By Vivienne Russell | 3 December 2012
Private companies providing public services are becoming too big and complex to fail, third sector leaders are warning.
A report published by Social Enterprise UK today claims that companies’ drive to increase shareholder profits is pushing down the quality of services and staff wages and ‘stripping wealth’ out of communities. It also cites polls showing little public support for the idea of shareholders making profits out of public services.
According to The shadow state, around £82bn or a third of spending on public sector commissioning and procurement goes to independent providers. This is projected to rise to £140bn by 2014 once the effect of major outsourcing programmes in welfare and health is felt.
The report also notes that the largest outsourcing firms are involved in a range of different public service areas.
‘It is difficult to imagine them being easily allowed to fail because taxpayers are now dependent on a few companies for a great many services. It is not easy to see who would quickly or easily fill the large gaps they have carved out across public services,’ it states.
With the ‘lion’s share’ of outsourcing contracts going to large firms, charities and social enterprises are being overlooked, Social Enterprise UK said.
Chief executive Peter Holbrook said: ‘This is not an issue of whether or not to outsource more public services but about how public bodies allow the markets to be shaped, and the sort of firms they choose.
‘The whole issue needs urgent attention. Commissioners need to be able to contract providers that are committed to quality public service and motivated not by shareholder profit, but by benefiting the communities in which they work.’
Two-thirds of UK adults believe it is ‘unacceptable’ for shareholders to profit from running hospitals and health services, children’s homes, police services and care homes for elderly and disabled people, according to the report.
Social Enterprise UK says the Public Services (Social Value) Act, which takes effect in January, should help to rebalance the public services market as it will allow commissioners to factor community benefit into their decisions. The Act followed a Private Member’s Bill sponsored by Conservative MP Chris White and Liberal Democrat peer Lord Newby.
White said The shadow state ‘asks a number of important questions’ about the future of public services.
He added: ‘The number one focus of public service delivery must be on improving outcomes and getting maximum benefit for our communities. I hope the government will look carefully at this report to see how we can maximise those benefits.’
Commenting on the report, a Cabinet Office spokeswoman said the government was doing 'more than ever' to ensure there was a diverse range of suppliers for public service contracts.
'We have already made real progress. The Social Value Act cements social impact in contracting for the first time, Big Society Capital has up to £600million to invest in social ventures and all our contract opportunities are now published online. We train commissioners about the benefits of social enterprise and we even fund social enterprises to prepare for contracts and investment.'
Private companies providing public services are becoming too big and complex to fail, third sector leaders are warning.
A report published by Social Enterprise UK today claims that companies’ drive to increase shareholder profits is pushing down the quality of services and staff wages and ‘stripping wealth’ out of communities. It also cites polls showing little public support for the idea of shareholders making profits out of public services.
According to The shadow state, around £82bn or a third of spending on public sector commissioning and procurement goes to independent providers. This is projected to rise to £140bn by 2014 once the effect of major outsourcing programmes in welfare and health is felt.
The report also notes that the largest outsourcing firms are involved in a range of different public service areas.
‘It is difficult to imagine them being easily allowed to fail because taxpayers are now dependent on a few companies for a great many services. It is not easy to see who would quickly or easily fill the large gaps they have carved out across public services,’ it states.
With the ‘lion’s share’ of outsourcing contracts going to large firms, charities and social enterprises are being overlooked, Social Enterprise UK said.
Chief executive Peter Holbrook said: ‘This is not an issue of whether or not to outsource more public services but about how public bodies allow the markets to be shaped, and the sort of firms they choose.
‘The whole issue needs urgent attention. Commissioners need to be able to contract providers that are committed to quality public service and motivated not by shareholder profit, but by benefiting the communities in which they work.’
Two-thirds of UK adults believe it is ‘unacceptable’ for shareholders to profit from running hospitals and health services, children’s homes, police services and care homes for elderly and disabled people, according to the report.
Social Enterprise UK says the Public Services (Social Value) Act, which takes effect in January, should help to rebalance the public services market as it will allow commissioners to factor community benefit into their decisions. The Act followed a Private Member’s Bill sponsored by Conservative MP Chris White and Liberal Democrat peer Lord Newby.
White said The shadow state ‘asks a number of important questions’ about the future of public services.
He added: ‘The number one focus of public service delivery must be on improving outcomes and getting maximum benefit for our communities. I hope the government will look carefully at this report to see how we can maximise those benefits.’
Commenting on the report, a Cabinet Office spokeswoman said the government was doing 'more than ever' to ensure there was a diverse range of suppliers for public service contracts.
'We have already made real progress. The Social Value Act cements social impact in contracting for the first time, Big Society Capital has up to £600million to invest in social ventures and all our contract opportunities are now published online. We train commissioners about the benefits of social enterprise and we even fund social enterprises to prepare for contracts and investment.'
