1. Role of the Government in the Economy

2. Instruments of Government Economic Policy
Fiscal policy
Monetary policy
Direct intervention
Price and incomes policy
Economic planning
Exchange rate policy

3. Summary of Government Economic Aims
Full employment
Control inflation
Equilibrium on the balance of payments
Control government finances
Just social policy
Provision of infrastructure
Achievement of economic growth
Regional development

4. Some Conflicts Between Government Economic Aims
Full employment versus control of inflation
To achieve full employment the government increases expenditure and lowers interest rates. These two actions would actually fuel inflation. Similarly, to control inflation the government would increase interest rates, decrease expenditure and increase direct taxes. These actions would be counter-productive to the creation of employment.
Control of government finances versus full employment
As an aid to employment the government usually undertakes measures that necessitate increased expenditure without increasing taxes. These actions have a detrimental affect on government finances.

5. Some Conflicts Between Government Economic Aims
Full employment versus balance of payments equilibrium
The creation of employment results in the increasing of the general level of income in the economy. As Ireland has a high MPM, this will automatically cause an increase in imports, which could result in a disimprovement in our balance of trade.
Provision of infrastructure versus control of government finances
Expenditure on the infrastructure is normally financed – apart from EU funds – by government borrowings. This expenditure does not always bring a direct or immediate return to the government, thus increasing the burden of the national debt, requiring extra servicing of the debt and thereby increasing current expenditure.

6. Some Conflicts Between Government Economic Aims
Economic growth versus just social policy
To achieve a just social policy the government may impose high taxes on the high-income earners and transfer this income to those on social welfare. These high-income earners are usually the wealth creators in the economy. These high taxes could force these people out of the economy and so seriously stunt the effort to achieve economic growth. Some people would also argue that the welfare payments might act as a disincentive to get people back onto the workforce.

7. Privatisation
Privatisation is the sale of government owned companies to the private sector.

8. Advantages of Privatisation
The sale of these companies can raise money for the government, which can be used to reduce the national debt.
Many of these semi-state companies are loss-making enterprises supported from taxation. Their sale would reduce the need for taxation or the money could be spent providing other services.
Some semi-state companies’ activities are restricted by the Act which set them up. This restricts their expansion and thus their profitability. By selling the semi-state company a new set of Memorandum of Association and Articles of Association can be drawn up allowing the business to expand.
Privatisation gives Irish people the opportunity to invest in major Irish companies. The government can discriminate in favour of investors seeking small numbers of shares and against large institutional investors.
Employees are often given shares in the company being privatised. This affords them a chance to earn capital gains on the stock exchange, if the company is successful.

9. Disadvantages of Privatisation
The government will succeed only in selling profitable or potentially profitable semi-state bodies, which will leave it supporting the loss-making bodies.
The new companies could fall into foreign control and decisions could be made that are not in the national interest.
The new company could discontinue the provision of services that the semi-state body deemed socially desirable, but which are unprofitable.
The privatised company may reduce staffing levels, thus creating more unemployment and causing an extra burden on government resource (in the form of more unemployment benefits).
If the new privatised firm is still a monopoly, it could restrict production to increase prices to the consumers.

10. The National Development Plan 2007–2013
The National Development Plan (NDP) has identified five prioritised areas of investment during the life of the plan.
Economic infrastructure
Aims to invest in:
Transport – €32,914m to be invested
Energy – €8,526m
Environmental Services – €5,772m
Communications and Broadband Programme – €435m
Government Buildings Infrastructure – €1,413m

11. The National Development Plan 2007–2013
Enterprise, science and innovation (about €20 billion)
Aims to:
attract high-quality foreign direct investment
develop our own indigenous (native) companies
establish Irish companies capable of becoming world leaders in given industries
modernise the agriculture sector, develop the tourism industry and support the rural economy.

12. The National Development Plan 2007–2013
Human capital (total €25,796m)
Aims to:
Ensure access for everybody in our society to the highest standards of education.
Meet the labour skills requirement of the future.
Develop the third level education sector.
Particular attention to be given to post-graduate studies.

13. The National Development Plan 2007–2013
Social infrastructure (Total €33,612m)
Aims to:
Have a fair and equitable redistribution of the wealth created by our economic success.
Invest €21 billion in housing to include the provision of 100,000 new social and affordable units.
Invest €5 billion in health infrastructure.
Invest €2.3 billion to modernised prison infrastructure, provide a new criminal courts complex and improve Garda infrastructure.

14. The National Development Plan 2007–2013
Social inclusion (Total €49,636m)
Aims to:
Invest €12 billion on a Children’s Programmes dealing with childcare services, child protection and recreational facilities.
Invest over €4 billion on Working Age Education Support programmes.
Invest €9.7 billion to help older people live independently at home and to provide quality residential care facilities for those who can no longer do so.
Invest €19 billion on programmes and services for people with disabilities.
Provide extra funding for the RAPID (Revitalising Areas by Planning, Investment and Development) programme.

15. Transport 21
Transport 21 is a government capital investment programme of €34 billion over the period 2006 to 2015.
Its stated aim is to provide finance to:
Complete the development of the inter-urban motorway network by 2010.
Bring about improvements in the rest of the national road network, particularly in the regions identified in the National Spatial Strategy.
Complete the safety programme on the national rail network.
Bring about a radical improvement in the level and quality of rail services.
Transform the public transport system in the Greater Dublin Area;
Develop the public transport system in the provincial cities;
Improve regional and rural public transport services;
Fund essential capital works at the six existing regional airports;
Improve accessibility to public transport for people with mobility, sensory and cognitive impairments.