Toning down past hostility by Labour, which had threatened to "abolish" fundholding GPs, Mr Smith will emphasise the need for consent in plans to replace GP fundholding with joint commissioning by groups of family doctors.
Labour's aim, however, would remain to bring GP fundholders within the planning remit of the National Health Service. It would seek to end the system under which the internal market has allowed queue-jumping by fundholders, who purchase hospital care for their NHS patients.
Mr Smith faced a barrage yesterday from Stephen Dorrell, the Secretary of State for Health, over Labour's refusal to match the Government's promise to spend more in real terms on the NHS every year.
But Mr Dorrell's confidence that he can beat Labour on its home ground on health took a jolt from the British Medical Association, which has circulated a briefing note to peers for the second reading today of the Primary Care Bill, warning that it could lead to hospital closures.
The briefing note, which The Independent has seen, warns peers that the plans could involve a switch in resources from hospitals to fund an expansion of primary care.
The Bill gives the Secretary of State powers to establish pilot schemes across the country from April 1998 for family doctors to expand the range of services they offer, including minor surgery normally only on offer in large hospitals. The BMA warns peers in the briefing note that unless more money is pumped into the NHS, the pilots will not work.
Tessa Jowell, Labour's health spokeswoman, also disclosed that in spite of the Government's claims to be spending more on the NHS, there were shortages of GPs across the country. Figures given to her by the Government show that there are nearly 1,000 unfilled GP vacancies in practices across England and Wales, with some of the largest gaps in inner-city areas such as east London. The Government is seeking to counter the shortages by allowing hospitals to hire GPs for the first time.
Labour believes it can convince the voters about its commitment to the health service without competing with the Tories on spending. But Mr Smith and other Labour frontbenchers were repeatedly taunted by Mr Dorrell during a Commons debate on the Budget to intervene at the despatch box to commit Labour to spending more on the NHS in real terms.
"If one of them - any of them - can give a commitment that a Labour government if elected would give a real-terms increase to health expenditure, they can intervene," he said. "They cannot because they won't give that pledge."
The Government has announced that it is spending an extra pounds 1.6bn - an increase of 2.9 per cent - on the NHS next year. Mr Dorrell last week also announced that hospitals will be given an extra pounds 20m this year to avoid a winter crisis.