Public Ownership

Debates continue about the relative merits of private and public ownership of organisations supplying services in a number of sectors – transport, healthcare, education, criminal justice and banking are all currently in the spotlight.

Valid arguments exist for both forms of ownership, thus perpetuating the debate.  For example, public ownership is seen as a means of encouraging organisations to act in the public rather than private interest, to provide services that are socially necessary but not profitable, and also avoids the profit motive to raise prices and/or squeeze wages.

By the same token, private ownership is claimed to supply the commercial incentives to be efficient and to innovate, to be responsive to consumer preferences including product and service quality, and to permit the operation of market mechanisms to match demand and supply.

These advantages occur differentially in different sectors e.g. promoting the public interest is obviously of prime importance for policing, while responsiveness to consumer preferences is central to retail operations.  These differential advantages lead naturally to a tendency for public ownership to be more prevalent in some areas of society and the economy than in others.  However, in any sector, competing arguments can be put forward for public and private ownership, as each has its advantages.

This suggests that there should be no ideological preference for either form of ownership and that the choice between the two should be made on purely pragmatic grounds.  And that, given that there are substantial costs involved in moving from one form of ownership to the other, privatisation or nationalisation should only occur when a particular sector is facing severe problems and a change in ownership is the best or only means of remedying these problems (given that there may be alternative means of addressing problems that do not require a change of ownership e.g. using inspection regimes to promote efficiency in a publicly owned organisation or strengthening the ombudsman function with respect to a particular part of the private sector).

An exception may be where (as in the case of some banks) companies have been nationalised as a short-term stabilisation measure and can be returned to the private sector with minimal disruption. Overall, though, there seems to be little need to bring about an increase or reduction in the size of the public sector in the foreseeable future.


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