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Privatisation - Outsourcing surges


The Labour government has speeded up Thatcher's privatisation programme. A Review of the Public Services Industry, published on 10 July, found that outsourced public services have grown by 130 per cent since 1995. The industry is now second in size only to the USA's, and has a £79 billion turnover. It accounts for nearly 6 per cent of GDP and directly employs more than 1.2 million people.

But the Review revealed that the PSI's growth rate has been slowing and the costs of bidding are rising with an increasingly complex commissioning process. Growth was 6.8 per cent a year in real terms from 1995/96 to 2003/04 and has been 2.9 per cent a year since then.

Health was the largest sector of PSI spending in 2007/8 – £24.2 billion, followed by social protection (the new term for social security, tax credits, etc, £17.9 billion), defence (£10.1 billion) and education (£7.3 billion). The fastest growing sectors in the PSI over the last 12 years have been education, environmental protection and health.

The report concludes with a threat, "government departments and local authorities should seek to introduce competitive challenge into areas of service delivery where it has not yet been tried."