The private sector would manage NHS hospitals and clinical services through an expanded private finance initiative under policy proposals being considered by shadow health secretary Ann Widdecombe as part of her review of Tory health policy.

Speaking on LWT's Jonathon Dimbleby programme, Ms Widdecombe said she also wanted an expansion in the numbers of people taking out private medical insurance, and admitted that tax relief was one of the incentives available to achieve this.

Ms Widdecombe was careful not to commit herself to policy positions, but made it clear such proposals would be taken seriously.

'There is now the question of whether we should expand (the PFI)... to include clinical services so we get the private sector taking the risks, putting in the investment, paying the staff salaries, doing all the rest of it, under contract to the NHS, who can then control the price of what they buy.'

She added: 'That is a possibility and I put it no higher than that.'

On tax relief for private medical insurance, she said: 'Although I'm not going to make policy on the hoof...one of the things one would look at would be fiscal incentives.'

Catherine McLaughlin, chair of the NHS Confederation, was in the audience and spoke as chair of Bromley health authority. She said, 'I think it will actually undermine what the NHS is doing.