and indirect political intervention in public services has no direct equivalent in the
private sector. For example, in many countries, especially in southern Europe, the
state has been a source of patronage and acted as ‘employer of last resort’ cushion-
ing many citizens from unemployment, but with detrimental consequences for
managerial accountability and eYciency (Bach 1999 ). The most direct inXuence of
the state relates to theWnancing of public services which are funded predominantly
through mechanisms linked to central or local taxation.
For the last two decades, however, governments have been concerned about the
growth of public expenditure and have been reluctant to raise taxation because of
the fear of the response of taxpayers and concerns about the potential adverse eVect
on private investment. Although there is considerable variation, most countries
have attempted to exert tighter control on public expenditure and the burden of
adjustment has fallen disproportionately on the public sector workforce. These
pressures have been reinforced for European Union member countries by the
stability and growth pact which restricts member states’Wscal freedom by estab-
lishing a 3 percent ceiling for public deWcits. AdditionalWscal pressures on public
service providers arise from the growth in demand for services, alongside severe
constraints on income generation because of the strict limits placed on user
charges.
This picture is complicated by the distinction that is often made between the
trading and non-trading parts of the public sector (Beaumont 1992 ). The latter are
those services, such as education, defence, emergency services, and central govern-
ment administration, which are integral to national well-being and are sheltered
from the market. In contrast, organizations in the trading sector are more mar-
ketable services such as postal, telecommunications, and transport services. They
often operate at ‘arm’s length’ from central government, but, nonetheless, their
presence in the public sector reXects a political judgement that they remain of
societal importance and should be sheltered from market competition.
For those services that remain in the public sector, the state is a distinctive
employer arising from the public accountability and transparency expected in the
use of public funds. Decisions in particular relating to selection and rewards are
open to public scrutiny and this has invariably encouraged standardized forms of
HR practice (Morris 2000 ). An important aspect of this accountability concerns
the pay and conditions of public sector employees; the state has to reconcile the
expectation that it should be a fair employer with its duty to taxpayers as the
guardian of the public purse.
In liberal democracies, this accountability occurs through elected party political
representatives, found at diVerent societal levels, typically national, regional, and/
or municipal. In federal states, for instance, the USA, Germany, and Australia,
lower levels of administration have considerable autonomy compared to the more
centralized control in more uniWed states such as the UK. Because funding is
designed to give eVect to party programs, representatives are concerned to ensure
hrm and the new public management 471