How the government spends our £300bn buying goods and services

Just four departments spent more than half of their entire budgets with external suppliers last year – and 20% of all procurement still goes to companies over £100m in turnover. Oligopoly, much?

Posted 3 January 2019 at 8:00am by

HMG spends £284bn a year on buying goods and services from external suppliers – a third of all public sector spend, and outsourcing is is now the single biggest component of modern government.

However, you may still be surprised that just four Whitehall Departments – the Ministry of Justice (MoJ), the Department for Transport (DfT), the Department for International Trade (DIT) and the Department for Environment, Food and Rural Affairs (Defra) – spent more than half of their entire budgets with external suppliers last year.

But you probably won’t be surprised that nearly nine years on from the first serious attempts to break the oligopoly, the proportion of published procurement spending going to strategic suppliers – companies that receive over £100m in revenue per year from government contracts – has grown over the past five years, with roughly a fifth of all central government procurement spending going to the Big Boys, up from around an eighth in 2013.

The news came from an analysis published before the break by independent think tank The Institute for Government (IfG), in a study entitled Government procurement: the scale and nature of contracting in the UK.

The good news is that the UK is not being excessive by international standards here, says the study – the UK’s procurement spending is “not high by international standards”, it notes, and “some government departments are beginning to take greater control of aspects of their IT”.

This is risky for government, given that its top three suppliers have all experienced financial difficulties in recent years, the report warns.

Despite the scale of spending on procurement and outsourcing – and increasing financial problems in parts of the sector – the data available on procurement and outsourcing is poor, argues the Institute, calling for greater transparency:

“Every day, public bodies procure hundreds of millions of pounds’ worth of goods, works and services. With a clearer picture of how much is spent, on what and with which suppliers, government could make better-informed spending decisions and make significant savings.”

The study concludes by exhorting government to build the “world-leading data collection and publication systems needed” to ensure that public servants can make informed procurement decisions, that public sector markets are more competitive – and that the public can hold government and suppliers to account.

The Institute for Government positions itself as “the leading think tank working to make government more effective”.