Private companies in hospitals, police and schools are here to stay, says Oliver Letwin

Private companies working in hospitals, police and schools will “no longer be a matter of debate” after the Coalition’s reforms of public services, Oliver Letwin, the Cabinet Minister, has said.

Mr Letwin said greater competition will soon seem “straightforward and obvious” once it has been introduced across the public sector.

Setting out his vision for a leaner public sector, he said there is currently no one at the top of the civil service “who knows how to improve the bang for the buck”.

“We need, desperately, much more urgently than we would have done if we had very much more money, to find means of opening the public service, creating competition and choice,” he said, speaking at a London conference hosted by Reform, the think-tank.

“It will become not a matter of political debate but straightforward and obvious as a way of conducting business in this country.”

Mr Letwin said he even expected all political parties to agree that competition works once the Coalition’s reforms have been carried out.

“No one rational should ever again argue that it makes sense to try to deliver public services on the basis of top-down, command and control monolithic monopolies,” he said. “It doesn’t, it won't. And therefore, we are moving the nation in the direction that is unarguably the right one.”

Mr Letwin's comments come at a provocative time, as the Government is battling to get support for its controversial health reforms embracing competition in the NHS.

They will also revive speculation that the Government is planning to propose new laws this year making it easier for private companies to get involved in providing public services.

Mr Letwin’s department published a White Paper setting out principles of transparency last year. This has not led to new legislation, although the Health and Social Care Bill introducing more competition into the NHS fulfills some of its aims.

Speaking at the same conference, Theresa May, the Home Secretary, said it was vital to harness the innovation of the private sector to help the police force.

She said the public "wouldn't care" if human resources and back office functions in the police are carried out by private contractors, rather than civil servants.

Sir Nicholas Macpherson, Permanent Secretary of the Treasury, also underlined the need for reform of public services, saying the quality would “deteriorate rapidly” without action from ministers.

“It’s extraordinary how the public sector has lagged the private sector in its approach to financial management," he said.

But he also warned: “If you want to change public services, you shouldn't depend on the bureaucrats”.

The view that civil servants are an obstacle to reforms of the public sector was supported by Frank Field, the Government’s poverty tsar and former Labour minister

He said dealing with civil servants was like “wading through treacle” when trying to get things done.

The former minister said reforms to public services are being blocked by "the mindsets of public servants" unable to grasp the need for change, adding that he is "deeply, deeply depressed" about the scale of the task ahead.

Senior Conservatives have been concerned that the Prime Minister will retreat from promises to break up state monopolies, over fears that opposition could prove too strong.

The White Paper on public service reforms last year set out five key principles, including the promise that public services would be opened to new providers in voluntary, public and private sectors.