Understanding the Public Services Industy

Public Services Industry Review
2.11 In the UK, health constitutes the largest sector of PSI spending. It totalled £24.2bn in
2007/8, accounting for around 30 per cent of the total PSI market (Figure 2.5). In part
this reflects the high proportion of government spending devoted to health, but it
also results from the relatively advanced use of the PSI in this area. After health, the
next largest sectors in the PSI are social protection (£17.9bn), defence (£10.1bn) and
education (£7.3bn).
2.12 Growth in the use of the PSI has varied significantly across sectors. The categories
with the fastest annual average growth over 12 years (in real terms at 2007/08 prices)
were education (8.1 per cent), environmental protection (7.9 per cent) and health
(7.0 per cent). The slowest growing areas were general public services (-0.3 per cent),
economic affairs (2.3 per cent) and defence (3.6 per cent).
Figure 2.5: Growth of the sectors that make up the PSI (2007/8 prices)
90
£ billion
80
70
60
50
40
30
20
10
Housing and community amenities
General public services
Recreation, culture and religion
Environment protection
Public order and safety
Economic Affairs
Education (includes training)
Defence
Social protection
Health
1995/96 2001/02 2007/08
Source: Oxford Economics: PESA
How might the PSI grow in the near term?
2.13 Projections for the growth of the PSI have been derived from three scenarios based on
the different assumptions listed below. Figures 2.6 and 2.7 summarise these results.
• A central projection is based on planned procurement spending for each
government department as published by HMT along with an assumption that
the PSI continues to grow in line with historical trends. On this basis, the PSI is
projected grow at a rate of 3.4 per cent per year to 2010/11 (in real terms);
• A high case scenario is based on additional growth in those COFOG categories
where the UK lags behind other OECD countries in terms of the share of PSI
provision (see Section 5). This gives a growth rate of 5.9 per cent per year;
A • low case scenario which assumes that the PSI share in total public services
stays at its current level so that growth simply mirrors projected spending
increases. This scenario gives a growth of 1.9 per cent per year.
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