Spending watchdogs should be allowed to audit government contracts with private sector firms responsible for delivering £187bn of public services each year, the CBI has urged today.

The CBI's recommendation the National Audit Office should scrutinise major government contracts in a structured and systemic manner is one of a series of measures put forward by the employers' group to restore public faith in the outsourced delivery of public services - after a spate of scandals involving major suppliers.

Other recommendations aimed at boosting commercial transparency include publishing all government contracts online, and explaining any redactions or at whose insistence the full details of deals are not issued.

Public sector buyers and their suppliers should also work to proactively release contractual details in a way that is accessible and easy to compare with other deals.

All contract talks should be based on a presumption in favour of open book accounting, which means public sector bodies have knowledge of the profit margins their suppliers are achieving, and the value of savings delivered.

Independent research from Oxford Economics indicates the public services industry is worth £48.7bn to the economy, with some 200,000 firms - supporting 5.4 million jobs, half of them in the supply chain - providing services to the public on behalf of the government.

‘The public services industry is a great British and international success story,' said CBI director-general John Cridland.

‘But 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,' Mr Cridland added.

‘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,' he added.

Troubled outsourcing firm, Serco, yesterday announced a dramatic 62% fall in profits from £281m to £106.6m after paying a £90.5m financial penalty to the Ministry of Justice for ‘gaming' its electronic prisoner tagging contract. 

Serco also lost out on the opportunity to bid on a major outsourced prison contract and withdrew from a consortium bidding to take over the running of the Ministry of Defence's £15bn annual spend on kit and equipment.