14.12.12
Competition can reduce impact of public service failure – OFT
Failing public service providers can be an important driver of competition, a new working paper from the OFT suggests.
The paper considers how policy makers, regulators and contracting authorities can facilitate the ‘orderly exit’ of failing public service providers. Failure can drive competition and create opportunities for better suppliers, as well as incentivising the performance of existing suppliers.
But if managed badly, failure can lead to service disruption and cost to the taxpayer. With more competition being introduced, failure and the possible closure, merger and takeover of public service providers could become more common.
A competitive system of service delivery can reduce the impact of failure, the OFT argues, and adds that the Government needs to find ways to ensure services are continuously available, with well designed continuity regimes in place.
Ed Smith, director of services, infrastructure and public markets said: “Recent failures in public markets such as the collapse of Southern Cross reiterate the importance of government being able to respond to failure when it occurs. This publication looks at ways in which government can protect users of public services and also ensure the credible threat of exit which is an important driver of competition.”
Tell us what you think – have your say below, or email us directly at [email protected]