Labour plans to overturn principle of a free NHS

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The NHS will never work unless we change the way we pay for it is changed

Secret Labour proposals to water down the founding principles of the NHS by proposing a health service providing only "largely comprehensive services", "overwhelmingly free at the point of use" are contained in a policy document leaked to The Independent.

The highly controversial moves, which appear to open up the possibility of new limits on NHS services and raise the prospect of charges for some patients who are able to afford them, are contained in a draft discussion paper prepared by a policy commission co-chaired by Alan Milburn, the Secretary of State for Health. They pledge to use the private sector "to the full", fuelling the dispute over Labour's plans to reform public services.

But the document will enrage Labour activists and union leaders because it directly contradicts the first two "core principles" in the Government's NHS 10-year plan – and runs counter to the social doctrine on which the health service was built. The preface to the 10-year plan, published in 2000, declares that "the NHS will provide a universal service for all based on clinical need, not ability to pay" and promises that "the NHS will provide a comprehensive range of services".

It was deliberately phrased to echo the words of the 1942 Beveridge Report, which paved the way for the creation of the welfare state, and proposed a comprehensive healthcare system "without a charge on treatment at any point".

Last night Mark Seddon, editor of the left-wing Tribune newspaper and a member of Labour's national executive, said: "This does not just water it down, it waters it down quite substantially.

"In a way it's a statement of where we are, but it also opens up the door for further deals with the private sector.

"For party members any watering down of these very basic values of the NHS would be unacceptable and would be contrary to what Tony Blair promised in 1997.

"There's a real fear that the NHS is being privatised by stealth, although it's not being done by stealth if they use language like this."

The document comes after Tony Blair's references to left- and right-wing "wreckers" during his speech to the Labour spring conference at the weekend provoked fury from union leaders.

The latest proposals are yet to become official Labour policy, but they will further infuriate the public-service unions, who have expressed outright opposition to Mr Blair's moves to increase the private sector's role in public services.

The document, part of the policy-making process that will culminate in the next Labour manifesto, will be debated tomorrow by the 182 members of Labour's national Policy forum. It has been drawn up by a policy commission including Mr Milburn and the Health ministers John Hutton and Hazel Blears. Union leaders will be dismayed by its references to "franchising" management to the commercial sector and a clear reference to the expanding role of private companies in the NHS.

It says: "To increase capacity open to the NHS we need also to use suppliers of private health care to the full. For as long as there is a shortage of capacity within the NHS, it will be vital to ensure that NHS patients have the opportunity to be treated in any high-quality hospital in the country."

It proposes "mutual" or "public interest" companies to operate independently within the NHS and floats the idea of making direct cash payments to elderly people or their relatives to allow them to buy social care on the open market.

John Edmonds, general secretary of the GMB union, said: "Tony Blair is increasingly accusing those who warn of NHS privatisation as wreckers, but this document shows that the fundamental principles of free health care at the point of need is now facing abolition.

"Once again the Government's commitment to the private sector appears to be coming before their commitment to the health service."

Dr Liam Fox, the shadow Health Secretary, said: "I think it is clear that Labour are moving away from the position that they were elected on for a fully comprehensive service, free at the point of use.

"As ever with New Labour you have to watch their every word, and their every word in this case suggests they are moving to a service which is relatively comprehensive and largely free at the point of use."

The storm over the National Health Service broke as Mr Blair had his latest Question Time clash with Iain Duncan Smith over health policy.