Business group the CBI says ministers should increase competition and transparency within the system for private firms contracted to provide public services.

The group, which campaigns on behalf of some of the UK’s biggest businesses, says improving competition in this area could help save taxpayers money and work to bring down the country’s spending deficit.

The government spends £187 billion a year with 200,000 private businesses providing public services. The CBI says they in turn contribute £48.7 billion to the economy.

But the industry needs to build taxpayer confidence that they are getting a good service as well as value for money, it added.

CBI director general John Cridland said: “Public services businesses recognise that they operate in an industry which rightly demands close public scrutiny, which is why we are unveiling a range of measures to boost transparency and accountability.”

“We can’t ignore the fact that confidence in the sector has been badly hit by several high-profile failures and that it will take time and meaningful change to rebuild it.

The CBI’s recommendations include:

In every contract negotiation, contractors and their customers should discuss how to release information proactively and in response to public enquiries, but also make the information released as accessible and comparable as possible.

All government contracts should be published online, as long as the customer is happy for this to happen. When a contract isn’t published or is in any way redacted, there should be a clear explanation of why this has been done and at whose request.

In every contract negotiation, there should be a presumption in favour of open book accounting. In practice, this means a full and frank discussion between the contractor and its public sector customer about the contractor’s profit margin. Profit information should include the value or savings being delivered.

The National Audit Office should be able to audit government contracts with the private sector. This should take place on a structured and systematic basis, to avoid adding a regulatory burden which will increase the cost of services.