CIMA BA1 Syllabus B. Microeconomic And Organisational Context Of Business - Government intervention - Regulation & direct provision - Notes ^{8 / 9}

Direct provision

Where the free market is producing too few merit goods, or where the market power at private firms is seen to be too high, the government may decide to act as a provider of goods and services

eg provision of healthcare in the UK through the National Health Service (NHS).

There are potential problems with this approach, for example:

• Government organisations do not need to make a profit so there is less incentive for them to control costs.

• State ownership leads to large organisations which are difficult to control.

• Some international trade treaties Forbid state ownership.