The British State in all its manifestations - whether central government, town halls, the National Health Service or schools - has always bought some services from the private sector. Even when the hospitals were nationalised in 1948, the odd voluntary hospital - St John and St Elizabeth in Yorkshire for example - limped on, its services bought on contracts from the NHS.
Much road building and maintenance; some consultancy and services bought from hospices remained part of the contractual state. But it was in the1980s, with the introduction of compulsory competitive tendering (for bin emptying and street cleaning, followed by catering, cleaning and laundry in the National Health Service), that "the public services industry" truly began.
Just how big it has become - so big that it is now possible to think of it as an industry in its own right - has just been illustrated by the recent publication of the DeAnne Julius review, commissioned late last year by John Hutton, the business secretary, in a conscious, if slightly sotto voce declaration, that Blairism in public sector reform lives on, whatever the apparent wobbles that model faced in the first few months of Gordon Brown's tenure as Prime Minister. The review's conclusions are startling. A third of all public services - far more than previously thought - are now delivered by the private and voluntary sectors.
Its size has doubled in little more than a decade, and now embraces everything from health and waste management to IT, welfare-to-work, training, construction and legal and other consultancy services, not to mention PFI projects which range from simple student accommodation to the training of RAF pilots. According to the study, backed by analysis undertaken by Oxford Economics, the UK now spends a larger share of its gross domestic product on outsourced services of one sort or another than the US, or indeed any other country in the OECD other than Sweden and Australia.
Previous attempts to estimate the size of the market - undertaken for example by the Financial Times, various consultancies such as Kable, and by the CBI - concluded that around a fifth of public services were outsourced. The Julius Review puts the figure higher, at around a third, with the market now worth almost £80bn a year, employing 1.2 million people (almost as many people as the National Health Service), with revenues growing at 7% a year in real terms between 1995/96, before slowing to 3% a year in real terms after 2003-2004.
Different point of view
Reactions to this finding were predictably varied, from a warm welcome from the CBI to one that "the sharks are circling" around public services, from Dave Prentis, the general secretary of Unison, who concluded, entirely rightly, that the object of this exercise was to establish how to make the public services industry work better.
Noting DeAnne Julius' long track record as a private sector economist, Prentis argued that what was needed was "a genuinely independent review of the public services industry", one that asks whether its increasing role is genuinely in the interests of the taxpayer or public service users, rather than one "simply asking what would make the lives of multinational companies easier".
