Blair will let private sector into public services

The government is planning a big extension of the private sector's involvement in health, education and other services if Tony Blair wins a second term.

The government is planning a big extension of the private sector's involvement in health, education and other services if Tony Blair wins a second term.

The move will cause anxiety among Labour traditionalists and trade unions. Although some ideas are being considered, they are unlikely to be included in Labour's election manifesto in case they provoke allegations that the party would privatise key services.

Ministers insist the plans would not amount to privatisation. They say, for example, that the National Health Service will remain universal and free at the point of use. But ministers believe there is much more scope to use private sector expertise to boost the efficiency of public services and expand the number of public-private partnerships.

In health, commercial firms have been involved mainly in building hospitals. Some Labour advisers believe they should have a role in computer and medical equipment projects and the management and planning of primary-care GP services. But direct provision of services to the public is seen as "out of bounds" politically.

In education, ministers want to involve a new generation of private-sector education consultants in the running of good schools and local education authorities (LEAs). They have mainly been sent in to rescue failing schools and LEAs.

The school standards minister Estelle Morris told BBC Radio 4: "If I am really serious about saying the private sector has something to offer education, it's got to offer education something where it is succeeding as well as where it is failing. I am not at ease with our only turning to it when the public sector has failed."

Ministers want LEAs to hive off more of their administrative services to the private sector, which they believe could play a bigger role in looking after children with special needs.

But the moves will worry local authority leaders, already anxious about the Government's decision to bypass them by channelling more money directly to headteachers.

Council leaders want ministers to reject calls by the private companies to let them run schools completely by giving them the power to hire and fire staff. They are worried that the Government is creating a "vicious circle" in which the best staff leave LEAs for the private firms, thereby weakening the LEAs' performance and strengthening the case for them to be taken over by the private companies.

The Downing Street Policy Unit is taking a close interest in the plans.

A blueprint for a new relationship between the state and private sectors will be issued in May, after the expected general election, by the Institute for Public Policy Research, a think-tank with close links to the Government.

The institute has set up a commission to see whether there could be a bigger role for the private sector in health, social services, education, local government and prisons.

Yesterday a member of the commission said: "It is not about making sure there is less public and more private provision. There may be a case for different types of service provision. We will also look at the voluntary sector and ways to encourage more local and community involvement."

He added: "The public purse will still be footing the bill. The task is therefore to consider whether public-private partnerships can improve the quality and cost-effectiveness of publicly funded services."