Opening up delivery of public services could save £23bn, claims CBI

The CBI has called on the Government to end majority state provision in areas of public services such as social housing management, claiming that a bigger role for independent providers could deliver savings of £23bn.

Publishing a report based on research it commissioned from Oxford Economics, the CBI argued that “ploughing on regardless” was not an option if the challenge of making public spending cuts and balancing budgets by the end of 2016/17 was to be met.

Calling on the Government to deliver its Open Public Services strategy, the business group insisted that the Oxford Economics research demonstrated that average cost savings from productivity improvements of at least 11% could be achieved across the 20 discrete services areas reviewed.

The CBI then applied these principles and calculations to the £278bn of public services which it believes could “feasibly be fully opened up” to reach its total savings figure of £22.6bn.

“Independent providers are already delivering many public services well, but in order to plan investment into new areas they need to know how markets will operate in the future,” the CBI claimed.

It said that the Government should:

• “Create a transparent market place to allow commissioners to compare performance and providers;
• Establish mechanisms to address provider failure and maintain service continuity;
• Promote contracts that are structured to focus on outcomes;
• Ensure the public sector has the right mix of commercial skills to commission effectively; and
• Create effective government engagement will all types of provider.”

The Open Access report claimed that savings could be achieved across a range of areas, including £675m by opening up social housing management to competition, £190m through improved productivity in waste management and £209m from opening up facilities management in schools.

John Cridland, CBI Director-General, said: “Our public services are under pressure as never before, with increasing customer demand, including from an ageing population, and an urgent need to manage costs. Carrying on regardless would be a recipe for disaster. The Government needs to face this tough policy challenge head on.

“Most public services are still largely state monopolised and it’s time to open some of them to competition. That is the way to maintain quality and achieve billions of pounds worth of savings.”

Cridland added: “We need the Government to set out which services it is prepared to open up to independent competition, and when. Businesses recognise that there are justified concerns following recent high-profile failings and that they have to work hard to maintain public trust by consistently delivering high quality services.”

Adrian Ringrose, Chair of the CBI Public Services Board and CEO of Interserve, said: “Ensuring providers from the public, private and voluntary sectors can compete on a level playing-field, and their performance is judged on equal terms, means in the end the best provider will provide.”

However, the Local Government Association poured scorn on the CBI’s figures.

Cllr Peter Fleming, Chairman of its Improvement and Innovation Board, said: "The estimated savings are pie in the sky. Councils already outsource more than any other part of the public sector and are examining every avenue to provide value for money for taxpayers. However, the CBI calculation assumes that cost is the only criteria councils have to consider, and rickety methodology means fresh savings are being claimed for services which have already been outsourced.”

Cllr Fleming insisted that local authorities routinely looked at how services could be delivered better and more cheaply.

“In some cases the private option is the best and in others councils find better value, a superior service and more control over standards by keeping services in house,” he said. “A narrow ‘private good, public bad' approach just doesn't add up for local communities.”

Cllr Fleming argued that a blanket assumption on the savings that could be delivered by opening services to tender was “ludicrous”.

He added: “Clearly when it comes to essential, big cost areas like social care the drive to save money has to be tempered by the need to maintain high standards and ensure strong lines of democratic accountability.

"The public sector does need to make sure it is providing value for money. That means not only opening public services to private providers when appropriate, but also tearing down the barriers between different parts of the public sector.”