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THE PUBLIC SECTOR. run & owned by the state (central / local government). M erit goods Definition

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The public sector


run & owned by the state

(central / local government)

Merit goods


Goods or services (such as education and vaccination) provided free for the benefit of the entire society by a government, because they would be under-provided if left to the market forces or private enterprise.

Public good


An item whose consumption is not decided by the individualconsumer but by the society as a whole, and which is financed by taxation.

A public good (or service) may be consumed without reducing the amount available for others, and cannot be withheld from those who do not pay for it. Public goods(and services) include economic statistics and other information, law enforcement, national defense, parks, and other things for the use and benefit of all. No market exists for such goods, and they are provided to everyone by governments.


The central government

Publicservices (financed from taxation):

  • National health

  • Defence (the police, the army)

  • Education

    Public enterprises(sold ata price, profit)

  • Utilities: electricity, water, gas, sewerage

  • BBC / HRT, Bank of England / HNB

  • British Rail

  • Owned by the central government

    (policy decisions – financial targets, prices)

  • Run by the Board of Directors

    – day-to-day control

    – the Board reports to ministers in charge –

    ministers report to the Parliament

Local authorit ies municipal undertakings

  • Cemeteries, crematoriums, market halls

  • Street cleaning, dustbin collection, waste dump

  • Car parks, street lighting, fire protection

  • Recreation facilities, stadiums, golf courses,

    swimming pools

  • Theatres, galleries, museums, airports


  • Natural monopoly in public ownership

  • Essential for social welfare

    (uneconomic for private businesses)

  • National security /e.g. atomic energy/

  • Government has resources to fund a vast industry, even if uneconomic

  • Provision of essential services

  • Profits for benefits of the whole nation


- Bosses are politicians

(lack of business expertise)

- Local issues may be disregarded in

favour of policies of national importance

- Taxpayers pay for losses

USE THE WORDS BELOW TO COMPLETE THE PARAGRAPH:goods, public sector enterprises, industries, public, private, financial, productive, service

  • The manufacturing sector consists of a variety of manufacturing ______________ .

  • Companies that are owned by shareholders or private individuals are in the __________________sector.

  • A nationalized industry, run by the state, is in the ______________sector, and the companies in this sector are examples of ____________________________________.

  • Any company that produces _______________or products is in the ___________sector.

  • Banks are located within the __________________sector of the economy, or in the ___________________sector of industry.

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Do you agree with the: Three reasons public sector employees are killing the economy? Explain your attitude.__________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

Public private partnership ppp or p3

public sector authority + private party

  • public service

  • public goods (infrastructure)

  • the company putting in the lowest bid – the cheapest price – gets the contract

  • places in old people’s homes, catering in hospitals, cleaning...has been put out to tender


Transfer of

government-controlled companies into

private ownership


  • competition – lower prices

  • more choice

  • better quality

  • innovation (new products, diversification)

  • sensitive to demands of consumers

  • managers make decisions freely

  • growing number of shareholders

  • selling the state owned industries

    raises revenue for the government


  • Laying off workers

  • Some services cannot be provided without state finance (e.g. railway network)

  • Concentrating on profit

  • Privatised firms may hand over control to foreigners

  • Trade unions not able to protect workers

  • State owned firms can only be sold once

  • RB: p.20-I

  • p.21-II,III,IV

  • Read about the history of HT and answer the questions.