Senior party MP says NHS should no longer be a 'state monopoly system'

David Laws, the Liberal Democrat work and pensions spokesman, called on Charles Kennedy, in his review of party policy, to examine whether insurance models of health care should replace the NHS.

His remarks, at a fringe meeting hosted by The Independent yesterday, will reignite the debate about whether the NHS should be broken up and will infuriate some of his colleagues.

Earlier Nick Clegg, the party's Europe spokesman, drew an angry response when he proposed that the policy review should not "rule out" NHS alternatives.

Mr Laws said the party should re-examine the "state monopoly system" and think about "a social insurance model where you can go to different providers but the money is raised on the ability to pay and everybody has access to those different providers".

In a debate about the future of the party, Simon Hughes, the party president, said there should be "no holy grails" in reviewing policies. But he made clear his opposition to scrapping a 50 per cent rate of income tax for those earning more than £100,000.

The meeting, "Can the Liberal Democrats be part of a new progressive consensus?", drew criticism of the Labour Party from Lynne Featherstone MP.

Ms Featherstone said she no longer "trusted Labour" and expressed doubt about whether the Liberal Democrats could find common ground with a Labour Party led by Gordon Brown.

She said: "I don't believe they are capable of true consensus. Brown's 'progressive consensus' means just that ­ OK so long as you agree with him."