Outsourcing of public services set to grow by £20bn by 2020

OC&C analysis understands that the share of departmental spending on outsourced services has increased from 22 per cent in 2010 to 28 per cent in 2015. Despite a two per cent annual real decline in spend on public services over the course of this parliament, OC&C’s analysis indicates that spending on third parties within the largest public sector organisations has grown by four per cent between 2012 and 2014.

Public services contracts are currently responsible for 36 per cent of all charity funding in the UK. One of the biggest players in local government outsourcing, Capita, accounts for just over one per cent of local authority spending on third parties. The top 15 suppliers, including well-known names such as Veolia and Serco, account for just 10 per cent.

Vivek Madan, partner at OC&C Strategy Consultants, said: “Well managed outsourcing can have an immensely positive impact on the country’s ability to deliver world-leading public services. People often forget that frontline staff such as nurses, soldiers and teachers only represent 15-20 per cent of departmental spending and that most outsourcing is politically uncontroversial.”

Madan continued: “Controversial cases of public sector outsourcing risk overshadowing the overwhelming number of examples where outsourcing is working well. With innovation in technology and a new wave of research into areas like criminology, there is more opportunity than ever to reduce costs and increase the quality of public services.”