THE government’s obsession with cost when outsourcing public services is undermining quality and encouraging private companies to take dangerous risks, a damning report published today reveals.

MPs on the Commons public administration & constitutional affairs committee found that “there has been a depressing inability of central government to learn from repeated mistakes” when contracting out services, which contributed to the collapse of Carillion earlier this year.

Their report found that “the failure of Carillion reflects long-term failures of government understanding about the design, letting and management of contracts and outsourcing,” and that the debacle “reinforced a widespread crisis of confidence in government reliance on the private sector.”

Significantly, the report found that the government was “unable to provide significant evidence for the basic assertion behind outsourcing: that it provides better services for less public money” or that private finance initiative (PFI) projects delivered any benefits for their additional cost.

It stated: “PFI costs more than conventional procurement [but] neither we nor the National Audit Office nor the public accounts committee can find any evidence of the benefits the government claims for it.”

It said that the government’s priority to spend “as little money as possible while forcing contractors to take unacceptable levels of financial risk” had damaged public services, as private companies responded to the government’s desire to do things on the cheap.

Committee chairman Bernard Jenkin said: “It is staggering that the government has attempted to push risks that it does not understand on to contractors and has so misunderstood its costs.”

The committee criticised the government’s “blind reliance” on what private firms said about their financial situation and warned that “government procurement has been driven by price, while failing to appreciate differences in quality that contractors may be offering.”

MPs also criticised the government’s failure to stick to its own outsourcing guidelines, saying it was “intolerable that the government is spending £250 billion with little evidence that it is currently following its own procedures to secure value for money.”

The committee pointed out that the government had been forced to renegotiate more than £120 million worth of contracts since early 2016 simply to “ensure public services would continue.”

A Cabinet Office spokesman said the government “will respond formally to this report in due course.”