SupplySide 24 stats

• Supply side policies are a major Hot Topic area for macro exams this year
• Supply side policies are often linked to Major themes, maybe UK themes, maybe more General themes
• You have to be ready regardless of what the question asks you to do
• This question will help you massively in that regard
• Make sure you've watched the video on UK stats as a lot of that context will be underlying in this video
• The presenter will release a fiscal policy themes video and a monetary policy themes video
• Potential growth has taken a battering in the UK ever since the financial crisis
• Prior to the financial crisis, the UK's annual potential growth rates were around 2-2.5%
• From the financial crisis up to covid times, the rate fell to around 1.5%
• As of now, potential growth annually is around 1%, with some organisations putting it even lower
• Reasons for the decline in potential growth include poor productivity, shrinking workforce, poor business investment, poor infrastructure, and underperforming public services
• Supply side policies


  • Interventionist supply side policies
  • Market-based supply side policies
• Economic inactivity


  People of working age who are either not willing to work, not physically able to work, or not seeking work
• Economic inactivity rates have risen from around 20% to 22.1% since Covid times
• Economic inactivity is bad for potential growth and contributes to higher inflation and labour shortages
• Supply side policies to reduce economic inactivity

  • Government spending on Education and Training
  • Government spending on Healthcare
  • Government spending on Infrastructure
  • Government spending on Child Care
  • Reducing income tax
  • Reducing National Insurance
  • Reducing benefits
• The UK's natural rate of unemployment is quite low at around 3.5%
• Types of unemployment in the natural rate

  • Structural
  • Frictional
  • Seasonal
• Supply side policies to reduce the natural rate of unemployment

  • Government spending on Education and Training
  • Government spending on Infrastructure
  • Reducing income tax
  • Reducing National Insurance
  • Reducing benefits
  • Reducing the strength of trade unions
  • Deregulating hiring and firing
• There is significant regional inequality in average weekly earnings in the UK
• Reasons for regional inequality include inequalities in productivity, education, healthcare, public transport, and infrastructure, as well as the changing structure of the UK economy
• Supply side policies to promote regional growth

  • Government spending on Education and Training
  • Government spending on Healthcare
  • Government spending on Infrastructure
  • Subsidies, grants, and tax credits for businesses
  • Tax incentives for businesses
  • Deregulation
  • Creation of Enterprise Zones
• Productivity in the UK has been abysmal since the financial crisis
• The UK's average annual productivity growth rates since the financial crisis have been 0.4%, less than half the rate of the richest 25 countries
• Low productivity is a major reason for the UK's high current account deficit
• Supply side policies to boost productivity and improve export competitiveness

  • Government spending on Education and Training
  • Government spending on Healthcare
  • Government spending on Infrastructure
  • Subsidies and grants to firms for investment
  • Lower corporation tax
  • Relaxing immigration controls
  • Reducing minimum wages
  • Reducing the strength of trade unions
  • Competition policies
  • Creation of Enterprise Zones
• Evaluating supply side policies involves considering their expense, time lags, lack of guarantee of success, negative stakeholder trade-offs, and the need for targeted interventions