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Competition
Forbid or allow takeovers/mergers 
Outlaw anti-competitive practices 
Opening markets to new entrants (eg gas) 
Monopolies
Break them up; regulate them 
Sales demand
Government policy affects demand 
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PART A: THE BUSINESS ORGANISATION, ITS STAKEHOLDERS AND THE EXTERNAL ENVIRONMENT 
 
74
 
8.6 Government influence over operational decisions 
Decision 
Comment 
Health and safety
Legislation, regulations 
Employment
Equal opportunities legislation 
Consumers
Product safety standards 
Tax
Sales tax procedures, income tax, accounting control 
As well as State influences, there are other influences which affect groups of nations rather than a single 
nation, for example the EU. These are known as supra-national bodies. We looked at these in Chapter 2. 
 
9
Fiscal policy
Fiscal policy 
provides a method of managing 
aggregate demand 
in the economy.
Fiscal policy
: government policy on taxation, public borrowing and public spending. 
9.1 Fiscal policy and the Budget 
A feature of fiscal policy is that a government must 
plan 
what it wants to spend, and so how much it 
needs to raise in income or by borrowing. It needs to make a plan in order to establish how much 
taxation there should be, what form the taxes should take and so which sectors of the economy (firms or 
households, high income earners or low income earners) the money should come from. This formal 
planning of fiscal policy is usually done once a year and is set out in 
the Budget
. 
The two components of the budget which the Government determines and through which it exercises its 
fiscal policy are: 
(a) 
Expenditure
.
The Government, at a national and local level, spends money to provide goods and 
services, such as a health service, public education, a police force, roads and public buildings, 
and to pay its administrative workforce. It may also, perhaps, provide finance to encourage 
investment by private industry, for example by means of grants. 
(b)