Oil squeeze forces British to propose cautious '86 budget. But '87 tax breaks expected in the run up to next election
Britain's 1986 budget offers a little bit of butter this year, and the prospect of jam next year. Or, as the Chancellor of the Exchequer, Nigel Lawson, summed up his budget arithmetic, his tax proposals for the coming year are ``a safeguard for the present and a springboard for the future.''
In saying that, the chancellor was presenting what everybody expected: a cautious budget for this year and the promise of tax goodies next year to woo the voters in the run up to the next election which could take place as early as autumn of 1987.
Mr. Lawson produced what is being interpreted as a populist budget. He took 1 pence off the pound in the tax rate, thus reducing the standard income tax rate from 30p to 29p in the pound.
The chancellor set the tone for his speech by acknowledging the serious impact of falling oil prices, which drastically reduced his scope for tax cuts. The fall in oil revenues amounted to as much as 5 billion this year, and automatically sabotaged his hope voiced last year that some 3.5 billion would be available for tax cuts this year. The actual amount available was just under 1 billion.
While the slump in oil prices produced a far more modest budget, the chancellor insisted that his policies would remain unchanged.
Opposition politicians criticized the budget, arguing that the government's plan would only mean longer unemployment lines. Unemployment now stands at 3.27 million, and the opposition parties hoped for a more interventionist budget in which large infusions of government money could help create new jobs.
The government's budget strategy was to expand only existing schemes to help employ the youngest jobless as well as the long-term unemployed.
The budget, which was as much political as fiscal, stressed the government's efforts to keep down the rate of inflation, expected to fall below 4 percent in the coming year.
Disappointment among the less well off contrasted with the reaction in financial circles to Lawson's budget. The value of the pound, which has been steadily moving up against the dollar in recent months, strengthened even more while stock market prices also improved. Interest rates are expected to fall this week with a corresponding cut in mortgage rates.