Business, The Economy and Government

BUSINESS, THE ECONOMY AND GOVERNMENTUnit 6

Aims of this sectionBe able to:• List the ways in which the government creates a suitable

climate for business.• Explain the ways in which the government affects the

labour force.• Explain the impact of the economy on business.• Explain the impact of business in the development of the

economy.

What is the role of government?

• Which of these directly affect business development and growth in Ireland?

Local GovernmentHelps businesses by:• Zoning of suitable land for industrial development.• Provide affordable housing in an area.• Waste & sewage disposal for households and businesses• Provision and maintenance of good infrastructure.• County Enterprise Boards help new enterprises.

Central Government• Comprises of the Dail and

Seanad.• Dail is the place where all

revenue & spending decisions are made and new legislation is introduced.

• Budgets and bills must be approved by the Seanad.

• When the bill has been passed by the senate it must be signed by the president.

Reasons for Government InterventionThe government intervenes for a variety of reasons.• Legislation

• To protect those who have dealings with business. • E.g. Companies Act (memo of assoc), Health and Safety

• Protection of employees and consumers• Ensure the fair treatment of workers and consumers through

legislation.• E.g. Employment Equality Act, Sale of goods supply of services

Act.• Provides Infrastructure

• Government capital expenditure is spent on roads, rail, ports etc so that the economy can operate efficiently.

Reasons for Government Intervention• Promotion of enterprise and employment

• Through state agencies such as Ireland and Solas, the govt promotes employment. Grants and subsidies promote enterprise.

• Environment• The government must take measures to protect the environment

from damage, and the promotion of sustainable development.• E.g. Environmental protection Agency, An Taisce, Bord Pleanala.

• To provide essential services• The government will provide unprofitable services that would not

be provided by private companies. E.g. bus routes, electricity supply.

• Public amenities such as libraries, museums, parks must be provided for the welfare of the citizens.

Creating a suitable business climateIt is the role of government to create a suitable climate in which businesses can thrive:1. Taxation

• PAYE• Tax Credits• VAT/Excise duties• Corporation Tax• Stamp Duty

2. Government Expenditure• Capital Spending• Current Spending

Creating a suitable business climate3. Government Agencies

• County and city enterprise boards• Enterprise Ireland• IDA Ireland• Solas (Fás)

4. Government Planning• Wages• Industrial Relations

5. Economic Policies• Low interest rates• Low inflation• Low unemployment

The Government and the Labour Force

• As an employer:• The government is the single largest employer, employing approx.

250,000 workers.• Taxation:

• Low rates of personal taxation result in consumers having more disposable income. Spending on goods and services increases demand which leads to job creation.

• Low corporation tax provides incentives for companies to create jobs in Ireland.

• Grants and incentives:• Given to both domestic and foreign companies to locate their

businesses in Ireland providing employment.

The Government and the Labour Force

• Government expenditure:• The government spends large sums on products and services from

Irish businesses thus maintaining employment.• Investment in infrastructure leads to an increase in the number of

workers employed in the construction industry.• Education spending:

• Investment in education through training schemes, short-term courses, and schools and colleges result in a more skilled and employable workforce.