Supply- side policies

• A response to increasingly fierce international competition and they aim to change the underlying structure in the economy.
• Supply-side policies such as tax changes designed to change personal incentives, may increase potential output and improve the underlying trand rate of growth

They also affect:

• The level of unemployment
• The rate of change of prices
• UK external performance as reflected in the balance of payments

Act on the motivation and efficiency of individual economic agents to improve economic performance

If successful, such policies also have a macroeconomic effect by shifting the economy's long-run AS curve to the right

Industrial policy meaures

• Privatisation - the sale or transfer of assests such as nationalised industries from the public sector to the private sector
• Marketisation - the shifting of economic activity from non-market provision financed by taxation to market provision
• Deregulation - the removal of previously imposed regulations in order to promote competition by removing barriers to entry and to get rid of uneccessary red tape and bureaucracy, which raises firms' costs

Labour Market meaures

• Cutting income taxes to create labour market incentives
• Reducing state welfare benefits to create an incentive to choose low-paid employment rather than unemployment
• Increasing labour market flexability by reducing the powers of trade unions and replacing jobs for life with short-term labour contracts

Finacial and Capital market measures

• Deregulating finacial markets to create greater competition and lower borrowing costs
• Encouraging saving by granting special tax privileges for saving and selling shares in privatised industries to encourage wider share ownership
• Promoting entrepreneurship via tax cuts
  
  
• Reducing public spending, budget deficit and government borrowing to free resources for private sector use

• Aim to shift the economy's long-run AS curve to the right - increasing the economy's potential level of output

Diagram:

Supply-side policies can lead to an outcome in which invention and innovation reduces business costs - and price level - at the same time as promoting economic growth and higher levels of output and employment

• By making markets more efficient and competitive, supply-side policies were vital in promoting and elongating the boom years
• The bad side - high unemployment and widening income inequalitities
• The good side - continuous economic growth that kicked in when the appropraite policies were in place

The private sector's role in improving the supply-side of the economy

• supply side policies promote entrepreneurship and popular capitalism
• 
• It cannot deliver unless the private sector does its job in improving labour productivity, innovation and investment