The Changing Public Sector: A Practical Management Guide

Malcolm Prowle

• Editorial: Gower
• Año: 2016
• ISBN:
  9781317038856
• Edición: 1
• Categoría: Business
• Categoría: Management

The public sector in the UK has undergone radical change over the last two decades. Consequently, managers and service professionals have had to adopt new ways of working and acquire a wide range of new managerial skills to deal with the changes that have taken place. The continuing process of change in the public sector also means that these managerial skills need to be continually maintained and developed. This book provides comprehensive coverage of public sector management approaches covering: ¢ Strategy ¢ Finance ¢ Human resources ¢ Marketing ¢ Quality ¢ Information systems. Thus it provides managers, professionals and students with a clear understanding of the main elements of each aspect of management as applied in public sector organizations. The book also outlines the ongoing changes which will impact on public sector organizations in the future and discusses the implications of these changes for public sector management methods.

PART I
The UK Public Sector: Structure and Trends

CHAPTER ONE
Introduction

This century has seen substantial changes in the composition and size of the public sector of the economy in the UK and other developed countries. Moreover, the policies of successive Conservative governments in the period 1979 to 1997 saw radical changes taking place in the organization and funding of the public sector. As we move into the new millennium, the various political, economic and technological trends in the world suggest that the public sector will continue to undergo substantial change. This book is about the public sector in the United Kingdom, the changes it has undergone in the past, will undergo in the future and the impact of those changes on the practice of management in public sector organizations (PSOs). However, before considering the trends that have taken place in the sector it is first useful to give some consideration to what is meant by the term ‘public sector’.

THE PUBLIC SECTOR: PROVISION AND FINANCING

In considering the meaning of the term ‘public sector’ it is necessary to draw a distinction between the twin issues of service provision and service financing. This is illustrated in Figure 1, using health services in the UK as an example. A similar analysis could be prepared for any other sector, such as the education sector.

Figure 1 Public sector services: provision and financing

This diagram shows that health services can be delivered either by public sector organizations such as NHS hospitals or by private sector organizations such as private hospitals. On the other hand, the funds necessary to provide health services can come from a combination of private or public sources. Private funding implies people paying out of their own pocket, usually via some form of private health insurance, while public funding suggests governmental sources. Within each of the four boxes are examples of each type.

This analysis leads us to four combinations:

• Services which are publicly financed and publicly provided (1) – these are clearly part of the public sector.

• Services which are privately financed and privately provided (4) – these are clearly not part of the public sector since they involve a contractual arrangement between a private individual and a private company.

• Services which are privately financed and publicly provided (2) – these could be considered as being part of the public sector since they involve activity by a PSO.

• Services which are publicly financed and privately provided (3) – since these involve public expenditure they can be regarded as part of the public sector.

Thus it is suggested that three of the four combinations described above can be considered as forming part of the public sector and are thus of relevance to this book.

THE UK PUBLIC SECTOR 1900–1979

Let us first consider the growth and development of the public sector in the UK. It is not always appreciated how extensively the public sector has changed during the twentieth century. A hundred years ago the public sector in the UK and most developed countries was vastly different from the way it is today. Consider first the size of the public sector and its relation to the overall size of the economy of the UK. A common way of doing this is to express total public sector expenditure as a percentage of the gross domestic product (GDP) of the country. This shows how large the public sector is compared to the whole of economic activity. Consider the data shown in Table 1.

Table 1 UK public expenditure and gross domestic product

It will be noted that the trend in public expenditure has been consistently upwards, reaching around 40 per cent of GDP at the start of 1970. Since that time it has been in excess of 40 per cent of GDP and seems unlikely ever to drop back to the pre-war levels. This is because since the end of the Second World War the size and composition of the public sector has undergone many changes in functions and organization but has never reverted back to the limited role it had prior to the 1940s. The only exceptions to this trend are the two periods of World War (1914–18 and 1939–45) where public expenditure increased extremely rapidly as a direct result of high levels of military expenditure.

This upward trend in the size of the public sector needs some broad explanation, and identification of the main causal factors. At the start of this century the involvement of government, in the UK and most other developed countries, was largely limited to three areas of activity, namely:

• defence of the realm – expenditure on armed forces

• maintenance of law and order – police, courts, prisons and so on

• trade – regulation and promotion of trade matters.

Given this limited range of activity, the public sector, in all developed countries, was much smaller and restricted in range. Since that time there are three factors which have contributed to the upward trend in public expenditure leading to the public sector being much larger and complex than it was, and having a greater direct impact on the life of the average citizen. These three factors are:

• creeping involvement in social welfare

• increasing need for services

• increased involvement of the state in economic management.

CREEPING INVOLVEMENT IN SOCIAL WELFARE

There is a general recognition that in a modern state, government needs to be actively involved in many aspects of social welfare (for example education, health and pensions). Politicians of the left and right may argue and debate the extent of that involvement but few politicians of the right would suggest that the welfare state be contracted back to pre-First World War levels. This size of welfare spending in developed countries is illustrated by the international comparisons shown in Table 2.

