FIVE hundred new office jobs were heading to Blackburn today after a council handed over some of its services to a private company.

Blackburn with Darwen Council signed, sealed and delivered the white collar deal which business leaders hailed as a shot in the arm for the town.

The partnership is with the FTSE 100 company Capita. The firm will also set up a new £5million business centre in Blackburn to house the new staff.

Mike Damms, chief executive of East Lancashire Chamber of Commerce, said the introduction of the jobs would act as a magnet to other office-based employers to come to Blackburn and the rest of East Lancashire.

And Blackburn MP Jack Straw said the town would no longer be "in the shadow" of Preston when it came to white collar jobs. The first 120 new vacancies will be created in the next 18 months with the remainder promised over the next five years, Phil Watson, chief executive of Blackburn with Darwen Council said. Capita says it will target local people for the posts.

It will also mean a further 500 council staff will transfer to Capita's employment from May 1this year after the agreement was reached by the local authority's all party executive committee last night. Capita will invest £5million in a new business centre to be located in Blackburn and most of the Capita employees from Blackburn with Darwen Council will transfer there within two years.

The partnership with Capita - a company that provides services and advice to more than 350 authorities nationwide - is expected to result in £1million of savings through being more efficient and using more modern technology and reduce costs by £600,000 a year for the council over the next 15 years. Rod Aldridge, executive chairman of Capita, said this would be a "massive opportunity" for the staff moving to his company, and promised an "enhancement in services and how they are delivered".

He said: "It's a great area to build a business centre, with good access to the surrounding area, including access to Manchester."

The company recently came under fire in an independent report over its handling of housing benefit services it carried out for Lambeth council, after a 30,000 backlog of unopened mail was discovered. But Blackburn with Darwen bosses say they are confident Capita has rectified the problem and it will not happen here.

The Capita staff will provide services such as housing benefits, personnel and payroll services, property management, architecture and civil engineering and other administrative support and digital technology for Blackburn with Darwen Council. The company also plans to use its staff to carry out work for other organisations and companies in the region.

The three political parties in Blackburn all welcomed the agreement, which they say will help improve council services.

And Blackburn MP Mr Straw said: "I have been kept in touch with this for some months. It's a great tribute to Blackburn with Darwen and the wider area that this has been completed.

"It's particularly important because it involves new jobs for white collar workers. This will help balance the economy in the area.

"Blackburn has long been in the shadow of Preston when it comes to white collar jobs. This will go a long way to changing that. I hope it will also attract other similar ventures to the area."

Tony Lubman, divisional director of Capita, said the company had identified "two or three town centre sites" for the new business centre and planned to have the facility fully operational within two years.

Mr Lubman said the new business centre would also provide back office facilities for the 2,000 employees based at Capita's Liverpool and Manchester offices.