Leaked memo reveals snub on workers' rights

Tony Blair was accused last night of preparing to scrap a promise to protect workers' rights in order to "keep business on board" with his policy of contracting out public services.

A leaked Cabinet Office memo, drawn up last month on the instructions of the Prime Minister's Principal Private Secretary, sets out proposals that would mean dropping an earlier commitment to block the the creation of "two-tier workforces" in companies that have been transferred to the private sector.

The leaked memo, in effect, abandons a government promise to support legislation to stop private contractors offering new recruits worse terms than existing staff.

It also reneges on a commitment made three years ago by Ian McCartney, then a trade minister, to protect the pensions of employees whose company is sold off.

The consultation document, marked "Restricted Policy" says that Tupe rules, which protect the conditions and pay of such staff, should not be extended to cover pensions.

The memo, dated 1 February 2002, says: "In order to keep business on board, ministers might think it preferable not to extend the Tupe regulations but to maintain the current system."

"The outcome of the Tupe review should be that the scope of Tupe regulations should not be extended to cover pensions and service contracts."

The document, drawn up by a working party of civil servants led by Jeremy Heywood, the Prime Ministers' PPS, will alarm the unions who were promised by Stephen Byers at the last Labour conference that he planned to act to end "two-tier workforces."

Last night, sources close to Patricia Hewitt said the review of Tupe rules was ongoing. "We are still consulting on the issue," said a senior aide.

But the Cabinet Office document makes clear the Government is concerned concessions could deter companies from making public sector deals.

The memo says the unions' call for new employees to be treated "no less favourably" than new staff "would seriously lessen the degree of flexibility contractors would have to make improvements."