The health secretary declined to rule out a pay rise for GPs as he discussed plans to hand them most of the NHS budget.

Andrew Lansley said doctors were best placed to know what kinds of treatments and services patients needed and said he envisaged them showing leadership.

His plans will see around 80% of the NHS budget - which tops £100bn - pass into the hands of GPs.

Strategic health authorities and primary care trusts, which currently handle commissioning, will be abolished.

Mr Lansley told MPs at a meeting of the health committee the NHS was moving to a simpler, de-layered management structure.

“We have a body of evidence that is clear about the benefits associated with practitioner-based commissioning,” he said.

Asked about the GP contract in 2004, which resulted in doctors seeing their pay rise substantially, Mr Lansley declined to discuss how the British Medical Association (BMA) would now be prevented from “running rings” around the government when it comes to pay.

He said: “You will forgive me if I don’t. One of the principles of negotiation is not to pre-empt and pre-judge them - as it were show one’s hand in the financial aspects of the negotiation.

“I think the last negotiation leading up to the contract in 2004 in a substantial measure failed.

“I don’t think that was entirely that the BMA ran rings around them or anything like that, although there might have been some element of that.

“I think one of the fundamental problems was that in negotiating in particular the quality and outcomes framework, there was an insufficient understanding on the part of the government of the nature of the job GPs were doing.”

He said, as a result, GPs were “paid a lot more than they were intended to be paid”.