CBI warns against state run IT service companies

The government's plans would see back-office tasks taken away from firms such as Capgemini and EDS

The Confederation of British Industry (CBI) has argued that proposals put forward by the government on Monday to create state-owned 'business service companies' could "backfire".

Prime minister Gordon Brown said in a speech yesterday that the government will create business service companies to handle the routine back-office functions of Whitehall departments, in a bid to increase public sector efficiency. Such tasks are currently handled by the private sector.

The government proposals remain vague at this time, but the tax payer will presumably fund the new business service companies instead of paying companies such as Capgemini, EDS, IBM and Capita.

"The prototype for this new approach already exists. The shared services centre in the Department for Work and Pensions already supports 140,000 staff in three departments and plans to take on four more in the next year," Brown said.

The prime minister argued that this arrangement will be cheaper, but the CBI believes that competition is essential in keeping service delivery costs low.

"[Private sector] business service companies will not be able to sell to the government so they will look for growth elsewhere," said James Fothergill, head of public service policy at the CBI.

"The main impact will be on the tax payer. By not opening up the work to the private sector, the departments will lose out on the greater efficiencies achieved from competition.

"I'm not saying the public sector won't be able to offer the best service at the right price, but that without competition the process is less clear and less transparent."