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Wednesday, 16 May, 2001, 14:25 GMT 15:25 UK
Reforming public services
Nurses at Guy's Hospital, London
Private companies could take over wards under Labour
Tony Blair has given the clearest indication yet that he is prepared to hand over many of Britain's schools and hospitals to private contractors, if Labour wins a second term.

Speaking at the launch of his party's manifesto, Mr Blair said he wanted to massively increase the role of the private sector in the delivery of public services.

What matters is delivering the best service for the patient

Tony Blair
Although he stressed that education and medical care would remain free at the point of delivery, he said that many of those services could be provided in partnership with private companies.

Labour in office has embraced private-public partnerships, although so far this has been confined mainly to capital projects.

Private finance initiative

In opposition, Labour derided the 'backdoor privatisation' of the Conservatives' Private Finance Initiative (PFI).

But, in power, PFI has become Labour's favourite way of paying for new schools and hospitals.

Labour has also experimented with the contracting out of failing schools and education authorities, and ancillary parts of the health service.

And it has increased the NHS's use of private hospitals in the battle to reduce waiting lists.

So far the management of clinical health services and mainstream secondary education has remained firmly within the public sector.

But it is now clear that Labour is ready to move to the next level.

On Wednesday Mr Blair told the BBC: "Already through the Private Finance Initiative we have involved the private sector very greatly.

Whether the management of those (non- emergency hospital units) should be in the public or private sector should be an open question

Tony Blair
"We see an ability to expand that role in the future, still providing services free at the point of use within the national health service, but with different ways of providing those services.

"For example, there are certain services we can provide in partnership with the private sector.

"Or where we are setting up new hospital units that can do the non-emergency operations - whether the management of those should be in the public or private sector should be an open question.

"What matters is delivering the best service for the patient."

Mr Blair is convinced that structural changes are needed within the NHS and other public services to prevent the extra cash the government is pouring into them being wasted.

Leaked report

According to a report leaked to the Guardian newspaper, New Labour is planning to introduce private contractors into the management of key services, if it wins a second term. The report - drawn up by the influential centre-left think tank the Institute of Public Policy Research - is, according to the Guardian, being held back until after the election.

It says private contractors could be brought in to run local health authorities and primary care groups.

And it suggests that the private sector should be allowed to bid for the contracts to replace 3,000 GP premises.

It even suggested that an entire district general hospital could be run by a PFI.

In education, the option to contract out the management of schools should be available to all schools, not just failing ones, the report says.


Taken together, these policies would fundamentally change the role of government from a provider of public services to a facilitator.

When Mr Blair talked recently of being more 'radical' in a second term, this may have been what he had in mind.

With an election looming, he has staked his reputation on delivering better public services.

But he clearly does not trust the existing infrastructure alone to deliver the results he will need to see if his party is to win a third term.

Only the profit motive, he seems to be saying, can cleanse the NHS of its crippling inefficiencies.

Shadow chancellor Michael Portillo could only respond to Mr Blair's proposals on increased privatisation by claiming that he would fail to deliver the promised changes.

Meanwhile, the Lib Dem leader, Charles Kennedy, attacked Chancellor Gordon Brown for his 'timidity' in not raising taxes to fund a major public spending spree.

Tory initiative

PFI was dreamed up by the Conservatives in 1992 as a way of funding infrastructure developments without running up debts.

Rather than borrowing to fund new projects, John Major's government entered into a long-term leasing agreements with private contractors.

Under a PFI, companies borrow the cash to build and run new hospitals, schools and prisons for a period of up to 60 years.

So far, about 150 PFI contracts have been signed, worth more than 40bn, with many more in the pipeline.

PFI is often portrayed as using private money to pay for improvements in public services.

But, critics argue, it is still paid for through the public purse. It is not new money.

Furthermore, the critics say, private finance is, by its nature, more expensive than public capital.

The government of the day may feel it is getting a hospital or school at a bargain price but the country will pay more in the long run.

BBC News Online's in depth coverage of the 2001 election campaign

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