Row over public service outsourcing

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The review, led by economist DeAnne Julius, said there were "clear benefits" to taxpayers in opening up public services to competition.

Competitive tendering has led to cost savings of between 10% and 30% and also improved service quality in some cases, according to the report, which was commissioned by Business Secretary John Hutton.

Dr Julius made a number of recommendations, including one calling on the Government to demonstrate its long-term commitment to opening up public services to competition.

She stressed in her report the benefits of public, private and voluntary sectors competing to provide public services.

The report said that public sector industry had become a significant part of the UK economy accounting for nearly 6% of economic output and employing more than 1.2 million workers.

Dr Julius said that despite this success, her review uncovered some "worrying trends" because the growth rate had been slowing and the costs of bidding for contracts were increasing.

Trade unions were critical of the findings and said the Government should be investing money in public sector provision rather than in private firms.

Mark Serwotka, general secretary of the Public and Commercial Services Union, which has held a series of strikes in recent years over pay and jobs in the civil service, said the report summed up everything that the Government had got wrong.

He told BBC Radio 4's Today programme the Government has the wrong priorities and is "obsessed" with opening up public services to the market rather than asking what public services are for.