For at least the last seven years ministers have been trumpeting the role of small businesses as beneficiaries of public sector contracts, along with the big multinationals. Not for the first time, however, ministerial exhortations turn out to be unsupported by facts.
The Cabinet Office last week issued a report showing that most government departments are nowhere near hitting the target of ensuring that by 2020 a third of procurement budgets are spent on small businesses (SMEs). The target date has now been put back to 2022.
One of the worst performers is the Cabinet Office itself with just 19% of its procurement budget spent on SMEs. Departments with responsibility for overseeing local services fare little better; the Department for Communities and Local Government spent 21.2% of its budget on SMEs in 2015/16 and the Department of Health 22%. One former Labour minister accused Whitehall of being too focused on larger providers and, as a result, undermining economic growth.
The private sector is heavily dependent on public sector contracts. A decade ago the DeAnne Julius report estimated the value of the public sector market as 6% of GDP, with health and social care being among the largest sectors. The report also concluded that in the future it would require experienced public sector commissioners ‘who are adept at long-term market development'.
This means ensuring an active market which is not dominated by an oligarchy of multinationals, though, as we have seen recently, one or two of these have become seriously unstuck over their public sector contracts.
Local government, in particular, will always need the services of private and voluntary sector providers and needs a vibrant market to ensure competition and choice.
Furthermore, with 100% business rates retention and the Industrial Strategy looming, the role of Whitehall nationally and local government locally in ensuring that smaller firms benefit from public sector contracts – and help boost local economies as a result – becomes even more vital.
