After agreeing what level of public spending is desirable and affordable, as described above (3.5.2.3), there is still the question of how best to deliver the chosen services. A government has a duty of care: to ensure that the services it funds are of adequate quality and that they represent optimum value for money.
Whereas the State itself can choose to deliver services directly, with its own employees, it can also choose to pay for outsourced service delivery or allow private companies to sell a service directly to the public. Outsourcing back-office facilities, such as infrastructure and IT support, allows them to be shared across government departments with efficiency benefits. “Outsourcing saves on average 20 per cent the first time it is done”, according to the article To outsource or not to outsource, but “it is then vital for the government body to make sure it has the resources, capacity and capability to manage both the procurement process and the contract once it is awarded”.
There has been a trend towards privatisation since the 1980s, driven by ideology, as explored in Kean Birch’s article: Neoliberalism and the geographies of marketization: The entangling of state and markets; the article explains the background to this trend and examines the reasoning behind it:
“growing public and political antipathy to the expansion of public spending, compounded by demands for tax cuts, led to a crisis of public investment…
…governments around the world have turned to the private sector to pursue their agendas, partly to access new sources of financing but also to encourage greater efficiencies and accountability as a result of this private sector involvement.”
The politics of choosing public-service providers are discussed later (6.7.1.2), but there are several purely economic considerations – as described in the following sub-sections:
· State employees can offer a uniform service, but without consumer choice; they might not offer the efficiency and level of innovation of private companies (3.5.3.1).
· More choice can be offered with public funding to non-profit organisations, possibly supplemented by private charitable donations (3.5.3.2).
· People can be given public funding to make their own purchasing decisions from private companies, with potential cost and efficiency benefits, although consumer protection is essential (3.5.3.3).
· When government makes procurement choices, for example in cases where there is a natural monopoly, it is important to have appropriate procurement safeguards (3.5.3.4),
· The use of private finance for public infrastructure projects has been an expensive way of dodging headline government expenditure, rather than properly explaining the need for investment (3.5.3.5).
· And the role of profit in public-service delivery is contentious, especially with health and social care, sometimes resulting in poor value for money or creating conflicts of interest (3.5.3.6).
(This is an archive of a page intended to form part of Edition 4 of the Patterns of Power series of books. The latest versions are at book contents).