Microsoft bill hike angers ministers

Bill Gates and Tony Blair met in 1999

A clash is looming between the government and American computer giant Microsoft over huge increases in software use charges.

The company is being warned that Britain's public services could switch to using other manufacturers' products rather than pay licence fee rises thought to total £60m.

The negotiating team from the Office of Government Commerce (OGC), led by chief executive Peter Gershon, met Microsoft on Friday to urge a more realistic deal.

It is understood the current proposals have been estimated to involve 250% higher costs for some government departments and organisations.

Viable alternatives are already being evaluated, although officials hope a deal can still be hammered out with Microsoft after more than three months of negotiations.

Blair meets Gates

Spokespersons for both Microsoft and the OGC would only confirm that negotiations were continuing between the two sides.

The OGC was set up in April 2000 to negotiate government supply deals with the private sector involving everything from paper clips to hotel accommodation.

Until now departments have negotiated separately and the aim was to harmonise arrangements and save money - secretaries of state retain any savings for their own budgets rather than handing them over to the Treasury.

News of the negotiations with Microsoft comes only a week after its boss, Bill Gates, took part in an NHS conference as his firm was being lined up to help develop electronic health records for every patient in Britain.

The health service has already struck a deal to supply nearly all its computers with versions of Microsoft's key business software, Office.

Two years ago Prime Minister Tony Blair met Mr Gates at Downing Street, when they discussed industry and employment-related matters.