"We are not reversing all the Conservative reforms," he declared when launching Renewing the NHS, a document which none the less promises an end to GP fundholding as it currently exists and the NHS internal market.
Labour will "discourage the signing" of long-term contracts for the private sector to run entire hospitals for the NHS. It will also review private practice in the NHS both to ensure the service is "adequately recompensed" for use of facilities and to judge its impact on waiting times. But Mr Blair said "we want to raise the standards of the health service - not get sucked into the old pay beds issue".
Virginia Bottomley, the Secretary of State for Health, attacked the plans as "a big botch" claiming that Labour, in spite of its rhetoric, was turning back the clock and "wrecking the reforms".
Mr Blair replied that in place of the inflexibility of the old NHS and "the market chaos of the Tory NHS", Labour offered "a sensible third way for the future".
Labour will replace the annual contracts of the market with longer-term rolling "comprehensive health agreements" in which health authorities will commission care from separately managed NHS hospitals and units. Mrs Bottomley has recently said that she wanted to see longer-term contracts and Labour said work that the NHS Executive is already doing to simplify purchasing by using "health resource groups" will be adopted.
Trusts will retain their separate boards - but they will be reformulated to include patients, health professionals and local representatives, all appointed in line with the Nolan recommendations. Trusts will be redesignated as Local Health Services, but they may retain their names. They will, however, cease to control their own assets and their absolute right to set their own pay rates looks set to go. Instead Labour will offer "local flexibility" on pay within a national framework.
Health authorities will commission care for their populations, advised by GPs, in a move that Mr Blair said would retain what is currently called the "purchaser-provider split" but without the detailed transactions that have wasted "millions of pounds" on bureaucracy. Authorities will retain the right to choose which local services they use "to suit patient needs".
The Labour document states: "We believe there should be a separation in the planning and delivery of health care. We want health authorities to commission care, but we do not want them to run hospitals on a day- to-day basis." Indeed health authorities will have "neither the capacity or ability to do that". The chief executives of trusts will be held accountable for keeping within budget, and hospitals will be allowed to keep "a proportion" - not all, as at present - of any savings they make. That, Labour says, will provide an incentive to be efficient while allowing gains to be shared more widely by the health authority.
The document implies GP fundholding will be phased out. But Margaret Beckett, Labour's health spokeswoman, promised to consult GPs "to thrash out a realistic timetable" and the document contains no absolute commitment to abolish it.
In its place, Labour will promote GP commissioning, where family doctors work with health authorities to commission care - allowing a wide range of different models along lines already adopted in Nottingham, Blackpool and East Dorset.
In Nottingham, a group of 200 GPs caring for nearly 400,000 patients works through an elected forum with the local health authority to buy care for their patients. They claim many of the advantages of fundholding. Physiotherapy is available in the all the practices, out-patient waiting times have been cut and the local trusts' services for ophthalmology, ear, nose and throat and orthopaedic surgery improved as the commission has made changes that the GPs have sought.
The document says it is "essential" that GPs retain some influence over hospitals and Labour is keen to see the use of "shadow budgets" evaluated with individual accounts held by the health authority for each practice so that GPs can continue to switch spending between drugs and other treatments.
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