Ed Miliband has pledged that a Labour led government would impose a profit cap on private providers of NHS ‘clinical services’. He made the announcement at a speech to launch the party’s general election campaign in east London today.

The Labour leader said that the 5 per cent cap would form part of a “double lock” to protect the health service from the “tide of privatisation”, in tandem with the £2.5bn extra funding per year which Mr Miliband announced last year.

Ed Miliband

A Labour led government would impose a profit cap on private providers, Ed Miliband said

The cap would apply to all contracts worth more than £500,000 delivered by private companies. Labour told HSJ the rule would apply only to “contracts for clinical services”, therefore excluding for example, back office services or supplies such as medicines. It also said the rule would not apply to GP practices.

The party has not yet confirmed how it would be applied to support services such as diagnostics.

Labour said any surplus made above the 5 per cent cap would need to be returned to the government.

However, commissioners would have the power to raise or lower the cap on particular contracts.

Mr Miliband also announced a Labour led government would develop a more “cost reflective” tariff system in order to prevent what he described as companies “cherry picking” lucrative services.

Speaking at the Queen Elizabeth Olympic Park in east London today, the Labour leader said: “Privatisation cannot meet the needs of 21st century healthcare.

“We’re going to restore the right principles to our National Health Service.

“With the next Labour government, we’ll scrap David Cameron’s market framework for the NHS and stop the tide of privatisation. The NHS will be the preferred provider.

“No company working with the NHS will be able to profit by cherry picking - rejecting patients with the more complex and expensive needs for their own advantage.”

A Labour statement added: “Labour will develop a more cost reflective tariff system to ensure that prices paid better reflect patient complexity. This will stop providers getting over-reimbursed if they only treat simple cases and ensure that NHS hospitals – that have to treat all cases – are not short changed.

“Where providers are not delivering high quality care, commissioners will have to serve remedial notices, and if necessary terminate contracts and recommission services.”