We've had 11 years of Labour's approach to public services – centralising, micromanaging, pouring unprecedented amounts of money in through a tiny funnel in No 10 – but that's come to an end. Because New Labour is dead in the water.

And the state of the economy means there is no more money to pour in, no matter which party forms the government. So now is the time for new thinking about how to get more without spending more.

When we consider changing the NHS, we must think big. It is time to deliver to England's patients the standards of personal care, individual empowerment and accountability that millions of patients elsewhere in Europe take for granted. But we must deliver that without destroying the ethos of solidarity and equality, which rightly underpins an NHS funded through progressive taxation.

The health service budget has tripled in eight years, while services themselves have been subject to more Whitehall command-and-control and micromanagement than this country has ever seen. Yet, productivity is stagnant; outcomes are worse than in much of Europe; and health inequality is the widest since Victorian times. As the World Health Organisation said last month, "social injustice is killing people on a grand scale."

Labour's experiment has failed. There are two basic, structural problems with their NHS: it is too massive and centrally controlled; and because of that centralised system, we have a second basic problem, that the financial incentives all pull in the wrong direction. The more operations a hospital does, for instance, the better (under Labour) – it doesn't matter if a person is readmitted a few months later with the same problem. This is madness.

The whole financial system on which the NHS operates is broken. So how do we fix it?

The basis of my approach is to make the NHS a people's health service, with resources controlled from below, not from the top down. We want to replace centrally-set targets with personal entitlements like the ones you get in an insurance contract. Everyone should have the right to private treatment, paid for by the NHS, if the waiting time is not met.

To give patients more control over their care, we would extend direct payments and personal budgets – so people with long-term and chronic conditions choose what care they need.

I also believe top-up payments should be possible within the NHS. This is difficult territory. I'm concerned that people may feel the need to get expensive insurance for rare cancers they stand a one in a million chance of developing. I'm concerned the NHS may have to pick up the pieces – at great cost – if extra treatments go wrong. I'm concerned that the more people fund extra treatment, the easier it will become for the NHS to shrink to provide just a rump of "essentials".

But I'm a liberal. We cannot continue to deny people the right to top up their care – particularly where they are following a clinician's advice – when the NHS has finite resources and cannot provide everything for everyone.

I have three provisos. First, there must be no hidden costs for the NHS. So, paying for your drugs should mean also paying for treatment for any side-effects or unexpected consequences. Second, top-up payments should be limited to drugs and procedures that have been licensed and clinically recommended by your doctor. And finally, we must ensure that no PCT can use the availability of top-ups as an excuse to offer fewer drugs or treatments for free.

So we must enshrine everyone's legal entitlements to all treatments ruled cost-effective by Nice. There must be no risk of NHS "shrinkage" – not now, and not in the future.

Our NHS is at the core of what many people feel it is to be British. It's close to everyone's heart. But that affection mustn't cloud our judgment or hold us back. If we can make it a people's health service, local, flexible and accountable, I believe it can thrive through the challenges of the 21st century.