Sunday, April 18, 2010

Public v Private

There is currently an ideological battle going on, although you may be forgiven if you haven't noticed, between those who believe in Public sector services and those who believe in the Private sector, the market and competition.

The theory is that being subject to competition and the market drives productivity and efficiency and brings down unit costs and therefore prices at the point of sale. This works well to a point. Where customers are many and behave as a crowd, switching to another product or just stop buying, it does rather concentrate the minds of the producers or service providers if they want to stay in business. But that’s not the only factor. Volume creates it’s own downward pressure on prices. We saw the VCR in its infancy costing on average about £500, and at its demise 20 odd years later, at £50.

But the problem is that it doesn’t always work like this. There are some companies who have no incentive whatsoever to reduce their prices. They produce exclusive products or services for very few customers, so if everybody could afford them they would no longer be exclusive and they would lose their market niche.

Then there is another category of company who have the customer tied in. That is, the customer has no choice but to buy and to pay whatever the cost is. One example here is the drugs and medication procured by the National Health Service from the major Pharmaceutical companies.

Anyone who has had a look at the prices paid by government departments and local authorities to Private Companies will know that those prices are steep. They don’t mess about haggling. And there is masses of it. Drugs are but one item – ambulances, hospital equipment, beds, linen etc. School desks, chairs, books, etc. Police vehicles, uniforms, protective equipment, fire engines, military equipment [sic!]…. Then there are the people who build and maintain our roads, collect our rubbish, sit on quangoes and let’s not forget the ubiquitous and expensive Consultants. You could probably come up with a dozen more. Oh, mustn’t forget all those people building computer systems that don’t work

Now think about this! Public sector employees like nurses and teachers don’t actually get paid a great deal, but the people who are in charge do – the executives and the politicians. And it is those people who are responsible for wasting spending taxpayer’s money with the Private sector and don’t have the faintest idea of how to operate like Tescos. So, where do you think the axe will fall? And where should it fall?

The state just ain’t good at shopping. And if we privatise these services, i.e. contract them out where the state still pays the bill, it ain’t gonna get any better.

The Public and the Private sector do not exist in isolation. They are both interlocked within a highly complex economic system and both have an important part to play and both depend upon each other. I just wonder though; who exactly is ripping off the taxpayer and who would be squealing if the State did actually get a grip Tesco wise?

Meanwhile, Owen over on The Third Estate makes the case for pen pushers.


  1. Well, I have a one-mind track and I am so amused that the very much higher powers at the council imagine that, should we charge our plotholders the same fee as the council does in direct-let sites, we would be able to pay lovely rents to the council for the privilege of running the sites. If we were to forget tight controls on water usage (the council unavoidable way) we would be in the red within a couple of months on water consumption.
    How can they make enough profit out of their sites to think they would be able to pay rent and rates as we have to, I would love to know!

  2. Once the election is over, ask our MP, Lee Scott, about pharma prices as paid by the NHS - he has been an assiduous member of the Health Select Committee which investigated this, and reckons that NHS bargaining intelligence is (how can I put this politely?) in the minus category.

  3. Why wait, ask him now or at the hustings on Thursday.

  4. Or indeed, why not ask Ms Klein to justify the appalling record of financial waste in Labour's handling of the NHS for the past 13 years.

  5. And the appalling record of the previous administration for exactly the same reasons, voila- neither party is capable of running it, and it is perfectly obvious that is is not capable of running itself either!!
    The user is between a rock and a hard place!

  6. It's always nice to receive feedback. Apparently the above post is "impenetrable".

  7. Dear dopeyf, I agree with you! The NHS was badly planned from the beginning (as Ernest Bevin warned), and has been a voracious moneypit. The problem is that it has been a political tool from its inception, and therefore no Party has had the guts to reform its structure.