The prime minister has rejected claims of a rift with the chancellor.

Amid reports that the Treasury is blocking plans to give the new foundation hospitals borrowing powers, Tony Blair insisted there was no conflict with Gordon Brown.

Whilst he conceded that there was disagreement over how the policy could be achieved, he insisted there was no ideological clash between the chancellor and the government.

"It is a practical argument to make sure that the treasury's totally legitimate concern about the public finances are taken account of," he said.

"I don't regard it as an issue of principle I regard it as an issue of practicality."

Health secretary Alan Milburn had also earlier sought to play down suggestions that he was at odds with the chancellor.

"I think there is no disagreement about the idea of foundation hospitals going ahead, being part of the NHS, providing services to NHS patients based on the right principles," he said.

"There's no disagreement that we've got to get power out of Whitehall and get it down to the local communities.''

Earlier this week, Milburn was accused of briefing against the chancellor.

Reports suggested that Brown was refusing to back plans which would give the new hospitals "arms length" powers to raise capital.