The government is planning to create service providers that will support government departments with IT and other services.
According to reports former civil servant Gerry Grimstone has been asked by the Treasury to find ways to raise money for the government.
The plan could see the creation of massive public sector companies that would eventually be floated on the stock market. They would compete with big public sector service providers such as Capita.
He told the Financial Times that there are lots of things in the public sector that are akin to business activity. "We are just embarking on what could turn out to be a radical piece of work on identifying business activities within government and corporatising them."
Robert Morgan, director at supplier side sourcing consultancy Hamilton Bailey, described the idea as a "fascinating and wonderful idea."
He said the savings are that can be made are "stupendous" and run into billions.
"This is a very good idea because all government departments have very similar back office functions and these could be easily consolidated," added Morgan.
He said this is not a new idea but in the past similar plans have "lacked political will."
"If they are capable of getting the direction from government and take simple things like payroll, HR and pensions into one company it would be the biggest supplier of these services in the country.
Add to this all the Quangos and local government, and the opportunity for savings and earnings once the companies are floated are massive, he said.