The government is preparing to rethink its major NHS reform amid fears that it could lead to financial problems in advance of the general election.

The proposal aimed to establish a system of "payment by results", where health service funds follow the patient and hospitals receive a fixed sum for each course of treatment.

The idea is for hospitals to compete for funds by offering patients better care.

However, John Hutton, health minister, confirmed yesterday that the system would apply only to waiting-list operations from April.

Its application for emergency admissions will be delayed for a year, meaning it will now cover only about 30 per cent of most hospitals' activity rather than the 70 per cent originally planned.