Report on Supply Side Policies in the UK Economy: An Economic Analysis

Verified

Added on  2020/07/23

|14
|3331
|335
Report
AI Summary
This report provides a comprehensive analysis of supply-side policies and their effects on the UK economy. It begins with an introduction to supply-side policies, explaining their objectives and importance in enhancing economic efficiency. The report then examines the UK economic environment, detailing the reforms implemented, such as income tax cuts, financial deregulation, reduction in trade union power, and privatization, alongside interventionist techniques like education and infrastructure development. The report further discusses the effects of these policies, including their impact on inflation, unemployment, balance of payments, and overall economic development. It highlights both the positive and negative aspects, offering a balanced perspective on the efficacy of supply-side economics in the UK context. The report concludes by summarizing the key findings and implications of supply-side policies for sustainable economic growth and stability.
Document Page
Economics for Business
tabler-icon-diamond-filled.svg

Paraphrase This Document

Need a fresh take? Get an instant paraphrase of this document with our AI Paraphraser
Document Page
TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
Supply side policies................................................................................................................1
UK Economic Environment as implication of Supply side policies reforms.........................1
Effects of Supply Side Policies in UK economy....................................................................4
Recent changes and supply side policies in UK economy.....................................................9
Limitations or disadvantage of Supply side policies............................................................10
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12
Document Page
INTRODUCTION
To have the favourable economic environment in the nation there has been development
of various policies and strategies that helps in enhancing economies. In the present report there
will be discussion based on various supply side policies which are being adopted by the UK
government in consideration with enhancing the economic environment of nation. This report
will be beneficial as there is determining of the various effects, importance, examples as well as
limitation of Supply side polices. Moreover, there will be identification of the policies which
help on overcoming with the effects of inflation on country.
Supply side policies
These are the policies which help in enhancing the internal economic efficiency as well
as improving the small scale industries to have better growth as well as fruitful operations.
Therefore, these are the policies which are being adopted by the nations as to have the fruitful
increment in the domestic production. These techniques are very time consuming as the
outcomes of such strategies take time to reflect their actions (Crisp and Powell, 2017). The main
objective of the supply side policies to enhance the aggregate supply which affects in enhancing
the capacities of economy in consideration with making increment in the quality of the
production. Therefore, it has various positive effects such as it helps in reducing the rate of
unemployment as well as bring the stable prices over the necessities and household commodities.
UK Economic Environment as implication of Supply side policies reforms
The nation has been affected by various external effects such as recession, inflation and
other financial crisis. In accordance with the Implication of Supply Side policies in UK, in the
period 1980-1990 there has been various challenges and competition which has been seen. Thus,
the economic policies made by the government in these regard help theme in making adequate
rise in the production, reserves as well as standard of living for the citizens (Danaher, Smith and
Telang, 2017). However, there has been reforms which are being taken by the UK government
with respect to this, such as:
1
Document Page
Illustration 1: Supply side policies
(Source : Crafts, 2017)
Free- Market Oriented Supply Side Policies
Income tax cuts: These reforms have helped the nation in terms of reduction in the
income tax rates which was cut from 83% to 40%. Thus, it has helped in terms of giving the
better wealth and revenue to the societies as well as corporations. Hence, it has been criticised by
several economists that it impacts of the rise in the labour productivity as to bribe them to make
efforts to earn incentives (Greenfield and Paoli, 2017). However, it can be said that it has helped
the nation in terms of acquiring the adequate efficiency, development of small scale industries as
well as rising the wealth of society. Therefore, another side effects is that it has helped in rising
the inequality in the nation as the remuneration are being payable as per the qualification and
level of duties performed by such individuals.
Financial Deregulation: It has impacts on various financial bodies such as banks and
relevant institutions which are having adequate amount of reserves and they were being capable
2
tabler-icon-diamond-filled.svg

