"It was a very shocking moment,'' he says. "Until then, I had believed that the state should provide everything. But I saw that the producer interest could squeeze out the interests of consumers - in this case rather poor consumers. It got me thinking that maybe there were other ways of doing things."
More than 20 years later, as managing director of the Centre for British Teachers, one of the private organisations vying to take control of large chunks of the education system, Mr McIntosh is one of those in the vanguard of trying to put "other ways of doing things" into practice.
The CFBT, based in modest offices in Reading, Berkshire, has broken new ground in the way schools are managed, forging a close partnership with two London boroughs to help run some of their most problematic schools. Since September, it has acted as consultants and supplied the head teacher at the Rams Episcopal Primary School in Hackney, east London, which had been on special measures for two years and is under notice of closure unless it can improve. And it has linked up with the borough of Lambeth, in the south of the capital, to help run its education action zone. More controversially, the CFBT is bidding to take over the running of a whole secondary school, Kings Manor, in Guildford, Surrey.
But this could be just the beginning. If all goes according to plan, the centre could soon be a big player in the provision of education. As well as its direct involvement with schools, including some inspection work for OFSTED, it manages the National Numeracy and Literacy Centre for the Department for Education. It runs the careers services for the counties of Berkshire, Bedfordshire and Oxfordshire, as well as for four London boroughs, Ealing, Hillingdon , Hounslow and Richmond. Out of its grants budget of Pounds 720,000 this year, it is funding projects ranging from research into learning among disaffected youngsters by the think tank Demos, to providing books for schools in the Baltic states, and to supporting the "high reliability schools" project based at Newcastle University. It employs around 900 people, including 50 at its headquarters and 300 teachers abroad.
The centre's international flavour - Mr McIntosh's offices sports a map of the world stuck with red and black marker pins, not, as his critics might suspect, part of a plan for global domination, but merely indicating the 14 countries in which the CFBT operates - goes back to its roots in the Fifties. It started as a company employing teachers to work abroad, mainly in Germany, later becoming a charity. In the early Nineties, with the debate over "choice and diversity" at its height under a Conservative government, it decided to turn its attention to the domestic scene.
Simon Blacksell, then deputy head of a Wiltshire comprehensive school and now organiser for SFE, a firm that specialises in conferences, and a member of the CFBT (he began his career with the organisation teaching in Germany), remembers: "It occurred to me that the services we were selling abroad could be expanded into the home market. It was the very early days of Ofsted inspections and the government was desperately short of inspectors, so I suggested we could explore going into that market. Now the home market is the most solid foundation of the firm. The days of local authorities are numbered. Schools now are looking for services from the best people, whoever they may be."
But whether organisations such as the CFBT, Nord Anglia and Capita have a secure future in the British education market will depend, in the long term, on whether their aims and objectives and the principles on which they are based tally with the wishes of those who hold the purse strings - the Government and, ultimately, taxpayers.
CFBT's annual statement for 1998 sets out the values by which it operates."Our overarching commitment is to education," it says, "to enable individuals, institutions and communities to make better informed choices and to broaden their opportunities." It emphasises that it is a not-for-profit organisation, but also says it "values commercial disciplines as a means of ensuring efficient service delivery and of making a reasonable return on operational activities which support and reflect our values". Those returns - the turnover in 1998 was #163;38 million - go to a trust fund for grants to "support initiatives which promote our values and complement our operational work".
Despite the good intentions, the gradual incursion of private organisations into the state sector inevitably has its critics. Margaret Tulloch of the Campaign for State Education says: "I don't see how a private organisation can be accountable to the people whose money they are spending. Local authorities are elected and accountable bodies. If there is a lot of money being made out of schools, it should not be going into private hands, it should be spent in the classroom."
But the local authority recipients of CfBT's services apparently do not see it that way. Heather du Quesnay, chief education officer at Lambeth, where once the idea of inviting a private organisation in to help run schools would have once been unthinkable, says the authority had to convince the unions that CfBT was not "predatory" and guaranteed that the teachers' terms and conditions would not be affected. But calling on outside organisations for help is the way forward, she says.
"I'm very happy about it. We had worked with CFBT and asked them to help us with the education action zone. There is going to be much more diversity in the sources of supply for all sorts of goods and services in the future, and I welcome that. I don't think it changes the essential role of the local education authority.
"Our role is to make sure we have the right number of schools operating at the right standard to offer educational opportunities for all the pupils in our area. We need to provide the strategic overview because we understand the needs of the people and have the authority of the ballot box behind us. But the question of who provides those services is a separate one.
"Bringing in people from outside will mean more competition and focus on the needs of the system and providing services at an appropriate price and at the right standards."
Hackney, another authority where bringing in outsiders would have prompted a strike not so long ago, is also remarkably quiescent. An Ofsted inspection this month will determine whether the CFBT management at Rams Episcopal School has made any progress since it started in September. A spokesman for the authority said: "We're still in control of the school. We've acted as any other organisation would have done, faced with an intractable problem. We've brought in outside consultants. We wouldn't rule out providing support of this kind to other schools in the future if it were needed."
Mr McIntosh often faces the question "What's in it for you?" from people suspicious of a private organisation becoming involved in the state sector.He turns it back on his questioners. He is no different from them, he says.He wants to provide an excellent education system but is also keen to build up his organisation and be successful. The crucial point, he says,is that schools, and taxpayers, should be given choice about who provides education rather than being forced to accept the local authority's services come what may.
"People sometimes say local authorities like Lambeth and Hackney have abrogated their responsibilities by calling us in. But as I see it, the ultimate abrogation of responsibilities is to put someone into a school who you know is not up to it. That is what has happened in the past when local authorities had a complete stranglehold."
It is no coincidence that this kind of thinking is in tune with the New Labour agenda of developing a more open market approach to education, begun by the previous Conservative government, while at the same time maintaining a strong regulatory mechanism in the hands of the state.
Mr McIntosh, now a Liberal Democrat, accepts this with a smile.
"I would be surprised if there wasn't a continuing move away from the state as the sole provider of services," he says. "I see people like us, non-profit making organisations but not in the state sector, playing an important role in the future. We are the Third Way."