This reportexplains the Governments role in managing the economy of the United Kingdom,exploring why economic markets fail and how the Government could help tocorrect these market failures. Also, it explains UK Government policy on theenvironment.Market failure it is the situation when free marketcannot ensure the efficient allocation of goods and services. Market failureoccurs when the marketplace cannot provide Public goods (it is a goods orservices which is provided for all the people by the Government or by privateindividuals or organisations, without gaining profit from it), like defence,street lighting etc.; Merit goods ( it is a goods or services, like education,that the government feels that people will under-consume, and which should tobe subsidised or provided free at the point of use so that consumption does notdepend on the ability to pay), like public libraries, health programmes, earlyyears education etc., these goods provide an example of Missing markets- these arethe markets where demand exist, but supply is absent, it happens because theentrepreneurs are impossible to charge consumers at the point of consumption, forexample, street lighting is available in an area, all the people can use it,and no one can be denied access to it.
These markets would not exist if therewas not Government intervention in market mechanism. Also, Market failuresoccurs if there are Negative Externalities, they take place when theconsumption or production of goods have harmful impact on other groups ofpeople, with no compensation have been paid, for example, pollution, if somefirms produce chemicals and cause pollution as a side effect, then the localfisher mans won’t be able to catch fish. This loss of income going to be theNegative Externality. The Government intervention helps to prevent and reduceharmful impact of pollution, congestion etc, by using regulations and laws. Forexample, the environmental Taxes, like The Congestion Charge- this is a highprofile environmental charge introduced in February 2003.
It is designed to cuttraffic congestion in inner-London by charging motorists £8 per day to enterthe central charging zone, as not one single person or business can beresponsible for it. Positive externality occurs when consumption of product orservices causes a benefit to another person, for example, education, when youget education you get a private benefit, also you can educate another person.The Government intervention helps to unemployed workers gain useful trainingand education, in consequence of that Government receives more tax revenues andpays less unemployment benefits. Another aspect, which could lead MarketFailure is Imperfect Competition, it means that larger firms (Monopolies-market with one seller and multiplied buyers) who is the price maker, can risesthe prices and earn more profit, what can impact on consumers welfare, alsomonopolies could create large barriers for other companies to enter the market,for example patents, government restrictions etc, or exit the market, forexample existing contracts, union agreements and regulations. The Governmentintervention could help both, consumers and firms who seek for lower prices anda profitable share of the market. The regulations like a price setting,taxations or subsidies could help consumers and firms to achieve the desiredresults.
UK Government policy on theenvironment.Environmentalissues are important in todays’ society, because of constant growth of naturaldisasters, warming and cooling periods, changing weather and much more, thereason of that is a constant pollution of environment. Pollution is theexistence in or introduction into the environment of a substance which hasharmful or poisonous effects and is a worldwide problem. The UK Government ishardly working to protect our environment, by preventing and reducing harmfulimpact of pollution, reducing the amount of waste, preventing the air and waterpollution and protecting areas of parkland, wildlife reserves and marinebiodiversity, by enforcing laws, regulations and other policy mechanisms.Government can control pollution by using the different types of Environmentalpolicy instruments- these are tools used by Governments to realize theirenvironmental policies, for example economic incentives and market basedinstruments, which can be very effective to encourage compliance withenvironmental policy such as: v Legal controls, for example,regulations to prohibit, limit (legally enforceable; punishment and adversepublicity for offenders)v Persuasive guidelines, for example,on product design, process control (not legally enforceable, but discriminationpossible against firms and products which fail to comply)v Financial inducements, for example,grants to modernise plants, processes.v Financial penalties, for example, atax on products which breach standards set, a tax on firms, which use pollutiongenerating processes.UKStatistics on Waste, prepared by Department for Environment Food & RuralAffairs, for period from 2010 up to 2015 shows that Recycling Rate for Wastefrom Households was 40.
4% in 2010 increasing by 44.9% in 2014 and falling to44.3% in 2015. This is the first time, rate has fallen since it began in 2010,though the 2015 figure still represents the second highest annual value onrecord. There is an EU target for the UK to recycle at least 50% of householdwaste by 2020. Inconclusion, I would like to tell that Government intervention in economy, helpsto prevent lots of problems and imperfections in many industries. References1.