Thatcher budget primes Britain for economic rebound
Question: Which Common Market country is expected to have the greatest economic growth rate this year? Answer: Britain.
Britain, on the economic rebound, is no longer ''the sick man of Europe.''
Business confidence is rising. A national television poll of more than 200 senior executives from across the business spectrum on the eve of Tuesday's budget showed the vast majority planning for prosperity.
As many as 81 percent anticipated higher company profits; 60 percent saw larger capital investments; and 42 percent expected to increase their number of employees.
With a 3 percent growth rate projected for the coming year, Britain's economic recovery may well pale next to the more robust 6 percent predicted for the United States. But it eclipses that of its major rivals, France and West Germany.
More significantly, the British growth rate is three times the 1 percent annual rate of the past 10 years.
The overriding concern is unemployment. Although the jobless rate appears to be flattening out, it remains a worrisome 13.4 percent (or 12.6 percent when seasonally adjusted). At that rate, there are some 3 million people out of work.
Yet there were enough other positive indicators for Britain's new chancellor of the Exchequer, Nigel Lawson, to announce to a boisterous House of Commons on Tuesday that the British economy was well on its way to recovery, and that it was fully sustainable.
No, there would not be any tax cuts this year, he said, but there was the promise of tax cuts to come in 1985/86, and the years beyond, if the economy kept chugging along as nicely as it was now.
Overall, the Thatcher government's budget produced increases in some forms of taxation, such as higher duties on gasoline and some consumer goods, but softened the blow for lower-scale wage earners by raising the income tax threshold.
For business, there was welcome relief in cuts in the corporate tax and the removal of the much-detested surcharge on national insurance (payroll tax).
Predictably, response to this kind of budget, which deftly mixes giveaways with takeaways, splits down party political lines.
The opposition Labour Party dismissed the budget as a ''rich man's budget'' that did nothing for the poor and the unemployed.
''It's an employers' budget,'' said a man with a strong Lancashire accent to his North Country colleagues over a breakfast table in London the next day.
But the rank and file Conservative members were ecstatic over Mr. Lawson's performance. Rattling their order papers and intoning ''hear, hear,'' they hailed him as the most impressive messenger of good tidings since the days of ''Super Mac.''
(''Super Mac,'' as former Prime Minister Harold Macmillan was known, was famous for his electioneering slogan, ''You've never had it so good'' back in 1960s.)
The London Stock Exchange exuded similar confidence. Immediately after the budget the market reached record levels. The upsurge was the largest single-day leap in 19 months.
If the House of Commons was divided over economic priorities, there was a consensus that Mr. Lawson had turned in a virtuoso performance.
The Guardian newspaper, not often known to side with a Tory government, called Mr. Lawson's speech a ''triumphant tour de force.''
When the BBC's ebullient commentator Sir Robin Day asked a panel, ''Were you not impressed with his coherent force and technical grasp?'' Liberal Party leader David Steel replied, ''I would concede that. Full marks for his clarity.''
The urbane Roy Jenkins, a former chancellor in an earlier Labour government, a past president of the European Commission, and now a leading member of the fledgling Social Democratic Party, described Lawson's speech as ''lucid, highly intelligent, succinct.''
Economic jargon, such as the public sector borrowing requirement, leaves the British taxpayer cold. What he wants to know is, ''Will I be better off or worse off than I was before budget day?''
When social benefits and direct and indirect taxes are all thrown into the pot, the net effect is that every wage earner will come out somewhat ahead. For the unemployed there is only the hope that a resurgent economy will create more jobs.
An accountant interviewed on television before Mr. Lawson revealed what was in his battered budget despatch case had a shrewd idea of what the chancellor had in mind: ''They'll bash the same old things, cigarettes and booze, but I'm hoping wine will not go up.''
The Conservative government did ''bash'' cigarettes, which recorded the largest single tax increase, and beer. Cigarettes went up 10 pence for a packet of 20, reflecting Lawson's concern about the health risks of smoking. Beer went up a more modest 2 pence per pint.
The rise in beer and the fall in table wine (down 18 pence per bottle) is not so much a political aberration as a desire by the chancellor to keep liquor in line with a ruling of the European Court.
Lawson's budget is an extension of Tory policies that put Prime Minister Margaret Thatcher and President Reagan in the same conservative camp.
And just as Ronald Reagan is viewed as America's most conservative postwar president, so Mrs. Thatcher is emerging as Britain's most conservative postwar prime minister.
Ironically, the welfare state is a British invention. Socialism in Britain has meant the nationalization of large industries and a national health care system.
Though many of these socialist innovations have stuck in the throat of the free-enterprise Tories, Conservative prime ministers have tended to accommodate with existing socialist legislation.
Not so Mrs. Thatcher. She has left the country in no doubt as to where she feels Britain should be heading.
Addressing the House of Commons earlier in the month, she said in her usual trenchant style, ''We shall continue to work for sound money, for lower inflation, for lower government borrowing and lower interest rates; we shall pursue value for money in public services. We shall reduce regulations and government control over industries and individuals. We shall continue to foster the spirit of enterprise. . . . We shall continue to transfer industries from the public to the private sector where they will be subject to competition and the disciplines of the market. We shall maintain the right of council (public housing) tenants to buy their houses and encourage local authorities to sell voluntarily. . . .
''We shall give parents more choice and more power in schools. . . .''