Public funding and public production are separate decisions.
Direct provision can arrange collective finance and delivery of a good that the market would not adequately provide. Government may produce it or commission another provider. Joint provision means public and private providers both contribute to supply. Provision can improve access, but the appropriate scale, quality, funding and eligibility still need decisions. Government ownership does not make a service a public good.
- Finance
- Collective funding, such as taxation, can pay for a useful service when private providers cannot collect enough from its beneficiaries.
- Delivery
- Government may produce the service itself or commission it: pay another provider to deliver it under a contract.
- Access
- Public and private services can operate alongside each other. What matters is actual access and quality across the sector, including whether staff are simply moved between providers.
Joint provision and targeting
Joint provision
Public and private providers can both deliver a service, such as education or healthcare. Compare total access and quality, not only the size of the public sector.
Direct provision
Government can finance production directly or commission delivery. Public-good finance may need collective collection because individual exclusion is difficult.
Opportunity cost
Staff, land and funds cannot be used simultaneously for the next-best project. Free access does not remove those costs.
Accountability
Specify outcomes and quality, monitor delivery, and compare actual capacity with displaced provision. A contract is not proof that all announced places are additional.
Worked example: More clinic places
A district funds 200 clinic appointments and contracts a provider to deliver them. Private clinics continue offering appointments. Demand is high, but trained staff are scarce.
- Public funding reduces the finance barrier for the eligible patients; private delivery does not remove that public funding role.
- Publicly funded appointments alongside private services illustrate joint provision in the sector.
- If the contracted provider merely draws staff from existing clinics, the net increase in total capacity may be less than 200.
- Evaluate appointments actually delivered, access by need, quality and the alternative use of the funds, not just the announced allocation.
Watch out for this
Government providing 200 places guarantees 200 extra places in the economy.
Check whether capacity is newly created or displaced from other providers, and whether the places are delivered.
Check your understanding
Government pays a contractor to maintain a flood barrier. Which conclusion is justified?
- It cannot be public provision because the workers are privately employed.
- Its resource cost is zero because beneficiaries pay no direct fee.
- Government finance and private delivery can be combined.