STATE spending on private consultants has soared to £2.5 billion, the equivalent of a penny in the pound on income tax, official statistics obtained by The Times reveal.

Figures from the Office of Government Commerce show that spending on consultants rose by 42 per cent last year from £1.76 billion in 2003-04. That is as much as it would cost to build 150 new hospitals or employ more than 100,000 nurses or 75,000 policemen. A taxpayer earning £40,000 is now contributing around £87 a year to private sector companies.

The increase comes as Whitehall tries to shed some 84,000 Civil Service jobs, and unions have complained that departments are paying more to have their work done privately — often by former civil servants. The disclosure, on the opening day of the Labour Party conference, also coincides with the revelation that Gordon Brown intends to reinstate civil servants to their pre-eminent position should he succeed Tony Blair at 10 Downing Street, reversing the Prime Minister’s reliance on political advisers.

Some private consultancies are now focusing entirely on public sector contracts, which can attract fees of up to £2,000 per day. Firms are being hired to advise on outsourcing, to “manage change”, to set up IT systems, to advise on advertising and communications and to conduct polls and surveys.

For example, one public relations company with close links to the Labour Party has been given almost £3 million to persuade businesses to sponsor city academies. Weber Shandwick has been hired on a three-year contract by the Department for Education and Skills to “build and develop relations between the department and business”.

Weber Shandwick’s chief executive, Colin Byrne, is a former chief press officer for the Labour Party and worked for Peter Mandelson during the 1997 election campaign. And two senior press officers have left the Education Department to join the company in the past year.

Other departments spending large sums with private concerns include the NHS, which spent £85 million on consultancy work last year — up 235 per cent — defence, up 77 per cent at £148 million, work and pensions, which paid out £345 million, and transport, which spent £328 million. Local government has paid consultants more than £230 million, almost four times as much as last year.

Mark Serwotka, general secretary of the Public and Commercial Services Union, said the Government planned to save £3 billion a year by slashing civil servants but was now spending almost as much on management consultants. “It is sheer lunacy and represents little value to the taxpayer, especially when you have consultants sitting opposite civil servants doing the same work but being paid up to ten times more,” he said.

The MORI polling organisation said that its public sector contracts had accelerated since 1997 and that there had been more commmissions from Whitehall heads in the past two years, after Civil Service reforms. “Permanent secretaries have been given targets, some of which are based on improved consumer satisfaction, so more surveys are being commissioned,” a spokesman said.

Whitehall departments, hospitals and town halls are also increasingly relying on consultants to help with the introduction of radical reforms. Hospitals are also paying external consultants to advise them on contracting out operations to the private sector.

Douglas Johnson-Poensgen, director of Serco Consulting, said that his firm had seen a 250 per cent increase in public sector contracts in the past two years, particularly from the NHS. The Health Department’s commercial directorate, which is trying to reduce waiting lists, had spent £30 million on consultants to advise on contracts worth £4 billion, he said. The NHS is also hiring IT consultants to help with a national programme to transfer all patient records on to computers.

The Ministry of Defence logistics department has hired consultants to help it to buy military equipment, while town halls have brought in advisers to improve customer relations, set up call centres and to save money on supplies.

Andy Ford, head of local government consultancy at PricewaterhouseCoopers, said his firm’s public sector contracts had doubled over the past three years, particularly in local government. This was partly due to council league tables, Sir Peter Gershon’s drive to save £20 billion in the public sector and local efforts to improve frontline services.

All work was now being done against background that existing staff would be reduced, he said. “If the goal of Whitehall is to do policy work, then why do you need to provide back office IT staff? Isn’t it better to get someone else to do it?”

But the FDA, which represents senior civil servants, said it had repeatedly raised concerns about the use of management consultants who were often former civil servants being paid more to do the same work. “There is no accountability for the money spent,” a spokesman said. “Nobody knows how much money is spent, it often doesn’t appear in department running costs, and it is just spiralling out of control.”

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