Make private firms work harder to cut UK government waste

Sir Philip Green, one of Britain's most successful entrepreneurs, thinks it is a crime Whitehall is not exploiting its position as the biggest buyer in the country.

UK government waste, and carefully logged details of it, are nothing new. But maybe the solution can be found in forcing the private sector to work harder for contracts

You can understand the thought process. The British prime minister David Cameron and his chancellor George Osborne suddenly reach high office and are staggered by the numbers of secretaries, cars and buildings to which they have access.

With a populist touch, they bring in a straight-talking businessman to take a quick look under the bonnet. When everyone sees just how wasteful things are, they reason, the public will be pleading with us to cut back the bloated public sector.

Enter Sir Philip Green, one of Britain's most successful entrepreneurs and the owner of Arcardia Group, which has BHS and Top Shop among its businesses.

Sir Philip knows how to run a business or two. Close attention to detail is his specialty and it shows in this report. In just two months, he has found evidence of "staggering", and yet completely predictable waste.

Top Shop would be bust if it ran itself like this. BHS would be broke.

Sir Philip reveals that some departments pay as little as £8 (Dh46) for a packet of paper; others £73. Departments order computers from 13 different suppliers, spending between £353 and £2,000 on essentially the same product.

Government is spending £25 billion a year on property but only 6 per cent is checked centrally.

Whitehall, Sir Philip says, has no fewer than 68 deals with the same mobile phone company, where any respectable business would have one contract.

And would you credit it? The government has changed its terms of business so that all suppliers are now paid within five days. In the private sector, good practice is to pay in 60 days.

That means taxpayers' money has been subsidising the cash flow of the likes of Microsoft, IBM and Dell.

Sir Philip thinks it is a crime Whitehall is not exploiting its position as the biggest buyer in the country. But by assuming that what works in business will work in government, Sir Philip has produced a solution that goes right against the grain for Conservatives and Liberal Democrats.

The coalition wants to cut the state back, axe semi-government departments and devolve power to local people, parents and school governors. Central buying departments may work in business but in government they are part of what the coalition wants to unravel.

Nor is Sir Philip the first government adviser to observe that civil servants do not spend public money as carefully as they would their own.

For many of the years Labour was in power, its best-paid civil servant was a man called Sir Peter Gershon, a former executive with GEC, whose 1999 review of efficiency led to him becoming a civil servant in charge of making government procurement more efficient and businesslike.

Sir Peter's baby, the office of government commerce, is no more but he is still around, having switched sides. He now advises the new government's efficiency and reform group, which will be responsible for acting on Sir Philip's review. Sir Peter's previous strategy was to try to standardise procurement across departments and local authorities, with more streamlined systems. It was not a great success but it did remove many of the barriers that made it difficult for small businesses to tender for government contracts.

In contrast, Sir Philip's preferred method to cut waste seems to be to put the big beasts of the private sector in a room and shout at them. He thinks Whitehall could save between £600 million and £700m on the government's £2bn telecoms bill alone.

That is clearly a worthy prize but the implications are far-reaching. The private sector has done rather well out of bamboozling public servants into parting with cash. All those poorly negotiated contracts, overpaid consultants and unnecessary property leases went into creating a nice fat profit margin for many private sector companies.

Take that away and Sir Philip's private sector mates will really have to crank up the efficiency levels to survive.

You can't keep shouting down the supply chain forever. Eventually the buck stops somewhere.