Move to the right and break up the NHS, senior Liberal Democrat tells his party

A plan to break up the NHS and introduce a national health insurance system was proposed yesterday by a senior Liberal Democrat MP as part of a "manifesto" for reclaiming the free market Liberal agenda.

A plan to break up the NHS and introduce a national health insurance system was proposed yesterday by a senior Liberal Democrat MP as part of a "manifesto" for reclaiming the free market Liberal agenda.

In a book that will reignite concern within the party about a left-right divide and infuriate many activists, David Laws, the MP for Yeovil, argues the Government should no longer run the NHS "on a daily basis" and it should compete with the private sector.

An insurance system would allow individuals the choice of being treated outside the state system for no extra charge. They would pay for national health insurance according to their income in a scheme that mirrors those in continental Europe and in Canada.

Mr Laws' proposal to break up the NHS and remove state control flies in the face of current Liberal Democrat health policy, which favours pumping more into the existing health service.

The proposal, already rejected by a Liberal Democrat policy commission on health care, is one of several essays designed to spark debate within the party about choice and the free market.

It is expected to be seized on by Labour MPs as evidence of a Liberal Democrat shift to the right to appeal to Tory voters.

Mr Laws argues the proposal would allow the NHS to cut red tape and offer patients more efficient treatment.

Matthew Taylor, who chairs the Liberal Democrat parliamentary party, tried yesterday to distance the party from the proposal. He said: "The party has coalesced over a clear agenda for the next election. David's proposals on the NHS are well known. I don't think this is the route the party is going down."

The Orange Book: Reclaiming Liberalism also urges the party to temper its enthusiasm about Europe and to offer constructive criticism. Nick Clegg, a former MEP, writes in the book: "Liberal Democrats must urgently explain and explain again that to be pro-European does not require an abandonment of basic critical faculties."

He warns against conforming to a stereotype as "doctrinaire, fanatical foot-soldiers of the European cause willing to trample all domestic considerations underfoot".

Vince Cable, the party's treasury spokesman and co-author of the book, wants to reclaim the economic territory mapped out by Adam Smith, the free market liberal thinker who has traditionally been associated with the Tory right. He argues for a dramatic reduction in international trade barriers and environmental regulations to allow Third World nations to trade with the developed world.

He criticises the "insatiable appetite of politicians to wrap themselves in national flags in trade" and argues for "relatively open system" of immigration. Mr Cable warns "inevitably, in a reasonably open society with large numbers of overseas visitors, it is impossible to stop illegal migration".