Government Interventions to Correct Market Failure in the U.K.

GOVERNMENT INTERVENTIONS TO CORRECT MARKET FAILURE DO MORE HARM THAN GOOD
Student’s Name
Course
Instructor’s Name
Institutional Affiliation
City/State
Submission date
It is essential to have an active government that cares about the welfare of its people in terms of pricing, production, and consumption of products and services. One way governments intervene to promote market and general economic fairness is by developing policies to control the pricing of commodities. This way, consumers are protected from overcharging since the prices remain standard and change with changes in the cost of production. Anon (2011; 2020); Das (2021, p. 312) imply that examples of such interventions by governments include regulating negative externalities such as overcharging, environmental pollution, and obesity among consumers due to the diet content of manufactured products breaking up monopolies. For instance, monopolies control market prices at the expense of the consumers due to a lack of competition, hence exploiting consumers based on “pay if you need it or stay without.” Sometimes governments fail when they develop interventions to correct market failure and end up causing more harm. This has been the case with many governments on several occasions, where they design strategies to have standard prices for consumers, but instead, there is more harm to either the producers, the consumers, or all parties involved in the production, supply, and consumption (Saunders 2017; Solimano 2005, p. 145). For instance, the U.K. government has been a victim of such scenarios. It placed several policies and directives to control and correct the market, but the results were more detrimental effects.
Examples of when the U.K. government became a victim of more harm resulting from its interventions to correct market failures are the sugar tax policy, energy tariff cap, and the doctoral loan. These interventions were made to benefit consumers but ended up hurting other entities and even the consumers due to changes occurring due to unseen internal and external influences.
Sugar Tax Policy by the U.K. Government
The Sugar Tax by the U.K. government was introduced on April 6, 2018. This policy was introduced to promote reduced sugar intake among school children to fight obesity, where the majority of obese children carried the obesity attributes into adulthood (Treasury 2018). This policy provided that companies would pay 24p per liter for drinks containing 8 grams of sugar per 100 ml and 18p per liter for drinks containing 5-8 grams of sugar per 100 ml. The implementation of this policy was meant to ensure that companies producing drinks with high sugar content paid levies that could support student sports in schools and promote healthy student lives by catering to healthy breakfast clubs. On the contrary, the impacts of this policy were not as expected since there were some direct and indirect changes in purchasing and remittance of levies. Due to the imposed levies for the different sugar concentrations, there were increased prices for the drinks. The increased costs were because of an increase in taxation to help cater to health-promoting activities of school children.
Consequently, there were reduced purchases due to the high prices of soft drinks, leading to low-income levels for the production companies. The plan then did not work as anticipated since the market for soft drinks tumbled and could not support the production and supply system. This was a significant example of when government interventions to correct market failure caused more harm since the soft drink market became troubled and could not support the activities meant to be championed by its progress. 8827388997327628-330341
-23854-14756301963972-284921963972-28492
Figure 1: An expressive relationship between negative externalities and tax.
Figure 1 shows the relationship between negative externalities and tax. First, sugar-sweetened beverages have negative externalities since they contain extremely high sugar content. Sugar beverages cause harm o society through increased obesity which is a risk factor for other diseases such as diabetes. Hence, they contribute to an unhealthy society, leading to increased costs of treatment for diabetes and cardiovascular diseases associated with obesity. Therefore, taxations on such products help minimize the rate of purchase and consumption. The taxes collected are used to support health programs that cater to the treatment of such conditions (Zhao 2020; Winston 2006, p. 45; Anon 2013, p. 178). Therefore, it is evident that the sale and consumption of unhealthy products lead to increased living standards and unhealthy living due to consistent health complications. When taxes are imposed on negative externalities, they reduce purchases, hence reducing production (Labonte 2010, p. 98). As a result, the outcomes become more social-efficient.
Energy Tariff Cap by the U.K. Government
-5491722960548The energy tariff cap by the U.K. government was implemented on January 1, 2019. This was a measure to keep consumers safe by ensuring they were not charged excessively for energy consumption by the sellers. This measure was intended to provide a stable structure in which the consumers have standard rates to pay for their energy based on Default Tariff Price Cap and Prepayment Meter Price Cap. With this measure implemented, it was believed that the prices for gas and electricity would not go up, hence keeping the consumers safe. Unfortunately, oil prices went, causing a hike in the prices of all other commodities. Since oil is essential in energy production, increasing its price meant increased energy capped prices. Therefore, the Default Tariff Price Cap increased from £1,137 to £1,254. On the other hand, the Prepaid Meter Cap increased from £1,136 to £1,242 (Anon n.d.)). This increase meant more charges for consumers. Notably, when there are tariff caps set, it always means that they will be at a standard high level where both the suppliers and consumers will be safe in case of slight fluctuations. When the Default Tariff Price Cap increased, the consumers were charged more; hence the government’s initiative to protect consumers failed.
-7951-157...