BS2032 Public Sector Management 5: Public Services and Market Mechanisms

BS2032 Public Sector Management 5: 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

BS2032 Public Sector Management 5: Public Services and Market Mechanisms 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

BS2032 Public Sector Management 5: Public Services and Market Mechanisms 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)

BS2032 Public Sector Management 5: Public Services and Market Mechanisms The modern economy: Infrastructure Government and industry Demography Education Health Social security

BS2032 Public Sector Management 5: Public Services and Market Mechanisms Why should ‘public services’ be non-marketable? McKevitt(1998),Managing Core Public Services argues… Differential information (e.g. health, law) Social interdependence (public health)

BS2032 Public Sector Management 5: Public Services and Market Mechanisms GOVERNMENT SPENDING Keynesian control of the modern economy from ’s Government spending as % of GDP: 42% (1996) OECD average 46%; Britain ranks approx. 11 th /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)

BS2032 Public Sector Management 5: Public Services and Market Mechanisms 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’

BS2032 Public Sector Management 5: Public Services and Market Mechanisms Radical right solutions.. ‘Thatcherism’ [ ] 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’

BS2032 Public Sector Management 5: Public Services and Market Mechanisms The Major Years [ ] Poll tax replaced after popular discontent The ‘Charter’ movement Agencification continues Market testing of government functions

BS2032 Public Sector Management 5: Public Services and Market Mechanisms 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

BS2032 Public Sector Management 5: Public Services and Market Mechanisms Modernisation programme Policy initiatives in health, education A Government for London Independence for Bank of England Incorporation of European Convention on Human Rights

BS2032 Public Sector Management 5: Public Services and Market Mechanisms 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 ?

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