Leaked report warns of 'two-tier NHS'

Tony Blair is accused of creating a two-tier NHS, in a leaked report by one of his senior advisers.

The confidential report, written for No 10 by Adair Turner the former CBI director general, warns that moves to give the best hospitals more freedom will divide the health service into first and second divisions.

The plan for prestigious Foundation Hospitals which could boost pay to lure the cream of nurses and doctors from other parts of the NHS is one of the Government's flagship policies to lever up standards.

In his report, Mr Turner says the reforms should be delayed to give time for extra spending for the NHS to increase capacity and staffing in less-successful hospitals. To rush ahead would risk struggling hospitals losing their best professionals because they could not match the range of bonuses the new foundations could provide, he says.

The warning will be particularly embarrassing for the Government because it comes from one of the Prime Minister's stable-of unpaid "blue skies" advisers in the Forward Strategy Unit set up by Mr Blair after the 2001 election. Mr Turner is one of the Prime Minister's favourite businessmen, credited with building bridges between the CBI and New Labour. He holds a string of directorships plus the chairmanship of the Low Pay Commission.

It is the second time this year that ministers have found their policies challenged in leaks from Mr Blair's small circle of parttime long-term thinkers. Transport Secretary Alistair Darling was forced to disown plans for tolled superhighways proposed by Lord Birt which was leaked by opponents.

The most controversial suggestion in the Turner report amounts to a return to the Conservatives' controversial internal NHS market which Labour pledged to abolish on taking power in 1997. Every treatment would be awarded a "price tag" so that doctors and patients could shop around for the best value at both NHS and private hospitals.

Mr Turner is also calling for staff to be given extra duties - nurses taking on some doctors' duties - to raise capacity.

The report will be seized on as evidence that Mr Blair is attacking the principles of the NHS by backdoor privatisation. There was immediate speculation that the report had been leaked by a minister or civil servant in a sabotage bid. Downing Street refused to comment on the accuracy of the leak.