Public funding can be used for private delivery of public services, so that they remain free to some users and allow consumer choice.
There are different ways of providing government funding for private companies:
· People most in need can be given transfer payments: benefits, which they can spend as they wish.
· Some people, or everyone, can be given vouchers. Education vouchers, for example, can allow parents to choose a school for their children – allowing them to set the voucher against a State school or towards the cost of a private school.
· Governments can reimburse private companies, such as private healthcare providers, for costs that have been incurred by some individuals.
Where it is possible to ensure that there is competition, private companies can ensure value for money in publicly funded services. An article in The Economist, The end of privatisation?, claimed that “Privatisation has become a dirty word in Britain. That is curious, since it has been a huge success”. It cited the example of Britain’s privatization of telecommunications: new entrants joined the market; quality and reliability improved; and prices almost halved.
Competition is an effective form of governance in itself (3.3.2). It is synonymous with offering choice to the consumer and it can make suppliers more responsive. Safeguards are needed for private delivery of public services, though:
· Consumers need transparent and honest information so that they are not misled when making their choice of supplier, and the quality of the services offered should be adequate. This is a matter of regulation (3.3.1).
· People may lack sufficient knowledge to choose. This is the case with health, where specialist advice is needed, though people can use independent doctors to advise them before choosing treatment in a hospital or clinic.
Employees of private companies are likely to be profit-orientated, but this might not be to the customer’s disadvantage if a globally competitive market encourages innovation in technologies and service offerings in response to consumer demand.
(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).