Blair springs to defence of PFI as unions threaten rebellion

Tony Blair will today defend the Government's decision to bring private finance into public services, and vow to expand the private sector's role despite strong opposition from the trade unions.

In a pamphlet by the Fabian Society, a Labour think-tank, the Prime Minister will declare his determination to press ahead with radical changes to the running of public services. A Blair aide said: "We are at the crossroads. Either we pour in billions without reform, which won't save public services. Or we secure lasting change which saves them for future generations."

A rebellion by big unions against the private finance initiative(PFI) threatens to inflict a damaging defeat on the Labour leadership at the party's annual conference in Blackpool next week. Unison and the GMB have tabled a motion calling for a moratorium on future projects while a value-for-money study is done.

The unions want guarantees that workers on private firms providing public services will not enjoy worse pay, pensions and conditions than those remaining in the public sector. Dave Prentis, general secretary of Unison, and John Edmonds, leader of the GMB, met the Chancellor, Gordon Brown, on Wednesday. But there is little sign of a compromise.

Yesterday Mr Brown said: "No responsible government could support imposing a moratorium on hospitals and schools and bring building work to a halt when plans were in place, builders ready and cash available, and explain why building sites were left empty and thousands of construction workers had lost their jobs."

The Chancellor said the Government had promised to put "schools and hospitals first" and would not put them second to dogma. To increase public borrowing instead of using PFI projects would mean "lurching back to the bad old days of reckless borrowing".

Mr Brown and John Prescott, the Deputy Prime Minister, issued a 25-page document spelling out the "success" of transport, school and hospital projects built with the help of private finance.