Tony Blair has restated his commitment to a centrally funded health service, pouring cold water on Conservative plans for an expansion of private healthcare and ruling out tax breaks for private policy-holders as a 'deadweight cost'.

In a warmly received speech to The Royal College of Surgeons on Tuesday, watched by health secretary Alan Milburn, the prime minister spelled out his plans for the health service under the NHS plan.

He presented the private sector as a drain on the NHS's finances and staff, saying: 'Every pound spent on tax relief is a pound not spent on the NHS. More than that, the deadweight costs of providing tax breaks for all those who currently have private health insurance would be£700m.'

Although Mr Blair did not directly refer to the Conservative Party, he tore apart shadow ministers' plans to encourage private healthcare for less serious conditions. 'Many insurers already exclude pre-existing conditions and some will not cover any condition over the age of 75. So I think it is unlikely that the insurance industry is going to restructure and make provision to cover this group.

'And even if they can get cover, how is the pensioner couple with an average income of£250 a week meant to afford£70 a week premiums?'

The prime minister acknowledged that spending had been 'tight' during the first two years of his administration, and promised that continuing economic prosperity would be matched by more increases in funding. In return, he said, 'some of the old-style practices must go. The NHS has to be designed around the needs of patients.'

The government and British Medical Association were yesterday due to announce a new annual appraisal system for consultants and a new system of 'intensity payments'.