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To What Extent Will Government Intervention Essay

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To what extent will government intervention correct market failure? Market Failure is a situation in which the market fails to allocates resources efficiently or fairly. At the moment there is market failure due to an overconsumption of alcohol in the UK, this overconsumption leads to negative externalities and this is one of the main causes of market failure. The government now has an opportunity to correct this market failure through taxation, regulation and legislation, but are the methods used likely to be successful or will alcohol prove to be an unrecoverable market? Alcohol abuse costs the UK government a staggering £27bn per year, and a tenth of this is the annual cost to the NHS. Through tax duty the UK government gets £8.13bn in the form of receipts. The money that the government gets back through receipts doesn't even cover a third of the cost of alcohol abuse to the government. Essentially this means that alcohol abuse is costing the government far too much money, however the government has come up with some methods to reduce the damaging effect that alcohol is having. One method being used by the government is to increase the tax duty on alcohol. At the moment the tax duty on alcohol is at 25% and this is set to increase in the near future. The government is increasing the tax duty in an attempt to discourage people from buying as much alcohol as they did before. When people have a night out then they won't be able to afford as many drinks and so they will struggle to get drunk, or alternatively they won't be able to afford to go out as regularly and so they will cause havoc less often. Consequently, by increasing tax the government will receive...

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