Public Sector Management

Norman Flynn,Alberto Asquer

• Publisher: SAGE Publications Ltd
• Year: 2016
• ISBN:
  9781473994515
• Edition: 7
• Topic: Política y relaciones internacionales
• Subtopic: Política pública

The seventh edition of the bestselling Public Sector Management is a rich and insightful description, analysis and critique of the management of the public sector by the UK government.

NEW to the seventh edition:

• Now set in an international context with comparative global examples throughout
• Three new chapters covering: strategy and planning in the public sector; transparency, accountability and ethics; and non-profit management, including the role of social enterprise and the voluntary sector
• Examines the impact of the continuing financial crisis on public spending
• An updated companion website with tutorial videos, free access to full-text journal articles, policy documents, links to useful websites and social media resources

Public Sector Management is essential reading for undergraduate and postgraduate students studying public sector management as part of a business, management or politics degree.

1 The Public Sector in the United Kingdom in a Global Context

This chapter starts with a discussion of the definition of the private and public sectors and how the boundary between the two has changed over time. It looks at the argument that there are ‘public goods’ that are distinct from other goods and services and explains the extent of the public sector. It then looks at the specific characteristics of the public sector in the United Kingdom: the devolution of powers to Scotland, Wales and Northern Ireland, and the fact that there is persistent and continuous reorganisation to the structures of the public sector, especially in the NHS and central government. It then describes the main institutions of the state: central government, the NHS, local authorities and their relationship with central government. It ends with a brief discussion of whether recent changes have resulted in a ‘hollow state’ as some theorists argue.

Learning Points

• The boundary between the public and private sectors is both permeable and changeable.
• The institutional forms that the state takes vary in the constituent countries of the United Kingdom.
• Governments reorganise structures very frequently.
• The UK is simultaneously decentralised in the cases of Scotland, Wales and Northern Ireland, but very centralised when it comes to central government control of local authorities, especially in England.
• The public sector represents a large part of the national economy and employment and was, until recently, growing.

Private and Public Sectors

The boundary between the public and private sectors changes with time and circumstances. During the period of post-war reconstruction industries such as coal-mining, steel-making, motor manufacturing, shipbuilding, public transport including buses and trains, telecommunications, aircraft manufacturing, harbours, airports, oil, gas and electricity extraction, production and distribution were all publicly owned. In the same period, healthcare was taken into public ownership and the production of new housing was dominated by local authorities.

At the beginning of the 1980s there was a reversal of the process, as the state divested itself of industries and returned them to the private sector. There were a range of reasons for the privatisations – ideological, fiscal and pragmatic. There had always been politicians who opposed state ownership as a matter of principle, the principle that the profit motive was the only acceptable motive for business. At the end of the 1970s the Conservative governments were dominated by politicians who held this view and the sale of state assets started, first with Cable and Wireless, then British Aerospace, British Petroleum, British Telecom, and later in the 1980s British Gas, the water industry in 1989, followed by electricity in 1990. The fiscal motivations were also important, as the cash raised from selling state assets could reduce the need for taxation, while the divestiture of (sometimes) loss-making industries reduced the burden of subsidy. The fiscal motivation contributed to the pragmatism of asset sales: even if there was not a strong ideological motive, faced with a choice between raising taxation or borrowing and making money by selling an asset, it would take a strong pro-public ownership ideology to resist the temptation. And so it proved through the 1990s, and into the Labour governments at the end of the 1990s; there was a growing consensus in favour of privatisation.

How the assets are owned and governed has an impact on decisions about asset acquisition, disposal and use. The estate, the land and buildings that an organisation has in ownership is an important element of any buildings-based service. Universities, for example, during the expansion period, acquired and disposed of land and buildings as part of their planned service delivery; some acquired assets far from their ‘home’ base and the resultant configuration of the estate had a fundamental impact on the types of research and teaching they could do, as well as how big they could be. Education authorities have had a responsibility to provide school places for the school-age population of their territories and have had to respond to the ebb and flow of pupils on the tides of demography and migration. Land acquisition and disposal has been an essential element of that response. The same is true of the health service, the prison service, the military and any service provided through land and buildings. Flexibility and responsiveness of asset use is greatly affected by the nature of the ownership: long leases under Public–Private Partnerships, for example, lock the organisation into the asset for the period of the lease, however the requirement might change. Profits from changes in land values have traditionally provided public bodies with capital to make investments, an opportunity that only comes with unfettered land ownership.

