A trend that started under Mrs Thatcher, but has been enthusiastically adopted by New Labour, is the increasing reliance on the private sector for the provision of public services. This has been motivated in part by the perception that the private sector is more efficient than the public sector, and hence provides better value for money.

This is a disastrous non sequitur. The private sector is good at making profits for shareholders; that is directors' overriding duty under company law. This does not necessarily equate to value for money to the customer, though it may do under perfect competition. In the manufacture and supply of off the shelf goods, there is effective competition and customers do get good value. The supply of services is different. Customers and suppliers normally enter into long term relationships, the terms of which are agreed or deemed to have been agreed at the outset. Here the suppliers who know their business normally have an advantage over customers who do not understand the ins and outs so well. Customers' exasperation with financial services companies and mobile phone companies provide a good example of this. Profit comes from knowing and manipulating the rules, not from providing value for money.

One might think government should be an expert customer able to deal with the private sector on equal terms, but the evidence seems to suggest that it is not. On Private Finance Initiative Projects for example, the private sector always seems to outmanoeuvre government.

Government's incompetent and inappropriate use of the private sector might have been more excusable if it had been a controlled experiment from which lessons had been quickly learned.