Public Policy: Using Market-Based Approaches - Department for ...

More documents

Recommendations

Info

Public Policy: Using Market-Based Approaches government intervention in the first place. In Table 1 we link market failures to possible market-based mechanisms. Table 1: Market failures and market-based mechanisms Market failure Potential market-based mechanisms Market power Competitive tendering Removing entry barriers Public goods Competitive tendering User choice Externalities Marketable permits Taxes and subsidies Social objectives Competitive tendering User choice The common feature of these market mechanisms is that they involve a different role for the public sector than before. This need not always be a reduced role. One of our case studies examined the experience of local authorities switching from an administrative system for allocating social housing to a more marketbased system of user choice. This new scheme removed the need to employ local authority officers to make decisions on which property to allocate to which potential tenant. However, it introduced new demands on local authorities’ resources, which meant there was no reduction in the overall resources required to administer the provision of social housing. The scheme delivered other benefits instead: the new system was found to be more efficient in terms of the speed of response and also to be more popular with users. 16
MAIN MECHANISMS REVIEWED Our case studies explored the practical application of three different marketbased mechanisms. These mechanisms are summarised below. Competitive tendering Where the public sector takes responsibility for providing a service – either because it is a public good, or to avoid problems arising from provision by a private sector monopolist – it may be possible to hold a competitive tender to choose the supplier of the service. This tender might allow both public-sector and private-sector suppliers to compete to become the chosen supplier. Competitive tendering allows the benefits of competition (such as improved efficiency and innovation) to be introduced to situations where there is a single supplier of the service. Competitive tendering can introduce competition for the market where competition in the market might not be possible or desirable. We examined the competitive tendering of prison services. User choice In other situations it may be possible to introduce competition in the provision of public services by having competing suppliers of the public service. This competition can be between public service providers, privatesector suppliers, or both. In each case the individual users of the service are given the right to choose a service provider. The most popular providers gain users and the less popular lose them, creating incentives for providers to be more responsive to customer needs. User choice often provides users with a “voucher” or entitlement that can be exchanged for a specified service, although our case study on choice-based lettings involved a different approach. Tradable permits Section 2 – Using market mechanisms The examples above involve using market-based mechanisms in the provision of services by the public sector. Tradable permits are a means of introducing a market discipline to the regulation of private-sector activities. Regulation is often used to address problems of externalities, for example, by placing a control on the quantity of a pollutant that can be emitted, by individual firms. Tradable permits are often used in this context. They involve setting an overall limit on the total level of emissions by all firms, and issuing permits up to this limit. Firms can then trade these permits amongst themselves. Those firms with a high cost of cutting emissions will buy permits from firms with a low cost of cutting emissions. Trading permits in this way allows emission reductions to be focused on those firms who can reduce emissions most easily. These firms will also be rewarded financially for doing so by those firms that find it more expensive to cut emissions. Our case study examined the impact of the UK emissions trading scheme to control greenhouse gas emissions. 17
Page 1 and 2: DTI ECONOMICS PAPER NO.14 Public Po
Page 3 and 4: DTI ECONOMICS PAPER NO.14 Public Po
Page 5 and 6: Contents Acknowledgements vi Forewo
Page 7 and 8: Contents Section 11 Emissions Tradi
Page 9: Foreword There is increasing intere
Page 12 and 13: SECTION 1 Introduction and summary
Page 14 and 15: Public Policy: Using Market-Based A
Page 22 and 23: SECTION 2 Using market mechanisms U
Page 30 and 31: SECTION 3 Lessons for the design an
Page 40 and 41: SECTION 4 Introduction This part of
Page 50 and 51: SECTION 7 Market-Based Mechanisms W
Page 74 and 75:
Public Policy: Using Market-Based A
Page 76 and 77:
Page 78 and 79:
SECTION 8 Framework for assessing m
Page 81 and 82:
Part IV Case Studies 73
Page 83 and 84:
● the Green and White papers behi
Page 85 and 86:
A prison failing to deliver on its
Page 87 and 88:
Table 9.3 Companies providing priso
Page 89 and 90:
Section 9 - Competitive Tendering o
Page 91 and 92:
detect any deviation from a collusi
Page 93 and 94:
at HMPS began as an equal mix of th
Page 95 and 96:
(e.g. lighting). This impact could
Page 97 and 98:
MARKET POWER The full benefits of c
Page 99 and 100:
However, it should be noted that te
Page 101 and 102:
on competition is uncertain. The ab
Page 103 and 104:
Controlling for problems of asymmet
Page 105 and 106:
Procurement process design One way
Page 107 and 108:
however, financial deductions are m
Page 109 and 110:
Page 111 and 112:
The Independent Monitoring Board at
Page 113 and 114:
Figure 9.1: Difference between the
Page 115 and 116:
‘While there were staff in the pu
Page 117 and 118:
design the invitation to tender and
Page 119 and 120:
Page 121 and 122:
and demand conditions. Second, we d
Page 123 and 124:
DEMAND Anyone can apply to a local
Page 125 and 126:
● Rent deposit guarantee by the l
Page 127 and 128:
The Green Paper stated the Governme
Page 129 and 130:
It was not an objective of ODPM or
Page 131 and 132:
DESCRIPTION OF MARKET MECHANISM The
Page 133 and 134:
Once the outcome is determined, fee
Page 135 and 136:
DEVELOPMENTS OVER TIME The major mo
Page 137 and 138:
Concerns about capacity constraints
Page 139 and 140:
from those already located within t
Page 141 and 142:
In several areas, registrations by
Page 143 and 144:
Controlling for information problem
Page 145 and 146:
extent though, it was competition b
Page 147 and 148:
Section 10 - Choice-Based Letting i
Page 149 and 150:
levels are reducing and new tenants
Page 151 and 152:
desired effect of limiting points-c
Page 153 and 154:
efficiency savings in some areas. T
Page 155 and 156:
SECTION 11 Emissions Trading Introd
Page 157 and 158:
Section 11 - Emissions Trading coex
Page 159 and 160:
Section 11 - Emissions Trading emis
Page 161 and 162:
A more detailed and diagrammatic de
Page 163 and 164:
The costs of monitoring and reporti
Page 165 and 166:
INITIAL ALLOCATION OF PROPERTY RIGH
Page 167 and 168:
only 242 in the second year. The di
Page 169 and 170:
COST-EFFICIENT EMISSIONS REDUCTIONS
Page 171 and 172:
consultants to Defra of £11 per to
Page 173 and 174:
Participation has helped us to rais
Page 175:
Section 11 - Emissions Trading emis
Page 178 and 179:
SECTION 12 Issues in the implementa
Page 180 and 181:
Page 182 and 183:
Page 184 and 185:
Page 186 and 187:
Page 188 and 189:
Page 190 and 191:
Page 192 and 193:
Page 194 and 195:
Page 196 and 197:
Page 198 and 199:
Page 200 and 201:
Page 202 and 203:
Page 204 and 205:
Page 206 and 207:
Page 208 and 209:
Page 212:
Printed in the UK on recycled paper
show all

Public Policy: Using Market-Based Approaches - Department for ...

Create successful ePaper yourself

Delete template?

Save as template?