Topics to cover Deregulation Privatisation PPIs Public vs Private Sector Provision Arguments for public sector provision? Arguments for private sector.

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Presentation transcript:

Topics to cover Deregulation Privatisation PPIs

Public vs Private Sector Provision Arguments for public sector provision? Arguments for private sector provision?

Arguments for public sector provision Public goods Merit Goods Control of Monopoly Maximisation of social benefit not private profit Lower costs (1 ‘firm’ can achieve greater E of S than many firms).

Arguments for private sector provision Lower costs (x inefficiency will be reduced) Choice and quality Innovation (increased dynamic efficiency) Allocative efficiency (market forces will allocate resources in the ‘best’ way for society…) Governments misallocate resources for short term political gain

Privatisation in the UK The early 1980’s saw a move towards privatisation. The Conservative government at the time sold off nearly all nationalised industries incl. telecommunications, gas, water, steel, electricity and the railways. Seen as a means of revitalising inefficient industries (benefits of private sector ownership discussed earlier) also raising revenue for the Govt.

Railways (homework) In 1947 the railways were nationalised In 1995 Railtrack (the monopoly owner of the existing rail infrastructure) was privatised However, rail crashes, government subsidy costs resulted in it being effectively renationalised in Now called Network Rail- a non- profit company maintain the infrastructure and earn revenue from the companies that operate using it’s tracks (eg. Virgin)

Other ways to improve efficiency…

Deregulation The process of removing government controls from markets. Govt. may allow private firms to compete against a state monopoly eg. In 2006 Royal Mail’s 350 year monopoly came to an end. Any licensed operator is now able to deliver mail to business and residential customers. The total UK household and business mail market comprises around 16bn items and £6bn to £7bn per annum of revenue. In 2010 Royal Mail had a market share by revenue of over 90%. Govt may remove/ reduce regulations which prevent competition eg. All taxis and their drivers must be licensed. Licensing authorities have the power to limit the number of taxis they licence in their area, for reasons of managing the supply. Successive governments have looked at whether it would be right to remove the ability of licensing authorities to impose such restrictions. Current debate (2012). Govt. may lift regulations when an industry is privatised. Eg. Any laws that protected the state monopoly would be reduced Deregulation of the bus industry in the 1980s….

Lesson Objectives