Reforms will not produce two-tier system, says Blair

Tony Blair rebuffed Gordon Brown last night by rejecting criticism that the Government's education and health reforms could result in two-tier services.

The Prime Minister has clashed with the Chancellor over foundation hospitals and university top-up fees and Mr Brown has called for limits to the role of market forces in public services. Some Labour MPs have echoed Mr Brown's concerns by attacking the Blair approach as "elitist" because the best hospitals, schools and universities will win more money and freedom.

Mr Blair told a Labour Party event in London: "The greatest sadness is when people describe the pursuit of excellence as elitism. It is surely in the nature of things that some parts of a service perform better than others.

"But it is the oldest and most damaging shibboleth in the left-wing book that levelling down is the route to equality and social justice. In fact, it is excellence within a public service that provides a spur to greater achievement and the levelling up of the whole of the service."

Without that, those who could afford it bought their way out of the public service. "The result is elitism – and worse on the ability to pay. That is real two-tierism."

Mr Blair's comments go to the heart of an intense debate at the top of the Government over its plans to modernise public services. Despite the criticism, he argued that Labour needed to go "further and faster" on reform and should not "opt for the quiet life".

He added: "If we shy away from reform because we see it as unsettling or difficult, too challenging of old assumptions, we will fail our supporters, and fail ourselves. We cannot waste this precious period of power."

The Prime Minister tried to win over his Labour critics by insisting that his reforms were the route to fulfilling the party's traditional goals. He said high-quality public services were "the best attack on poverty, the best corrective to social injustice, the best provider of opportunity that we have. Redistribution helps us combat poverty and raise the incomes of struggling families and poorer pensioners."

Mr Blair hailed the shake-up of university funding announced on Wednesday as an example of the difficult decisions Labour could not afford to duck. He said the plans would mean a bigger subsidy from the taxpayer to the universities and defended top-up fees, saying students "are, after all, getting the benefit of a top-class education".

Charles Clarke, the Secretary of State for Education, pledged last night to "hit the road" and visit every corner of the country to try to win students and academics round to the plans. Mr Clarke and Margaret Hodge, the Higher Education minister, are planning tours of English universities.

Meanwhile, Buckingham, the country's only private university, criticised the proposals yesterday. Dr Terence Kealey, its vice-chancellor, said it was "absurd and even dangerous" to appoint a state access regulator to decide whether universities "are sufficiently working class in their intake" to be given approval to charge top-up fees.