Public Administration in Britain

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Public Administration in Britain

• 3 Is the public sector a business?

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BS1032 Public Administration in Britain 3 Is
the public sector a business?

• Traditional phase (1945-1980)
• Government ran large nationalised industries
  (electricity,gas,water, telecommunications, oil,
  airlines, nuclear power)
• the private sector (after WW2) could not afford
  levels of investment in bankrupt industries

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BS1032 Public Administration in Britain 3 Is
the public sector a business?

• The resurgence of the market (1980-1997)
• Many of the utilities sold off, giving enormous
  sums to the Treasury of 60 billion (although
  some maintain they were sold off too cheaply)
• An ideology that government should be run like
  a business I.e. with private sector concepts
  and techniques such as TQM, cost-centres,
  budgetary controls

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BS1032 Public Administration in Britain 3 Is
the public sector a business?

• The middle way (1997-)
• A greater balance between government approach
  to industry but still
• basically hands-off e.g. Railtrack
• government likes to get close (some would
  argue too close) to big business

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BS1032 Public Administration in Britain 3 Is
the public sector a business?
Classical stakeholder theory of the firm
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BS1032 Public Administration in Britain 3 Is
the public sector a business?

• In the classical stakeholder theory of the
  firm, Managers hold the ring between contending
  forces
• shareholders/workers
• customers/suppliers
• senior management/ junior management
• government/ society at large

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BS1032 Public Administration in Britain 3 Is
the public sector a business?

• Criticisms of this approach include
• It fails to explain how each stakeholder can
  be treated in an equitable fashion (e.g. who
  should suffer in a recession
• the shareholders through dividends
• The workers through a factory closure )
• in the last analysis, it depends on the
  relative power of the stakeholders who are
  anything but equal

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BS1032 Public Administration in Britain 3 Is
the public sector a business?

• Applying stakeholder theory to the government
• Governments role is to ensure a level playing
  field in which competition may occur (e.g.
  through legislation)
• Governments reserve the right to intervene on
  behalf of the social interest/society at large
  but in practice may be reluctant to do so
• Government itself becomes just another
  stakeholder e.g. regulation of the tobacco
  industry

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BS1032 Public Administration in Britain 3 Is
the public sector a business?

• New Labour and stakeholder theory
• The Blair government was concerned that the
  de-industrialisation of the 1980s had produced a
  dual economy
• some in secure, well paid jobs
• weakened unions and a flexible labour force
  had created many part-time and temporary jobs
  without worker protections

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BS1032 Public Administration in Britain 3 Is
the public sector a business?

• The stakeholder society was one in which
• business and financial communities accept
  social obligations towards their employees
  and society at large as well as their
  shareholders
• hence reverse EU Social Chapter opt-out,
  legislation for a minimum wage but
• tight restraints on public spending means no
  change ?
• Welfare-to-Work scheme reminiscent of 1834 Poor
  Law ?

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BS1032 Public Administration in Britain 3 Is
the public sector a business?

• A level playing field ?
• Industry (and the political parties) demand a
  level playing field i.e. conditions under
  which competition is deemed to be fair
• However, definition of fairness is often a
  one- sided one as interested parties only
  complain of factors when they consider
  themselves disadvantaged, not the reverse

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BS1032 Public Administration in Britain 3 Is
the public sector a business?
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BS1032 Public Administration in Britain 3 Is
the public sector a business?

• Imagine the scenario
• Central London is brought to a stand-still by
  hauliers protesting because
• Continental lorry drivers pay so much more in
  payroll-tax, making them uncompetitive with
  British hauliers
• So the British demand a level playing field
  as they would not wish to have an unfair
  advantage vis-à-vis other European hauliers

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BS1032 Public Administration in Britain 3 Is
the public sector a business?

• Current competition mechanisms
• Competition Policy Directorate advises the
  Secretary of State for Trade and Industry
• OFT (Office of Fair Trading) headed by the
  Director General of Fair Trading keeps watch
  on UK,EC and international monopolies,mergers,r
  estrictive agreements
• Competition Commission investigates and reports
• European Commission has exclusive powers to act
  on certain large mergers with a European
  dimension

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BS1032 Public Administration in Britain 3 Is
the public sector a business?

• Extract from a Competition Commission Report
• Taking the May 1999 survey (the most recent
  available at the time of our report), for 58 of
  the 71 models we analysed the UK price was at
  least 20 per cent higher than in the cheapest
  country even when the three countries with the
  highest levels of car tax (Denmark, Finland and
  Greece) were excluded from the comparison. When
  those three countries were included, the UK price
  was at least 40 per cent higher for 49 of the 71
  models analysed. In sum, prices in the UK have
  been higher on a long-term basis and a wide gap
  has developedand persistedover the last few
  years.
• http//www.competition-commission.gov.uk/439.htm

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BS1032 Public Administration in Britain 3 Is
the public sector a business?

• Privatisations
• took place in three stages (HM Treasury)
• Initial commercial phase (British Airways,
  BritOil)
• Utilities phase (BT, British Gas, Water
  companies)
• Third phase, involving companies that still
  require some subsidy from government for
  socially desirable purposes (Railtrack)

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BS1032 Public Administration in Britain 3 Is
the public sector a business?

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BS1032 Public Administration in Britain 3 Is
the public sector a business?

• Regulators currently

OFGEM Office of Gas and Electricity Markets
OFWAT Office of Water Services
OFTEL Office of Telecommunications
ORR Office of the Rail Regulator
OFREG Office for Reg. Of Elec and Gas - NI
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BS1032 Public Administration in Britain 3 Is
the public sector a business?

• Who regulates the regulators ?
• (Quis custodet custodes ipsos who guards the
  guards ?)
• The dilemma is for a government to leave the
  market to itself but also to have a degree of
  control when necessary (Railtrack)

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BS1032 Public Administration in Britain 3 Is
the public sector a business?

• Who shaves the barber?
• Consider a town where there is a barber, and the
  barber shaves. The barber shaves all - and only -
  those people who do not shave themselves. Now,
  who shaves the barber?
• If the barber shaves himself, that can't be right
  because the rule is, 'The barber shaves all - and
  only - those people who do not shave themselves.
• ...but, if someone else shaves the barber that
  can't be right either because the rule is, The
  barber shaves all - and only - those people who
  do not shave themselves.

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BS1032 Public Administration in Britain 3 Is
the public sector a business?

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BS1032 Public Administration in Britain 3 Is
the public sector a business?

• But note the following paper
• Giulietti, Price and Waterson(2000) Competition
  and Consumer Choice in the Residential Energy
  Markets
• Warwick Business School
• Centre for Management under Regulation
• http//www.wbs.warwick.ac.uk/cmur