Since coming to office in 1979 the Conservative government has concentrated on improving the supply side of the economy in two main directions. First. an attempt has been made to improve the way the labour market works by providing increased incentives to supply labour and reducing distortions which impedc the smooth operation of the labour market. Second a policy of privatisation has been followed as a way of making markets for goods and services function more efficiently. Before we outline the nature of the policy initiatives it is important to stress two points. First, one of the principles underlying the wide range of supply side policies pursued by the Conservative government is a political philosophy of minimal slate interference with the working of the free market system. This is associated with the economic belief that the freer play of market forces will lead to improvement in economic performance. It need hardly be said that such views are highly controversial. Second. the empirical evidence available on a number of recent initiatives is limited and often inconclusive. Bearing these two points in mind. we first examine supply side policies affecting labour market(section 16.5.2) and subsequently privatisation(section 16.5.3)