THE GOVERNMENT AND THE ECONOMY 24/05/2019 CHAPTER 14 ECONOMICS 2: THE GOVERNMENT AND THE ECONOMY This is the Title Slide R. DELANEY

Reasons for Government Involvement in The Economy. R. Delaney Reasons for Government Involvement in The Economy. To provide merit goods. To provide sociably desirable goods or services. To provide an income for people who cannot provide one for themselves. To provide services that are too important to be controlled by the private sector. To provide finance for industries when the private sector is unable to provide it. To make regulations concerning the running of the economy.

Central and Local Government R. Delaney Central and Local Government Central government is responsible for overall national economic issues and the provision of goods and services such as national roads, railways, electricity supply and health care. Local government is responsible for the provision and maintenance of local roads, water services, waste disposal services, public housing and libraries.

R. Delaney The National Budget The national budget is the government’s estimate of its income and expenditure for the coming year. The government makes a distinction between current and capital expenditure so we have a Current Budget and a Capital Budget. Government current (day-to-day) expenditure is spending on the provision of goods and services that will be totally used up in that year. Government capital expenditure is spending on assets that will benefit the country for some years into the future.

Example of a Current Budget R. Delaney Example of a Current Budget National Current Budget For Year 2013 INCOME €m €m 338 PAYE 18 Customs Duty 73 DIRT 129 Excise Duty 144 VAT Corporation Tax 57 759 EXPENDITURE Health & Social Welfare 275 Education & Science 166 Defence 49 Debt Servicing 138 Agriculture 76 704 SURPLUS 55

Types of Current Budgets R. Delaney Types of Current Budgets A balanced current budget happens when the planned current income equals the planned current expenditure. A surplus current budget happens when the planned current income is greater than the planned current expenditure. 3. A deficit current budget happens when the planned current expenditure is greater than the planned current income. (In this case the government must borrow money).

Government Capital Expenditure and Sources of Income R. Delaney Government Capital Expenditure and Sources of Income Examples of Capital Expenditure Building new schools Building new roads Building new hospitals Providing computers for schools Examples of Income for Capital Expenditure Surplus, if any, on the current budget Income from the sale of semi-state bodies, e.g. Aer Lingus EU grants Borrowings

Terminology used with government finances R. Delaney Terminology used with government finances The exchequer balance is the difference between total government revenue and total government expenditure (current and capital) in any one year. The national debt is the total amount of money owed by the central government at any given time. The general government debt is the national debt plus all local government debt at any given time. Debt servicing is the payment of interest on the national debt.

Government Departments R. Delaney Government Departments The names of many of the government departments have changed since publication of the textbook. The next slide contains the official names of all government departments as at 1st September 2010. Remember these can change from time to time and up-to-date names can be found on the website: www.irlgov.ie/departments

Government Departments R. Delaney Government Departments Agriculture, Fisheries and Food Communications, Energy and Natural Resources Community, Equality and Gaeltacht Affairs Defence Education and Skills Enterprise, Trade and Innovation Environment, Heritage and Local Government Finance Foreign Affairs Health and Children Justice and Law Reform Social Protection Tourism, Culture and Sport Transport Taoiseach