Tory right-wingers step up pressure on Cameron over NHS

David Cameron's authority as leader of the Conservative Party faces a fresh challenge by Tory right wingers after the row over grammar schools - with some MPs now calling for the NHS to be abolished as a tax-funded system.

Mr Cameron flew back from his holiday in Crete with a defiant message to his party that he will not be forced to drop his opposition to a new generation of grammar schools, except in areas that already have selection.

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However, his leadership is facing a new test by the 40-strong Cornerstone group of right wing Tory MPs with a radical plan for all patients to be required to take out compulsory private health insurance.

The group, which is led by senior Tory backbencher Edward Leigh and has the support of a number of front bench spokesmen, said in a report that scrapping the NHS as a tax-based system could enable the Tories to offer "massive" tax cuts at the next election.

The report by Tory MP Peter Bone will embarrass the Tory leadership, which has ruled out compulsory private health insurance for all and, so far, resisted demands by traditional Tory supporters for big tax cuts.

"The way forward is compulsory insurance. It is up to the Conservative Party to think radically about a health shake-up that will benefit all.

"If the Conservative Party believes in a smaller state, lower taxes and better public services, then a compulsory insurance system will provide this and bring this country's health service into the 21st century.

"An added bonus of this shift in policy would be a massive cut in taxation without penalising public services. The cuts could be directed towards average hard-working families who suffer most due to this Government's taxation policies."

It also rebukes Mr Cameron's remarks to the Tory conference last year, when he said his priority could be summed up in three letters - NHS. The Cornerstone group report says: "Saying our priority is the NHS is one thing but we must not let it become just a soundbite."

Lady Thatcher, whose leadership is admired by the group, famously said she used private health care because she wanted the "doctor of my choice at the time of my choosing", but she was persuaded against compulsory health insurance. Her Chancellor, Lord Lawson said the NHS was like a national religion.

Mr Cameron's Shadow Chancellor, George Osborne, a key ally in the modernisation of the Tory Party, last week ruled out private health insurance as a Tory option, saying: "We are having no truck with ideas for some alternative funding mechanism like social insurance. Nor are we looking to help fund escape routes from public services for the few who can afford it, which is why we have moved away from the idea of the patients' passport."

A spokesman for the Tory leader denied it was a direct challenge to Mr Cameron's authority. "They are free to put forward their ideas," he said. He also dismissed reports that David Willetts, the Shadow Education Secretary, will be dropped for mishandling the grammar schools policy. Mr Cameron will tell his rebel MPs this week in a speech on welfare that he will not allow the Tory Party to "maroon" itself on the wrong side of social change. "David believes the argument about grammar schools was a not particularly welcome distraction. He believes there has been a lot of media froth about U-turns," the spokesman said.

However, Graham Brady, the Tory MP who deepened the row when he resigned from the front bench over his support for grammar schools, hit back yesterday, accusing the leadership of failing to debate on the policy before details are unveiled this summer.

An opinion poll by ICM for The Sunday Telegraph confirmed a poll for The Independent last week that Mr Cameron's standing has been damaged by the splits over the grammar schools. It showed that Gordon Brown was 25 points ahead for competence, although overall, the Tories still have a five point lead over Labour.

A survey by grassroots Tory group Conservativehome showed support for Mr Willetts had slumped, with 36 per cent of Tory members satisfied with him and 60 per cent dissatisfied.