Private sector companies are to be encouraged to make bids for contracts to run multibillion-pound welfare services, a Cabinet minister has said.

In an attempt to harness the capabilities of both private companies and voluntary groups, contractors will be asked to come up with proposals for the welfare services that they want to run. James Purnell, the Work and Pensions Secretary, is expected to outline the plans today.

Welfare-to-work schemes and projects for the rehabilitation of former prisoners are just some of areas that could be run by the private sector. “This is us saying very clearly the only limit is the quality of service and the imagination of the provider,” Mr Purnell told the Financial Times.

He added that, potentially, all services could be opened up to bidders, leaving his own department to look after a few policy functions.

The minister singled out Jobcentre Plus as an example of a government agency that was providing a “world-class service” but suggested that even that could be operated by an outside contractor.

“I’m not ruling anything out,” added Mr Purnell, who said that British companies operating in the area would be able to expand into world markets for welfare delivery.

Putting forward his own ideas for how the welfare state could be reformed, David Cameron, the Conservative leader, also suggested this month that the voluntary sector could have a role to play.

Charities would be allowed to earn substantial fees from delivering public services, he said.

Mr Purnell said: “We are nonideological about who delivers the service but we are ideological about what we want to achieve.

“Where providers identify a part of our business or a customer group that they think they could do more for in a particular region, I want to hear their proposals.”

Mr Purnell is also expected to set out plans to devolve decisionmaking from Whitehall and increase customers’ rights to choose the services they access.

Several big international welfareto-work groups have already looked to Britain as a potential growth market for their services.

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