Table 2 Public expenditure on social welfare

In all four of the countries shown it can be seen that:

• total public expenditure consumes a substantial proportion of the total GDP of the nation

• public expenditure on health and education form a substantial part of GDP and hence total public expenditure.

However, this was not always the case. Within the UK, major welfare reforms took place in the early part of the twentieth century, which resulted in an increase in the degree and scope of government involvement in welfare issues. The main aspects of this were determined by two key pieces of legislation passed by the then Liberal government of the day. These were the Old Age Pensions Act of 1908 which provided for a non-contributory but means tested pension and the National Insurance Act of 1911 which provided a contributory but non-means tested cover against sickness and unemployment for some classes of worker. Between the two World Wars the development of the welfare state was somewhat limited although there were key developments in the fields of social housing, pensions and education.

The Beveridge Report of 1942 paved the way for the foundation of the modern welfare state as it is currently known. Beveridge made recommendations for the development of comprehensive systems of social security and the development of a national structure of health services. Following the end of the Second World War the new Labour government embarked on a huge programme of improvements in social welfare, which basically involved the implementation of the Beveridge recommendations. The social security developments were underpinned by the passing of the National Insurance Act of 1946 and the National Assistance Act of 1948. However, perhaps the flagship policy of this period was the creation of the National Health Service (NHS) in 1948, which brought into public ownership large numbers of what were previously private or voluntary hospitals. Relating back to the comments made above, it is interesting to note that the provision of what are now termed family health services (general practitioners, dentists, community pharmacists and opticians) all remained in the hands of private practitioners. However, even though the services were provided by these private practitioners the funding for the services was public and the practitioners obtained most of their income through the means of contractual arrangements with the NHS. This somewhat strange arrangement was basically the political compromise that had to be made by the government to get the NHS formed.

In the area of education the critical development to be noted was the passing of the 1944 Education Act. This provided for the provision of universal free state secondary education and provided the framework for the education services we have today.

INCREASING NEED FOR SERVICES

Once governments had become involved in various aspects of social welfare they had virtually committed themselves to responding, to a lesser or greater extent, to increases in the need for services. Unfortunately, at the time of initial involvement, it was not always perceived that the needs and hence demands for services would grow substantially. Take, for example, the NHS. At the time the NHS was formed, there was a strong belief that the pool of sickness and thus the need for health services was finite, and that the provision of a certain level of resources to the NHS would meet all the health needs of the population. With the benefit of hindsight, that view now seems naïve, and current conventional wisdom is that the demands for health services are virtually unlimited.

There are probably three specific causes of this increasing need and demand for many public sector services:

• Ageing population – it is a well-known demographic phenomenon in developed countries, including the UK, that the average age of the population has increased and continues to increase. In addition to an increase in the normal human biological lifespan, more people are avoiding premature death (defined as less than sixty-five years of age) and surviving into their eighties and nineties. This is illustrated in Table 3.

Table 3 The ageing population

The table shows a clear trend of an increase in the proportion of elderly and very elderly people in the population. Older people have a greater need for social services and health care than younger people and thus, as a group, consume substantially more resources. As the population ages, the demand for additional resources in relation to health and social services increases dramatically. Also, the ageing population places increasing demands on pensions, particularly where no earmarked pension fund (funded by contributions) exists as is the case with the UK state pension.

• Scientific and technological developments – this is a phenomenon particularly associated with health care. Most people are aware of the continual developments in medical science and technology. Take, for example, artificial joint replacements. Forty years ago these were virtually unheard of, yet today they are commonplace. Consider also transplant surgery. In 1967 the world’s first heart transplant took place in South Africa and the patient survived eleven days. Today there are several transplant centres in the UK alone and patients survive many years. In addition, behind these glamorous surgical procedures there are a whole host of smaller-scale medical and surgical developments taking place in many hospitals in the country. These various developments, although usually worthwhile, consume yet more health care resources and the very existence of a new medical service creates its own need, and hence demand for that service, where none previously existed. Furthermore, there seems no limit to the ingenuity of medical science. Just consider, for example, the potential impacts of genetic engineering and multiple organ transplants. Thus, overall, it can be seen that such developments generate new needs and demands on health service resources.

• Population aspirations – this is a more nebulous issue but it is often argued that today’s population is not prepared to accept readily the standards and types of public services which were tolerated by previous generations. This trend could also be fuelled by developments such as the Patient’s charter and, in turn, puts increasing pressure on public sector resources.

STATE INVOLVEMENT IN ECONOMIC MANAGEMENT

During the period 1935–45 there was an increasing international acceptance that governments needed to have a much larger involvement in the management of their economies. This was the period of Keynes, the birth of macroeconomics and the use of large-scale public spending in the USA and Germany to boost flagging economies. Also, in the period immediately following the end of the Second World War, large parts of the UK economy passed into public ownership through the large-scale nationalization of industries such as coal, ...