Public Corporations

• Features of Public Corporations

  State owned -> the government owns Public corporations, this means that the government appoints the people who run the organisations, a board of directors.
• Features of Public Corporations

  Created by Law → Public corporation are created by an act of parliament, the power and duties are specified.
• Features of Public Corporations

  Incorporation → Public corporations are incorporated businesses. this means that they have a separate legal identity. They can sue, be sued and enter contracts under their own names.
• Features of Public Corporations

  State-funded → The government provides capital needed by public corporations. The money comes mainly from tax. All the assets and liabilities of public corporations belong to the state, but corporations can also borrow money.
• Features of Public Corporations

  Provide Public services → public corporations do not aim to make profit, their main objective is to provide public service.
• Features of Public Corporations

  Public accountability → They are accountable to taxpayers because state-owned corporations are accountable to the public . If a public corporation makes a profit, the money will either be reinvested in the business or handed to the government.
• Advantages of Public Corporations

  Avoid wasteful duplication → In some industries, a natural monopoly exists. This means that it is more efficient to have just one business providing a service for the whole market. For example, railway transport.
• Advantages of Public Corporations

  Maintain control of strategic industries → It is said that it would be better for industries vital to the nation’s security, such as water supplies, to be owned by the government. This would prevent ‘outsiders’ from another country taking them over and exploiting the nation.
• Advantages of Public Corporations


  Save Jobs → A business can be taken into public ownership to save jobs. A government might take control of a failing private sector business if it employs a large amount of employees. It might be better to save a business that does not make money from trading rather than mass unemployment.
• Advantages of Public Corporations

  Fill in the gaps by the private sector → In some markets, the private sector will not make adequate provisions to meet the market’s needs. For example, it is desirable for all children to get quality educations however, the private sector would only allow that for those who are prepared to pay.
• Advantages of Public Corporations

  Serve unprofitable regions → In some markets, the private sector would not deliver important services to unprofitable regions - however public corporations can be prepared to meet those needs.
• Disadvantages of Public Corporations

  Cost to government → A number of public corporations make losses - these losses have to be met by a taxpayer. If losses get bigger and more frequent - taxpayers may subject to financial burden.
• Disadvantages of Public Corporations

  Inefficiency → Public corporations are criticised for their low productivity and inefficiency. The cause of that inefficiency is often blamed for lack of competition, the absence of profit as an object and the knowledge that they cannot go ‘bust’ because the losses will be met by the government.
• Disadvantages of Public Corporations

  Political Interference → Public Corporations often suffer owing to government interference. This may occur because different governments have different views about the way public corporations should operate. Corporations are subject to new policy changes whenever a new government is set in place.
• Disadvantages of Public Corporations

  Difficult to control → Some public corporations are very large - they may employ thousands of workers across the globe and own huge quantities of physical assets. This might make it difficult to co-ordinate different parts of the business and run it effectively.
• The process of transferring public sector resources to the private sector is called privatisation
• Forms of Privatisation

  Sale of Public corporations → the sale of public corporations has been a popular way of transferring business activity from the public to the private sector. One way of doing this is to sell shares in the business to anyone that wants them.
• Forms of Privatisation

  Deregulation → This involves lifting legal restrictions that prevented private sector competition.
• Forms of Privatisation

  Contracting out → many government and local authorities have been ‘contracted out’ to private sector businesses. This is where contractors are given a chance to bid for services previously supplied by the public sector.
• Forms of Privatisation

  The sale of land and property → For example that sale of council-owned properties to tenants, they were given generous discounts - if agreed to buy.
• Reasons for Privatisations

  to generate income → that sale of assets generates income for the government.
• Reasons for Privatisation

  to reduce inefficiency in the public sector → many public corporations lacked the incentive to make profit and often made losses. It was argued that with a switch to the private sector - they would have to cut costs, improve services and return profits for shareholders.
• Reasons for Privatisation

  to reduce political interference → in the private sector, the government could not use these organisations for political aims. They would be free to choose their own investment levels, prices, product ranges and growth rates.