The coalition government is considering setting targets for the share of public services that should be outsourced to the private and voluntary sectors, in an attempt to drive up the involvement of both.
While the state should continue to fund important services, the spending review underlined the coalition’s view that the government “does not have to be the default provider”.
And in spite of its repeated condemnation of Labour “targets”, the coalition is considering setting one to boost private provision.
It will “look at setting proportions of appropriate services across the public sector that should be delivered by independent providers, such as the voluntary and community sectors and social and private enterprises”, the review said.
The approach “will be explored” first in social care, early-years, community health, pathology, youth, court and tribunal services, and early interventions for the neediest families.
The Treasury said on Thursday this was “forward-looking policy” that “was still being considered”, and it was not possible to indicate what proportion of services might have to be outsourced. Dave Prentis, general secretary of Unison – many of whose members provide such services – accused the government of “going a step further than the free market”.
“Surely commissioning should be about getting the best value and the best- quality services – not about creating arbitrary levels of private versus public. The government is considering engineering a built-in bias to the private sector, which is simply unacceptable.”
Labour has effectively excluded the public sector from bidding to run services – for example, by building prisons under the private finance initiative, or creating privately run centres to treat NHS patients that the health department set up.
In a range of other cases, however, both Labour and the previous Conservative governments allowed in-house bids – in which other parts of the public sector competed – when services have been outsourced.
Meanwhile, management consultants warned the coalition that it faced a big challenge in implementing its spending cuts at the same time as cutting Whitehall and other administration costs by at least a third and attempting changes to the running of schools, health and the welfare system. John Fotheringham, public sector partner at Deloitte, said reducing administration by a third was “an extremely challenging target”.
He added: “Our experience of helping both public and private sector businesses is that cutting by 10 per cent is painful but achievable. Cutting by over 25 per cent is exceedingly difficult.”
Such changes required investment and new ways of working, he said, and if that did not happen as budgets were cut “the savings will not be achieved, and those savings which are made will not be sustainable”.
Alan Downey, head of public sector at KPMG, the accountants, said the big question “is whether people working within the public sector have the enthusiasm and the skills necessary to make these very big changes happen”.
Claire Hall, a partner at PwC, the professional services firm, said: “Trying to deliver even more complex change projects with fewer civil servants and reduced budgets will surely lead to more delays and overspend rather than greater success, unless carefully handled.”
It would require “outstanding project management”, when such skills were in short supply.
Dean Arnold – lead health partner at Deloitte’s, the accountants – said given the huge structural change planned for the NHS, “there is a significant risk that the NHS will not be able to live within its reduced means”.
There was, he said, an argument for it learning to operate within what is effectively flat funding, before embarking on the major structural change of abolishing all its health authorities and switching the commissioning of care to GPs and a new commissioning board.
Get alerts on UK politics & policy when a new story is published