The Government has no intention to "freeze out" third sector or private providers of healthcare despite its policy that the NHS should be the preferred provider of health services, according to Baroness Thornton, the Government's spokeswoman on health in the House of Lords.
The preferred provider policy was announced by health secretary Andy Burnham at the Labour Party conference last year.
In a Lords debate on Tuesday, Thornton rejected crossbench peer Baroness Murphy's claim that the move looked "very much like a sodden sop, pre-election, to the public sector unions" that would have a "major impact" on the Co-operation and Competition Panel, which investigates potential rule breaches in NHS procurement.
The panel decided last week not to take up a complaint from chief executives body Acevo about NHS Great Yarmouth and Waveney's decision last year to exclude charities from bidding to provide community services.
Thornton noted that tendering in the east of England had been suspended after the controversy, but she denied that Department of Health lawyers had ruled that the policy broke procurement law.
She said the suspension was merely temporary "to ensure that those bodies that are discussing what to do with their community services have the most up-to-date guidance".
She said the preferred provider policy was intended only to set out the rules on when NHS provision could be challenged so that NHS staff would have a chance to improve failing services before they were put out to tender.
"There is no expectation or intention either to freeze out private or third sector providers, or to diminish their contribution to NHS services," she said.
Stephen Bubb, chief executive of Acevo, said the debate had exposed the "hypocrisy" of the Government's position. He said he felt sorry for Thornton, who used to chair the Social Enterprise Coalition, for having to "defend the indefensible".
"You could tell her heart was not in it," said Bubb. "I bet she has had some firm words with Andy Burnham behind the scenes.
"If the NHS is the preferred provider, then the third sector is not, as their lordships were quick to notice. So no amount of waffle and rhetoric about how great we are will cover up the fact that the Government has broken its promise to treat us on equal terms."