A DEAL to provide a jobs boost by transferring council services in Blackburn and Darwen to a private company is set to go-ahead even though the firm faces the sack by another authority.

The deal between Capita and Blackburn with Darwen Council is set to get the go-ahead following a meeting of the authority's ruling Labour group despite the company being heavily criticised in a report for the housing benefits service it provides for Lambeth Council in London.

Capita has promised the deal will mean up to 500 new jobs in Blackburn and massive new investment in the town including a new business centre as well as council employees being transferred to work for the private company. The development is also expected to boost existing local businesses.

But Lambeth was told by independent consultants it would be "more cost effective" to carry out housing benefits work itself and end their 10 year old deal with Capita.

But Blackburn with Darwen Council chiefs say they will push ahead with their plans to form a partnership with the company which provides services and advice to more than 350 authorities nationwide. A final decision will be made at a meeting of Blackburn with Darwen's Labour-dominated executive committee on March 20.

Coun Gail Barton, deputy leader of Blackburn with Darwen Council, said the authority was "still in a negotiating position" with the company which employs more than 8,000 people nationwide, and she did not want to pre-empt the decisio. When asked about the criticisms levelled at Capita in the report Coun Barton said the company had faced a very different situation in London in taking over an already struggling service and Capita had explained to Blackburn with Darwen Council bosses why it had difficulties in Lambeth.

The report to Lambeth Council by the Barony Group, South East-based housing services consultants, advised the London borough to end its contract with Capita to provide housing benefits and said it would be cheaper to take the work back under direct council control.

The report said Capita's problems at Lambeth had included massive backlogs of work. At its peak in April last year 55,000 items of outstanding post had not been dealt with, and although a recent partnership between Capita and the council to tackle the problem resulted in a significant reduction it is still estimated at 23,000, according to a Lambeth Council spokesman.

Coun Barton said: "I am just grateful we don't face those kinds of problems. I think Capita have done a very good job there in very difficult circumstances.

"I don't expect any major surprises and there is no reason to believe there will be anything to give us any cause for concern, but of course we will have to await the formal process.

"If the best and final offer they present to the council meets the objectives we set 12 months ago I don't believe any political group on the council would turn it down."

Capita has also recently taken over a range of white collar services from Cumbria County Council which has transferred 650 employees to the private sector in a deal which has netted the authority £4million and the promise of 1,000 new jobs for a seven year contract with the company.

Tony Lubman of Capita, said the company would be making a final presentation to the council's executive committee and it would be "hopefully points of clarification rather than substance."

Mr Lubman said his company was also working closely with Lambeth Council, but added: "What is clear is the contract between us is not the right contract. It's a problem and needs to be completely re-written.

A Lambeth Council spokesman said the the London authority was now considering the outcome of the Barony Group's review of the housing benefit service but added: "We did not commission the report to ignore recommendations."

Coun Colin Rigby, leader of the Conservative group said he had just received the Capita report and did not want to comment until his party had discussed it.