Understanding the Public Services Industy

Public Services Industry Review
Section 6: A Vision for the future of the PSI
6.1 After two decades of rapid growth, the UK’s Public Services Industry now accounts
for nearly 6 per cent of GDP, employs over 1.2 million people and in 2007/08 had
revenues of £79bn (Section 2). In absolute terms it is second in size only to that of the
United States and, as a share of GDP, it is larger. It has been a major contributor to the
increased investment that the UK has made in building new schools and hospitals, and
in shrinking the waiting times for public services that were in short supply.
6.2 Yet major challenges remain if Britain is to develop the personalised, easily accessible,
world class public services that are being demanded by its increasingly diverse
population. This will require a range of providers – from the public, private and third
sectors – with more autonomy for front-line staff to take decisions in the interest of
users. It will require more sophisticated ways of measuring and contracting to deliver
outcomes that match users’ expectations, and it will require experienced public sector
commissioners who are as adept at long-term market development as they are at
procurement and project monitoring.
6.3 Previous sections developed a set of recommendations toward achieving these
ends. This section concludes with the key themes that underpin the importance of
government’s role and future policy agenda towards the PSI.
The importance of public services
6.4 The quality of a country’s public services is a key contributor to the productivity of its
economy and to the standard of living of its people. As countries grow richer their
demand for public services – especially education, health and transport – tends to
grow as a proportion of their total spending. This demand also tends to become more
diverse across different regions, age groups and income classes. In poorer countries,
populations are more satisfied with standardised public services since ‘one size fits all’
is a significant step up from limited access to public services and a private market that
many could not afford. This was clearly the case in the early post-war period in Britain
and other European countries when the foundations of the public welfare state were
laid.
6.5 Today however, citizens want more varied, more immediately available, more modern
(i.e. efficient and continually evolving) and, more customised and caring services.
They are used to these qualities in the private services they consume - from haircuts
to housing. In the private services marketplace, the diverse preferences of consumers
are readily accommodated by a range of prices for different service offerings and
competition amongst producers on both cost and quality. It is difficult to replicate
this flexibility and choice in the public services arena, where the taxpayer foots the
bill rather than the user, and where differences in services can lead to misguided
complaints about a ‘postcode lottery’ whenever service levels appear to differ (whether
for good reasons or bad). But there are many ways in which competing providers, user
choice and greater ‘user voice’ via surveys of user satisfaction levels, for example, can
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