Cabinet Office minister David Lidington has insisted the government will not move away from using private providers to deliver public services, but acknowledged the need to increase the range of suppliers after the collapse of outsourcing giant Carillion.
In a speech to the Reform think tank today, Lidington said that the government would change its procurement rules so that "social value" was now included in all assessments of providers for government work. He has also set out plans to revitalise the use of mutual and cooperatives to provide services, an approach favoured by former Cabinet Office minster Francis Maude in the coalition government from 2010 to 2015.
Lidington insisted that the high-profile closure of Carillion, which collapsed on 15 January after months of speculation that it was unable to service its debts, would not dim the government’s commitment to the private and voluntary sector delivery of public services.
“We are determined to build a society where people from all parts of our country can access the best public services, and for those services to run efficiently and smoothly for them and their families. Whether that service is delivered by public, private or voluntary sectors, what matters is that it works for them and their everyday needs, while providing value for money for the taxpayer,” he said.
“And whether it is operating our call centres, building our railways, or delivering our school meals, the private sector has a vital role to play in delivering public services – something this government will never cease to champion.”
However, he acknowledged that the failure of Carillion meant that changes were needed to ensure a diverse range of companies were able to bid for government contracts.
Following its collapse a number of other outsourcing firms, including Capita and Interserve, have also issued profit warnings, leading Labour to warn of an “outsourcing crisis”.
In his comments today, Lidington said the government wanted to see “public services delivered with values at their heart, where the wider social benefits matter and are recognised”.
He added: “That means government doing more to create and nurture vibrant, healthy, innovative, competitive and diverse marketplaces of suppliers that include and encourage small businesses, mutuals, charities, co-operatives and social enterprises – and therefore harness the finest talent from across the public, private and voluntary sectors.”
Maude led moves to spin out public service mutuals from within government between 2010 and 2015, including the so-called ‘Nudge Unit’ from the Cabinet Office, in order to give public sector workers “an ownership stake” in their work.
However, this foundered amid little appetite for the change among public sector workers, including civil servants.
Today, Lidington said that the government will extend the provisions of the Social Value Act, which currently instructs government departments to consider wider social values when awarding contracts, to ensure that these evaluations are explicitly made in procurement decisions.
“By doing so, we will ensure that contracts are awarded on the basis of more than just value for money – but a company’s values too, so that their actions in society are rightly recognised and rewarded,” he said. This will help level the playing field for mutuals, cooperatives and social enterprises bidding to win government contracts, he said.
The government will also require outsourcing companies to publish more details on their own quality and diversity by making this a requirement to provider services. They will also need to maintain "living wills" that set out how services will be maintained if the provider hits difficulties.
“If we are to build a fairer society, in which the public has greater trust in businesses not just to make a profit, but also to play a responsible role in society, then we must use the power of the public sector to lead the way,” Lidington said.
“We will now develop proposals for government’s biggest suppliers to publish data and provide action plans for how they plan to address key social issues and disparities – such as ethnic minority representation, gender pay, and what they are doing to tackle the scourge of modern slavery.”
He called on the industry to help the government to rebuild trust.
“We need them to put right failings where they have occurred; demonstrate their ability to respond to changing circumstances; and show their capacity for innovation and creativity as well,” he said.
“By doing so, we will go some way to restoring trust between government, industry and the public – and build public services that have the confidence of the people they are there to serve.”
Responding to the speech comments, Mark Fox, the chief executive of the British Services Association, said that Lidington had set out “a robust and welcome challenge by the government to all those involved in the delivery of public services” and acknowledged outsourcers needed “to improve management practices, increase transparency and develop new arguments for the private sector to deliver public services”.
Matthew Fell, the CBI’s chief UK policy director, said the collapse of Carillion was a warning of the dangers of short-termism in public contracts, and said both the industry and the government needed to learn lessons.
“So businesses will welcome a change of focus to long-term value rather than short-term costs in procurement, and its intention to reduce complexity and cost involved in bidding to allow more SMEs to compete for work,” he said.