Business leaders say the public sector could save at least 25 billion pounds a year by reforming the way it buys goods and services. In a report today the Institute of Directors argues that within three years a radical restructuring of public sector procurement could bring annual savings of 15 billion a year and greater use of shared services and outsourcing could save a further 10 billion pounds.

The IoD says politicians talk about the need to cut waste, but rarely give any detail on how to achieve this. Its report, it says, is a much-needed blueprint. If politicians had the will and began the restructuring immediately the changes could be made within 12 months and deliver savings within three years.

The report says the UK public sector spends 220 billion pounds a year on procurement, accounting for a third of Government expenditure and costing 3,500 pounds for each person in the country. Despite some areas of excellence and good collaborative initiatives, the Institute says, the majority of public procurement spending is so fragmented that big potential savings are being missed. It believes the problem is that the public sector organises itself on the “corner shop” model, with local authorities, NHS trusts and small central Government departments each doing their own thing.

It says the solution is to create an integrated public sector procurement and outsourcing structure with a single leadership point that all public sector bodies would have to use. The report’s author, Colin Cram, who is a leading public procurement specialist, said: “A step change is long overdue in the way public sector procurement is organised and managed. Its complexity does not excuse looking to the best private sector models, for example, companies like Tesco.”