Oaten calls for greater use of PFI as split emerges on public services

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The Liberal Democrats must consider the greater use of commercial firms to run Britain's ailing public services if the party is to provide an "honest" opposition, Charles Kennedy was told last night.

In the first signs of dissent to emerge from the Bournemouth conference, Mark Oaten, the party's influential cabinet office spokesman, criticised "vested interests" in the party who would end up penalising consumers by keeping schools and hospitals under state control for ideological reasons.

Speaking at a fringe meeting, he warned Mr Kennedy not to alienate disaffected Tory voters by ruling out the use of insurance to pay for some form of health care and the introduction of charges for non-essential surgery such as tattoo removal.

The suggestion is at odds with the official policy of the party, which is to increase public spending to improve services.

"We made a virtue of being honest about public services at the last election and we were right to call for additional funding," Mr Oaten said.

"The honest thing to do next time round will be to suggest alternative ways of delivering services outside the public sector, however uncomfortable that may be for some in the party. There is a danger that we are drawn into speaking just for professionals or trade unions in this debate."

His call to contract out more services is echoed by other senior party figures, who claim the Liberal Democrats are moving too far to the left to occupy the territory vacated by Labour.

But Matthew Taylor will seek to paper over the emerging cracks with a motion that will call for private finance initiative (PFI) schemes that do not offer good value for money or better public services to be abandoned by the Government.

These include plans to part-privatise London Underground and air traffic control and PFI hospitals that do not offer value for money.

Mr Taylor, the Liberal Democrat economics spokesman, will say today: "Half of all [PFI] schemes have got major errors in the calculation of cost compared to the public sector, all of which favour PFI."

The party's left wing will register even stronger opposition to the creeping privatisation of the public sector. Evan Harris, the health spokesman, and Phil Willis, the education spokes-man, will strongly oppose any greater involvement of commercial firms in the delivery of "frontline" services.