Councillor Richard Kemp challenged commissioners to be more ambitious in their design of services. “I simply cannot understand how much of public sector procurement is still silo based and predicated on an outdated belief that the two choices available to us are in-house or privatised,” he said.

Kemp said the benefits of getting the third sector involved are manifest; the sector is community based and brings with it knowledge and expertise of the area in which it works. And because employees are likely to be local, the money earned re-circulates into the community.

“All major public sector providers need to be far more imaginative in the way that they develop and procure services if we are to get the full benefit of third sector activity from social enterprises, charities and the voluntary sector,” he added.

The call came as the Cabinet Office announced that the Improvement and Development Agency is to run its £2 million programme to train council commissioners in the potential of the third sector.

Minister for the third sector Ed Miliband said: “To bring about genuine culture change we must foster greater understanding, particularly at a local level, of the benefits third sector organisations can bring in delivering services that change people’s lives for the better.”

Meanwhile, Birmingham and Croydon Councils were named by the IDeA and the Communities and Local Government Department as Beacon councils for increasing voluntary and community sector service delivery.