The government will take a tough approach to moving to an all foundation trust system, and seek to put providers “outside state control”.

The white paper says all trusts should become foundations by April 2014. It threatens that if trusts fail to come up with “credible plans” the Department of Health will force change, for example a management takeover, merger, or tendering their running to the independent sector. There will be a new DH unit to push the process and NHS North East chief executive Ian Dalton has been made managing director of provider development.

The paper says all providers, including remaining non-foundations, will be taken under the control of Monitor from April 2013. A senior source said Monitor’s transition into a system wide economic regulator, that will protect essential services if providers fail, could be used as justification to make it easier to become a foundation.

In addition, the white paper proposes to move foundations “outside state control” but says they “will not be privatised”. HSJ understands the plan is to push through the vision first set out by former health secretary Alan Milburn where foundation trusts were not on the government balance sheet.

That would mean FT borrowing would not be recorded as UK government debt, nor would FT spending be counted against DH spending limits.

The government will consult on removing or relaxing a number of DH controls over FTs, including being allowed to determine their own governance arrangements and abolishing the cap on the income they can earn from private patients.