Supply side policies in the UK during 1980s and 1990s

Some of the supply side policies used in the UK during the 1980s and 1990s.

1. Privatisation.

There has been an extensive privatisation campaign, most of the major utilities such as Gas , Water and Electricity were sold by the government and floated on the stock market. In some industries like telecommunications it has led to more competition, lower prices and better quality of service.

However it has been difficult to introduce competition into the water industry. Rail Privatisation has been unsuccessful with the government having to effectively renationalise the railways.

2. Income Tax Cuts.

In the 1980s income tax was cut especially for the better off. The top rate of income tax fell from 60% to 40%. Overall the tax burden has not fallen because the government has increase indirect taxes such as VAT.

3. Reduced Power of Trades Unions:

The power of trades unions has fallen because of laws making it more difficult for unions to operate.

As well as supply side policies, the decline of manufacturing industries reduced the influence of trades in many industries like coal and steel.. There are now less days lost to strikes and wage inflation has not been a problem like in the 1970s.

  • However many workers are less protected and may get lower wages leading to greater inequality

4. Deregulated Financial Markets

The government has deregulated the financial services market, for example building societies can act like banks, and more institutions can now offer mortgages, this led to more competition and lower borrowing costs. However, the credit crunch of 2008-09, illustrated the problem of less regulated financial markets.

5. The New Deal.

This has made it more difficult for the unemployed to get benefits, benefits have also been increased in line with inflation and therefore less than wages. This has increased the incentive for people to get a job, unemployment in 2003 is at its lowest for over 20 years

 

Other factors that have increased productivity in UK economy

Increased productivity is not just due to government supply side policies. Other factors have also caused increased productivity.

1. Better technology. The development of the internet has helped reduce costs for firms and increase competition, this is not due to the govt.

2. Lower prices of raw materials. In the past decade the price of raw commodities have stayed fairly low, this has helped keep inflation low

3. Increased inward investment. Foreign companies have often been successful in implementing better working conditions

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