Former Health Secretary Frank Dobson has launched a savage attack on New Labour, dismissing its flagship health policy as "nonsense".

Mr Dobson's successor, Darlington MP Alan Milburn, is bringing forward controversial legislation to give top-performing health trusts greater freedom from Whitehall.

But the move, unveiled in last year's Queen's Speech, has sparked a backbench revolt among Labour MPs, led by Mr Dobson.

Yesterday, on a visit to Mr Milburn's own North-East back yard, Mr Dobson launched a scathing attack on the proposals, claiming they "blur the distinction between Labour and the Conservatives".

Speaking at a regional GMB conference on Foundation Hospitals on Tyneside, Mr Dobson said: "The whole concept is unworkable, divisive and frankly nonsensical.

"They will not deliver the improvements that the NHS needs and only make sense to those who think change for change's sake is a good idea."

He added: "Foundation Hospitals put us on a track to a two-tier health service, something our party opposes."

Referring to the Prime Minister's powerful policy advisers, he said: "We need to remember that the vast majority of the party do not want this - just a small unaccountable group."

Mr Dobson's outspoken comments are the latest evidence of growing unhappiness in the Labour heartlands with aspects of the Government's policies on public services.

It follows last week's warning by the former Cabinet minister and North Tyneside MP Stephen Byers that Prime Minister Tony Blair risked "losing touch" with party members.

Mr Milburn's plans would see Foundation Hospitals run locally by elected representatives with the ability to borrow from public and private sectors and vary pay. But Mr Dobson argues it will mean a relaunch of the internal market in the NHS, introduced by Margaret Thatcher and abolished by himself after 1997.

Regional secretary of the GMB Kevin Curran said: "If the Tories had proposed Foundation Hospitals the whole of the Labour Movement would have united to fight against them.

"Yet we now have a situation where Downing Street and their unelected advisers are foisting these imitation Tory politics upon us."

Mr Curran said: "Foundation hospitals will create a postcode lottery for health care. If you are not lucky enough to live in an area where your hospital enjoys the preferential status that Foundation status brings be prepared for inferior care. The whole situation is disgraceful, and we will fight the creation of Foundation Hospitals until this rotten idea is consigned to the bin."

At yesterday's conference at St James's Park in Newcastle, Mr Curran warned Mr Blair that his record on public services has led to a fresh review of the union's relationship with Labour.

Mr Dobson's appearance at St James's Park represents the first of two attacks on Foundation Hospitals this weekend.

Tomorrow he will be engaged in a head-to-head battle with Health Minister Hazel Blears at a special weekend school on the idea staged by the regional branch of the Co-operative Party in Cumbria.