Paraphrase This Document

Need a fresh take? Get an instant paraphrase of this document with our AI Paraphraser
Document Page
of lending the money to the society such as loan, mortgages, borrowings etc. It has affected in
rising the competition among such financial bodies as well as effecting in reduction of the
interest rate charge over such financial grants (Amountzias, Dagdeviren and Patokos, 2017).
Therefore, here the motive of government in terms of making the adequate rise in the economic
development, wealth of society as well as advancement of technologies in the nations. Therefore,
after that much financial changes in the nation which are brought negative impacts in 2018-09 as
per introduction of global financial crisis and inflation which has created obstacles in the
economic environment of the nation.
Reduction in the trade unions power: In accordance with the introduction of inflation
in the UK environment which has brought the less efficiency and operations for the trade unions
in the economy. Therefore, the Law has reduced the power of manufacturing units in the nation
which as resulted in the less production in the case of Coal, steel and minerals businesses and
brings sticks as well as financial shortage (Owen and Mason, 2017). It has also brought the
negative impacts over the work environment in such industries as increment in inequality in jobs,
pay-offs etc.
Privatisation: The impacts of Supply side polices which has brought the privatisation in
the national boundaries. Thus, the government has sold its various main utilities such as water,
gas and electricity units to the private sector. It effects in the rising the efficiency and revenue
generation of such industries. The privatisation action was made in accordance with the
fluctuation in the UK stock market (Bono, Leathers and Raines, 2017). It also has the negative
impacts as it introduces the competition in the various business units such as telecommunication
sectors and industries like, BP, BT and British Airways. It has impacts over them as the services
offered by them at the cheapest rate and with good quality.
Competitive tendering: In context with these economic reforms which had brought
completion in every field of work such as banking and financial institution and various utilities
of the Country such as water, gas and electricity (Crisp and Powell, 2017). The impacts of the
competition creates competition tendering due to impacts of such market monopolies.
Interventionist Supply Side Techniques:
3
Document Page
Rise in the level of education and literacy: There has been impacts of this economic
reforms over the society as the literacy rate of the nation is tends to have the adequate rise as
well as it has provoked the educational facilities in the nation (Danaher, Smith and Telang,
2017). There has been introduction of the new technologies, reforms in teaching techniques etc.
Therefore, such changes has positive impacts as per increment in the labour productivity in
various industries. However, it may cost the government and require time and higher tax to have
the adequate amount of funds to promote the training schemes to individuals but it will have the
favourable results in the long run.
Development of infrastructure and transportation facilities: There will be rise in the
capacity of the transportation made in the year as per such changes will help in enhancing the
productivity and developing the infrastructural facilities such as railways, airways, road etc.
However, this development will bring promptness in trade practices and have the favourable
impacts if the revenue generation by the government and various industries (Crafts, 2017). Thus,
it will be challenging in terms of implementation of such techniques in the crowded areas like
London, Manchester etc.
Affordable and budgeted development of Homes: The financial grants and borrowing
capacity of the various financial bodies has been increased such as banks and other relevant
institution. Thus, it affects in having the rise in level of loans and mortgages offered by them due
to the challenging environment and competition (Greenfield and Paoli, 2017). Thus, they have
offered such financial grants at lower costs, low interest rate etc. which become affordable for
the individuals in terms of acquiring houses.
Increment in the health and medical facilities: The government and appropriate
amount of reserves and funds as accordance to the supply side policies which has development
favourable conditions in the health care and medical services (Amountzias, Dagdeviren and
Patokos, 2017). There has been improvement in the public health as well as reduction in
consumption of alcohol, cigarettes, drugs and sugar. Therefore, it brings reduction in obesity,
pollution as well as life threatening diseases.
Effects of Supply Side Policies in UK economy
There will be various positive as well as negative effects of Supply Side policies in the
UK economy that will be helpful in terms of enhancing the economic growth. Therefore, Such
4
Document Page
policies usually very helpful in terms of economic reforms and development with consideration
of society at large (Walk on the supply side needed for UK economy, 2015). There has been
various positive and negative impacts of Supply side policies in UK economy such as reducing
the inflation rate, decrease in unemployment, increment in the productivity, reduction in the
spices of commodities, house loans as well as interest rates. Thus, such economic reforms will be
beneficial to have the sustainable economic growth, stable interest rates and increase in the
aggregate demand of the nation. This will be fruitful as to have the proper labour and capital
productivity, expansion of the business operations such as SMEs as well as reduce their
dependency over government grants (Owen and Mason, 2017). However, there has been various
challenging economic terms in the UK economy which will be solved and overcome by help of
supply side policies. Thus, here the several impacts of these economic policies such as:
Reduction of inflation impacts: The importance of such policies will be helpful for
them in terms of having the adequate reduction in the inflation rate. Therefore, in accordance
with the Europe and US they have faced the cost push inflation because of higher impact of trade
unions in such countries which has effects in increasing the wage push inflations (Bono, Leathers
and Raines, 2017). Therefore, the wages of labour sector has been increased so which has
reciprocally affected the rise in prices of commodities manufactured by industries as well as it
brings the inflation in the economy.
In consideration with implication of such policies in the UK economy it can be said that,
it has reduced the power of trade union which do not bring ten cost push inflation and have the
adequate control over the prices of commodities. Thus, such impacts do not invited the inflation
in the UK economy at that time (Crisp and Powell, 2017). However, it has monitored the lower
cost push inflation such as:
5
tabler-icon-diamond-filled.svg

