As the world reels from the economic crisis that began last autumn, the public sector sometimes seems like a safe shelter. Here, at least, employment is reasonably protected. Here, at least, money continues to flow. Here, at least, the squeeze now being felt by practically every private sector company is mercifully absent.

So goes the conventional wisdom. But don't you believe it. In the short term, public money may be flowing, but longer term, a menacing public sector deficit is going to have to be tackled.  There is just one way to fill the black hole: to bring about major productivity improvements in the public sector. So November's pre-Budget report announced that the government's already ambitious targets for efficiency savings were to be further increased by £5bn a year. Since the report, the government's forecasts look optimistic and more cuts will be needed. Forget cosy images of bowlerhatted bureaucrats. Economies will be required.

A brighter future
As ever, restraint in public spending will not be easy.  But the public sector, for all the improvements of recent years, can still be made to perform better. Public service reform, previously thought of as a wholly Blairite policy, will be central to any government trying to find a way out of present problems.

We need to seize chances now to put public services on a sounder footing for the future. More important still, it will save the services that the public still wants and values - albeit not always in their traditional forms.

Improvements can be made, and if something good can come out of the lean years ahead, it should be that the taxpayer gets a bigger bang for their reduced number of bucks. There is no single answer. But one tool for improvement which still has huge potential is smarter commissioning.

The Social Market Foundation has long argued about the potential for markets to improve our lives in general and public services in particular. Contestability and competition can improve efficiency. They stimulate innovation. They cut costs.