Para el primario del transformador (lado 23 kV)

Chancellor: Geoffrey Howe; Prime Minister: Margaret Thatcher (Conservative)

621

HC Deb 10 March 1981 vol 1000 c776 622

HC Deb 10 March 1981 vol 1000 c771 623

HC Deb 10 March 1981 vol 1000 c772 624

HC Deb 10 March 1981 vol 1000 c773 625

Ibid. 626

HC Deb 10 March 1981 vol 1000 c776 627

HC Deb 10 March 1981 vol 1000 c782 628

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Context

Over 1981 real output continued to fall, although there was some variation between quarters. The continuous quarter on quarter fall in GDP came to an end in the first half of 1981, though real consumer spending fell after the 1981 Budget. The inflation trend was downward; in 1981 inflation was more than 6 percentage points lower than in 1980. However, in January 1982 the twelve month change in the Retail Price Index was still 11 per cent, the same as a year earlier. Unemployment, however, rose to reach nearly 2.5 million by the March 1982 Budget,629 albeit a smaller increase than over the 12 months to March 1981.

Overall Budget Objectives

Familiar themes were restated in the Budget speech: public borrowing “cannot make excessive demands on the funds available without putting upward pressure on interest rates”.630 However, there was to be no large rise in taxation, in fact “I shall be proposing substantial reductions in taxation while at the same time reducing the Government's borrowing requirement”.631 This was not, however, a demand stimulus. Indeed, Britton (1991) notes “fiscal policy was not tightened further, but on the other hand little was conceded to those who argued for a large stimulus to help the economy climb out of recession”.632 Rather “this will be a Budget for industry — and so a Budget for jobs”.633 ‘Borrow, borrow, borrow’, the Chancellor argued would not help the unemployed, better to secure lower borrowing and stable prices and at the same time “to achieve substantial tax reforms, to promote the wider ownership of wealth, and to encourage the productive private sector”.634 Essentially this Budget began work on the Government’s exogenous, long-term objectives.

Major Budget Tax Measures

Cuts in personal income tax made up over half the nominal cost of the tax remissions. The Chancellor considered all six of these measures together in his speech, and introducing them explains “the paramount aim of this Budget is to help industry, to encourage business, and to create jobs… We remain firmly committed as ever, over the years, to reduce the burden of direct taxation. It is essential to do so to improve incentives, to remove disincentives and to reduce the poverty trap”.635 The main, additional and age allowances were then increased, as was the basic rate limit, the further higher rate threshold and the investment income threshold; all from 6th April 1982. A sizable amount of this remission was however, statutory indexation and so I only include that which was additional in the tax series. Being to stimulate the supply-side of the economy, I classify these tax cuts as exogenous, long-run.

Changes were made to the Petroleum Revenue Tax (P.R.T.). The supplementary petroleum duty was abolished and the P.R.T. rate was reduced from 1st January 1983. In the previous year the changes made the taxes more responsive to changes in price. With the fall in oil prices over 1982, the Chancellor noted that he could not reduce the burden of tax as much as industry had wished for. However, “I do agree with it on the need for some change of structure. I see, in particular, the advantage of profit-related taxes in relation to additional investment in existing fields… My hope is that the new tax structure that I have proposed will provide a more secure and stable regime for the future, permitting development to go ahead uninhibited by major fiscal uncertainties”.636 I classify these changes as exogenous, long-run.

The National Income Surcharge (N.I.S.), imposed by the previous Government, was cut by 1 percentage point from 2nd August 1982. Howe explained: “our prime purpose is to help private commerce and industry to help itself, by cutting its costs”.637 To provide more relief during the current year, there was a further ½ per cent reduction between August and 5th April 1983. The purpose of this was to effectively reduce by 1 per cent payments for the whole year 1982-3. I therefore do not treat this as a temporary measure and make use of the ‘full year’ cost. The purpose was to lower the long-term burden placed on industry by the tax; I therefore classify this as exogenous, long-run. The changes in income, P.R.T. and N.I.S. account for over 80 per cent of the tax cuts.

629

Claimant count measure; Cairncross (1992) explains that it was well over 3 million by March 1982 (p. 249). 630

HC Deb 09 March 1982 vol 19 c735 631

HC Deb 09 March 1982 vol 19 c727 632

Britton (1991), page 61. 633

Ibid. 634

HC Deb 09 March 1982 vol 19 c757 635

HC Deb 09 March 1982 vol 19 c756 636

HC Deb 09 March 1982 vol 19 c745 637

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Almost all the tax rises were on indirect taxes. The Chancellor noted: “For the Excise duties there has grown up in recent years a sensible presumption that they should be adjusted in line with the movement in prices from one year to the next…That is the basis of my approach to Excise duty changes this year”.638 Following this comment, fuel and alcohol duties rose on 9th March, tobacco duty from 11th March, gambling duties increased from 1st April and 1st October and Vehicle Excise Duty from 9th March 1982. Little is said other than the need to maintain real revenue or to raise revenue. Given that the overall stance of the Budget provides significant remissions for exogenous, long-run reasons, I assume the above changes are part of the package to fund the remissions and classify these as exogenous, long-run.