It's very strange for the Labour leader to be captivated by private enterprise, but he really is."

Lord Hattersley

And he compared Mr Blair's attitude towards public services to that held by the former Conservative Prime Minister Margaret Thatcher.

In an interview with the ePolitix website Lord Hattersley said Mr Blair sometimes made favourable comments about nurses "but for most of the time it's an extension of Mrs Thatcher's general view that the public service is doomed to failure."

He added: "My problem with the prime minister is not that he doesn't believe in anything that he believes in the wrong things.

"It's very strange for the Labour leader to be, I wouldn't say obsessed, but captivated by private enterprise, but he really is."

Hattersley says Blair is "captivated by private enterprise"

Turning to the government's tense relationship with the unions Lord Hattersley said: "What has to happen now is the government has to find an accommodation with the trade unions.

"If the prime minister, as I fear is his character, goes on trying to rub their noses in it ... tell[ing] them all that they aren't capable, competent of running public services, then I fear they'll have a confrontation."

Such a stand-off would produce chaos, particularly in hospitals, he predicted.

Union meetings

Tony Blair has offered to meet the unions six times a year, a move welcomed by Lord Hattersley as a "great step forward".

"There have been times when the prime minister and some of his gung-ho ministers have exuded contempt for the public services and the public service unions and this is a sign of respect," said the Labour peer.

He believed the meetings would "educate" ministers whom, apart from Deputy Prime Minister John Prescott, "really don't understand how unions work".

"I think too many people on the Blairite Labour Party think that all the men and women who work in the hospitals think of is 'what's going to be in his pay packet at the end of the month'."

Persistent critic

The comments are the latest in a series of broadsides Lord Hattersley, a member of Labour's old right, has launched against the government.

Last month, he called for party members to "rise up" to protect Labour values "against the coup d'etat which overthrew the legitimate philosophy".

This week, he attacked Home Secretary David Blunkett's suggestion that water cannon could be used to control riots like those seen in Bradford - a tactic he forecast would be "absolutely disastrous".