3.2.3.1 Public Services

All governments have a duty to maintain law and order, and to defend the population from attack.  The cost of these services forms part of government spending, but the justification for providing them is not primarily based on their contribution to the economy – although economics is sometimes a consideration with defence spending, as discussed later (7.4.6.3).

Government spend can include the funding of healthcare and education as so-called ‘socio-economic rights’, forming part of a ‘Welfare State’.  This amounts to a government investment in people, who are a key component of wealth creation – as described later (3.2.5).  As such, there is some economic justification for funding these services.

Public services can be provided by employees of the State or by private companies:

  • When a State provides services with its own employees it has full management responsibility and it can ensure standardisation across the country. These services might be provided free of charge to everyone in the society, or only to those who could not otherwise afford them.
  • When the State provides funding for ongoing purchased services which are provided to the people, it is creating demand for the suppliers in the commercial sector or civil society. As with the previous category, it may decide that some people should pay for the use of these services.

The choice of providers for public services can be treated as a question of value for money (3.5.3).

The State needs some administrative functions – including procurement of some services, regulation of the economy, tax collection and benefit allocation – to exert management control over its finances and the services it provides.  Administration can be seen as a category of cost that should be minimised because it doesn’t directly deliver a service to the public, but it cannot be totally eliminated.  If it is done well, it can improve the overall cost-effectiveness of government spend.

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