4.2.5.2 Supply Side

• Offshore Wind aims to produce 40 gigawatts by 2030 and support up to 60,000 jobs
• In 2018, the UK spent 1.7 % of its GDP on R n D
• In 2018, Germany spent 3.1 % of its GDP on R n D
• In 2018, South Korea spent 4.5 % of its GDP on R n D
• The UK aims to lift R n D up to 2.4 % of its GDP by 2027
• The UK was ranked 9th out of 140 in global competitiveness in 2018
• What are the aims of supply side policy?

  • Improve incentives to look for work
  • Increase labour and capital productivity
  • Increase occupation and geographical mobility
  • Increase investment and research and development spending
  • Promote competition and stimulate invention and innovation
  • Improve a country's competitiveness in the global market
  • Improve the trend rate of growth
• What are the three types of policies?

  Firm, Interventionist, Freemarket
• What are the six Interventionist policies?

  1. Interventions to reduce poverty
  2. Provision of key public goods
  3. Active Regional policy
  4. State ownership of key businesses
  5. Policies to list human capital
  6. Building more social housing
• The North East Active Travel Strategy aims to have over half of all short journeys in the North East (under 5 miles) to be made up of active travel by 2035. In 2018/2019 it was 37%.
• An example of a intervention to reduce poverty is Universal Basic Income. A 2023 report proposed a trial of UB of £1600 a month in Jarrow and East Finchely, involving 30 people and last 2 years
• The Mayor of Tees Valley Ben Houchen's Tees Valley Combined Authority , bought Teesside Airport from Peel Group in 2019, making it state owned
• Human Capital can be lifted through apprentiships , T-Levels, and training schemes
• Building social housing will decrease geographical immobilites
• The Levelling Up policy aims to create more opportunities across the UK, particularly in the North. The government is investing £13 billion into Levelling Up projects for local people and businesses to grow the economy, create jobs, improve transport and provide skills training
• Interventionist policies can be used to help with supply issues relating to scarring
• Scarring effect can happen when:

  1. People become economically inactive
  2. Businesses fail and the stock of businesses decline
• Examples of economic policy responses:

  1. Employment subsidies eg. furlough
  2. Relax immigration controls to address skill shortages
  3. Loans to guarantees schemes to improve corporate finances
• Six Free market Policies:

  1. Tax cuts
  2. Cutting red tape
  3. Privatisation
  4. Free Trade
  5. Flexible working
  6. Deregulation#
• Reducing red tape like environmental targets and legislation can reduce businesses costs
• Thatcher privatised British Gas in 1986, British rail in 1994 and 1997, British Airways in 1987 and British Telecom in 1984
• An example of flexible working hour are zero hour contracts
• Property rights are important as people have more on an insentive to do something if they own it and can make money from it.
• Property Rights can prevent the Tragedy of the Commons
• Drawbacks of Free Market Solutions:

  • Lower taxes do not necessarily improve work incentives
  • Reductions in progressive direct taxes might lead to an increase in inequality
  • Lower corporation tax may not increase investment, as corporations might increase dividends instead
  • Deregulation markets can lead to increase instability
  • Reducing labour market protections can increase insecurity and reduce investment in training and skills
• Why is infrastructure important?

  • off grid renewables
  • transport
  • waste disposal
  • improve irrigation in farming
• Interventionist - provide public goods to fill in for missing markets like lighthouses and street lights to fix market failure
• Interventionist - Build more social housing, so vacancies can be filled and AJ shifts to the LF as employment is a merrit good
• Interventionist - provision of public goods, increase growth as government spending increases
• Interventionist - Provision of public goods means that development improves, meaning better healthcare, growth and education so growth is more sustainable
• Interventionist - Building social housing means that employment increases and growth as consumption will increase, which could lead to inflation
• Interventionist - Training schemes means that development will be more sustainable , there will be more output, so more trade and growth will increase. Also more corporation tax
• Interventionist - Nationalisation will mean that government spending will increase, employment will rise, causing consumption to increase so marginal propensity to consume will increase and the multiplier will have a greater effect
• Free Market - Privatisation will make a firm more competitive and efficient, so profit and output will increase, could lead to dynamic efficiency
• Free Market - Flexible working hour will cause the AJ to shift to the LF
• Free Market - Deregulation will increase competitiveness, and decrease barriers to entry which could decrease profits of firms already in the business
• Free Market - Tax cuts means that profit will increase, and potentially increase in wage, or a decrease in price and an increase in efficiency as investment in research and development
• Free Market - Privatisation will lead to an increase in growth and trade, but a decrease in employment
• Free Market - Flexible working hours could lead to a increase in inequality as there could be more people on low paid jobs
• Free Market - Deregulation could increase trade and growth