Secret talks have been held at the highest levels of the Tory party to carry out the biggest restructuring of the National Health Service since its creation, with all people earning more than £35,000 banned from treatment.

Hoping to spark a debate about NHS funding, William Hague's top health adviser last night indicated the party believed in large-scale privatisation of the health service as well as means-testing for patients.

In an interview with The Observer , which immediately provoked accusations that the Tories had a secret plan to 'privatise the NHS', Dr Michael Goldsmith said that it was time for radical thinking about how the country treats millions of patients every year.

Goldsmith said there should be a complete overhaul of health provision, described modernisation of the NHS as following the 'railway' model and said that it could eventually be left as a provider of 'core services' rather than offering universal care as at present.

Goldsmith, who said his views were 'personal', said that without the change the NHS would not give the public the service they deserved.

A number of senior Tories are said privately to agree with him, although one admitted that it would be 'political dynamite' to admit it publicly. Hague has ordered a clampdown on talk of privatisation by MPs, fearing it will be electorally damaging.

The Labour Party said Goldsmith's ideas revealed a Tory agenda for a two-tier NHS.

'On the weekend that the Conservatives are supposedly drafting their manifesto, we see now the detail of their plans,' said Alan Milburn, the Health Secretary. 'This is not a slip of the tongue, it is the authentic voice of today's Conservative Party on health. They are more extreme than even Mrs Thatcher, and everyone knows what damage she did to the National Health Service.'

Goldsmith said that the only way to increase health spending to the level of continental Europe would be to increase taxes enormously, which people did not want, or to allow the private sector to treat more patients.

'In Britain we spend less in the private sector than anywhere else in Europe,' he said. 'If we can encourage private spending, [then] that is adding to the total pot of expenditure on health and, if you add to the total expenditure on health, then the health of the nation will improve.'

Goldsmith, who heads the Conservative Medical Society, praised 'the German system', where he said that people earning more than £35,000 had to rely on private insurance for their health care.

'We may get into a system where it [healthcare] is means-tested - like in Germany where, if you earn more than £35,000 a year, you can't have national health service treatment. It isn't for you, you have to have private insur ance. It works really well on the Continent.

'The NHS is for people earning up to a certain amount and after that they've got to insure privately, because the NHS won't cover them.'

Goldsmith is one of the most influential health experts in the country. He was adviser to the last Conservative government, and was praised by David Willetts, the Shadow Social Security Secretary, for being behind the GP fundholding reforms which made doctors battle in a market for resources.

He now advises Dr Liam Fox, the Shadow Health Secretary, and is behind Fox's plans to increase the number of people with private health insurance.

'A proportion of what you spend on health care will come from the Government and that's [for] your basic core and the rest is down to you,' Goldsmith said.

'The NHS will be responsible for policing [and] standard setting as they [the Government] are now with the privatisation of railways. I use the word privatisation carefully. I'm not suggesting privatisation of the NHS - the NHS has got to stay - but you might have privatisation of provision, I think that's quite possible. That's a model that's workable.'

Goldsmith's arguments will convince critics that the Conservatives want to move large amounts of the health service to the private sector, believing it can do a better job than the 'bureaucratic' NHS.

In a speech last week, Fox said that 'it is not a capital crime to admit that the NHS desperately needs far-reaching reform. On the contrary, until that reform is undertaken, the health of the British people will continue to suffer.'