COMPUTER giant IBM has signed a controversial £5.4billion contract with Essex County Council which could see it put in charge of the district's schools and roads.

The privatisation scheme, which has been sealed this week, will start with the firm reviewing all the authority's services in an attempt to identify possible areas for cuts and "increased efficiency".

Advocates say the deal, which runs for eight years, could save up to 20 per cent of the council's annual £1.2 billion budget in just three years, but critics say services will suffer and that hundreds of jobs could be lost.

Unions such as Unison claim the company will put its profits before the welfare of residents.

Critics also claim the scheme will put too much power in the hands of a private company, but a spokesman for the authority said: "The partnership will be led and governed by Essex County Council at all times."

The agreement is widely seen as a test case which could be copied by other local authorities if it proves successful.

Ongar MP and Conservative Party Chairman Eric Pickles told the Times newspaper: "I certainly think this is the future and we will be watching developments in Essex very closely."

Initially IBM will get to work "modernising and streamlining" the council's website, offices and procurement sections, but the deal could potentially lead to greater involvement in other areas of the council's remit.

Leader of Essex County Council, Lord Hanningfield said: “IBM has demonstrated its ability to help us deliver our vision of providing the very best quality of service for our residents.

"With the additional capacity, capability and skills that IBM will provide we are now looking forward to working with them as we move towards a more efficient, customer-focused organisation, providing first class front-line services.

"Working together we will also be able to keep council tax low and deliver real value for money for Essex residents.

"This is the most ambitious project that the council has undertaken, and finding the right partner to help us deliver it is a vitally important step.

"I look forward to working with IBM.”

Brendon Riley, Chief Executive of IBM UK and Ireland, said: "IBM is pleased to have been selected as the strategic partner for Essex County Council's exciting Transformation Programme.

"We look forward to supporting the council's drive to deliver enhanced, high-quality services once the contract has been finalised."

After a fierce bidding war among several corporations, IBM was announced as the council's preferred choice in June, with the council's cabinet agreeing to sign the firm up earlier this month.