How Far Have The Labour Government’s Economic Policies Met Business Objectives?
The British Government, like other democratic governments, seeks to influence the business environment to meet a range of objectives. These include stability and promotion of international trade and are essential in improving the people’s standard of living. By achieving stability and fairness, the government gives people an opportunity to find reasonably well paid and secure jobs, thereby ensuring a source of income. Furthermore, an efficient and internationally oriented business environment contributes to an increased number of successful businesses due to a bigger market and increased demand. If people have good purchasing power due to their high incomes, the businesses are encouraged to compete on product quality as well as prices. If achieved, high levels of income and better quality of products and services will lead to a significantly improved standard of living in the UK. Although this aim justifies government’s interventions affecting the business environment, there is still a debate going on about the extent to which government interventions influence individual businesses. The policies should not put too much extra burden on the shoulders of companies that are already struggling with internal problems such as high
The introduction of the minimum wage is still probably the most controversial part of the Social Chapter. There is no doubt that its introduction has been a success, with little employment cost or inflationary cost. This has prompted many to back a significant rise in the minimum rate. After all, if it has not hurt inflation or jobs by now and it has not significantly increased businesses’ costs, why should it in the future? But there are reasons why the national minimum wage has yet to damage the competitiveness of UK businesses. It is argued that the current level of £3.70 benefits relatively few people. This, in turn, has minimised the knock-on impact on jobs and inflation. Analysis done in the mid-1990s suggested that a minimum wage of £4.50, which some see as a likely EU-wide rate would have a much bigger impact on prices and jobs. The rise would affect small business in particular by rising their costs. Therefore, although a success so far, there should be an alternative to a minimum wage. If the minimum wage is raised to a level at which it is jeopardising job creation, this cannot be good for society as a whole. Benefits are one way in which the government can top up income, although Labour has tended to fear that these would create a culture of dependency on the state. Another crucial issue for the businesses and the economy as a whole is the level of inflation. The current government policy is to keep its level at about 2.5 per cent, which is being managed quite successfully at the moment. The awareness of possible effects of unregulated inflation, such as increasing costs for businesses and their inability to meet the demand, are a strong incentive for its careful control. Currently, the level of inflation in the UK is controlled by a careful use of deflationary monetary policy. Interest rates are set monthly by the independent Monetary Policy Committee (MPC) to achieve the government inflation target. It is argued that the fact that the government has given independent control of interest rates to the MPC is its cleverest decision. Major strategies employed are not decided by politicians but financial experts. On the other hand, it is argued, this means the government cannot claim that the low level of inflation is its own achievement. t has not been falling as fast as it did before 1997, the Labour government did create a million new jobs. Whether that is completely its merit or a consequence of good conditions created before its election is debatable. Statistics suggest that the chief cause of low income in the UK is unemployment. Unemployment has always been an issue of mutual concern of bot
Some topics in this essay:
Social Chapter,
Enterprise Councils,
British Government,
Committee MPC,
Competition Commission,
Chapter Chapter,
Furthermore Labour’s,
South American,
Tony Blair’,
British European,
minimum wage,
labour government,
social chapter,
economic growth,
business environment,
level inflation,
monetary policy,
individual businesses,
influence business environment,
businesses economy,
living standards,
promotion international trade,
level economic growth,
monetary policy rates,
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Approximate Word count = 1778
Approximate Pages = 7 (250 words per page double spaced)
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