Public services evaluation from the perspective of public risk governance

Abstract

As the foundation of state governance, the key objective of public finance is to mitigate public risk. Public finance directly helps supply public services through raising public revenues, and minimize public risk and ensure fiscal sustainability. Further, governing fiscal risk can also provide a policy tool for controlling public risk. Therefore, the interacting relationships between public risk, public service, public revenue, and fiscal risk should be studied carefully. It is of great significance to get a balance between fiscal risk and public risk. Minimizing public risk with fiscal risk under control should be the ultimate goal for state governance and a benchmark for public service provision. The factors constraining fiscal risks might change over time and need to be considered in a sustainable and long term growth context. Additionally, it is important to focus on effectiveness of public service provision, or in other words, increasing the capacity to govern public risk. Despite the fact that there is relatively limited room for China to increase fiscal risk currently, the Chinese government can also achieve its public policy target by optimizing revenue structure, improving effectiveness of public service and capacity for public service provision, reforming central-provincial and local government relations. These are the theoretic and practical foundations for deepening fiscal reform and optimizing fiscal policy. Using the analytical framework developed in this article which links public service evaluation to public risk management, we argue that the gap between public service provision and the requirement of public risks governance can be reflected in fiscal risks. These are the key reasons why countries such as Greece, Spain and Ireland suffered from sovereign debt crisis in the recent past (see Ahmad et al. in MultiLevel finance and the euro crisis. Edward Elgar, 2016). Traditional theories on the role of government and public service provisions are based on public welfare theory and market failure theory. When analyzing market failures, traditional theories urges a role played by the government to address market failures. There may also be government failures, and there is a new "positive" literature devoted to this topic (see Ahmad and Brosio in Handbook of multilevel finance. Edward Elgar, 2015 for a review). This provides a basis for our analysis in this paper.