HEALTH Secretary Alan Milburn has given North-East hospital chiefs the go-ahead to free themselves from the shackles of Whitehall control.

The Darlington MP marked his third anniversary in the NHS hot seat with a speech in Newcastle confirming the launch of a foundation hospitals programme.

He believed foundation status - which will give trust managers more freedom over local decision making, will unleash local innovation and entrepreneurial spirit.

These hospitals will not be directly managed by the Department of Health, will undergo less inspection and monitoring, and will be able to borrow money from banks to finance building programmes without prior approval from the Treasury.

"These hospitals will signify the end of some of the monolithic structures that have dominated the NHS since the 1940s," said Mr Milburn.

The scheme aims to improve the health service by giving the best performers additional freedoms denied to non-foundation hospitals.

They will include being allowed to decide how to spend Government funding and any cash generated from land sales.

The new hospitals will also be able to give staff local pay incentives.

Hospitals in South Durham, Northallerton, York, Sunderland and Newcastle could qualify to become foundation hospitals as early as 2004.

In the speech, delivered to the Public Sector Excellence conference, held at the International Centre for Life, in Newcastle, Mr Milburn also told delegates that the public sector had to learn how to look after its staff from private companies.

And he vowed to improve services through extra staff training.

Anyone who does not have recognised qualifications but has worked for the NHS for five years or more will be entitled to train at the centre.

"We have got to not only invest extra resources in front line services, but invest trust and power in front line staff," the Health Secretary said.

Chief executives from all NHS hospital trusts will attend a conference in London later this month to learn more about the foundation scheme.

All of the trusts contacted by The Northern Echo said it was too early to tell if they would apply for foundation status.