The Prime has said dropping the private finance initiative would be a fundamental mistake at a time when the government is determined to press ahead with reform in the public services and a radical restructuring of the welfare state. But his comments have run into immediate criticism from public service unions with renewed calls for a review to establish whether or not the PFI brings value for money.Mr. Blair used his monthly televised Downing Street briefing to stress his continued commitment to reform, which was, he said, the big challenge facing the government and the Labour Party. “Our purpose is to take the 1945 welfare state settlement and radically redraw it,” he said. He outlined what he saw as a series of improvements in health and education but said there was a gap between people’s perceptions and the facts of what was happening in the NHS.

Turning to the question of the Private Finance Initiative, Mr. Blair said it would be wrong to drop it now and a mistake of “fundamental historic importance” for Labour to back away from reform. But critics of PFI were quick to point to recent research, which they said showed clearly that private investment was not bringing best value.

UNISON general secretary Dave Prentis said it was extraordinary for the Prime Minister to link the future of public service reform with the PFI as it suggested there was no other way of improving services. The government’s mistake had been to prevent the public sector using other methods of procurement.

“PFI is not building world class public services. In fact, there is overwhelming evidence to the contrary. Only last week new research in the BMJ revealed that using public-private partnerships to build hospitals was poor value for money and resulted in falling bed numbers and service cuts,” said Mr. Prentis.

He said the government needed to ask itself why it continued to support the use of PFI in the face of growing criticism and he repeated calls made at the Labour Party conference for an independent review to establish once and for all whether the public-private partnerships were delivering value for taxpayers’ money. On health, Mr. Prentis said foundation hospitals would be like a Trojan horse, bringing private companies into the heart of the NHS, creating a two-tier service.