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UK is world leader in outsourced public services

10 July 2008

The contribution of outsourced public services to the UK economy has grown 130 per cent since 1995 and now represents the most developed public service industry in the world, according to a report on the Review of the Public Services Industry conducted by Dr DeAnne Julius .

The industry has grown so significantly over the past 12 years that it is now second in size only to the US, and with a turnover of £79bn contributes more to the UK economy than key industries such as communications and electricity, gas and water supply.

Secretary of State for Business John Hutton said: "It is clear that private and third sector organisations play a
valuable part in delivering modern public services and our substantial investment over the past ten years has paid off. This is now a thriving sector that employs over one million people and makes a major contribution to the UK economy. It is helping maximise taxpayer investment and improve quality as we strive toward world class public service delivery.

"UK companies and the services they deliver are of increasing global interest in this growing market. Across health, education, welfare, transport and criminal justice the tried and tested UK model is of
increasing global interest in this growth market. I welcome Dr Julius's Review and we will now come forward with measures to support the future development of this sector. The ideological battle over using private and 3rd sector providers is over. What matters to the public is not who provides but how well a service is provided. Government has a key role in ensuring the competitiveness of this sector of our economy. As policy maker and procurer we ultimately get the markets we deserve."

The Review, commissioned by Mr Hutton and led by economist Dr DeAnne Julius, recommends that to further support this industry the Government should:
- Reinforce and demonstrate a long-term commitment to open up public service markets and maintain effective competition.
- Appoint a Director of Service Delivery for all government departments and local authorities, who should have senior level responsibility for commissioning service delivery.
- Work together with industry to raise the profile of the public service industry domestically and promote its export potential through UKTI.
- Work to reduce bidding costs by agreeing clear and consistent objectives, simplifying bid documentation, reducing uncertainty around timing and engaging in earlier and more open communication about desired outcomes and risk allocation.
- Ensure commissioning objectives are clear, consistent and balanced so that value for money is maximised.
- Provide a level playing field for public, private and third sector bidders by considering such measures as tax treatment and pension obligations and costs.
- Encourage partnership working between contractors and providers.

Report author Dr DeAnne Julius said:"Innovative public policy over a number of years has allowed a
diverse collection of big and small, private and voluntary enterprises to step in to this significant and now world leading British industry. Together these firms provide a huge range of services - from welfare to work at the local level to complex military support packages - and in doing so make a significant contribution to UK citizens and taxpayers. There is a clear case for action to ensure conditions for growth of the public services industry continue. I very much hope that the analysis and recommendations developed in this Review will help government to continue the drive towards world-class, personalised public services for all."

Commenting on the publication of the report, BSA Chief Executive Mark Fox said: “We support the recommendations made by DeAnne Julius. We look to the Government to show the necessary determination and commitment to build on the gains that have been made by outsourcing to the private sector a range of public sector services. The challenge for government, and those who aspire to government, who are committed to improving public sector services is to pursue the reform and outsourcing agenda with energy and determination. The private sector, and with it competition, has brought real and measureable improvement across the whole range of public sector service provision – from schools to hospitals, housing to waste management. The industry drives choice, innovation and diversity."

Public services union, Unison called for an indepedent review of the impact of market forces on services ahead of the publication of the report on the "public services industry" commissioned by John Hutton at the Department for Business, which is examining ways of "increasing the role of the private and third sectors" in public-service delivery. General secretary Dave Prentis said: "We need a genuinely independent review of the public services industry – one that asks whether its increasing role and influence is really in the interests of taxpayers and public service users – rather than simply asking multinational companies what would make their lives easier. Public services are being exposed to the economic downturn and destructive market forces because of an increasing reliance on a private public service industry. More than £70bn of taxpayer’s money now goes to the private sector and to private equity firms who increasingly own public services and the union is calling for an independent review into the impact of market forces on services."

The Public Services Industry Review was launched by Secretary of State John Hutton on Wednesday 5th December 2007 at an address to the CBI’s Public Services Forum. It aimed to provide an analytical framework and factual basis sufficient for defining the UK’s ‘public service industry’ (PSI) and to identify areas for policy development, if warranted. It examined the increasing contribution made to the UK economy by firms and other organisations who deliver services in the NHS, the prison service and right across the public sector, as well as examined the market’s scale, employment base and characteristics of its leading players. The Review also set out to determine the value of the PSI's contribution to the UK’s economy, productivity and international competitiveness.

A copy of the report can be found at

The following link will go to the main Public Service Industry Review page, containing a short introduction to the review and links to the PDF files for all three reports (DeAnne Julius and two Oxford economics Reports)

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