ONE of Britain’s biggest outsourcers has accused Tony Blair of frittering away at least £8 billion every year because of the Government’s failure to outsource low-skill, back-office civil servant jobs, The Times has learnt.

Alistair Cox, the chief executive of Xansa, the outsourcing and technology group, has written to the Prime Minister, detailing how the Government spends £40 billion on basic human resources, finance and administration tasks that could be carried out for less.

Mr Cox also offered a guarantee that he could cut the bill — which is met by taxpayers — by 20 per cent. The calculations are based on open data on public spending for each government department.

The public sector payroll has been a thorn in Gordon Brown’s side. Only in the past year has the Chancellor succeeded in bringing the rate of wage inflation in the public sector below that of the private sector. Headcount in the Civil Service fell year on year in June for the first time in eight years.

Mr Cox said: “Within the Civil Service people are reluctant to grasp the nettle and reduce costs. There is a reluctance to deal with headcount.” He will tell the Prime Minister that the Government has been slow to make the most of lower-cost labour in countries such as India.

“The Government spends £40 billion on basic back-office administration. Not even £1 billion worth is outsourced,” he said. “The private sector has been enjoying these benefits for years.”

Recent research by Kable, the public sector research firm, indicated that public sector outsourcing work was worth £49 billion a year. That figure is set to rise by 30 per cent in the period to April 2009, with the largest increases expected from central government contract awards and in health.

The NHS has been a leader in public sector outsourcing of back-office work. It set up a joint venture shared services business, run in partnership with Xansa, that combines the back-office workloads of all the member NHS trusts, sending a limited amount of that work to be completed at a lower cost in India.

The venture has special permission to complete 37 per cent of its work in India, but such rules are rare in government contracts. The project has cut costs by 34 per cent. The NHS’s IT modernisation programme has prompted significant software development work in India to save money. British, Indian and American firms are scrambling to persuade UK employers to outsource work to lower cost economies, with companies typically splitting the work between sites in the UK, Eastern Europe and Asia, depending on the tasks being done.

India’s growth as a data processing hub is well documented, with Eastern European countries increasingly important for their language skills and proximity to Western Europe.

Client-facing work or highly sensitive work is typically completed domestically. A recent Channel 4 investigation raised questions about the security of sensitive data in overseas centres. The outsourcing of public sector work would probably require that sensitive information, including medical records, be processed in Britain.

LOOKING EAST

September 2006: Aviva announces plans to create 1,000 jobs in India while cutting 4,000 jobs in the UK; Leeds Teaching Hospitals NHS Trust cuts 60 typing jobs, as typing of notes and letters transferred abroad

Others already there: British Airways, HSBC, Standard Chartered, Lloyds TSB

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