Public services firms propose new transparency measures
The CBI proposed new measures to boost transparency and trust in private and third sector managed public services contracts, so that they can continue to work with the Government to deliver high-quality services, reduce the deficit and boost the UK economy.
Despite a strong start on deficit reduction, the Government is only half way there. The CBI expects the public sector net deficit to stand at £80.1bn in 2015/16, down from £159.2bn in 2009/10, thanks to both tax revenue growth and public spending reductions. This illustrates why the Government must continue to open up public services to independent competition to get the best taxpayer value possible.
The Government already spends £187 billion a year with 200,000 private firms managing public services (1) which in turn contribute £48.7 billion to the economy. But the industry recognises that it must work hard to boost public confidence in order to be able to do its job in this sector.
John Cridland, CBI Director-General, said:
"The public services industry is a great British and international success story. Not only has it helped the UK public sector lower its costs while improving services, it’s also an important fast-growing part of our economic renaissance, contributing tens of billions of pounds to our economy.
"But public services businesses recognise that they operate in an industry which rightly demands close public scrutiny, which is why we are unveiling a range of measures to boost transparency and accountability.
"We can’t ignore the fact that confidence in the sector has been badly hit by several high-profile failures and that it will take time and meaningful change to rebuild it.
"That said, we must not let anti-business rhetoric tar the public services industry as a whole, because the UK needs the expertise, investment, growth and job creation which these innovative firms bring to our economy."
Ruby McGregor-Smith, CEO of Mitie and Chair of the CBI’s Public Services Board, said:
"The public services industry is proud of its contribution to the UK economy, helping to tackle the deficit, creating thousands of jobs and apprenticeships and exporting our services around the world.
"But all businesses delivering public services need to do more to build a trusting relationship with the public. To make that happen, Mitie, along with other CBI public services businesses, are committing to releasing more information proactively, publishing all government contracts online, being open and honest about our profits and being independently audited."
The CBI’s recommendations on transparency include:
- In every contract negotiation, contractors and their customers should discuss how to release information proactively and in response to public enquiries, but also make the information released as accessible and comparable as possible
- All government contracts should be published online, as long as the customer is happy for this to happen. When a contract isn’t published or is in any way redacted, there should be a clear explanation of why this has been done and at whose request
- In every contract negotiation, there should be a presumption in favour of open book accounting. In practice, this means a full and frank discussion between the contractor and its public sector customer about the contractor’s profit margin. Profit information should include the value or savings being delivered
- The National Audit Office should be able to audit government contracts with the private sector. This should take place on a structured and systematic basis, to avoid adding a regulatory burden which will increase the cost of services.
The public services industry is a major contributor to the UK economy, according to new independent research by Oxford Economics commissioned by the CBI, and is well positioned to increase international trade. Their findings include:
- Sustaining jobs. Public services firms support 5.4 million jobs in total, including 2.7 million jobs created indirectly through supply chains
- Supporting growing firms. The Government has 200,000 suppliers, the majority of which are small and medium-sized firms or charities. The risks and costs often associated with public procurement mean not every contract is a good fit for a small company, but prime contractors can help manage this
- Around 20% of central government procurement spend goes directly or indirectly to small and medium-sized businesses, amounting to around £8.5bn
- Carillion, for example, estimates that around 70% of its total spend - £2bn - goes to SMEs directly or through its larger sub-contractors
- Amey has an online supplier pre-qualification portal which makes it easier for suppliers of all sizes to access opportunities within the Amey supply chain
- Developing skills. Contractors are actively developing workforce capabilities. Mitie, for example, has around 1,000 apprentices across its business, all of which study for formal qualifications in addition to gaining practical experience on site, with most being between 16 and 24 years old.
- Boosting exports. Research commissioned by the CBI suggests that emerging economies will triple the amount they spend on public procurement by 2030. The greatest increase will be seen in contracted services – healthcare, education, business services, consultancy, and so on. UK government contractors are extremely well-placed to seize these opportunities, and already work across the globe.
1. The public services industry accounts for all private or third sector enterprises that provide services to the public on behalf of the Government or to the Government itself.
A link to the CBI's public services reports on - transparency, value to the economy and supply chain support - are below.