Milburn tries to defuse row over 'two-tier' hospitals

Alan Milburn will try to quell Labour's simmering row over the formation of prestige hospitals today by insisting no NHS trusts will be left to "sink or swim".

In a document outlining plans for "foundation hospitals", seen by The Independent, the Secretary of State for Health aims to answer criticism that the Government is putting in place a "two-tier" National Health Service by giving more money and freedom to the best hospitals rather than helping the poor performers.

"Since different NHS trusts have different starting points, different forms of action are needed ... A mix of incentives, support and intervention is needed," he writes. "No part of the NHS will be left to sink or swim. Every part of the NHS will be helped to raise its game." The move will be seen as a tacit admission that the foundation hospitals strategy has appeared to focus on the top performers.

In a Commons statement, Mr Milburn will announce that financial freedoms will no longer be limited to hospitals obtaining the top "three-star" rating – the only ones allowed to win foundation status. "Two- star" hospitals will also be allowed more freedom to go ahead with capital projects without government approval, keep the proceeds of land sales, set up "spin off" companies and enjoy a lighter inspection regime. The worst or "no-star" hospitals will qualify for at least £250,000 of high-quality support and help to draw up improvement plans.

The Health Secretary will also announce safeguards to reassure critics worried that foundation status is a halfway house to privatisation.

The legislation will ensure the prestige hospitals will operate in the public interest inside the NHS.