bs3914 public service delivery 5: public services and market mechanisms

BS3914 Public Service Delivery

5: Public Services and Market Mechanisms

BS3914 Public Service Delivery5: Public Services and Market Mechanisms

TRADITIONAL MODEL OF PUBLIC SERVICE PROVISION

• Public provision is more effective than any private alternative e.g. defence, law and order

• Role of the state is to provide conditions in which social life and markets may operate

• On moral grounds, services such as health, education and welfare are regarded as ‘moral’ goods


MARKET FAILURE

• Public goods (clean air,health-education-welfare are largely public goods)

• Increasing returns to scale (telecommunications, utilities)

• Externalities not taken into account e.g. pollution

• Merit goods (e.g. education, health) to which private markets may restrict access

• Information assymetries i.e. power of professionals


THE FAILURE OF THE STATE

• Large bureaucracies doomed to failure

• Wasteful because no incentive to control costs

• ‘Public choice’ theory argue that politicians, bureaucrats act only in their own self-interest – prestige projects can proliferate (Concorde, Millennium Dome)

• Large scale bureaucracies produce results that were unintended (Child Support Agency)


The modern economy:

• Infrastructure

• Government and industry

• Demography

• Education

• Health

• Social security


• Why should ‘public services’ be non-marketable?

• McKevitt(1998),Managing Core Public Servicesargues…

• Differential information (e.g. health, law)

• Social interdependence (public health)


GOVERNMENT SPENDING

• Keynesian control of the modern economy from 1945-1970’s

• Government spending as % of GDP: 42% (1996)

• OECD average 46%; Britain ranks approx. 11th/17 industrial societies (Sweden 65%; USA 33%)

• Rigid attempts to control % of GDP (‘rolling back frontiers of the state’) unsuccessful (43% in 1980, 47% in 1996)


• The 1970’s watershed…

• ‘Stagflation’

• Corporatism

• Oil crises and disruption to western economies

• Globalisation and rise of the ‘tiger’ economies

• Impact of ICTs

• ‘Winter of discontent’


• Radical right solutions .. ‘Thatcherism’ [1979-1990]

• Monetarist experiments

• Taxes on consumption, not incomes

• Attack on public expenditure (but huge costs associated with health, social security,poverty)

• Privatisation programme

• ‘No such thing as society’


• The Major Years [1990-1997]

• Poll tax replaced after popular discontent

• The ‘Charter’ movement

• Agencification continues

• Market testing of government functions


• New Labour [1997..]

• Retained conservative spending plans

• Agenda said to be right of Margaret Thatcher’s first manifesto

• Devolution; Reform of the House of Lords

• The politics of the spin-doctor


• Modernisation programme

• Policy initiatives in health, education

• A Government for London

• Independence for Bank of England

• Incorporation of European Convention on Human Rights


• What kind of public services do we want ?

• Can we have better quality at lower cost ?

• What room for manoeuvre has any modern government ?

• What is the role of the market in health ? education ?

bs3914 public service delivery 5: public services and market mechanisms

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