Supply Side Policies in UK (Essay Sample)

IMPORTANCE OF SUPPLY SIDE POLICIES IN IMPOROVING THE PERFORMANCE OF THE UK ECONOMY
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Introduction
Supply side policies aim at eliminating barriers that limit production capacity of goods and services, they also help in boosting investment in capital goods. In the end this helps consumers to access a variety of quality goods and services at lower market prices. Supply side policies can be categorised into two; market based policies and interventionist policies (Arestis 2011).
Market based supply side policies
Reducing disposable income tax
When income tax reduces the employees the UK employees get motivated to work more since taxation because they feel offloaded from the heavy burden of taxation. The increase in working hours will help in increase the output of the country. Furthermore reduction in disposable income enables households to save a sizeable amount that they inject back into the economy inform of investments (Arestis 2011). This boosts the investment level in UK and hence the level of domestic output.
Reducing corporate tax
A reduction in the level of corporate tax levied by the UK government enables producers in UK to make more profits. Thus increase in profit levels get used in expanding production capacities of various firms across the country. Increased production further leads to creation of more jobs and hence reducing unemployment levels in UK (Claessens 2010). Thus the policy has double benefits to the economy; increased output and increased job creation opportunities.
Reforms in the labour market
Reforms in the labour market of UK like Reducing of trade union’s powers would help to improve economic performance in many ways. For example by abolishing the minimum wage policies, many industries in UK would be in a position to cut down the high cost of production incurred in paying salaries, the cost reduction would enable the UK industries the opportunity to save more and hence expand their production capacities through research and development. This would greatly help in expanding the growth of the UK economy (Claessens 2010).
Privatization
Privatizing companies owned by the UK government would help in improving efficiency in management of the firms and hence increase their output levels. Furthermore privatization relives the UK government the financing burden of sustaining state owned companies (Claessens 2010). Thus the UK government would be in a position to use more of its budgetary allocation towards infrastructural development projects which would help to spur economic growth and development.
Interventionist supply side policies
Government subsidies
Government subsidies help in reducing the operation costs incurred by many industries in UK. Thus the industries save and expand their production capacities boosting economic growth levels (Arestis 2011). Furthermore subsidies help in lowering prices of goods produced in UK and hence increases their competitiveness in the global market, this in the end increases UK’s export earnings in the global market improving its balance of trade and hence influencing the overall growth of the UK eco...