In a speech at the Reform think tank in central London, Minister for the Cabinet Office, David Lidington, said: ‘We are determined to build a society where people from all parts of our country can access the best public services, and for those services to run efficiently and smoothly for them and their families. Whether that service is delivered by public, private or voluntary sectors, what matters is that it works for them and their everyday needs, while providing value for money for the taxpayer.’

The announcement comes amid revelations of unethical practices and unfair treatment of suppliers by failed construction giant Carillion, one of the government’s biggest suppliers.

The Financial Reporting Council (FRC) is currently investigating the audits by KPMG of Carillion between 2014 and 2017.

Lidington said the government would encourage and make it easier for small businesses, mutuals, charities, co-operatives and social enterprises to take on government contracts.

‘We want to see public services delivered with values at their heart, where the wider social benefits matter and are recognised. That means government doing more to create and nurture vibrant, healthy, innovative, competitive and diverse marketplaces of suppliers that include and encourage small businesses, mutuals, charities, co-operatives and social enterprises - and therefore harness the finest talent from across the public, private and voluntary sectors.’

A major part of the policy is to extend the requirements of the Social Value Act in central government to ensure all major procurements ‘explicitly evaluate’ social value where appropriate.

‘By doing so, we will ensure that contracts are awarded on the basis of more than just value for money - but a company’s values too, so that their actions in society are rightly recognised and rewarded,’ Lidington said.

In addition, the government will use its purchasing power - some £200bn is spent per year on private companies providing public services - to challenge its major suppliers to do better on equality and diversity.

‘If we are to build a fairer society, in which the public has greater trust in businesses not just to make a profit, but also to play a responsible role in society, then we must use the power of the public sector to lead the way,’ said the minister.

‘We will now develop proposals for government’s biggest suppliers to publish data and provide action plans for how they plan to address key social issues and disparities - such as ethnic minority representation, gender pay, and what they are doing to tackle the scourge of modern slavery.’

Other measures announced include requiring key suppliers to develop ‘living wills’ to allow contingency plans to be rapidly put into place if needed, increased transparency for major contracts by publishing key performance indicators, improved training for government procurers, and enhanced protection for suppliers from cyber-attacks.

Report by Rob Munro