More private firms to join reform of public services spending

Alistair Darling today signalled a radical overhaul of public services after the election, including much more use of the private sector.

In a keynote speech in Cardiff, he served notice of a round of modernising reforms that could mean more firms delivering services in the NHS and elsewhere.

His vow that the state would "step back" will alarm Labour MPs who this year rebelled to halt the part-privatisation of Royal Mail.

The Chancellor also promised spending cuts to curb the budget deficit - though not until after the election, saying cuts should not come until the economic recovery was "established".

However, marking a victory in his battle with Gordon Brown over whether Labour should even admit the need for public spending reductions, he said cuts would come.

"This will mean, as Gordon Brown and I have already made clear, hard choices on public spending," he said.

"We won't flinch from the difficult decisions that will be necessary."