Public Corporations

Question 1

Public corporations

Answer 1

Business organisations owned and controlled by the government that provide a public service

Question 2

Features of public corporations

Answer 2

• State-owned - owned by government who appoints BOD to run business.
• Created by law- created by an act of parliament, in which powers of duties are clearly stated
• Funded by the state- gov provides all capital needed, all liabilities belong to the state. Bus is free to borrow money and reuse revenue
• Provide public services- this is their main objective, most don’t aim to make a profit
• public accoutability- annual reports are produced for minister in charge, but are accountable to taxpayers since their money funds operations.

Question 3

Reasons for public ownership

Answer 3

• Prevent wasteful duplication- a natural monopoly exists in some industries
• Maintain control over strategic industries- if vital to nation’s wellbeing or security, government should take control to provide reliable supply and quality and avoid being exploited or taken over
• Save jobs- preferable to take control of failing priv. sect businesses and allow them to continue trading if it prevents mass unemployment
• Serve unprofitable regions- cost of supplying remote indivduals/firms is unprofitable for private sect bus, but pub sect is willing to meet cost
• fill gaps in the market- private sector will only supply to who can pay. Those that cannot afford to pay for vital services like education will be left inadequately educated. Pub sect can provide service for free

Question 4

Reasons against public ownership

Answer 4

• cost to government- losses have to be met by taxpayer, money used to subsidise could have been use more attractively
• Inefficiency- Low productivity and inefficiency because of lack of profit incentive and the knowledge that all losses will be met by the government
• political interference- subject to policy changes
• large and difficult to control

Question 5

Privatisation

Answer 5

Transfer of public sector resources to the private sector

Question 6

Forms of privatisation

Answer 6

• sale of public corporations (shares)
• deregulation (allows private and public sect competition)
• contracting out (allowing priv sector businesses to bid for services)
• sale of assets

Question 7

Reasons for privatisation

Answer 7

• Generate income
• Reduce inefficiency (cut costs, improve services, return profits, accountable)
• Reduce govt. interference- free to make own choices about products, price etc
• Deregulation- After deregulation, existing firms are privatised to encourage new firms to enter the market