He called for 'a genuine mixed economy provision in which councils provide quality services as well as commission them'.
'Experience in the fields of residential care for the elderly and children shows it is dangerous and expensive to depend entirely on external providers,' Sir Jeremy said.
Effective inspection would support change rather than 'simply stigmatise failure', and local government should push for this in a second Labour term.
He highlighted the importance of public service agreements: 'In the next parliament we will work with the Labour government . . . through local PSAs to secure locally agreed solutions to local problems, drawing on the skills and experience of local partners, including our own workforce.'
But he stressed: 'For our part we will have to be innovative, whether in the realms of e-government, sustainable development or the engagement of citizens in promoting the civic society.'