Plans to allow foundation hospitals to appoint their own auditors have been slammed by the former head of the Financial Services Authority.

Writing in the Financial Times on Monday, Sir Howard Davies argued that such a move was "inconsistent with the principles of public sector audit".

The Health and Social Care bill, currently in the House of Lords, "creates a conflict of interest where none now exists" he claimed.

Davies, now director of the London School of Economics, also warned that comparative work, which allows assessment of how an organisation is performing according to "best value", would be lost with the introduction of private sector auditors in the public services.

"The government should think again, or the House of Lords should require it to," he wrote.

"There is no reason why foundation hospitals will be less attractive if they are denied the power to appoint their own watchdogs.

"The idea that the right to appoint auditors is a sign of virility and independence would be risible to many company directors, who would be happy to be free of that responsibility.

"This is an area where the public sector has a better model in place: I see no reason whatsoever to change it, and many arguments for keeping it as it is."