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Private contracts target for savings...
Private contracts target for savings

By Dan Drillsma-Milgrom, finance reporter

Councils must wring further savings from their private-sector contracts if they are to meet the government's increased efficiency targets without cutting services.

Gordon Brown announced in his pre-Budget statement that from next year both central and local government would have to make annual efficiency savings of at least 3%, with the majority made as cashable savings. A Treasury report published in July had indicated that the figure would be 2.5%.

LGC understands the Treasury sees the procurement of goods and services from the private sector as an area where substantial savings can still be made.

Steve Holland, director of the national procurement programme for the Regional Centres of Excellence, said the centres would publish best practice in the new year on making savings in areas including the procurement of construction, environmental services and adult social care.

'We estimate the total net expenditure of the 388 authorities in England this year will be£100bn and almost 45% of this is from procurement,' he said.

'This is why we are focusing on it in the first instance as it is so big.'

David Smith, director of resources at Wigan MBC, said it was important that the government took into account the progress already made.

'It is possible that local government will actually exceed its efficiency targets this year,' he said. 'I think government should consider this when deciding its baseline targets for local government over the next three years.'

Meanwhile, a working group to boost efficiency savings from procurement, set up by the Treasury, the Local Government Association and the Confederation of British Industry, is yet to meet.

The LGA believed it had secured a Treasury commitment that the group would address the burdens placed on local government by European Union regulations and spiralling private-sector contracts (LGC, 28 September). The group will have its first meeting in the new year.

A source said: 'Progress has been a bit slower than we would have hoped.'

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