal foundation status is already advocated by the shadow health secretary, Liam Fox.
Mr Milburn also sought to ease backbench fears by saying he would allow NHS foundation hospitals to use their borrowing powers and surpluses to help primary care trusts to improve primary care. But in a 150-minute grilling yesterday he said the Labour local government leader, Sir Jeremy Beecham, was wrong to suggest councils should be given seats on the boards of the proposed foundation trusts.
He also rejected claims that the star rating system did not reflect real local hospital performance. Only hospitals that secured three star status were entitled to apply for foundation status.
Mr Milburn explained he was starting with three star status hospitals because trying to cover all hospitals at once would have a "cataclysmic ef fect on the health service". But he insisted the NHS was in a transitional phase and the 2008 target for all NHS hospitals to achieve independent foundation status was realistic.
A bill would be introduced within the next month with the first foundation hospitals coming into legal force in spring next year.
David Hinchliffe, chairman of the select committee, told Mr Milburn the government's ideas were clearly evolving, but the pledges to consult the public had not been kept.
"The entire process of starting this has treated the local communities with contempt," he said. The plans amounted to reintroduction of the Conservatives' internal market.
The normally loyal Labour MP Siobhan McDonagh also asked why he was bringing back the internal market.
Mr Milburn countered that under the Tories the internal market had required competition based on price between NHS institutions, while his proposals were based on choice for patients.
He said hospitals that lost patients "might sit up and take notice".
Yesterday Dr Fox said his party was "very much supportive" of the plans, provided they were not too watered down.
The Liberal Democrat health spokesman, Evan Harris, said it was hard to deny that the government was widening the gap between different health facilities.
What's the idea? And what happens next?
Why do some Labour MPs object to foundation hospitals? They fear a two-tier NHS, with an elite sucking staff and resources away from "bog standard" hospitals - and perhaps charging patients for superior service.
How does Alan Milburn respond? Desperate to improve delivery, he says foundations will unleash "the spirit of public service enterprise" and push up performance. He thinks foundations are a way of convincing the middle classes to stick with the NHS. People (the vast majority) not living within a foundation's catchment would not, however, have a right to choose to go there for treatment.
What's the big idea? Initially a dozen or so high-performing English hospitals (such as Sunderland or the Royal Devon and Exeter) would be given a new legal status.
Is this just in England? The Scottish executive has not only rejected the idea, it is getting rid of hospital trusts altogether. Welsh Labour leader Rhodri Morgan declared the principality a foundation-free zone.
How do supporters and opponents line up? Doctors are keen, so is the NHS Confederation, representing trusts at large. Unison is against, fearing they are going to be secretive and too close to business. Tories say the plan does not go far enough and leaves foundations overregulated.
What about accountability? Foundations could be more accountable to local people than regular hospitals since some members of their governing boards are to be elected.
Where do GPs fit into the picture? Foundations will rely on referrals from GPs as at present; the idea is they will compete more fiercely to attract the money that comes with patients.
What's the timetable for change? There has been some slippage. As of yesterday 32 trusts have applied and that will have to be whittled down. Successful trusts are to get "shadow" status in early autumn and full status from April next year.
What happens next? In theory the number of foundations could expand indefinitely; there is talk of 50 before the next election. The Department of Health says primary care trusts could also get foundation status. Tony Blair has said all hospitals could eventually become foundations, which some say defeats the point of the exercise.
