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

2. 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.

3. 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.

4. 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.

5. 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

6. 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).

7. 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

8. 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.

9. 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:

10. 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