Liberal Democrat leader Nick Clegg has chosen the launch of a report calling for primary care trusts to be replaced by a health insurance style system to flesh out policies on healthcare reform.

Mr Clegg was speaking at a lunch held by think tank Reform. The report advocates a system where everyone could spend a tax-funded premium of£2,000 a year with competing independent health protection providers.

But he shied away from backing the Reform proposals completely, saying that while they had "many strengths", the Liberal Democrats would support elected accountability for PCTs. Mr Clegg, whose comments came days before the Liberal Democrat party conference in Bournemouth, also revealed that his party favoured allowing top-up payments. He said: "Productivity is stagnant, outcomes are worse than in much of Europe. And health inequality is the widest since Victorian times. Labour's experiment has failed."

In a 2005 interview with The Independent, Mr Clegg had refused to rule out considering insurance-based models similar to those in use in Europe and Canada.

But a Liberal Democrat spokesperson said Reform had approached the party about the speech. He said: "Nick's very clear we're not talking about insurance based systems at all."

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