1. Government Policies and Actions
Economic policy
Growth
Full Employment
Inflation / Deflation
Surplus / Deficit
Competitiveness
Equality
Government Business Ownership

2. The Government Policies and Actions
Government policies and actions affect business in many different ways
Government spending on a particular activity can help a business be successful
The Government also regulates business by setting out rules that businesses have to follow

3. Government policy affects business through these areas:
Policies and Actions
Government policy affects business through these areas:
Growth
Employment levels
Inflation
Surpluses
Competiveness
Equality
Government business ownership

4. Policies and Actions
The Economy

5. Government Economic Policy
Policies and Actions
Government Economic Policy
Economic policy is designed to provide the best possible economic environment for each of the 4 groups
There is overlap between all 4 groups – they aren’t isolated but interact and can have multiple roles
For example a business is also a consumer if it buys products or services from another business

6. Growth Policies and Actions
Government policy try’s to grow the economy
Growth refers to increases in the total number of goods produced
The more goods that are produced, the more people are employed. They earn more income. They spend more. Etc.
Growth is measured by Gross Domestic Product (GDP)
GDP = The total value of goods produced in a country in a given year

7. Growth in the UK, 2007 - 2010 Policies and Actions
Source: Office for National Statistics

8. Government and Growth Policies and Actions
The Government encourages growth in different ways
The Bank of England can keeps interest rates low so businesses invest in new technology and consumers will borrow more £ to buy expensive items
The Government can provide incentives for workers to train and to improve skills
Tax rates are kept low so more people start businesses and consumers have more disposal income to spend
The Government can spend money on new projects

9. Government and Growth Policies and Actions
The Government works closely with business to try and create policies for growth
Examples include making sure that taxes are not to harsh for small business and providing grants
Local government seeks to encourage growth of local business
Examples include creating new business development and providing business advice to small businesses

10. Full Employment Policies and Actions
Full employment exists in an economy when everyone who wants a job is employed
The availability of jobs is closely linked to the growth of the economy
Full employment acts to keep benefit costs low for the tax payer
The Government can encourage employment by
Making it difficult to receive benefits long term
Getting the unemployed to go on training courses
Providing incentives for industries to take on new workers in a recession

11. Unemployment in the UK, 2008 - 2010
Policies and Actions
Unemployment in the UK,
Source: Office for National Statistics

12. Effect of unemployment
Policies and Actions
Effect of unemployment
As people lose jobs there is an impact on the economy
Less money is spent as unemployment rises, which can lead to businesses not making enough money to survive and then to more job losses
High unemployment does mean that businesses have a large pool of people to choose from for jobs

13. Inflation / Deflation Policies and Actions
Inflation refers to general increases in price levels in the economy and can be measured in different ways
The UK Government tracks inflation using the Consumer Price Index (CPI)
Price rises can be bad for business as it means that the costs of business are higher (i.e. raw materials, fuel)
During periods of inflation, employees demand higher wages
One of the Government targets is to keep inflation under control and this is done through policies and with the Bank of England who set interest rates
The reverse of inflation is deflation
The ideal situation is when prices are rising very slowly in a predictable way

14. Keeping Inflation Low Policies and Actions
Reduce consumer demand and spending by increasing interest rates to encourage people to save more in banks
Increase taxes to reduce disposable income
Award public sector jobs only small wage rises

15. Prevent Deflation Policies and Actions Reduce tax so people spend more
Reduce interest rates to people get less back from the banks and are more likely to borrow from them instead
Increase government spending

16. Inflation in the UK, 2008 - 2010 Policies and Actions
Source: Office for National Statistics

17. Surpluses and Deficits
Policies and Actions
Surpluses and Deficits
The Government influences the economy through the Budget
The Budget is a plan that the Government makes each year (or more often if needed)
The plan sets out how the Government will raise money and how it will spend money
The main way of collecting money is through taxes
Government spends money on different things (police, schools, hospitals and so on)

18. Surpluses and Deficits
Policies and Actions
Surpluses and Deficits
When the Government spends more than it collects then it will run a deficit
When the Government spends less than it collects then it will run a surplus
Government surplus/deficit effects business
When the Government runs a deficit it puts more money into the economy so everyone has more to spend

19. Surpluses and Deficits – The Recession
Policies and Actions
Surpluses and Deficits – The Recession
The last Labour Government tried to deal with the recession through spending and they created a deficit by doing this
The problem with spending is that it can increase inflation rates so the Bank of England has kept interest rates very low to try and stop this
The new Con-Dem Government is cutting spending as it tries to pay back the deficit and eventually create a surplus

20. Competitiveness Policies and Actions
It is important for UK business as a whole to competitive
Competitive businesses are able to sell their goods and services overseas and at home in the face of competition from foreign firms

21. Competitiveness Policies and Actions
The Government supports competitiveness in a few ways:
By providing fast-moving motorways and train services
By supporting the development of a new IT structure, including increasing broadband speed
Through education and training initiatives
The Government is committed to creating a skilled workforce in order to make the UK more competitive in World Markets

22. Competitiveness Policies and Actions
The Government supports competitiveness in a few ways:
By providing fast-moving motorways and train services
By supporting the development of a new IT structure, including increasing broadband speed
Through education and training initiatives
The Government is committed to creating a skilled workforce in order to make the UK more competitive in World Markets

23. Equality Policies and Actions
In Britain there is a substantial difference between the rich and the poor
Governments have claimed to close this gap but the gap has grown in the last 20 years
A Government policy to reduce inequality is to tax people on high incomes more than those on low incomes
Some people argue that high taxes discourage businesses as they raise costs

24. Government Business Ownership
Policies and Actions
Government Business Ownership
The Government owns a number of businesses (i.e. Royal Mail, the BBC)
There are private-public partnerships which involve government and business working together (i.e. school Academy’s)
Some government departments provide services and act as a business (i.e. The Prison Service)
The Government can take over failing businesses (i.e. RBS)