Voting For A New Britain: Labour split over private finance

THE PRIME Minister warned Scottish voters against "divisive" nationalism yesterday amid signs of public divisions within his own party. As Mr Blair arrived in Scotland for a morning on the campaign trail, a Labour spokesman, John McAllion, was forced to issue a statement after dissenting from the party line on the use of private-sector money in hospitals and schools.

Mr McAllion, who later said he had been quoted out of context by The Scotsman, had told the paper that the Private Finance Initiative (PFI) could mean poorer working conditions. "When PFI through the private sector or consortia takes over, the jobs of cleaners, porters and janitors are effectively privatised and their pensions, wages and conditions are eroded.

"The challenge ... is to find a way to raise investment which doesn't mean privatising work or giving taxpayers a raw deal. I'm not convinced PFI is the way, but if enough people get together and think it through then we can find one," he was quoted as saying.

He added: "I am regarded with considerable apprehension by the leadership, which is why I have been kept 100 miles from any press conferences during this campaign."

Mr McAllion, who had been quoted in The Sun last March expressing similar views on PFI, yesterday issued a statement supporting Labour's manifesto commitments, after a late-night phone conversation with Labour's Scottish leader, Donald Dewar.

"I will give Donald Dewar all the support he needs. I have been reported inaccurately. What I actually said was that those who were opposed to PFI must come up with an alternative, and no one has done that," he said.

In the Sun interview, just before he joined Donald Dewar's team, Mr McAllion said he did not like the idea of hospitals being controlled and run by the private sector. He added that the issue had been too heavily dominated by party politics, and that all alternatives should be considered. The Dundee East MP has also caused friction in the past by supporting the renationalisation of the water industry.

The PFI has become a big issue in the Scottish elections and has been opposed by the big unions, although the Scottish TUC stopped short of full-scale condemnation at its annual meeting in Glasgow earlier this month.

The Scottish National Party leader, Alex Salmond, immediately seized on the remarks, describing Labour's PFI policy as a "disaster". "Clearly London Labour has applied the thumbscrews to poor John McAllion. At the start of the campaign a Newsnight survey showed that a majority of Labour's Scottish parliamentary candidates wanted to move away from PFI, but since then they have obviously been exposed to the Millbank mind-melding treatment," he said.

In a speech to Scottish journalists, the Prime Minister tried to divert attention from the divisions and concentrated instead on the nationalists' plans to "break Britain apart ... I believe passionately that it is in the interests of Scotland and England to stay together. Their economic policy is not credible. Their figures do not add up. Indeed, their policies are dangerous: they are too big a risk. We are better off united and worse off apart, and we stand stronger together," he said.

The Prime Minister also insisted that Labour's campaign had not been negative, claiming it was the party's duty to point to the costs of separation.

He said that Labour had delivered the Scottish Parliament and would use it to build a better Scotland. The Parliament was "a symbol of a new partnership in the UK".

Mr Blair added: "I am determined to be here today not just to campaign for the Labour Party but to celebrate the new Scottish democracy that we have brought about."