organisation - public sector organisations
Richard Bowett describes the main kinds of public sector organisations - why they exist and how they are organised.
Introduction - What are Public Sector Organisations?
Public Sector organisations are owned and controlled by the government (or local government). They aim to provide public services, often free at the point of delivery eg the NHS. There are particular goods, called ‘merit goods’ and ‘public goods’ which cause problems for the private sector, and so they are often better provided by the public sector.
Merit Goods
Merit goods have two ‘good’ bits only one of which will be paid for by the consumer. For example, if I pay for a ‘flu jab I will benefit directly by being less likely to fall ill with the ‘flu. But others also benefit because they are not going to catch the ‘flu from me. This second benefit will not be paid for by me (what do I care!) so private sector businesses cannot charge for it in their price, so they are unlikely to provide for it. For this reason, the public sector may step in to provide the good because it can calculate for both benefits.
Public Goods
These goods are ‘non-rival’ in consumption and ‘non-excludable’ in provision. The classic example is street lighting. If I walk down the street, taking the benefit of the street lights, the light I ‘consume’ leaves no less light for anyone else to consume (‘non-rival’ whereas eating a Mars bar is definitely ‘rival’ ie your consumption leaves less for me). Also, if you have paid your share of these lights, you cannot stop me benefiting even if I haven’t paid (‘non-excludable’ ie the ‘free rider’ problem). Because the good is ‘non-excludable’ a private business would have trouble making money out of it, so they tend not to bother. For this reason these goods are unlikely to be provided at all unless the government provides them out of general taxation which we all have to pay.
Types of Public Corporation
Public Utilities
These organisations provide household services such as water and sewerage, and electricity and gas. In the 19thC these were all privately owned, as are many still in the US. Little by little they came under public ownership. This was because they became to be seen as essential services without which life became impossible, rather than goods people buy if they want them. For example, it only takes one house to not pay for sewerage and that may affect all the neighbouring houses. More recently, these organisations have been privatised.
Nationalised Industries
During the 1940s and 1950s there was a policy of nationalising the major industries (eg coal and steel). This was partly to gain control over the main parts of the economy. It was also partly to control monopolies which could act against the public interest, especially by charging high prices to consumers. Eventually, the nationalised industries became mainly to preserve jobs when all other industries were losing jobs to increase efficiency. These industries became more and more inefficient until they needed government subsidies to stay in business.
Starting in the 1980s these businesses were privatised and immediately began to lose all the jobs that should have been lost during the preceding 30 years. The coal industry, for example, barely exists any more. Other industries, such as BT, have become efficient suppliers of goods and services able to compete in the market and provide decent quality and prices to consumers.
The BBC
This is a public corporation all of its own kind.
The Bank of England
This has been the government’s bank since the 17thC but was only nationalised in 1946. Its job is to carry out the government’s monetary policy. It has had independence since 1997 to set interest rates. This is done by the MPC (Monetary Policy Committee).
Local Authority Services
Under the Local Authority Act 1972 the local authorities
have had responsibility for providing a range of public services:
- Education & Recreation.
- Public (ie council) Housing.
- Environment & Conservation.
- Protection ie Police
- Social Services
Although the money for most of this comes from central government, it is felt that local decisions will better cater for local needs
Central Government Departments
Central government is very large and is divided into a number of main departments. These are regularly reorganised, but the main ones are:-
- The Treasury. Responsible for all the government’s
finances.
- The Department of Social Services. Responsible for welfare and looking
after the needy generally
- The Department of Trade & Industry. Responsible for business.
- The Department of Defence. Responsible for attacking other countries.
- The Department of Health. Responsible for the NHS.
- The Department of Education & Employment.
- The Department for the Environment.
- The Department of Transport.
QUANGOs
Quasi-Autonomous National Government Organisations have been growing in number and in importance over recent decades. They are, to a large extent, independent from government (ie ‘quasi-autonomous’) although they receive all their money from government. There are around 5 000 of them spending around 1/3 of all government spending. They are supposed to provide technical management to areas of public service where political interference would be inappropriate.
Executive Agencies
These have replaced government departments in a number of areas of public service since they were first introduced in 1986. They are supposed to be modelled on the private sector and to be more efficient that the usual government department.
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