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Government criticised over market reforms to public sector Government criticised over market reforms to public sector
(2 months later)
The government is pressing ahead with too many market reforms in the public sector at once and failing to ensure there is genuine competition for contracts, the Institute for Government (IfG), a respected Whitehall thinktank, said in a new report on Thursday.The government is pressing ahead with too many market reforms in the public sector at once and failing to ensure there is genuine competition for contracts, the Institute for Government (IfG), a respected Whitehall thinktank, said in a new report on Thursday.
The institute's report follows criticisms of how private sector contractors Serco and G4S had failed to provide proper value for money, and may have overcharged the government – including for tagging nonexistent offenders.The institute's report follows criticisms of how private sector contractors Serco and G4S had failed to provide proper value for money, and may have overcharged the government – including for tagging nonexistent offenders.
The IfG found mistakes in the setting up and management of outsourcing in areas such as care for older people, schools, probation and employment services.The IfG found mistakes in the setting up and management of outsourcing in areas such as care for older people, schools, probation and employment services.
Flaws meant some contractors were "gaming" the system, responding in "undesirable ways to the reward structures" including by parking people with complex needs and creaming off payments for the easiest cases.Flaws meant some contractors were "gaming" the system, responding in "undesirable ways to the reward structures" including by parking people with complex needs and creaming off payments for the easiest cases.
The government also struggles to force out poorly run companies, "partly as a result of a lack of confidence" that it can manage the switch to a new provider. The report comes after a number of companies have faced intense criticism over the way they have handled highly lucrative government contracts.The government also struggles to force out poorly run companies, "partly as a result of a lack of confidence" that it can manage the switch to a new provider. The report comes after a number of companies have faced intense criticism over the way they have handled highly lucrative government contracts.
The IfG has called for an urgent cross-government review to ensure the system is truly competitive, not just dominated by a few providers.The IfG has called for an urgent cross-government review to ensure the system is truly competitive, not just dominated by a few providers.
It wants full transparency on the contracts, income, performance and sub-contracting arrangements of all service providers. The IfG also recommends introducing more flexible contracts with performance-related break clauses that, while initially more costly, could save money in the longer term.It wants full transparency on the contracts, income, performance and sub-contracting arrangements of all service providers. The IfG also recommends introducing more flexible contracts with performance-related break clauses that, while initially more costly, could save money in the longer 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.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."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."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.""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.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."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.""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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