The public sector of the economy.

The public sector of the economy offers many goods and services to the consumer, some of which are financed entirely by money the government obtains from taxes or by borrowing and which are offered to the consumer free of direct charge at the point of use. Other goods and services are offered in return for payment. Usually the state owns the capital and land required for production, employing the necessary labour. Sometimes the state rents land and borrows money. In general these resources are used to produce goods and services that it is believed the private sector cannot or will not produce efficiently. The state can be involved in business in a number of ways:

1. by owning shares in a public or private company. In this case the business will be funded and operated according to normal commercial criteria.

2. By providing services such as health, policing, defence, social security and advice to trade and industry. The finance for these services comes from taxation, the community charge, the business rate and government borrowing.

As we know, firms in the public sector are a)______the government, one example being the post office. However, in certain countries, notably in Britain, there is a b)_______ towards c)________ or selling certain government-owned organizations such as the railway and telephone companies back to the private sector. This has both positive and negative aspects:

+	–
As firms active in these privatized industries may find themselves in e)____ with other firms, it is in their interest to make the services provided more f)____, which g)___ the customer. The money h)…… can be used to reduce taxes.	As firms in the pri­vate sector are mainly interested in d)_____, privatization may make certain ser­vices more expensive for the customer. Necessary services may not be provided because they aren't profitable.

Companies in the public sector have certain i)_____ to public limited companies. However, there are a few important differences:

0. While public limited companies are owned by the public, public sector companies are owned by the j)_____.

1. The k)_____ of a plc is chosen by the share­holders, whereas the chairman of a public sector com­pany is chosen by the government.

2. A plc l)_____ capital by selling shares, a public sector company by selling stocks.

3. The profits earned by a plc go to the sharehold­ers, the profits earned by a public sector company m)_____ to the government.

4. Where the main n)_____ of a plc is to make the largest possible profit, public sector companies are o)_____ primarily to provide the public with essential services.

2. Comprehension check.

Say if the following sentences are true or false. Correct the false ones.

1. Thanks to privatization certain government – owned organizations in Britain back to the private sector.

2. The customer is in the best situation when companies of privatized industries find themselves in rivalry with other firms.

3. Firms in the public sector are absolutely identical to public limited companies.

4. The president of a public sector company should be chosen by the shareholders.

5. The main source of obtaining capital in a public sector company is the provision of the public with essential services.

Discussion

Work in small groups.

Discuss what kind of business organization might each of these be: a sole trader, a partnership, a public or private limited company or a public sector company? Give your reasons.

1. A small corner shop.

2. A firm of solicitors.

3. The British Broadcasting Corporation (BBC) in Britain.

4. A large commercial bank.

5. A publishing house.

Writing

Give some examples of public sector organizations in your country. What effect do you think privatization would have on these organizations and on the servic­es they provide?

Unit 5

Accounting: an aid to decision making