ABSTRACT
For more than a decade, the centrepiece of the Conservative government’s macroeconomic policy has been the Medium-Term Financial Strategy with its formal monetary growth targets (see Chapter 7). The prime aim of these targets was the reduction of the rate of inflation in order to establish a favourable environment for sustainable non-inflationary growth in the economy. This strategy for growth did not rely solely on a spontaneous recovery of the economy as inflation fell. The government had, in addition, a parallel strategy to encourage growth by means of a radical reform of the microeconomic structure or ‘supply-side’ of the economy. An integral part of this ‘supply-side’ reform programme was the desire to restructure the tax system, especially direct taxes, to encourage enterprise, effort and innovation.
