Public sector wasting £25bn a year, say business bosses

Whitehall is in need of urgent reform, business leaders say

The public sector wastes at least £25bn a year because of a failure to reform outdated procurement and outsourcing practices, business leaders say.

The Institute of Directors argues that most state-run bodies "do their own thing" when it comes to money.

It says at least £15bn can be saved from annual procurement spending and £10bn from public organisations working together more efficiently.

The government said it had programmes in place to cut billions in waste.

But the institute is calling for wholesale reform of the public sector within a year.

Its report says the UK's "staggering" annual £220bn procurement spending total represents a third of government spending and costs every person an average £3,500 a year.

'Out of business'

It adds: "Despite some areas of excellence and good collaborative initiatives, the majority of public procurement spending is so fragmented that huge potential savings are being missed every year."

If multi-national companies operated on a similar pattern "they would have gone out of business years ago", the institute says.

Director general Miles Templeman said a restructuring of the public sector could be completed within 12 months and deliver savings within three years.

For the Conservatives, shadow chief secretary to the Treasury Philip Hammond said: "Billions of pounds are going to waste every year because the government refuses to implement the savings their own efficiency advisers have identified."

The government said it recognised the "importance of delivering value for money from collaborative procurement and other operational areas".

And it had "accepted the recommendations of leading industry experts to deliver £15bn of savings from these areas by 2013-2014 as part of the Operational Efficiency Programme".

A government spokesman added: "This challenging yet achievable target is only one part of government's package of reducing spending in a credible way to halve the budget deficit in the next four years."