FUNDAMENTAL flaws in the UK Government’s prioritising of cost over quality when outsourcing public services to the private sector have been exposed by a new report.

The document, compiled by the Commons Public Administration and Constitutional Affairs Committee (PACAC), found that the Tory Government is “spending as little money as possible while forcing contractors to take unacceptable levels of financial risk”.

Failings were exposed in how the UK Government awards £250 billion worth of contracts for services and projects each year, with the collapse of Carillion causing “serious damage” to public confidence.

A Cabinet Office spokesman said there would be a formal response in due course.

The quality of servies had deteriorated because contractors are aware that the UK Government prioritise price over quality. The Government was unable to present evidence to back its key claim that outsourcing produces better public services for less money, MPs found.

“It is intolerable that the Government is spending £250 billion with little evidence that it is currently following its own procedures to secure value for money,” said the report.

“The Government’s preoccupation with price has been noticed by the market and is a matter of grave concern. The Government’s failure to assess the quality of services as well as their cost is lamentable.”

The committee of MPs added that “preoccupation with cost” meant that since the start of 2016 more than £120m worth of contracts had been renegotiated in order to “to ensure public services would continue”.

“Ultimately, this has led to worse public services as companies have been sent a clear signal that cost, rather than quality of services, is the Government’s consistent priority,” said the committee.

“Contractors told us that the Government was known to prioritise cost over all other factors in procurements, driving prices down to below the cost of the services they were asking firms to provide.”

The way that Private Finance Initiatives (PFI) are operated also came in for some scrutiny, with the report criticising the Government’s admission that the entire PFI structure “is to keep the debt of the balance sheet”.

“It is staggering that the Government has attempted to push risks that it does not understand on to contractors, and has so misunderstood its costs,” said PACAC chairman Sir Bernard Jenkin.

“It has accepted bids below what it costs to provide the service, so that the contract has had to be renegotiated.

“The Carillion crisis itself was well-managed, but it could happen again unless lessons are learned about risk and contract management and the strengths and weaknesses of the sector.

A Cabinet Office spokesman said that the Government is committed to ensuring a diverse marketplace of companies bidding for contracts and had recently introduced a range of new measures.

“This includes extending the requirements of the Social Value Act in central government to ensure all major procurements explicitly evaluate social value where appropriate, consulting on improvements to the prompt payment code, as well as measures to make the outsourcing process more robust and the results more transparent,” he added.

“We will respond formally to this report in due course.”