Blair delays NHS reform to avoid party split

Tony Blair has delayed flagship legislation to reform the NHS by creating "foundation" hospitals, because he does not want to open up a new political row in the Labour Party during a difficult phase in the Iraq war.

With domestic politics effectively in deep freeze, government business managers are already planning what they call "domestic re-entry" – when public attention will return to issues closer to home. One minister confirmed last week: "They have put off foundation hospitals until after Easter because they don't want the point of domestic re-entry to be something which is going to cause a big backbench rebellion."

More than 120 Labour MPs have signed a Commons motion warning against creating a "two-tier" NHS, in which patients receive better treatment and staff are better paid at foundation hospitals than in other parts of the service. Foundation hospitals will have greater freedom than other NHS trusts to set their own budgets and pay rates and to borrow money, in a move designed to reduce centralised control of the NHS. The proposal led to a semi-public row between the Health Secretary, Alan Milburn, and the Chancellor, Gordon Brown, over how foundation hospital budgets will be controlled.

Other critics of the reform, including the former health secretary Frank Dobson and the leaders of the main health unions, believe it could open the way to more private practice within the NHS.

There are also fears that as more and more hospitals take on foundation status, the regulator – who will have the power to decide what treatments and services foundation hospitals are allowed to provide for their patients – will, in effect, become the head of the NHS, which will then have passed out of government control.

Mr Milburn faced highly critical questions form normally loyal Labour MPs when he appeared at a closed meeting of the Parliamentary Labour Party last week.

Helen Jones, Labour MP for Warrington North, wanted to know who would appoint the regulator and whether he or she would have to answer questions in the Commons. MPs at the meeting claimed that Mr Milburn skirted around the issue in his reply.

The decision to delay the legislation also created an embarrassing moment last week for Ben Bradshaw, a junior minister who has been acting Leader of the Commons since the resignation of Robin Cook.

Mr Bradshaw was taunted by the Tories after he had presented a timetable for Commons business covering the period to Easter, with no mention of the Health and Social Care Bill which will bring foundation hospitals into being.

Eric Forth, the shadow leader of the Commons, asked: "What has happened to the foundation hospitals Bill? It was, I thought, a flagship of the Government's legislative programme. Has it run aground? Is it possible that the reason for its non-appearance is that the Government fears yet another huge rebellion, so the health service is being denied the claimed benefits of foundation hospitals for grubby political reasons?"

The decision to delay the legislation follows an angry reaction to a magazine article signed by Tony Blair, which appeared to be calling for charging in the NHS and in schools. Since the article's appearance, in the magazine Progressive Politics, Mr Blair has been warned by his leading adviser on relations with Labour and the trade unions, Baroness Morgan, that it was harming relations between the Government and its natural supporters.

It was angrily denounced by Bill Morris, leader of the giant TGWU union, who forecast that it would mean that patients and parents would have to pay for services that are currently free.