by Trevor Sturgess

The public sector is squandering more than £25bn a year because it "thinks like a corner shop, not like Tesco," bosses claim.

The Institute of Directors has called on the sector to adopt a private sector approach to central buying that it says would dramatically cut wasteful spending.

In a new report, the IoD, which represents around 2,000 business leaders in Kent and a further 12,000 across the south, argues that £15bn could be saved through the restructuring of procurement, with a further £10bn of savings achieved if the public sector made greater use of shared services and outsourcing.

The report has this stark message for public bodies: "If the public sector were a company, it would have gone out of business long ago."

It highlights the UK’s annual spend of £220bn on procurement, equivalent to £3,500 for every man, woman and child in the UK.

"Politicians just talk about cutting waste - but we have a solution," it says. "Taxpayers have a right to expect speedy implementation - it is their investment and their services that will suffer without it. But this will be achieved only with strong leadership from government."

It criticises NHS trusts, local authorities and small Government departments for doing their own thing and ordering supplies and services at a local and separate level, saying such a "scattergun" approach is not cost effective.

Rodger Broad, regional director for the IoD South, said: "Each public body needs to stop thinking, and buying, like a corner shop and instead think of its combined streamlined purchasing power as being more akin to the might of Tesco.

"The private sector has been squeezed during difficult economic times so it comes as no surprise that the savings spotlight should now be turned on the public sector. We are fortunate here in the south east that a relatively small proportion of our economy and jobs is dependent on public money, but in parts of the UK where there is a greater reliance on government supported jobs the need for cutbacks will hit even harder."

The IoD calls for centralised buying organisations to manage major contracts on behalf of the whole public sector, regional procurement hubs, and a single leadership body such as an Office of Government Commerce.

Miles Templeman, IoD Director-General and chairman of Shepherd Neame, the Faversham-based brewer and pub operator, said: "There is a lot of talk among politicians about the need to introduce efficiencies into the public sector, but very little detail on how this will be done. This report provides a vital needed blueprint."