Hain supports attack on Milburn's plans for foundation hospitals

Alan Milburn, the Secretary of State for Health, faced fresh criticism of his plans for foundation hospitals last night when Peter Hain, the Welsh Secretary, appeared to endorse an attack on the policy.

Mr Milburn moved to reassure Labour MPs over his proposals yesterday by unveiling safeguards on their operation and redirecting billions of pounds of NHS cash to the poorest areas of England. In a Commons statement on his plans to free the best hospitals from Whitehall control, the Health Secretary insisted that he wanted an extension of public ownership of hospitals rather than privatisation.

But in what seemed to be the first open criticism of the plans by a cabinet minister, Mr Hain backed a speech by Rhodri Morgan, the Welsh First Minister, which derided the very idea of foundation hospitals. Mr Morgan was due to underline the "clear red water" emerging between the Welsh Assembly and the UK Government in a speech at Swansea University.

According to the text of his speech, he criticises government plans for foundation hospitals, saying they will be used by those who are already have the most social advantages. The experiment will end not in patients choosing hospitals but hospitals choosing patients, the speech says. "In welfare markets, producer choice, rather than consumer choice, is too likely to be the outcome."

Speaking in a Welsh Assembly debate, Mr Hain said: "Having had the opportunity to have an advance look at the text he is delivering tonight in Swansea, I very much endorse that speech and commend it be read by every member of this Assembly."

Mr Hain was unavailable for comment last night, but his officials said he had meant to praise Mr Morgan's right to carve a different path for Wales rather than criticise government policy. "The whole principle of devolution means that Wales can do something different and we absolutely respect their decision to do that. But as a member of the UK Cabinet, Peter has no problem at all with the Government's policy on foundation hospitals for England," an aide said.

Mr Milburn also faced a blistering attack from Gwyneth Dunwoody, MP for Crewe and Nantwich, as he outlined his plans in the Commons.

She dismissed his claims that he would impose a "legal lock" on a future government seizing the assets of foundation hospitals. "There is no legal way in which he can bind these trusts," she said.

"To create such foundation hospitals will not only damage the interests of the patients but will, in a final analysis, create the machinery that any incoming Conservative government in the future would use to privatise hospitals."

But Mr Milburn said that any Tory government that wanted to sell off foundation hospitals would have to seize their assets not from the Department of Health but from local people who would in effect own their neighbourhood trust.

The Health Secretary pleased Labour MPs by announcing a new NHS funding formula that will redirect money to the most deprived areas of the country.