Paraphrase This Document

Need a fresh take? Get an instant paraphrase of this document with our AI Paraphraser
Document Page
Decrease in Unemployment: In terms of these policies it can be said that it has brought
the appropriate increment in the numbers of jobs and opportunities which has the positive results
in controlling the employment rate in the nation. There will be rise in the requirement of funds
for provoking the education and training scheme to the society (Danaher, Smith and Telang,
2017). Therefore, these supply side polices help in increasing the employment rate in UK.
However, in comparison with other nations such as Europe and US, UK has less unemployment
which can be seen with the help of below listed graph:
6
Document Page
Illustration 2: Unemployment rate UK verses US and Europe
(Source : The importance of supply-side policies, 2016)
Enhancing the BOP and BOT of nation: In accordance with the implication of such
policies in the operational aspect of the business. Thus, increasing productivity of the business
helps in bringing the competition in market. However, if the increment in the competitive
environment in industries there will be high demands of products in the market. It can be
beneficial in improving the deficit balance in the current account of the nation. These polices will
be fruitful for the MNCs as helps in bringing up the transportation facilities (Crafts, 2017).
Therefore, it will be helpful in terms of overcoming with the costs of manufacturing as well as
beneficial for the organisation in reducing the costs.
7
Document Page
Economic development: In terms of adopting the Supply side policies which become
fruitful for government in terms of having the adequate increment in the productivity as well as
increase the national GDP rate. It can be said that if the government and wants the stable
sustainable growth rate than there will be need to have the appropriate supply side policies.
However, this will be beneficial for the business in terms of having the proper tax credit,
research and development, technical advancement, rise in the per person income as well as better
investment options (Greenfield and Paoli, 2017). However, it can be said that the nations who are
having long run supply which will affect in having the higher economic growth, it can be seen in
the below listed graph such as:
8
tabler-icon-diamond-filled.svg

Paraphrase This Document

Need a fresh take? Get an instant paraphrase of this document with our AI Paraphraser
Document Page
Recent changes and supply side policies in UK economy
In order to over come such challenges there has been various reforms and strategies
planned by the UK government. The government has sold our its main utilities to the private
sector such as water, electricity and gas unit. Thus, which has the positive impacts over having
the adequate revenue as well as increases their production efficiency (Amountzias, Dagdeviren
and Patokos, 2017). They have invited the incentive tax box for patent which helps in provoking
the research ad development in the nations. Government has reduced the corporation tax which
are levied over the businesses that help in having the stable prices over the commodities as well
as better remuneration to the employees. They have developed the national infrastructure plan
which has improved the transportation facilities in nation. Therefore, such reform has menaced
the economy conditions in the nation as well as increase the wealth of society. These can be seen
in the below presented picture:
9
Document Page
Limitations or disadvantage of Supply side policies
The disadvantages of supply side policies which can be seen in various cases and field of
operations. However, in accordance with the changing policies and procedure which have the
positive impacts over employment and GDP rate which have some limitations too. These
loopholes can be understand as follows:
Increase in dependency over private sector enterprises: The government has made
changes in the operational activities such as provoking the privatisation which will affect the
nation in terms of having the better revenue generation as well as efficiency (Owen and Mason,
2017). Thus, it may help them in bringing up the GDP ration but it somehow increases their
dependency over the private sector.
10
chevron_up_icon
1 out of 14
circle_padding
hide_on_mobile
zoom_out_icon
[object Object]