Remember the great public-private argument? The passions it aroused seem to have peaked around five years ago. Even if some unease about the hiving off of public services prevails, maybe all those acronyms and contractual complexities made it too arcane to compete with broad brush concerns like equality and climate change. Perhaps the toning down of the zealous pro-private talk that marked the later Blair years has convinced a lot of people that, under Gordon Brown, the great outsourcing drive – despite plenty of contrary evidence – is in retreat.

Despite the canning of mail privatisation and the demise of the London Underground consortium Metronet, another big push now looms. Austerity is the key. Even if health and education are protected from cuts, "efficiency savings" in those areas will surely be the aim of whichever party wins the next election – and outside those two sacred services, the 16% cuts forecast last week by the Institute for Fiscal Studies point towards much more contracting out. No one, after all, offers help with scything down budgets more enthusiastically than the private companies now jockeying to extend their reach.

In a recent news story in the Financial Times, the chief executive of the services giant Capita said he would be "deeply disappointed" if its take from government doesn't double over the next five years, while the boss of the outsourcing empire Serco predicted that dire public finances mean "boundaries will get pushed back further".

The most jaw-dropping changes will probably hit the penal system, where havoc can be wrought so long as politicians stick to the obligatory tough talk. If planned private prisons open on schedule and the tendering of jails in the public sector leads to their privatisation, by 2014, 25% of prisoners could be the responsibility of private firms – which offer prison officers basic pay about 40% less than their publicly employed counterparts, are well ahead of the public sector on staff turnover, and score an average of 10% less on the government's measure of prisons' performance. It apparently matters not.

Should – or when – the Conservatives win the next election, they will sustain this mood, and then some. Across all three main parties, too many politicians have yet to understand the nightmare thus created: supposed value-for-money being realised via the slashing of wages, corrosion of conditions, and a degraded quality of service; or the reverse of cash savings, as contracting out creates private monopolies, and companies hailed for their dynamism turn out to be subsidy junkies. Here is a dependency culture built around vast sums of money.

The mess of contractual intrigue surrounding the health service is a good place to start. The crazy economics of private finance initiative deals are well known. Not that it made many headlines, but in 2005 the government finally guaranteed that outsourced "ancillary" staff would be paid the same rates as in-house employees – by forcing NHS trusts to pay private contractors an additional £75m a year.

Now, having put in a freedom of information request, Edinburgh University's indefatigable Allyson Pollock has shone a light on the "take or pay" contract for Scotland's only independent sector treatment centre (ISTC), where money is paid by the NHS irrespective of treated cases. In its first 13 months, operations by the South African firm Netcare accounted for only 32% of the contract's annual value – meaning an initial overpayment of up to £3m. What she infers from this is mind-boggling – given that "take or pay" applies to the 27 "first-wave" English ISTCs, and there is strong evidence of underperformance, the overspend south of the border could reach £900m.

Meanwhile, when contractors affect to be "efficient", down comes the axe. A report last year from the Department for Business claimed the average saving from outsourcing is about 20%, but in hospital support services it put the figure as high as 34%. In one of its priceless passages, the text claimed that "the evidence on quality change is weaker and more limited than that on cost savings" – but on the ground, the stories pile up. To have to replay such anecdotes after years of people drawing the obvious conclusions about hospital infections and privatised cleaning is painful, but anyway … Not long ago, I met two hospital cleaners whose jobs in Bury St Edmunds had been outsourced to a company that blithely cut the workforce in half. "We were always on about infection in the hospital," one of them said. "Instead of four cleaners on the ward, they said, 'We're going to put it down to two people, but you won't have to hoover.' Effectively, they were saying, 'clean less'."

And so to such trifles as democracy, public ethics and accountability. My favourite public service company is the aforementioned Serco, which grew from specialising in cinema-cleaning to running education authorities, welfare to work schemes, leisure centres, prisons, military support services, the Docklands Light Railway in London, and more – as well as two immigration removal centres, including Bedfordshire's infamous Yarl's Wood. Serco took these over from Group 4 in 2007, and grabbed headlines thanks to a plan to cut staff numbers by over 50%. For the umpteenth time, Yarl's Wood recently crashed into the news thanks to a bungled deportation of a Sudanese family, in contravention of a ministerial intervention, and a hunger strike and sit-in allegedly met with a brutal response by staff.

Should you want to shine a light on what happens there, you're likely to be frustrated by the blanket of "commercial confidentiality" that covers no end of outsourced services. In June, there was a flurry of optimism about the extension of the Freedom of Information Act, and that it might apply to private prisons and detention centres. But this month, the justice secretary, Jack Straw, announced private contractors would still lie beyond its reach. Here is the prospect of an expanding shadow state, whose soaking-up of the government's traditional responsibilities has not only financial benefits, but can remove troublesome matters from scrutiny.

The prospect of more private prisons underlines warnings that contracting-out will soon threaten control of policy. If a future government finally sees the light and decides to reduce Britain's prison population, it will find the obligation to maintain plenty of big jails contractually locked down. Worse, now that the outsourcing of probation is reportedly back on the agenda, the hiving-off of crucial links in the judicial and penal chain to firms that already run prisons threatens to result in insane conflicts of interest. When the then home secretary Charles Clarke floated the idea in 2005, the National Association of Probation Officers warned of "the absurd situation of Group 4 … writing court reports and recommending prison to boost numbers". At the time, such warnings seemed to be heeded. But now?

Here, anyway, is what increasingly seems to be the future: slick corporate logos flashing from prisons, hospitals, schools, detention centres, defence facilities, police stations and more, and a cut-price society pitched somewhere between Margaret Thatcher and Philip K Dick. Real-life dystopias, let us not forget, tend to arrive by stealth; whatever the political fashion, we need to start talking about all this again – and fast.