Government officials admitted "concern" yesterday about an academy chain preparing to privatise services at 80 schools during a Commons education committee hearing.

Labour MP Alex Cunningham grilled Department for Education (DfE) officials over the Academy Enterprise Trust's (AET) plan on the first day of an inquiry into academies and free schools.

The Star revealed on Saturday how the trust is offering privateers a £200-400 million contract to run all non-teaching functions.

Mr Cunningham pressed home concerns that at least 500 staff could lose their jobs, while others could have wages and conditions cut.

He demanded to know: "Have any of you been involved in discussions with ministers about these plans which will shift resources from the front line to profit-making organisations?

"I would hope that if there are profits to be made in the education system then they would be put back into the education of our children."

DfE funding director Andrew McCully initially insisted that was not what AET had proposed.

But under pressure from Mr Cunningham, he added: "We have had conversations with AET because they are one of the academy sponsors whose performance we continue to be concerned about."

It was revealed last year that AET poured school funds into the private business interests of its trustees and directors.

Tory committee chairman Graham Stuart also raised concerns about personal profit-making in AET's latest plan.

"If someone's husband or wife is being paid and they are part of the salary cost, it may be at cost but it's certainly remunerative," he said.