Large private sector companies must not be allowed to push aside social enterprises in competition for NHS contracts, the House of Lords has been told during the debate on the government's Health and Social Care Bill.
The Labour peer Baroness Jay of Paddington said that a decision made last month to award a £500m health contract to a private provider rather than Central Surrey Health, one of the first mutuals to be spun out of the NHS, showed that social enterprises would have trouble competing for large health contracts.
She said if a free market was opened up for NHS services, it should be based on quality of care and not on lowest price, and should be in the interests of patients, rather than providers.
"Today, I have to say there is already an expectation that a free market is opening up in a completely different way," she said.
"The particularly disturbing aspect of the Surrey decision is that Assura Medical, the Virgin company, is preferred over a well-respected local social enterprise mutual organisation, appearing to confirm fears that large multinational businesses will win out over smaller, less commercially sophisticated providers.
"If this is the future the bill will create, it is a revolutionary and unwelcome system."
The decision not to award the contract to Central Surrey Health was heavily criticised at the time by Peter Holbrook, chief executive of Social Enterprise UK, who said: "Some of the financial criteria used in contracts create an unequal playing field in which social enterprises are unable to compete because they may not have the same financial backing as private sector providers.
"Unless swift action is taken to address this, we will see social enterprises and mutuals lose out to the private sector."
The bill passed its second reading in the Lords last week and will now go to a Lords committee for scrutiny on 25 October.