The Conservatives have admitted that taxes will have to go up to pay for the NHS.

In a major policy U-turn, the party's shadow health secretary Liam Fox conceded on Thursday that if the NHS was to deliver then fiscal policy would have to change.

His comments followed a warning from the prime minister along similar lines on Wednesday.

"Taxes may need to be raised," Fox said. "What we've said is that we won't rule out more money going into the NHS if necessary. What we need to ensure is that the money is being spent sensibly."

His comments signal a remarkable change in Conservative thinking if the shadow cabinet allows him to go forward.

But Fox's remarks do not represent a return to the days of consensus politics as the party believes that ending waste in the service is one thing the government has failed to tackle and increasing red tape is holding back frontline staff.

"Under this government taxes have gone up and we haven't noticed any improvement," he said.

Blair had ignored fact that care home beds had been cut by 50,000 since 1997 Fox claimed.

"This is entirely a result of the government's incompetence over regulation and its failure to understand the interaction between hospital and community sectors. Far from being embarrassed about his government's failure, the prime minister almost glorified in it as an excuse to raise taxes further, pouring money into the NHS, tinkering with a system rather than undertaking real reform," he said.

His remarks followed comments by the prime minister which effectively prepare the ground for tax increases to fund the NHS.

Speaking to the BBC, Tony Blair, who ruled out a designated health tax, said that he wanted sustained investment funded "out of general taxation".

He said: "If we want sustained investment in the National Health Service over a period of time, we are going to have to pay for it and I believe we will find that money.

"In my view a fairer and better system is through general taxation. I hope that in the coming months that we will be able to show that we are able to make that commitment."

His comments are being seen as a clear hint that taxes will rise in the April budget.

During the interview the prime minister ruled out free long term care for the elderly.

Liberal Democrat leader Charles Kennedy said the row simply showed that Labour and the Conservatives were playing catch-up as his party had openly called for a tax rise to pay for health at the last election.

"Tony Blair is finally acknowledging that Labour has so far failed the NHS and more needs to be done if we are to create the type of health service that the British people want to see," he said.

"At the last general election only the Liberal Democrats said openly and honestly that we would have increased investment in our hospitals and funded it through fair and targeted increases in taxation. One should always welcome a sinner who repents. But it would have been more honest for Tony Blair to have told the British people that he was going to raise taxes before the general election, rather than after it."