Tony Blair has confirmed cabinet rifts between the chancellor and health secretary, who are at odds over proposed new NHS foundation hospitals.

Alan Milburn wants the new hospitals to be able to borrow money from the private sector without Treasury approval, but Gordon Brown maintains that such a move could jeopardise his reputation for fiscal "prudence".

Speaking during his monthly press conference, Blair said: "It is a practical argument to make sure that the Treasury's totally legitimate concern about the public finances are taken into account. I don't regard it as an issue of principle, I regard it as an issue of practicality."