Fresh official data published on Thursday have exposed the minutiae of government spending, from awaydays at popular bars to contracts in the billions with multi­national companies.

According to Financial Times analysis of the figures, in one instance HM Revenue & Customs spent £164,000 in six months to rent water coolers for use at 450 buildings in which it was worried that the tap water might not be safe to drink.

The data reveal a range of government outlays, from tiny items such as the £750 spent by the Equalities and Human Rights Commission on a day-long meeting at a Tiger Tiger bar in Manchester, to the £291m paid to CapGemini, the professional services group, largely to cover an IT contract.

The numbers flesh out how the government’s plans to cut spending by more than £83bn by 2014-15 will affect the private sector.

The figures show how public sector spending feeds into British business, with a handful of large contractors drawing in billions of pounds of taxpayer funds.

As government seeks greater efficiencies from contractors, these are likely to have to pare staff or to seek lower prices from the smaller suppliers that they rely on.

The figures show that £77bn flowed out of central government between May and September to be spent on public services and procurement, a total that excludes welfare payments, most pay and pensions, debt interest, public corporations and the devolved governments.

Only £8.8bn of that total is clearly identifiable as going to companies, but that figure underestimates the true size of the public sector’s cash injection into the private sector because the government data do not detail the spending of local government and many public bodies.

Central government spending

According to a report by DeAnne Julius, a former member of the Bank of England’s monetary policy committee, about £80bn of £583bn in total spending in 2007-08 by the government went to the private sector or voluntary organisations.

The Department for Work and Pensions, where private sector contracts account for 58.2 per cent of all spending, as against a department average of 11.4 per cent, according to an FT analysis, is a clear case where public spending cuts could hit businesses. Among its largest contractors are BT and Telereal Trillium, a buildings and services provider. Both have signed a memorandum of understanding with Francis Maude, the Cabinet Office minister, to deliver greater cost efficiencies.

However, more money could go to the private sector from the department because its welfare reforms aim to increase companies’ involvement in getting the jobless back to work.

Serco, the outsourcing business that does everything from run London’s new bicycle hire scheme to operating nuclear power plants, received £209m from identifiable central government spending in the period. That compares with revenues this financial year expected to be about £5bn.

Some 50 per cent of the company’s revenues come from the public sector. Serco declined to say if the dramatic paring-back in public spending would harm its business but said the company still planned to increase its headcount in the UK during the next year.

Top ten companies
By value of business
Telereal Trillium285
HP Enterprise Services UK284
Airwave Solutions148
Atos Origin129
Source: Cabinet Office

BT, which relies on government contracts for about 10 per cent of revenues, said it supports efforts to control costs. But a spokesman noted that the company had already had to cut costs sharply over two years in tough trading conditions, leading to 35,000 job losses.

Publication of the data is part of an attempt to offer greater transparency in the government’s finances. Figures of all departments’ spending greater than £25,000 will be outlined monthly, while local government finances are to be made public in January.

The hope is that greater visibility will discourage waste and produce savings for the government as businesses will see how much competitors charge – and then undercut them.

Get alerts on UK government spending when a new story is published

Copyright The Financial Times Limited 2019. All rights reserved.
Reuse this content (opens in new window)

Comments have not been enabled for this article.

Follow the topics in this article