07 December 2007
The government is to investigate the scale and nature of the private sector's role in delivering public services, as figures revealed that they now provide £44bn worth.
Business Secretary John Hutton announced a review to provide 'greater understanding' of the private sector's contribution to service delivery. It will be headed by DeAnne Julius, chair of the Chatham House think-tank and a non-executive director of BP and Roche.
The inquiry will also establish 'what more government can do, as policy-maker, regulator and procurer, to get the best results for consumers and taxpayers', he said.
Hutton's announcement to the CBI's Public Services Forum in London on December 5 followed a presentation of research by Oxford Economics. This showed that the private sector provided £44.3bn worth of services across seven main areas in 2005/06 – more than 18% of total public spending on health, home affairs, local government, welfare-to-work, education, transport and defence.
Almost half of the public funding for private providers – £20.7bn – came from the NHS, the research found. Local government accounted for £4.9bn, education for £5.4bn, and defence £8.2bn.
Hutton said a decade of economic growth and investment had fed the development of a 'public service industry' that had 'helped us to meet the challenge of renewing our services, through efficiency, innovation and effectiveness'.
The Julius review is aimed at providing a more detailed picture of the emerging industry and identifying factors that could support its growth, looking at the scale of the market, its employment base, the types of services provided, capacity, value and competitiveness.
The announcement was welcomed by the CBI as a further signal that Prime Minister Gordon Brown intends to maintain Tony Blair's enthusiasm for using the private sector.
CBI director of public services Neil Bentley said the government should 'move rapidly from a period of study into a time of action'. He called for the Department for Business, Enterprise and Regulatory Reform to establish a public services unit.
But Dave Prentis, general secretary of public sector union Unison, attacked the move. 'Private companies are creaming off big profits from public services – money that should be spent directly on improving patient care and local services,' he said.
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