Dorrell signals sell-off of Civil Service bodies

THE privatisation of 91 government agencies employing more than 350,000 civil servants came a step nearer last night after a key speech by Stephen Dorrell, Financial Secretary to the Treasury.

Referring to confidential complaints from frustrated agency directors, the minister said the agencies would feel increasingly constrained by strict Whitehall rules on their 'businesses'. Senior agency officials have argued that they are capable of competing with the private sector in the provision of services outside their normal functions.

A committee headed by the Prime Minister has ordained they should stick to their Civil Service brief and refrain from competing with businesses. But Mr Dorrell, speaking to an audience of Civil Service union representatives in London, made it clear the Government would allow the agencies to move into the private sector.

'As agencies develop their specialisms, they will be tempted increasingly to ask why they should continue to live with the undoubted constraints that are employed by public sector ownership.'

He added that employees did not pay tax in order to finance public sector businesses in competition with their employers. 'There will therefore always be tight constraints on the ability of agencies to develop their businesses in competition with the private sector.' However, he said the free- standing agencies had skills and expertise which would allow them to grow in the private sector. That was why agency status involved a regular review of the 'continued justification' of public-sector ownership.

'If an agency is able to win a contract from a purchasing department in competition with the private sector, there seems little reason to subject that organisation to constraints upon its growth; and every reason, both from the point of view of its own employees and from the wider economic perspective, to encourage it to opt for private ownership and the opportunity for growth.'

Ministers have increasingly encountered a contradiction between their encouragement of the entrepreneurial spirit in Whitehall and the ability of a publicly funded organisation to beat the private sector at its own game.

Mr Dorrell empahsised that the core activity of any department was that of a purchaser. 'Parliament authorises the collection of taxes in order to pay for the provision of a range of public services. When a government department uses those resources, it is acting as a purchasing agent on behalf of the taxpayer.'

Several consequences followed from the idea that government departments were simply buyers. The first and most important was that no purchaser wanted to be 'at the mercy of a single supplier'.

However, he said the Government was deeply committed to the idea of a high-quality public service. It had no aversion to the continued provision of large parts of those services by the public sector. He said he did not envisage any change that would undermine the 'enviable reputation of civil servants for integrity and political independence'.