Blair takes on unions by planning new role for the private sector

Tony Blair plans to give the private sector a bigger role in the running of public services despite calls by trade unions yesterday for a halt to the private finance initiative (PFI).

Downing Street and Cabinet ministers are drawing up proposals that could eventually allow hospitals and schools to become "public interest companies" enjoying much greater freedom from Whitehall control.

The move will infuriate the unions, which are threatening to inflict a defeat on Mr Blair at the Labour Party conference later this month by calling for a block on public-private partnerships. The Prime Minister would ignore such a vote and has urged his ministers to come up with fresh ideas to "redefine the barriers" between the state and private sectors. One cabinet source said: "We are at a crossroads. Either we just plough in the extra money and stand still or we move forward and secure radical change. People don't mind whether a service is provided by the public or private sector; what they want is good services."

The new plans could see public services run as "not for profit" companies whose boards would include representatives of private-sector financiers, the Government, staff and consumers. They would have a duty to put the interests of the service rather than shareholders first.

Gordon Brown, the Chancellor, insisted yesterday that public-private partnerships would go ahead. He said: "It would be completely unacceptable to put a moratorium on hospitals, schools, roads and rail projects, deny the public the services they need, and hold back the biggest investment project the country has ever embarked on."

But three big unions – Unison, the GMB and the Transport and General Workers' – will join forces at Labour's Blackpool conference in demanding that the programme be halted.

Dave Prentis, general secretary of Unison, said the facts could no longer be ignored. Taxpayers' money was being wasted, workers' pay and conditions were being hit and the state was being "ripped off".

He was joined at a Unison conference in London by Dr Margaret Cook, the former wife of the Commons Leader, Robin Cook, and a consultant haematologist, who said her investigation at Edinburgh Royal Infirmary had found intimidation of staff, exploitation of patients, contempt for the welfare and needs of workers and management "chaos".

* Train drivers are to stage strikes that will hit ministers heading for the Labour Party conference in Blackpool. Mick Rix, general secretary of Aslef, called nine weekend stoppages at First North Western yesterday, the first of which will halt services on 28 and 29 September. The walkouts are in protest at "strings" attached to an offer of a 19 per cent pay rise over three years.