Blair faces unions' wrath over public-private deals

The divisions within Labour over private-sector involvement in public services widened yesterday as three of Britain's largest unions appeared ready to inflict a damaging party conference defeat on Tony Blair.

The giant Transport and General Workers' Union said it was backing a conference motion calling for a moratorium on private finance initiative (PFI) deals, which will be debated on Monday.

Unison and the GMB are already backing the emergency motion, which means that the T&G's support would make a conference defeat for Mr Blair inevitable.

Union leaders were expecting a hectic weekend of negotiations with ministers aimed at averting a public clash on the issue. Unions want reassurances over the curbs designed to prevent the creation of a two-tier workforce, and are demanding a fully independent inquiry into the value for money of PFI deals.

The move came as splits grew over controversial proposals for a new series of foundation hospitals, which would be able to raise finance on the open market in return for high performance. Yesterday Alan Milburn, the Secretary of State for Health, insisted that he would press ahead with the policy despite the reservations of Gordon Brown.

On Thursday, the Chancellor of the Exchequer expressed concern about foundation hospitals borrowing money freely because of the implications for public spending.

But Mr Milburn told BBC Radio 4 yesterday: "We are going ahead with foundation hospitals." The minister insisted that staff "have to have some ownership of the agenda of change". Asked about splits with Mr Brown, Mr Milburn said: "I don't think it has been formulated with a view to snubbing Gordon Brown or anybody else."

Tony Blair added his weight to the policy in a Fabian Society pamphlet called The Courage of Our Convictions, published yesterday. The document said the private finance initiative schemes had a "central role" to play in making a success of the reforms.

Mr Blair wrote: "Only if we make the necessary changes to our public services will we be able to say this Labour government lived up to the high ideals and practical achievements of the government of 1945. It is time to acknowledge that the 1945 settlement was a product of its time and we must not be a prisoner of it."

The Prime Minister praised foundation hospitals, arguing that "they will enable communities to reclaim a stake in their local hospitals as they will be directly accountable to a stakeholder board rather than to Whitehall officials".

But yesterday Bill Morris, the T&G general secretary and a key ally of Mr Brown, condemned the foundation hospitals as "creeping privatisation and abandonment of the 1945 settlement that was about public services".

He warned: "The NHS should be about public services because that is the dividing line between Labour in government and the Conservatives in opposition."

John Edmonds, general secretary of the GMB, said the Government was "split down the middle" on the public finance initiative. He said: "When you hear the Health Secretary giggling on the Today programme about how he has put one over the Chancellor, is it any wonder the Government is having difficulties convincing the public and workers about its policies?

"This is further evidence of why we need a proper inquiry into PFI," he said.

Dave Prentis, general secretary of Unison, Britain's largest trade union, added: "The Government should just throw in the towel and let an independent inquiry decide the future of PFI instead of tearing the party apart.

"The bottom line is that the public and public-sector workers have a right to know that they are getting the best possible public services at the best possible price. But if the Government thinks they are right, let them prove it."

The Communications Workers Union, another of the Labour Party's largest affiliates, will also join the protest over PFI, while the giant Amicus union could abstain.

However, the scale of the defeat for Mr Blair will depend on the precise working of the motion which is presented to conference after a weekend of negotiations between union leaders and senior party figures. Labour will debate PFI near the start of their gathering at Blackpool, their first visit there since 1998.