Supply Side Policies: An Introduction

Key Macro Policy Objectives of Government

Inflation Control: Keeping inflation under control is a primary objective.
GDP Growth: Achieving steady, sustainable growth of GDP.
Employment: Getting more people back into work and lifting average living standards.
Trade Performance: Improving trade performance on the balance of payments.
Income and Wealth Distribution: Achieving a more equitable distribution of income and wealth.
Fiscal Objectives: Balancing the budget and reducing the size of the government national debt.
Welfare: Improving the overall welfare and well-being of the population.
Regional Balance: Achieving greater regional balance and stability in the economy.
Public Services: Increasing access to and the quality of key public services such as education and health.
Competitiveness: Maintaining and improving competitiveness in a fast-changing world economy.
Environment: Addressing environmental issues as both a threat and an opportunity.

What Are Supply Side Policies?

Supply Side Policies (SSPs) aim to increase productivity and the quality of factors of production, thereby increasing the productive capacity and capability of an economy. They're about improving the structural, long-term performance of an economy.

There are different approaches to supply side reforms:

Market-Led Policies: Emphasize giving the private sector more freedom in resource allocation.
Interventionist Approach: Focuses on overcoming persistent market failures.
Mixed Approach: A combination of market-led and interventionist strategies.

Examples of Supply Side Policies in Action

Privatization: E.g., Royal Mail privatization.
Tax Incentives: Patent box tax initiative, tax incentives for shale gas exploration, corporation tax cuts.
Investment in Apprenticeships: Expansion of modern apprenticeships, including the youth contract.
Welfare Reforms: Introduction of a controversial welfare cap.
Infrastructure Investment: The national infrastructure plan focusing on transport and the green Investment Bank for renewable energy.

Objectives of Supply Side Policies

Incentives: Improve for work and investment.
Enterprise and Innovation: Encourage startups and expansions.
Skill Development: Invest in people's skills for a changing work environment.
Capital Investment: Increase in factories, technologies, and R&D spending.
Product Market Competition: Make markets more competitive to stimulate innovation.
Economic Efficiency: Enhance mobility, flexibility, and overall efficiency.

Impacts of Effective Supply Side Policies

If executed well, supply side policies can:

Enhance GDP Growth: By increasing the productive potential of the economy.
Reduce Unemployment: By making the labor market more efficient.
Improve Trade Performance: Through enhanced competitiveness.
Mitigate Inflation: Allowing for non-inflationary growth.