The Simple reason why governments need to provide services for free?

One of the greatest conversations I had during my professional life concerns service cost versus service price. Generally, the primary focus of companies in the private sector is making profits. The profit is basically the difference between product’s price and cost.

The Government focus is slightly different, where the focus is to build trust and to meet customer needs and expectation with the most efficient way. Mostly the cost is higher than the price from government perspective with heavy burden on developing countries in how to bridge the gap with the better level of services and to deliver value.

Cost, Price and Value. Theoretically, Cost is typically the expense incurred for creating a product or service a government offer. The cost to issue your passport might include the cost of raw materials used, cost of the employees, the service center and the system involved on the process. Price is the amount a customer is willing to pay for a product or service. Value is that aspect of a thing which motivates a person to have it, value can never be calculated in numbers, the value could be better quality of life or social value.

Government always care about the value offered behind every service and how it contributes to country’s wellbeing and the quality of people’s life.

From government perspective, services are either profitable or subsidized. The word “Subsidy” can be defined as: a benefit given by the government to an individual, business, or institution. The subsidy is typically given to remove some type of burden, and it is often considered to be in the overall interest of the public, given to promote a social good or an economic policy.

A subsidy typically supports particular sectors of a nation’s economy. It can assist struggling industries by lowering the burdens placed on them, or encourage new developments by providing financial support for the endeavors. Often, these areas are not being effectively supported through the actions of the general economy, or may be undercut by activities in rival economies.

The recent study in GCC shows that almost all services offered to citizens and residents are subsidized, while the only services that are profitable are the fines services: paying traffic fines, shipping fines, and other types of fines which is typically costing the government nothing and building on people mistakes in following rules and regulations.

There are few different ways to evaluate the success of government subsidies. Most economists consider a subsidy a failure if it fails to improve the overall economy. Policymakers, however, might still consider it a success if it helps achieve a different objective. Most subsidies are long-term failures in the economic sense, but still achieve cultural or political goals.

Governments of the developed countries are using smartly the service price and the decision to subsidy services to achieve certain objectives:

- Garbage collection:

Governments in which promoting waste recycling and green economy are applying different education programs to educate people in how to produce less waste and promote reuse and refill rather than buying new products.

As a governance framework, such governments are hardly subsidy waste collection and as a preventive action they may make such service profitable in order to educate people how to think twice before generating more waste.

- Public beaches, gardens and sports:

Dissimilarly, governments in which wellbeing and health are at the heart of their agenda usually promoting effectively for working out and enjoy the healthy life.

Such governments are offering more gardens in each and every community, providing sports equipment for free and make it obvious and accessible for all segments, the same for public beaches and sports courts, accessible, available and for free.

- Respecting traffic rules:

Another great example is the heavy traffic fines, governments are using this as a good measure towards ensuring enhanced road safety, some feel the penalties are hefty and way too high. Well, committing traffic offences that can endanger the lives of people are not justifiable at all.

The above examples are a clear showcase in how the government can utilize the service cost effectively to achieve its national agenda and serve the strategic goals.

It is also a clear receipt in how to enforce certain directions to change people habits and attitudes.

Let’s imagine a country looking to promote healthy food Vs. junk food: Can we add extra taxes on junk food while supporting companies provide healthy food and fresh juices?

Let’s imagine a country looking to promote sports and direct young generation attention from online games to physical sports: Can we offer free classes and free transportation for physical activities while subsidizing such services from increasing taxes and fees on online games?

Important also to shed light on the UN effort, SDG’s are a great direction to align with, it is a clear roadmap to ensure that all human beings can fulfil their potential in dignity and equality in a healthy environment.