AS the bell rings to signal the start of lunchtime and the chairs scrape back as the pupils start to clear away their books, the teacher clears her throat for the obligatory end-of-lesson announcement. "This chemistry lesson has been brought to you by Acme, makers of fine quality paints," she says.

It may not be quite here yet, but the days when teachers make sure they include a word from their sponsor may not be too far away, if critics of the increasing involvement of private companies in schools are to be believed.

A shortage of cash to fund new building projects has forced local authorities to look elsewhere if those leaking roofs and cramped conditions are to become a thing of the past. And the only people willing to come up with the money are private companies, who see a nice little profit in it for themselves.

And it's not just schools. Hospitals as well, are also having to rely on private finance if they are to replace dilapidated buildings. The £97m University Hospital of North Durham, which opened its doors earlier this year, was one of the first in the country to be completed under the private finance initiative, where private companies put up the money and then are repaid through an annual charge.

Private cash is also behind the £10m community hospital at Chester-le-Street, as well as the £140m scheme to bring the three South Tees hospitals together on one site in Middlesbrough.

But the use of private sector funds to pay for public services has caused some disquiet. From the NHS to state schools, the public sector was founded on the basis of offering a service. Private companies, on the other hand, are there to make a profit, and it is this apparent collision of objectives which has raised concerns over whether the service will take second place to profit.

Some of these fears erupted at yesterday's opening day of the TUC conference, with union leaders voicing fears over the Government's enthusiasm to involve the private sector.

"Handing over large tranches of the public service provisions to be provided by the private sector will change the whole culture of what public services need," says Transport and General Workers' Union leader Bill Morris. "I don't buy the argument which says that the only way you can improve public services is to bring in the private sector.

"We need to acknowledge that a society which largely depends on the private sector to deliver public services would be a very different kind of society from that which is required to create equality and social justice. It would be a society in which the priority was shareholder value rather than social need.''

And, although a survey published yesterday showed that one in four Labour voters would desert the party if more private sector companies were brought in to provide public services, the indications are that Tony Blair will hold firm to his determination to create a partnership between the public and private sectors, when he addresses the TUC conference today.

But this does nothing to dispel the image of schools sponsored to promote certain messages in the classroom, according to NUT regional officer for the North-East Mike McDonald.

"Our concern is that this is the thin end of the wedge. There are examples of this kind of practice elsewhere in the world and the adverse impact it has on education," he says. "It could lead to schools being run for profit and clearly it is difficult to run education on that basis."

"We could end up with advertising on text books and exercise books, and we don't believe that is right.

"There are also worries about private companies skewing the curriculum for their own ends. If you had a manufacturing firm involved in a school, they might want to have a steady stream of pupils going to work for them. They are profit-making organisations and education does not make a profit."

Private companies with a financial stake in a school could also attempt to exert some influence over the governing body, interfering with hiring and firing staff, he says.

The effect on workers is also a concern for Robin Moss, Unison's head of health for the Northern region. "As far as we are concerned, they treat staff like chattels to be bought and sold," he says.

"Typically, contractors cut wages and hours and worsen conditions and pensions are not protected. If you transfer to the private sector, all you are entitled to is a comparable pension, but if you have built up 30 years' service, all you get is a comparable pension, not an identical one." And it is not just the staff who lose out, he says. The public also gets a worse service as private companies seek to cut corners, reducing the number of hospital beds available and putting in fewer facilities for patients.

But the alternative to using private finance is that the hospitals may never get built at all, says Jill Moulton, director of facilities and planning at South Tees, which is building a new hospital on the site of James Cook University Hospital

"This is a huge capital project which the NHS has not been able to get off the ground for years. Private finance allows Middlesbrough and its catchment area to have a new hospital," she says. "We tried through the public sector for a long time and we have waited a long time."

"And once the hospital is completed, the responsibility for maintaining it passes to the private sector. If they have got their sums wrong and it costs more, then that falls on them," she says. "We have a guarantee that the buildings will be maintained at a very high level for 30 years."

While Labour has traditionally been seen as the defender of the public sector, Tony Blair's enthusiasm for the private sector could spell the end for public services as we know them, according to Dr John Wilson, director of Teesside University Business School.

"Labour has traditionally been predisposed to the public sector, but Tony Blair is saying those notions are no longer appropriate and we have got to look at whatever works in practice," he says. "He is making a big play of the fact that he wishes to have a pragmatic approach to the delivery of public services.

"I think we need to move away from the notion that the public sector is bad and the private sector is good, or that the public sector is good and the private sector bad. It is perfectly legitimate to say we need to explore the role private sector companies can play."

But this does not mean there is no place for concerns over the future of public services, even if the image of sponsored lessons is still some way from reality.

"Private sector organisations exist to make a profit and, potentially, we have a conflict between providing services for the public, which themselves benefit the economy, and where profit is the over-riding objective," Dr Wilson says.

"That represents a fundamental tension between the different camps, and the argument is how we can ensure the health or education service is what we want it to be."