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Private companies to come under greater scrutiny

Prime minister's reforms to include extending FOI Act to cover private companies awarded public sector contracts

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Contracts between Metronet and London Underground left the taxpayer exposed. Photograph: Andy Raim

Last week the prime minister's outline of his constitutional reform measures included a pledge to extend the law on freedom of information to include private bodies who carry out public functions, at public expense.

This is something the government has been promising for a while. In fact, Michael Wills, the minister of state at the Ministry of Justice, must be slightly tired of repeating himself on this. Back in November 2007, Wills said the government was "exploring" an extension of the FOI Act, to open up private companies awarded public sector contracts to greater scrutiny. The greater FOI powers are likely to include private providers of IT services and possibly organisations such as academy schools.

Last month, Wills reiterated the plan to extend the FOI Act, and, following the prime minister's speech on reform on 10 June, Wills once more, repeated that an announcement on such an extension will be made "shortly" - probably next month, when the results of the consultation process will be released.

Even this relatively slow timetable has proved too much for some in the private sector. There have already been warnings that complying with any extension to the Act could be expensive for private firms, many of whom are nervous about greater transparency of their dealings with government, and about anything that might reveal more about how much they are making from government contracts.

But the plan to extend freedom of information highlights a wider and more significant trend, which is the increased blurring of the interface between the public and private sectors. When Gordon Brown was chancellor, he supported the private finance initiative partly as a way of keeping public spending off the public accounts.

Now, not only are PFI schemes themselves heading back onto the government's books, as a result of accounting changes, but in a whole host of other ways, including the government's support for the banks, demand is growing for greater accountability of public spending in the private sector.

The public services "industry" - that is, the amount spent by the public sector on goods and services from private and non-profit providers - is estimated to be worth some £79bn. That's a lot of money for the government to spend without seeing where exactly the money is going, and Brown acknowledged that in his speech last week.

But it will require significant changes in governance, not just in information, to manage privately-provided public services more effectively.

Earlier this month, the National Audit Office (NAO) criticised the public-private partnership arrangements with London Underground, which, it pointed out, left the taxpayer exposed when private contractor Metronet failed in 2007.

The contracts between Metronet and London Underground left the transport department with no effective means of protecting the taxpayer, said the NAO.


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