The Department of Health has denied reports that that government had planned to introduce price competition in the NHS but has now changed its mind.

"There is no U-turn because we never intended to introduce price competition," said a Department spokesman, commenting on media responses to a letter from NHS chief executive Sir David Nicholson in which he emphasises that there will be no question of introducing price competition in the NHS.

Sir David's comments appear in an annex dealing with frequently-asked questions about the Health and Social Care Bill, attached to the letter he sent last week to all NHS chief executives to update them on recent developments on the government's reform plans. "Services subject to tariff will continue to compete on quality: there is no question of introducing price competition," he writes.

"We want patients to be able to choose, where appropriate, from a range of qualified providers that are accredited to provide safe, high-quality care and treatment. In its new role, Monitor will ensure that competition works in the public interest, widening choice and driving improvements in quality and efficiency. From 2012, Monitor and the NHS Commissioning Board will decide the best structure and price levels without interference from government," he says.

"Final guidance on the 2011-12 tariff rules clarifies that the introduction of a new flexibility to agree prices below the national tariff is not intended to facilitate a move towards price competition," Sir David adds.

There has been "incorrect" media reporting around the issue of price competition and Sir David's letter "simply sets that straight," say Department spokespeople.

"There is no change to the policy set out in the 2011-12 Operating Framework and first set out under the previous government in December 2009. Given the potential risk to NHS business planning of the incorrect speculation that this policy amounts to price competition, Dr David's letter serve to reaffirm this policy - that we want to see competition on quality, not price," they say, adding: "anyone can see that it is difficult for the government to U-turn on a policy which it inherited from the previous administration and which it has not amended since coming into office." 

But critics point out that Clause 103 of the Bill states that Monitor and the NHS Commissioning Board will have the power to set maximum national tariff pricing for some services. Because it talks about maximum tariff, that means it must be possible to go below that price, according to Laurence Buckman, who chairs the British Medical Association (BMA)'s GP Committee. If Sir David's letter states that the Bill does not say that, then the government must now move an amendment to the legislation to preclude price competition, says the BMA.

Labour's shadow health secretary John Healey added that, if the coalition government's new policy is to rule out price competition in the NHS, "then I look forward to both Tory and Lib Dem MPs backing our amendments to do just that."