Understanding the Public Services Industy

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Public Services Industry Review Figure 1.4: GDP and Health and Education Spending Health care expenditure and national income per capita in 2004 Education expenditure and national income per capita in 2004 7,000 12,000 Total health spending per capita (USD PPP) 6,000 5,000 4,000 3,000 2,000 1,000 TUR USA LUX CHE NOR ISL CAN BEL FRA AUT DEU NLD DNK SWEAUS OECD-28 ITA GBR IRL GRC JPN FIN ESP NZL PRT CZE KOR SVK MEX Total health spending per capita (USD PPP) 1 1 1 1 Total education spending per capita (USD PPP) 70 75 10,000 8,000 6,000 4,000 2,000 USA CHE NOR AUT DNK SWE FRAISL BEL JPN ITA AUS GBR OECD-28 DEUNLD ESPFIN KOR NZL IRL PRT GRC CZE MEX SVK TUR 0 0 10,000 20,000 30,000 40,000 50,000 Net National Income per capita (USD PPP) 0 0 0 20,000 40,000 60,000 Net National Income per capita (USD PPP) Source: OECD Social Indicators 2006, Education at a Glance 2007 1.19 Much has been written about the ‘post code lottery’ in public service provision. The term is shorthand for the seemingly random variations observed in the quality of public service provision across the country. These disparities are almost always highlighted in negative terms, focusing on those regions were the quality of services or the level of funding, are relatively low compared to elsewhere. 1.20 However regional variations can also arise as an appropriate response to differing local needs. For example the NHS authority of a region with a relatively elderly population compared to the rest of the UK, might opt to shift its resources towards treatments for aliments that are more common as people get older. As a consequence the resources devoted to other areas of care will be reduced relative to the rest of the country. 1.21 If this situation led to variations in the degree to which health authorities met minimum standards in healthcare this would clearly be an undesirable outcome. However, over and above such minimum standards, there are benefits in allowing local decision-makers the flexibility to respond to differing local needs. This will result in regional variations in service provision which will increase the total health benefits delivered for the same cost to the taxpayer. 8
Public Services Industry Review 1.22 Another trade-off in trying to meet the growing demand for personalised services is that between universal coverage and choice. One of the primary rationales for government provision of public services is when universal coverage is desirable but would not be provided by the market. The consequence of this is that the standardised service provided by a single supplier may not meet the requirements of some users. By opening up the service to competition the user has greater choice but the public subsidy to the universal service provider may have to change since it can no longer cross-subsidise so effectively. The total public subsidy may not increase, however, if large numbers of users shift to self-financed private provision. Such trade-offs will have to be confronted if consumer demands for more personalised services are to be met. 9
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