MPs attack use of private firms
The Government has become over-reliant on a small number of "quasi-monopoly" private sector contractors for the provision of a vast swathe of public services, MPs have warned.
The Commons Public Accounts Committee said the fact that Whitehall departments continued to award work to Serco and G4S while they were under investigation by the Serious Fraud Office (SFO) for over-charging tens of millions of pounds underlined the scale of the Government's dependence.
The committee strongly criticised ministers for wrongly creating the impression that all business with the firms had been suspended after it emerged they had been over-charging the Ministry of Justice (MoJ) for years in relation to electronic tagging contracts.
In fact, the committee said, the MoJ as well as the Ministry of Defence, the Department of Health, the Department for Business, Innovation and Skills and HM Revenue & Customs all continued to award them additional work while inquiries were ongoing.
It said that the electronic tagging contracts were not isolated cases with two other G4S contracts with the MoJ having been referred to the SFO while another Serco contract with the MoJ was being investigated by the City of London Police.
"It was not acceptable for Government to give the impression that all business with Serco and G4S was halted whilst investigations took place, when in fact contracts were extended, new contracts were awarded and negotiations for new business continued," the committee said.
"The fact that Government gave the impression that all discussion with Serco and G4S were halted whilst investigations took place ... is evidence of the over reliance on these larger suppliers."
The committee chairman, Margaret Hodge, said the contractors had not shown "an appropriate duty of care" to the taxpayer and to users of public services.
"A culture of revenue and profit driven performance incentives has too often been misaligned with the needs of the public who fund and depend on these services," she said.
"Departments have taken their eye off the ball and placed too much trust in contractors and relied too much on the information contractors supply."
The Cabinet Office said changes made to the Government's procurement and commercial management since the last general election in 2010 had brought savings of £5.4 billion last year, but acknowledged that more needed to done.
"At the time of the last general election departments simply didn't know how much business they did with strategic suppliers," a spokesman said.
"Despite our excellent progress over the past four years, we have long argued that there is more to do, including to strengthen transparency further and support SMEs.
"Public service providers should act with integrity and our action over the past year shows how seriously we take breaches of those high standards."