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‘Mistakes will be made’ on public sector reform

Pressing ahead with too many market reforms at once in the public sector is failing to ensure genuine competition, a new report has warned.

The Institute for Government (IfG) found mistakes in the set up and management of outsourcing in care for the elderly, schools, probation and employment services. Some providers have been criticised for ‘parking’ those with complex needs and getting paid for the easiest cases.

The report calls for an urgent cross-government review to ensure the system is truly competitive. Full transparency is vital, and the IfG recommends introducing more flexible contracts, with performance related break clauses that could save money in the long term.

Tom Gash, director of research at the IfG, said: “Markets in public services can and do often work, but our research shows that mistakes can have a real impact on people's lives and value for money.

“Unless Whitehall and other agencies improve their skills and techniques for ensuring public service markets work, mistakes will be made and the public may lose confidence in this approach to reform.

“The current pace and scale of reform is a clear risk and we're calling for government to think carefully about how fast it is going.

“We want to see government carry out external reviews of all new outsourcing programmes worth over £100m per year to assure themselves and the public that they will work.”

A spokesman for the Office of Fair Trading (OFT) said: “The Institute for Government's report highlights the importance of designing market structures so they are correct right from the start.

“Our experience shows the long-term development of competitive markets in public service provision is directly linked to having good market design at the onset.

“The OFT has done a number of market studies where we have found tackling deep-rooted legacy problems in markets can be difficult and costly, often requiring regulators to intervene. We believe this can be mitigated with sufficient planning and competition expertise at the start.”

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