What are public service markets?

Public services are those – such as health and education – considered so essential they are made available to all citizens, regardless of income. For much of the UK’s recent history they have been provided by the state: paid for by general taxation and run on behalf of the country by the government.

However, the past 30 years have seen a dramatic shift in the way public services are provided. While the state retains ultimate responsibility, organisations from private, public and voluntary sectors now compete for the right to deliver many public services. Users are often able to have a say in whose services they receive. We refer to public services managed in this way as public service markets.

How public service markets work

Public service markets usually involve a contract between a service provider and a public sector body such as a central government department, a local authority, or a clinical commissioning group. This body purchases services on behalf of its citizens, who may then be able to exercise choice about exactly which service or provider they use.

Some examples of public service delivery models are:

Service How it is provided
Academy schools Department for Education and school governors work together to find sponsors to run academies. Parents select a school for their child.
Care for older people This varies according to the local authority. Some models include:
  • Government purchases care services and users can choose from a menu of options.
  • Users are given cash or virtual budgets to purchase services directly.

There is also a privately-funded care sector alongside these publicly funded option

Waste management (refuse and recycling) Local authorities purchase services on behalf of the public. Customers may also supplement with private provision.
Health GPs, as part of Clinical Commissioning Groups, purchase a range of services on behalf of their patients, within a complex regulatory framework. NHS England purchases some of the most specialist service for patients, on behalf of Clinical Commissioning Groups and their patients.
Probation The Ministry of Justice purchases probation services on behalf of the public
Employment The Department for Work and Pensions purchases employment services on behalf of the public.

Much of the publicity surrounding private provision of services has focused on large commercial enterprises such as Capita and Serco. However, at a local level many services are provided by small and medium sized organisations including charities and social enterprises.