John Hutton, a minister of state at the Department of Health, said the Government should end the practice of redistributing surpluses from successful hospitals and schools to those that need more cash.
Writing in a pamphlet for the Social Market Foundation, a New Labour think-tank, Mr Hutton called for successful hospitals and schools who cut costs and produce surpluses to be allowed to retain the money to improve their services. The remarks risk reopening a row with Gordon Brown and Labour traditionalists including Frank Dobson, the former health secretary, who oppose competition inside the health service.
"The concept of `profit' can and should play an increasingly important role in improving quality. Hospitals and schools that provide a high- quality service should be able to retain any surplus and be able to re- invest that profit in developing those successful services even further," he said.
His remarks will also jar with hospital managers who are warning the Government they will have to close wards before the end of next month because they have run out of money before the end of the financial year.
A survey by The Independent has found that some hospitals are already millions of pounds in deficit and are considering ward closures to balance the books before the end of the financial year next month.
Mr Dobson called on the Health Secretary, John Reid, to intervene urgently to stop ward closures. "I don't think it is right just to review what is going on across the country. He should step in and stop ward closures," Mr Dobson said. Ward closures would blow a hole in Labour's election campaign strategy to reassure voters that its NHS reforms are at last delivering real improvements in services.
Mr Dobson blamed the closures on foundation hospitals that were siphoning off funds from ordinary NHS hospitals. Mr Hutton's proposals will be seen as an attempt to further enrich the new foundation hospitals at the expense of poorer neighbouring units.
"What is happening up and down the country is very disturbing," said Mr Dobson, an opponent of foundation hospitals. "It is a product of reintroducing competition into the health service and forcing primary-care trusts to buy services from the private sector.
"Foundation hospitals are contributing to the crisis. They are being given a privileged position. They will get more money for doing the same work as non-foundation hospitals that desperately need more resources."
Mr Reid is determined to press ahead with the "unrelenting New Labour" agenda which will be set out by Tony Blair for the general election campaign today. Mr Reid has told colleagues that they must resist pressure to abandon their attempts to offer patients choice in hospitals on the NHS, free at the point of use. From December, all NHS patients will be offered a choice of five hospitals when they need treatment.
The Health Secretary will accuse the Tories of helping the few by taking pounds 1.5bn out of the NHS to pay for treatment in the private sector, providing patients can pay half of the bill themselves. A report in today's British Medical Journal also challenges the Tory plan. It claims that the Australian drive to push more patients into private health insurance schemes was expensive, and created greater inequality.Reuse content