Lord Birt's free blue skies thinking now to come with a price tag

Lord Birt, the former director-general of the BBC who does much of Tony Blair's "blue skies" thinking, has caused unease in Whitehall by asking to be paid for his work.

The possibility that he could receive a salary from public funds has raised anxiety among senior civil servants, because of a possible clash with his other business interests.

There was a political outcry when Lord Birt was first taken on by Tony Blair in July 2001, to advise on a strategy for fighting crime. Opposition MPs objected that he knew nothing about the subject, and that his main qualification was his 20-year link to New Labour through his friendship with Peter Mandelson.

Lord Birt has continued to advise the Prime Minister on political strategy for four years, but Downing Street has always stressed that he gives his advice for free.

One of his ideas was to build new toll motorways between London, Birmingham and Manchester, which would have a limited number of exits, and to have a north-south high-speed rail link like France's TGV system. His ideas were much criticised on cost and environmental grounds, and Tony Blair said in the Commons that there "probably isn't much support in the country" for them.

He is also an adviser to McKinsey, the large management consultancy which has clients in the media, telecommunications, banking and construction. Since February, he has been a director of PayPal, which handles credit card purchases on the internet. Until recently, he was also chairman of the city firm Lynx Capital Ventures. It has been estimated that these three roles would bring in an annual income exceeding £200,000.

His role has increased since the summer, when one of Mr Blair's longest-serving advisers, Geoff Mulgan, left No 10. Mr Mulgan was head of the Downing Street Strategy Unit, which caries out what is known as "blue skies" thinking into long-term policy issues.

While Lord Birt's advice is valued highly by Tony Blair, he rubbed civil servants and some ministers up the wrong way by his unofficial status and his willingness to put forward imaginative but controversial propositions.

One former civil servant said: "I know there is some concern about Birt. It's amazing how often he turns up at meetings with the Prime Minister - and almost the first thing the Prime Minister does is turn round and say 'What do you think, John?' He is a person about whom there are mixed feelings."

A Downing Street press officer said: "There has been no change to Lord Birt's position in Downing Street and as far as I am aware there has been no discussion of it changing."

Lord Birt's link to Labour dates back almost a quarter of a century, when he was at London Weekend Television and helped promote the brief TV career of the young Peter Mandelson, who was then an LWT producer. The Prime Minister's then press secretary, Alastair Campbell, explained Lord Birt's role in Downing Street by saying: "John Birt will do whatever the Prime Minister asks him to do, as he is that sort of person."

His 12 years at the head of the BBC were highly controversial. Some credited him with saving the corporation, which was locked in a damaging dispute with the Conservative government when he was appointed deputy director-general in 1987.

His willingness to work in Downing Street for no reward may surprise some old BBC colleagues, who recall "Armanigate", when it was revealed that Lord Birt had arranged for the BBC to pay his salary into a one-man company, John Birt Productions, enabling him to claim his £900 suits against tax.

Lord Birt's old rival Michael Grade, then chief executive of Channel 4, once accused him of introducing "Leninist style" management to the BBC, and the late playwright Dennis Potter described him in 1993 as a "croak-voiced dalek".

BIRT'S BIG IDEAS

Birt on crime

Appointed as "crime tsar" in summer 2000, and known in some circles as "the one-day-a-week crime buster". Advocated targeting "hard-core" criminals; making parents of young offenders attend court to explain what they were doing to control them; and police frog-marching drunken yobs to cash machines to pay on-the-spot fines. PM adopted the last, then rapidly dropped it as impractical.

Birt on transport

Turned to transport in 2002. As PM's special adviser, he proposed a high-speed north-south rail link based on France's TGV system; and "premium roads" - new toll motorways with few exits between London, Birmingham and Manchester. PM said there was "not much support" for latter wheeze.

Birt on drugs

A year later applied himself to drugs problem. He suggested that addicts who commit crime should be taken off the streets and undergo compulsory rehabilitation. His report was deemed too sensitive and not published.

Birt on spin-doctors

In August 2003 he was reported to be "heavily involved" in helping Peter Mandelson devise an exit strategy for Alastair Campbell. Campbell claims he tried to negotiate a peace deal with the BBC following the David Kelly affair, using Birt as an intermediary.