Public to pay for fat City bonuses

CITY EXECUTIVES will get large salaries and bonuses from the taxpayer to persuade companies to invest in schools and hospitals.

Alan Milburn, Chief Secretary to the Treasury, will this week announce plans to privatise the Government unit responsible for getting private money into the cash-strapped public sector.

City high-flyers will be given performance-related pay packages, which could total millions of pounds, to broker deals under the Private Finance Initiative.

The move will infuriate Labour left-wingers who are already angry about the Government's willingness to "sell off" parts of the NHS, education system and prisons infrastructure. "The city slickers are cashing in," one MP said.

However, ministers are determined to recruit the best executives from the City to sit on the board of the management company, in which the Government will have a large minority stake.

Ministers hope a professional organisation giving legal and financial advice to the public sector will help to avoid problems such as the recent Passport Agency computer fiasco.

The company will be based on the existing 12-strong PFI taskforce headed by Adrian Montague, who is paid a basic salary of pounds 160,000.

The plan comes as ministers move to clamp down on excessive boardroom pay with proposals to allow shareholders to veto overly generous remuneration packages for directors.

Mr Milburn will also announce a new Government agency to buy equipment across Whitehall departments. The Office for Government Commerce, with a staff of 1,000 and a pounds 13bn budget, will be charged with saving pounds 1bn on purchases in the next three years.