Whitehall is failing to use its financial might to force suppliers to pay their fair share of tax on UK profits, according to a powerful Commons committee.
In a series of reports into efficiency across government, MPs raised a raft of concerns about the way public money is spent and accused the Cabinet Office and Treasury of failing to get the best value for taxpayers.
The Public Accounts Committee found that while the Government has considerable buying power it does not adequately use it to challenge companies that have botched previous contracts or avoided paying enough tax on profits. It calls on the Cabinet Office to look at both areas when deciding on contracts and insists that European Union procurement rules "should not be interpreted as a barrier to making common sense decisions".
Earlier this month Prime Minister David Cameron indicated companies with ''broken'' cultures could be blocked from bidding for Government work following scandals involving security giants G4S and Serco. Contracts for tagging criminals resulted in the two companies overcharging the Government by tens of millions of pounds - including for monitoring dead offenders. G4S also botched the Olympics security contract and the Government uncovered potentially fraudulent behaviour in Serco's management of its £285 million prison escorting contract.
In its report on procurement, the PAC said: "While it is long overdue, we welcome the co-ordination of the management of major suppliers across government. However, government is still not fully using its negotiating position as a large customer to challenge those who pay little UK tax on their profits or those who have failed to deliver effectively in previous contracts. The Cabinet Office should consider how suppliers' performance and record of paying their fair share of tax impact on procurement decisions."
Top civil servants must be more accountable, MPs demanded as they highlighted how permanent secretaries do not appear to face sanctions for overseeing failing projects.
The PAC reports criticise the Cabinet Office for being a weak strategy department and the Treasury a weak finance department, warning they are "failing to act together as a strong corporate centre". That allows departments to continue acting as "silos" that waste money by failing to work together, according to the committee.
Margaret Hodge, who chairs the PAC, said: "These reports all consider how government could do more for less. The need for more efficient administration in public services has never been more pressing. Strong action is essential to minimise the impact of real terms cuts in public spending on the quality of public services. A central message emerging from our four reports today is that the Cabinet Office and the Treasury together need to be much stronger if they are to exert effective corporate control over spending in departments and achieve long-term sustainable savings for taxpayers.
"For too long these two central departments have been half-hearted in their dealings with spending departments and have failed to achieve best value for the taxpayer. Tougher leadership from the centre of government is required. The central departments should take on the challenge with renewed vigour and imagination, and take responsibility for instituting change across government and holding spending departments to account. So for instance capital projects should be stopped if the centre judges them to be poorly conceived and managed, and permanent secretaries should be held more firmly to account."
A Cabinet Office spokesman said: "We are pleased that the committee has endorsed our direction of travel on civil service reform. The steps we have taken to transform Whitehall into a leaner, more efficient machine, managing its finances like the best-run businesses, generated £10 billion of savings for the taxpayer last year alone. At the time of the last election, government procurement was unco-ordinated and bureaucratic. We've stripped out unnecessary procedures, improved the way we buy, and enforced sensible controls on spend."