Economics IGCSE Edexcel - Government Regulation

Promote competition:

1. Encourage the growth of small firms through lowering taxes and business start-up schemes.
2. Lowering barriers to entry.
3. Monopoly control - this is achieved through regulation offices such as the Office of the Rail Regulator (ORR) and the Office of Gas and Electricity Markets (OFGEM) who are used to regulate prices so that consumers are not exploited. Monopoly control is also achieved through the use of fines. For example, National Grid was fined 41.6 million pounds for refusing to allow smart meters.
4. Merger control - investigations are carried out by the Competition Commission (CC) to see if the merger will create a substantial lessening of competition. For example, BSkyB was forced to sell some of its stake in ITV to increase competition.

To influence location of firms:

1. Operating a regional policy to attract firms.
2. Firms can apply for financial help called Regional selective Assistance (RSA) if they demonstrate that their project will safeguard jobs,

Why influence location of firms?:

1. Reduce unemployment. This is done by offering firms incentives such as investment grants, tax breaks and rent free factory space.
2. Reduce congestion and other problems such as housing shortages and social services pressure by relocating businesses to other areas. This is done by offering incentives to relocate or by refusing planning permission.
3. Reduce income inequality between regions.

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Effects of Privatisation:

Consumers:

1. Higher competition means lower prices, increased quality and innovation.
2. Exploitation may occur. E.g. rail.

Workers:

1. More unemployment as focus on efficiency means introduction of machinery
2. Pressurised to increase productivity. 

Firms:

1. Access to more funds.
2. Aims changes to making profit.
3. Subject to less governmental interference.
4. Can be taken over or merged.

Government:

1. Money earnt from privatisation is huge. However, often governments sell them off too cheaply.
2. Increase in company profits means greater tax revenue.
3. Privatised firms don't have to be subsidised.
4. Governments no longer take profits from firm.

Economy:

1. Increase in efficiency means higher growth.
2. Unemployment may rise.
3. Inflation may become unstable.
4. Negative externalities may increase.