Byers speech will warn PM to limit use of private firms in the public sector

Stephen Byers, a former transport minister, is to issue a warning this week to the Prime Minister over his involvement of the private sector in public services.

Mr Byers, a leading Blairite moderniser before he became discredited and was sacked, will use a speech to the Social Market Foundation think-tank, to call for clear lines on private sector involvement in public services to reassure Labour members. "We need to put some boundaries around the debate, some lines in the sand that people feel confident we will not cross," Mr Byers will say in a speech disclosed to today's Guardian.

Those lines should be "no charges" for essential services like health or education and "no privatisation", says the man who brought Railtrack out of private ownership. "That does not deny a role for the private sector but the crucial point is that their involvement is in the public interest and that this comes before the interests of the shareholders."

Tony Blair risks being "too timid" on public sector reform, Mr Byers will also warn in the speech - one of four to the think-tank.

Mr Byers joins a growing number of past and present cabinet ministers who have questioned the role he has found for the private sector in public services. Plans to free England's best hospitals from Whitehall control by creating Foundation Hospitals caused a revolt in the House of Commons - 63 Labour MPs voted against the legislation though Mr Byers voted to support it.

The Prime Minister has made reform coupled with investment the key theme of Labour's second term. Yet not enough may have changed by the next General Election, according to Mr Byers.

"The Government is under clear pressure to improve public services. That is quite right," Mr Byers will say. "People are paying higher national insurance and want a return on their investment. By the next election the danger is there has been too much change to the public services but instead the reform will have been too modest and timid."

Mr Byers is still valued by Mr Blair despite the series of damaging episodes that eventually forced him to quit.

The Prime Minister even allowed him to deliver his resignation statement as Secretary of State for Transport Secretary from No 10.

Meanwhile, the outgoing leader of Britain's union movement spoke yesterday of "dissatisfaction and frustration" among trade unionists at the Government's policies. John Monks, the general secretary of the TUC, said there was "a hell of a lot of anguish" over the links between trade unions and the Labour Party.

Mr Monks warned ministers that the activists Labour relied on to deliver the vote at election times were angered by indecision on the euro, weak employment protection laws, privatisation and the "obscene conspicuous consumption" of fat-cat company directors.

The union leader who is leaving his post after 10 years to become general secretary of the European TUC, told GMTV: "I'm certainly reflecting this sense of dissatisfaction and frustration around the trade union world. It's about a feeling that we're rather second class in terms of labour standards compared to other people in the European Union."