Labour faces revolt over plans for privatisation

Tony Blair has been given an ultimatum by Labour supporters about his plans for private firms to take over the running of schools, hospitals and the Tube: reassure us or face a summer of protest.

Mr Blair will seek to defuse the growing row with his party's core supporters tomorrow with a speech setting out the limits of private sector involvement in running public services, but he has in effect been given 48 hours to get his message across.

One leading public sector union has prepared a poster advertising campaign showing a slick businessman and a nurse while posing the question "Who do you trust to run your health service?"

"We will shelve it if he reassures us on Monday, but if he doesn't, the campaign will run throughout the summer," said a source close to John Edmonds, general secretary of the GMB union.

Mr Blair's speech is seen in Downing Street as a definitive statement for this Parliament on his promise to introduce radical reforms to deliver better public services. The Prime Minister enraged unions and Labour MPs by insisting there could be "no ideological boundaries" to bringing in the private companies.

"We think it was the biggest blunder he has made since taking office four years ago," said the union source. "We are going to challenge him to put this on the agenda for the party conference. We cannot fix or spin this away. There has to be a debate."

Downing Street has become increasingly alarmed at the hostility to the private-sector plans outlined in Labour's election manifesto. Mr Blair, bogged down in Northern Ireland talks, missed hostile questioning by formerly loyal backbench MPs about charging for televisions in wards in privately financed NHS hospitals. Around the lobbies, the Government has said there would be no new NHS charges, but Labour MPs were growing increasingly restive. "We think this could be the thin end of the wedge to charging in hospitals," said one Labour MP.

The row will go to Labour's national executive committee later this month with a demand for a full-scale debate at the party conference. The unions are threatening a campaign of non-cooperation with the conference organisers to force the issue out into the open.

In London, union activists are threatening to call for Labour MPs to be deselected if they do not speak out against the public-private partnership for London Underground.

* Education Secretary Estelle Morris is expected to announce today that she is delaying until the autumn the education White Paper. The policy paper proposes the intervention in some schools by private firms but is now thought too controversial.