By Bruce Henry, Principal Lawyer
The Government has announced a significant change to the way public services are commissioned, introducing a new Public Interest Test designed to ensure that public bodies properly consider whether services should be delivered in-house before turning to external providers.
The move forms part of a wider programme of employment and procurement reform aimed at strengthening public services, improving accountability and rebuilding public sector capacity. Ministers say the reforms are intended to move decision-making beyond narrow cost considerations and towards a broader assessment of public value, service quality and long-term resilience.
Under the new framework, central government departments, executive agencies and non-departmental public bodies will be required to assess whether services valued at more than £1 million could be delivered more effectively in-house before beginning a procurement exercise.
The Public Interest Test represents a notable shift in approach. For decades, outsourcing has often been treated as the default option across large parts of the public sector. The Government now wants contracting authorities to demonstrate that they have seriously considered direct public delivery before proceeding with external contracts.
Announcing the reforms, Cabinet Office minister Chris Ward said the Government was drawing a line under an "outsourcing by default" culture. He argued that public service delivery should support the rebuilding of state capacity and contribute to a fairer economy. Where outsourcing is ultimately chosen, departments will be expected to provide a clear justification for that decision.
The accompanying guidance makes clear that procurement exercises should no longer focus solely on short-term financial costs. Instead, public bodies will be encouraged to consider a wider range of factors, including service quality, accountability, resilience, workforce implications and broader economic and social benefits. The aim is to ensure that decisions reflect the long-term interests of service users and taxpayers rather than immediate savings alone.
Alongside the Public Interest Test, larger public bodies will be required to develop five-year Insourcing Strategies. Organisations spending £100 million or more annually on contracts will need to identify opportunities to bring services back in-house and set out how they intend to develop the workforce, skills and operational capability required to make this possible.
The reforms also sit within a wider programme of employment rights and procurement changes that seek to improve standards for workers delivering public services. Together, the measures reflect the Government's view that procurement should be used not only to secure services, but also to support good employment practices and strengthen public institutions.
For trade unions, the announcement is likely to be welcomed as a recognition of longstanding concerns about the impact of outsourcing on service quality, accountability and job security. Campaigners have frequently argued that essential public services should be delivered directly wherever possible and that outsourcing has too often fragmented services while weakening public sector expertise.
The first Public Interest Tests will apply from April 2027, with departments also required to report on the outcomes of their assessments. As an early indication of the policy's direction, the Cabinet Office has confirmed that it intends to examine bringing cleaning and security services across government buildings back in-house when existing contracts expire in 2028.
The reforms stop short of creating a presumption in favour of insourcing. Public bodies will still be able to outsource services where this represents the best option. However, the new requirements fundamentally alter the starting point for procurement decisions. Before a contract is put out to tender, public authorities will now have to ask a question that has often been overlooked in recent years: could this service be delivered better in public hands?
For workers and trade unions, the introduction of the Public Interest Test marks one of the clearest signals yet that the Government intends to rethink the relationship between outsourcing, public services and the role of the state. Whether it leads to a significant wave of insourcing remains to be seen, but it undoubtedly represents a major change in the direction of public procurement policy.