Europe risks undermining public services

The argument that the only justification for collective action is market failure is misconceived, argues Paul Spicker

The best way to understand what a term means is not to impose a definition, but to look at how that term is normally used. In the European Union, public services are often described as services that are the responsibility of public authorities. In the convoluted language of the European Union, these are now described as "services of general interest".

The Public Services Directive, so-called, is actually about public procurement, and it is largely concerned with the question of whether government owns and controls certain activities. By that test, nationalised industries, armed forces and regulatory authorities are all public services. But in ordinary language public services are something very different – services of a special kind.

Claiming that something is a public service appeals to the norms and values which govern it. Lifeboats or mountain rescue, postal services and libraries, are public services. News and cultural programmes are provided as public service broadcasting. But in any of these examples, there is no reason to suppose that they are the responsibility of the public authorities. Often, they are not.

Public services have four key features. The first is that they are services to the public – not in the economic sense, which hinges on what they are selling, but in the social sense, that they actually do something for the people they serve. Roads, sewers, schools and social housing all deliver services to the public. Public agencies which serve government, like IT or audit, do not – so they are not public services.

Second, services are delivered according to principles of public benefit, not on commercial criteria. Another way of saying this is that public services are developed for reasons of public policy, but the policy is not just the policy of governments. Many social security systems in Europe were developed independently of government. Some libraries have been established through charitable donation while lifeboats in the UK are organised outside the control of the state.

Third, public services are redistributive, in the sense that those who pay are not necessarily those who benefit. That does not mean that they are egalitarian – it means that when people pay, they know that their payment is not an individual purchase, and that it will be used to benefit others. Some public services are based on pooled contributions and benefits, some are funded by taxation, and in some cases the individual beneficiaries cannot be identified.

These three elements – service, policy and redistribution – lead to the fourth. Public services are operated as a trust. The characteristic operation of a trust is an arrangement where person A pays person B in order to benefit person C. This kind of arrangement is common in public services. Schools, hospitals, care homes and prisons are all marked by arrangements where those who pay are not necessarily those who receive, and there is a disconnection between purchase and consumption. In economic terms, the consumer or service user is not the purchaser of services and the trustee is not an agent of a principal, but operates within a distinct and explicit framework of rules.

The key distinction made in the EU between different services of general interest lies between "economic" and "non-economic" services; the distinction depends mainly on whether or not people have to pay.That is not enough to distinguish public services from others. Public services for health, personal care, social housing, and education often charge, and they could be managed in the market, but they are typically operated as non-profit making trusts. The standard economic models – based on relationships between producer and consumer, or principal and agent – do not apply. Part of the assault on public services in Europe has been founded in a restrictive economic argument, that the only justification for collective action can be market failure.

That is misconceived. Superimposing market-based criteria on the operation of public trusts often leads, not to better or more efficient delivery, but only to patterns of delivery that are different – and so to outcomes that are not consistent either with individual preferences or with social ones. In the process, both the characteristic values and the benefits of public services can be lost – the development of a public sphere, the creation of social capital, and the sense of common responsibility. By pushing services towards commercial operation, the European Union is at risk of undermining the sort of things that make life in European countries worthwhile.

Paul Spicker is professor of public policy at the Robert Gordon University in Aberdeen