Blair faces 'privatisation' revolt

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Blair is warned against private finance 'fixation'

Leading article: Come on, Mr Blair, make the case for the profit motive in public services

Tony Blair's plans to step up private-sector involvement in public services will face their sternest test today when an independent report will savage the Government's record on the issue to date.

Amid a growing revolt from Labour MPs and unions, a highly critical study by a Blairite think-tank will attack the Prime Minister's "fixation" with current private finance schemes and public-private partnerships (PPPs).

The report, by a commission set up by the Institute for Public Policy Research (IPPR), found that plans to use the private sector in the London Underground and air traffic control were flawed and unaccountable. The commission warns that, while it supports the principle of private sector involvement in public services, major changes must be made to Mr Blair's policies.

The 284-page report, the most exhaustive study of the proposals to date, is sure to be seized on by critics of Downing Street's plans and will add substantial weight to the mounting opposition to the proposals within the Labour movement. Among the influential figures involved in the study was Ruth Kelly, the MP for Bolton West who was recently promoted to the post of a Treasury minister.

Opposition to Mr Blair's plans reached new heights yesterday as union leaders and Labour MPs warned they could trigger the worst industrial unrest since the winter of discontent in 1978-79.

John Monks, the general secretary of the TUC, and Lord Hattersley, a former deputy leader of the Labour Party, led a chorus of criticism of the proposals to use private firms to improve the NHS and schools. Mr Monks, who is due to meet Mr Blair to discuss his worries over the plans, said the Government should not try to "pick a fight' with unions over the issue.

"The impression that has been created by people somewhere near the middle of the Government is, 'We want to take somebody on, we want to put the gloves on and have a scrap about it'. That is entirely the wrong way to start," Mr Monks told GMTV. Briefing by Labour sources was "causing maximum apprehension and concern and minimum clarity" and as a result some unions were "doubling their sentries" in preparation for a conflict, he said. "I think it's very important that we all remember what happened last time a Labour Government had a scrap with the public-sector unions," Mr Monks warned. "Labour was out of office for a long time, 18 years, and it didn't do the TUC and trade unionism any good either, being seen as against the community."

Lord Hattersley called on Labour members to "rise up" against what he described as Mr Blair's "coup d'état" against the values of the Labour Party. "One by one the policies which define our philosophy have been rejected by the Prime Minister. [His] adoption of what is essentially a free-for-all philosophy presents party members with a desperate choice," he said. "We could resign or we could sulk in our tents.

"Or, believing that the party does not belong to Tony Blair, we could rise up against the coup d'état."

Frank Dobson, a former health secretary, also said that there was widespread public "unease" over the use of private firms in both the NHS and state schools. "I want to make sure that any involvement of the private sector in health care doesn't undermine the basic principles of the National Health Service or the way it functions," Mr Dobson said.

Asked if the Government should "take on" the health unions over private-sector involvement, Mr Dobson said: "The health unions include the BMA, the Royal College of Nursing and the Royal College of Midwives and I don't think taking them on is the right approach at all."

David Hinchliffe, the Labour MP who is chairman of the Commons Select Committee on Health, said that handing over whole hospitals to private management would be "a complete betrayal of everything the Labour Party stood for". Mr Hinchliffe told the BBC's On the Record programme: "It would ... cause uproar in the mainstream Labour Party. There would be tremendous opposition."

John Edmonds, the general secretary of the GMB union, added that the private-sector plans were a "hidden agenda" that had only been hinted at in the middle of the general election campaign.

Alan Milburn, the Health Secretary, warned that there could be no veto over the Government's plans by union leaders or others, but stressed that the core principles of the NHS were "not up for sale".