Published: 14/03/2002, Volume II2, No. 5796 Page 7

The government may be considering watering down plans which would have forced private contractors to give new staff equal pay and conditions to those given to staff transferred from the public sector.

Prime minister Tony Blair's spokesperson would not deny outright reports in The Times which claimed that the government was examining proposals which would effectively dismantle key components of a deal previously struck with unions.

The revelations about the direction of government thinking came last Thursday as Mr Blair issued a 30-page pamphlet designed to encourage public sector workers to embrace the government's reform programme.

According to The Times, leaked Cabinet papers said: 'Any action to limit the ability of private contractors to introduce flexibility will tend to diminish the benefits of outsourcing and public-private partnerships. It will also raise costs for the public sector as contractors price the lack of flexibility.' The paper apparently recommended the adoption of a 'code of practice' which will ensure new employees are offered a deal which is 'fair and reasonable', while still holding the power to set flexible rates and conditions - in line with an idea first proposed by the Confederation of British Industry. The status of the document is unclear.

Unison warned such a policy could cause a 'major rift' between the government and unions. But CBI director-general Digby Jones suggested it was not reasonable to expect private industry to provide identical terms to those in the public sector.