"My Government will continue to modernise the delivery of health care based on the founding principles of the National Health Service. Legislation will be brought forward to devolve power and resources to frontline staff; give greater freedom to successful hospitals while increasing their accountability to local communities; and to introduce an independent health inspectorate."

The Health and Social Care Bill aims to take the next step in the overall NHS reform strategy set out in Delivering the NHS Plan.

The flagship policy contained in the bill is the plan to establish a new cadre of NHS foundation trusts "fully independent" from Whitehall control - these will administer the headline-grabbing foundation hospitals.

The most controversial part of the bill relates to how the trusts would be financed - each would be able to borrow from either private or public lenders at their own discretion, not that of the government.

Each act of borrowing would have to be assessed by an independent regulator based on their ability to service the debt. This part of the bill has been criticised on the grounds that it will create a two-tier health service.

The second key change is that foundation trusts would be "public interest organisations" governed by a "stakeholder council", elected by the local community and NHS staff. The idea of foundation hospitals has been the subject of bitter media exchanges between present and former Labour ministers; in particular it was widely reported that the chancellor, Gordon Brown and the health secretary, Alan Milburn were at loggerheads over the question of how the borrowing levels were to be supervised.

The prime minister's intervention, along with the indirect involvement of the regulator, were apparently enough to assure the bill's presence in the Queen's speech.

With all the opposition parties committed to ending the centralised NHS bureaucracy by one means or another, the government is determined to rebut suggestions that it is seeking to micro-manage local hospitals by Whitehall diktat.

However, critics have said that having abandoned the "internal market" introduced by the previous Conservative administration, Labour is setting about creating its own "two tier" health service.

"Nothing in the Queen's Speech suggests that the government understands the scale of the crisis facing the NHS or has any idea about how to tackle it," said shadow health secretary Dr Liam Fox.

He attacked the "completely ill thought out approach to foundation hospitals".

"Medical professionals' morale is at an all time low. Huge spending rises are failing to make any impact on the problems patients endure every day," he added.

Dave Prentis, general secretary of Unison, said: "If we have hospitals acting outside of the NHS it sets up this two-tier system and will have a negative effect on recruitment and retention of staff from hospitals that don't have this kind of status."

The Royal College of Nursing said there was a danger of creating a two-tier system.

"Foundation hospitals must commit to the provision of a comprehensive, wide range of healthcare services, not just services that are financially profitable," said a spokesman.

Representatives of doctors and hospital managers were more welcoming, arguing that the reforms should even go further.

Gill Morgan, chief executive of the NHS Confederation, said: "We believe that foundations could be one way of releasing hospitals from Whitehall control, and a first step towards a more decentralised NHS.

"But they must not distract from the more far-reaching government commitment to a wide ranging programme of deregulation for all hospitals, not just the top ten."

Dr Ian Bogle, chairman of the British Medical Association, echoed that view, saying foundation hospitals would offer an "escape from unnecessary bureaucracy, and an unfettered ability to develop new ways of delivering better patient care".

But he called for the reforms to be extended to all hospitals.

Key Points:

• Create NHS Foundation Trusts to free hospitals from Whitehall control, starting with the best performers;

• Establish the Commission for Healthcare Audit and Inspection, a new inspectorate for the NHS and for private healthcare, independent of the Department of Health, which would assess performance and enforce standards;

• Establish the Commission for Social Care Inspection, a similar inspectorate for social services;

• Subject to negotiations, revise General Medical Services legislation to underpin the new GP contract which is currently being negotiated between the NHS Confederation and the BMA;

• NHS dentistry would come under the remit of Primary Care Trusts who would take responsibility for commissioning NHS dental services;

• Enable the NHS to recover treatment costs where people claim and receive personal injury compensation for accidents or injuries;

• Reform of the welfare food scheme.

House of Commons

First reading: March 12 2003 (HC Bill 70)

Second reading: May 7 2003

Committee stage (Standing Committee E)

• 1st sitting: May 13 2003 (am)
• 2nd sitting: May 13 2003 (pm)
• 3rd sitting: May 15 2003 (am)
• 4th sitting: May 15 2003 (pm)
• 5th sitting: May 20 2003 (am)
• 6th sitting: May 20 2003 (pm)
• 6th sitting: May 20 2003 (pm) part ii
• 7th sitting: May 22 2003 (am)
• 8th sitting: May 22 2003 (pm)
• 9th sitting: June 3 2003 (am)
• 10th sitting: June 3 2003 (pm)
• 11th sitting: June 4 2003 (am)
• 12th sitting: June 4 2003 (pm)
• 13th sitting: June 5 2003 (am)
• 14th sitting: June 5 2003 (pm)
• 15th sitting: June 10 2003 (am)
• 16th sitting: June 10 2003 (pm)
• 17th sitting: June 12 2003 (am)
• 18th sitting: June 12 2003 (pm)
• 19th sitting: June 17 2003 (am)
• 20th sitting: June 17 2003 (pm)
• 21st sitting: June 19 2003 (am)
• 22nd sitting: June 19 2003 (pm)
• Bill as amended (HC Bill 127)

Remaining stages: July 8 2003

House of Lords

First reading: July 9 2003 (HL Bill 94)

Second reading: September 8 2003

Committee stage

• 1st day: October 7 2003
• 2nd day: October 9 2003
• 3rd day: October 13 2003
• 4th day: October 16 2003
• 5th day: October 20 2003
• 6th day: October 23 2003

Report stage

• Day 1: November 6 2003
• Day 2: November 10 2003
• Day 3: November 11 2003

Bill printed as amended (HL Bill 119)

Third reading: November 18 2003

House of Commons

Consideration of Lords amendments: November 19 2003

House of Lords

Consideration of Commons amendments: November 19 2003

Royal Assent: November 20 2003