The Public Sector (AQA A Level Business): Revision Note

Public services

• The public sector is made up of organisations run or owned by the government or local authorities

  • In the UK, more than 6m people are employed in the public sector, delivering a range of services such as healthcare, education, policing and social services

• Governments are likely to retain ownership of organisations in the public sector for several reasons

  • They are strategically important to the country 

    • E.g. defence or justice systems

  • They provide essential services

    • E.g. water or electricity supply

  • They provide merit goods that may not be provided in sufficient quantities by private businesses

    • E.g. education or health services

• Public services are usually funded through taxation, though in some cases, a small fee is charged

Examples of public services

Public corporations

• Public corporations are organisations that the government owns, but they trade like businesses, earning most of their money by selling goods or services

  • Public corporations allow the government to keep control of services that have a clear public interest but are best run in a commercial way

• Over time, many public corporations have been privatised

  • E.g. in 2008, the UK government nationalised Northern Rock, a bank that was on the verge of collapse, as a result of the global financial crisis

• Some privatised businesses are highly successful businesses operating in competitive markets

  • Both British Airways and BT were privatised in the 1980s and are highly regarded, profitable businesses

• In other cases, privatisation has been less successful

  • UK water companies such as Southern Water continue to operate as monopolies

  • In recent years, some privatised water companies have been criticised for charging high prices and causing environmental damage