In addition to the sale of assets, the boundary between the public and the private was also pushed back in favour of the private by the sale of council houses to tenants through the ‘right to buy’ scheme, whereby tenants were offered big discounts and easy loans to buy the properties they lived in. This was largely an ideological and political choice, the judgement being that home-owners were likely to be more conservative than council tenants.

The third change in the boundary came with the increasing use of contracting with the private sector to provide services that remained public, such as highway maintenance, street cleaning, refuse collection. Beginning at the same time as the privatisations, the beginning of the 1980s, first local and health authorities and later the civil service were instructed to put out to tender an increasing list of services. This process of compulsory competitive tendering was extended to an increasing use of private finance and private management in new investment, especially in schools, hospitals and highways, through a process of ‘Public–Private Partnerships’, which we will examine in detail in Chapter 9. This process resulted, by 2011, in around 30% of all public expenditure being used to finance contracts for goods and services from the private sector. A government review (Julius, 2008) estimated that by 2008 outsourced public services accounted for 6% of GDP and employed 1.2 million people, with a turnover of £79 billion, up from £31 billion in 1995–96. The growth in outsourcing continued and accelerated under the Coalition and Conservative governments.

The result of the three processes – privatisation, council house sales and outsourcing – shrank the numbers employed in the public sector by about 2 million in the two decades from 1980, from 7 million to 5 million. Of these reductions, 1,355,000 were in the ‘nationalised industries’, 321,000 in local government and 200,000 in the civil service.

The shrinkage was reversed at the end of the 1990s, as the Labour governments increased public spending and public employment, especially in the NHS and education, but also in the civil service. From 1998 public sector employment rose every year to 2005, when it stood at 5,882,000, or 719,000 more than in 1998 and almost back to where it was before the great reductions started. The biggest increase was in the NHS, which put on 300,000 jobs.

This period of growth, which could be seen as a period of extending the boundary of the state, came to an end at the end of the 2000s, as fiscal deficits began to make the Labour governments look for reductions in numbers through greater use of Information and Communication Technology and increased efficiency and productivity. With the change of government in 2010 and a fiscal deficit that the government decided to attack by cuts in spending as well as increases in taxation, the trend towards cutting the size of the state accelerated, as the Treasury called for cuts of 20–25% with their resulting cuts in jobs. While the details of these changes will be discussed in Chapter 4, a rough calculation of the scale of the spending cuts and the average cost of a public sector job puts the reduction of public employment between 2010 and 2014 at between 500,000 and 600,000, almost but not quite reversing the growth in employment implemented by the Labour governments between 1998 and 2008.

These ebbs and flows of employment numbers are the result of political and fiscal choices, but they do not explain the underlying issues about the boundary between the public and the private sectors. Public expenditure in the United Kingdom accounts for about 40% of Gross Domestic Product. This is not an entirely satisfactory definition of the scale of the public sector, since half of that spending is on transfers, subsidies and benefits which are not counted in the GDP figure. Expenditure on public services accounts for about 20% of GDP. Over the long term, is there an explanation for what is ‘public’ and what is ‘private’?

Public goods and public services

There are four elements to the definition of what is public and what is private. The first is that certain things are ‘public goods’. One feature of such goods and services is that they produce ‘externalities’, or benefits that accrue to people other than those who benefit directly. For example, education is said to benefit everyone living in a society of skilled and educated people. The other feature is that people cannot be excluded from certain benefits. Everyone benefits from clean air or street lighting. Because no one can be excluded, people should pay for such services collectively rather than individually. Even those politicians who believe that the state should do the minimum possible are normally willing to concede that these categories of services should be carried out by the public sector. Some people believe that no services are better provided by government and that even clean air is best achieved by property rights in air.

As a justification for the public sector, the ‘public goods’ argument suggests that the public sector should provide services where the market fails to do so, and the goods or services are required collectively, a decision made through the political process. As an explanation of what is public and what is private it is less convincing, since different services are in the public and private sectors in different societies and at different stages of development. Examples of the differences include the extensive provision of education through religious organisations but financed by the state in the Netherlands, the private provision of ambulances and fire protection in Denmark, public ownership of airlines in various countries. History and politics have more convincing explanations than a theory about public goods. Britain went through a period in which the ruling Conservative Party had an instinctive suspicion of public provision and preference for markets and the private sector. The Labour party abandoned its belief in state ownership as part of its modernisation programme and claims to be pragmatic in its approach to what should be private and what should be public.

The second distinction is how services are financed. Services are public services if they are financed mainly by taxation, rather than by direct payments by individual customers. One characteristic of most public services is that they are not available for sale and people cannot necessarily have more if they pay more. Even those services that are ‘commercial’, in the sense that money is exchanged at the point of consumption, are sti...