features of public corporations
state owned
created by law
state-funded
provide public services
public accountability
features of public corporations - state owned
owned by the government and managed by a board of directors
features of public corporations - created by law
created by an act of parliament with powers and duties specified
features of public corporations - incorporation
have a separate legal identity from owners
features of public corporations - state-funded
government provides capital funded through tax
all assets and liabilities belong to the state
corporations can borrow money
features of public corporations - provide public services
most aim for a profit but their main objective is to provide a public service
features of public corporations - public accountability
produce annual reports submitted to the government
accountable to tax-payers
profit is either reinvested or handed over to the government
can public corporations be owned by a private sector
yes
reasons for public ownership
avoids wasteful duplication
maintains control of strategic industries
saves jobs
fills gaps left by private sector
serves unprofitable regions
how does public ownership avoid wasteful duplication
a natural monoploy exists in some industries meaning it’s more efficient to have just one business providing a service for the market to avoid a waste of resources
how does public ownership maintain control of strategic industries
industries vital to the nation’s security should be owned by the government to avoid exploitation or abuse to guarantee a reliable supply and quality
how does public ownership save jobs
businesses with public ownership saves jobs and a business can carry on trading even in loss to prevent mass unemployments
how does public ownership fill the gaps left by private sector
public corporations fulfill the market’s needs that the private sector may not be able to provide
how does public ownership serve unprofitable regions
a public corporation meets the requirements that a private sector business may not as it wouldn’t want to deliver services to unprofitable regions
reasons against the public ownership of businesses
cost to government
inefficiency
political interference
difficult to control
reasons against the public ownership of businesses - cost to government
losses from the public corporations have to be met by taxpayers who may object to financial burden if losses get bigger and frequent
any money used to subsidise public corporations cannot be used for more attractive alternatives
reasons against the public ownership of businesses - inefficiency
criticised for their low productivity and inefficiency
cause: lack of competition, absence of profit as an objective, losses met by government
reasons against the public ownership of businesses - political interference
suffer due to government interference
occur because different governments have different views about the operations
subject to policy changes
reasons against the public ownership of businesses - difficult to control
some are very large and across a wide geographical area might make it difficult to coordinate different parts of the business
forms of privatisation
sale of public corporations
deregulation
contracting out
sale of land and property
sale of public corporations
selling business shares and parts of the business over time
deregulation
lifting legal restrictions that prevent private sector competition
contracting out
local services ‘contracted out’ to private sector businesses are given a chance to bid for services previously supplies by the public sector
reasons for privatisation of government-owned resources
generates income
reduces inefficiency in the public sector - public corporations lack the incentive to make a profit and so have improved services, cut costs and returned profit for shareholders
result of deregulation - removal of legal barriers allow new businesses in the market as new firms are encouraged to join
reduce political interference - governments don’t use private sector businesses for personal aims