Crown Suppliers (Hansard, 25 July 1986)

§ Sir George Young

The Crown Suppliers have had another successful year's trading. Despite the fact that over 65 per cent. of their business is now untied and optional, they have more than met their financial objective for 1985–86. They have achieved this by raising their level of service, speeding up deliveries, reducing resource costs and offering still better value for money for the products and services they provide to an increasing number of public sector customers. This process will continue. They operate of course under the constraint that, as Departments are increasingly free to purchase goods and services elsewhere, the Crown Suppliers are expected to compete for work within the public sector, yet they cannot, generally speaking, seek business outside it as they would if they were a private concern.

The team of officials which last year reviewed the future of the Crown Suppliers concluded on the information available to them that whilst privatisation would be possible, it would not, in their view, be in the public interest. They recommended that the Crown Suppliers should be retained as a central purchasing agency in the public sector with rather greater autonomy in accounting and staffing matters, but that further consideration should be given to contracting out certain of their non-procurement activities. The central unit on purchasing has come to a similar conclusion about the central procurement function, but has made rather more radical suggestions about the Crown Suppliers' other activities.

Despite these recommendations, my right hon. Friend and I believe that, taking into account the wider commercial benefits, privatisation may yet prove to be a valid option. When he announced the original review last year, the then Secretary of State the right hon. Member for Wanstead and Woodford made it clear that advice would be sought from a merchant bank as and when necessary. Our final decision about privatisation must take account of the costs and benefits to Government, including the 573W marketable value of the organisation and the effects on other Government Departments. I have therefore decided, without commitment, that it would be timely to seek the advice of an outside financial institution about the feasibility of privatising all or part of the Crown Suppliers, including the possibility, of some form of management/staff financial participation in the business. I have also instituted a further detailed examination of the various recommendations for change proposed by the original review team and by the central unit on purchasing with the aim of implementing those recommendations which could be advantageous in terms of cost and efficiency. Meanwhile, the Crown Suppliers will continue to offer their present comprehensive service.