Yesterday’s National Audit Office (NAO) warning to the government over its recent heavy-handed approach with large suppliers is a wake-up call for this government’s scarily smug approach to ICT procurement.

To be fair, the long-heralded disaster of the Department for Work and Pension's (DWP) flagship Universal Credit project – where hundreds of millions of pounds of IT assets have been written off – should have rung alarm bells, but instead Ian Duncan Smith preferred to lay it at the door of one or two incompetent civil servants. David Cameron’s former digital advisor called Universal Credit ‘the last of the old public sector IT white elephants’, forgetting that it had been hailed as a shining example of their new ‘agile’ procurement when launched.

The NAO’s criticisms cannot be so easily dismissed or glossed over and the Cabinet Office, which oversees much of central government procurement, can have no excuse for complacency.

The NAO accuses the Cabinet Office of lacking "commercial experience and expertise below senior levels", and attacks available information on its 40 strategic suppliers as "inconsistent and incomplete".

Now this is all the more ironic as Cabinet Office minister Francis Maude and prime minister David Cameron's former senior policy advisor Rohan Silva have not hesitated to criticise both the ICT suppliers and the digital services of the last Labour government, claiming they were making billions of pounds of savings by breaking up a ‘closed cartel’ of government suppliers.

But we find that far from opening up procurement to new innovative providers, it is this government’s favourite recipients of public monies who are benefiting. Serco's public service contracts were worth £1.8 billion, including £611 million with the Ministry of Defence (MoD) and £382 million with local government.

Capita's totalled £1.08 billion, while those for G4S and Atos were £718 million and £683 million respectively.

Serco and G4S are currently being investigated by the Serious Fraud Office (SFO) over accusations of over-charging of the Ministry of Justice (MoJ) for electronic tagging after auditors found that the government had been charged for tagging dead or non-existent offenders.

And the NAO says that if the public sector is to stay innovative government needs to find more effective ways of working with the private sector.

The report emphasises the need for increased transparency, and we have called for the Cabinet Office to ensure more openness during and after the contracting process. Too often business confidentially is cited as a reason for not revealing contracting requirements that effectively bar smaller companies.

Equally, when services are outsourced into the private sector they are no longer subject to Freedom of Information (FoI) requests. Labour would apply (FoI) laws to private firms working for the government. We must ensure that the problems with Serco and G4S are not repeated and irregularities are identified much sooner.

It is right that Digital Government should drive increased public sector efficiency as we face rising demands and limited resources and need to do more with less. But this government fails to understand that rather than simply stripping out costs through systems outsourcing, digital government can enable better, cheaper and more innovative service delivery.

As the NAO says: “The Cabinet Office’s commercial relationship strategy is currently focussed on short term savings, which could pose a risk to value for money in the longer term”.

The government’s digital by default programme should be used to drive up digital skills instead of, as is too often the case now, effectively becoming digital exclusion by government diktat.

The government's long-promised Assisted Digital Provision is yet to materialise in any form while my postbag bulges with stories of vulnerable and isolated people forced to try to sign on online without help. But there are still five million households in this country that have no access to the internet, either because they don’t want it or because they can’t get it, and millions more who do not feel confident online.

But this is part of a broader, ideological failure on the part of this which does not see how procurement can make markets.

As Chuka Umunna has said, government should be “using the buying power of procurement can drive thousands of new apprenticeship places, support innovative new business, and unlock markets”.

The government needs to be more ambitious in its procurement. Already it has downgraded its target for 25 percent spend with SMEs to a mere aspiration.

We need to build broader objectives into contracts, recognising the added value that support for apprenticeships or including local SMEs and social enterprises in the supply chain can bring to the lifetime of a contract.

But instead, as the NAO report indicates, government is politicising procurement, incorporating ideology into ICT management and we are all paying the price.

Chi Onwurah is Labour shadow Cabinet Office minister and MP for Newcastle Central