Tony Blair issued a "trust me" appeal to the Labour Party yesterday as the Government offered a significant olive branch to trade unions opposing plans to bring in the private sector to run public services.
The Prime Minister came under fire at a meeting of the party's ruling national executive committee (NEC), where he faced tough questions about his support for possible military action in Iraq by the United States and his alliance with Silvio Berlusconi, the Italian Prime Minister, against EU plans to extend workers' rights.
Mr Blair suffered a fresh blow last night when it emerged that John Monks, the leader of the TUC and generally a staunch ally, was preparing to stand down early next year after a decade. He said he was considering standing for general secretary of the European Trade Union Confederation, a post he would be favourite for given his seniority in the British union movement.
Mr Blair warned the NEC about the dangers of a split between the party and the Government, and said both sides had a responsibility to avoid one. "The only winners would be the Tories," he said, adding: "Trust me." A move by NEC left-wingers to call a halt to the Government's public-private partnerships was squashed by 21 votes to seven. But last night ministers moved to quell a rebellion by unions, party activists and MPs by announcing extra protection for staff employed by private contractors who take over functions from local authorities.
Stephen Byers, the Secretary of State for Transport, Local Government and the Regions, won a Cabinet battle to prevent private firms bringing in a "two-tier workforce" by hiring new staff on less favourable terms. Alan Milburn, the Health Secretary, is expected to bring in similar safeguards in the NHS.
A leak last month suggested the Government would back a proposal by the Confederation of British Industry for a voluntary code of conduct. But Mr Byers persuaded Mr Blair to meet union demands for a legally binding code.
Council workers who switch to private firms are already protected by law. But unions are alarmed that private firms can make job cuts and recruit new staff on lower pay and longer hours, with fewer holidays and no pension rights. The new code of practice will ensure new workers have "broadly comparable" terms and conditions to existing staff. The code will be enforced by government inspectors to prevent "cowboy" firms ignoring it.