50. Irrespective of whether the Government decides to increase or reduce what it buys from the private sector, it will still purchase some services or goods from the private or voluntary sector
51. In some markets, as we heard, the Government buys services in the same way as any other entity would: the Minister told us, for example, that in markets like those for business processes (such as generic accounting or human relations functions), the Government does not dominate.114 However, in other markets the Government as a buyer does dominate. Rupert Soames, Chief Executive of Serco, described the Government, in these markets, as a "monopoly buyer".115 Sir Amyas Morse, the Comptroller and Auditor General, said that in some markets, such as prisons, Departments "are the sole customer".116 The Government's position as a monopoly buyer (or "monopsonist") may be ameliorated in some areas by the increasingly international nature of the market for public services.117 In the aftermath of the collapse of Carillion, the Government asserted that it was just another customer but as a monopsonist buyer this cannot be true.118
52. Where the Government has this monopsony position it is, as Margaret Stephens, a former KPMG partner, told us "very influential in terms of behaviour" in the market.119 She is not alone: the NAO has said that in these markets the Government enjoys "significant market power".120 Where the Government has monopsony power, its approach to contracting determines the behaviour of the market. Professor Sturgess said that the current literature on contracting lacks "sufficient awareness" of the Government's dual roles in these monopsonistic markets as both the monopoly buyer and the ultimate market steward.121
53. The Government's position in some public sector markets is monopsonistic. It has huge power as the only buyer in those markets to set prices, standards of quality and to determine the behaviour of participants. The Government should recognise in its response to our report its position as a monopolistic buyer in some markets and commit to publishing a strategy which would identify what it thinks the risks that arise from this are, how it can mitigate them and what it can do to improve these markets and render them more stable.
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114 Q764 (David Lidington MP)
115 Q632
116 Q517
117 Q517 (Sir Amyas Morse)
118 Official Report, 17 January, Vol. 634, Col. 872
119 Q579
120 National Audit Office A short guide to commercial relationships (December 2017) p. 24,
121 Q424