BRITISH BUDGET Unprecedented bid for tax-pay deal with unions

Press, Volume CXVI, Issue 34123, 8 April 1976, Page 17

BRITISH BUDGET Unprecedented bid for tax-pay deal with unions

• x.Z P A -Reuter—Copyright > LONDON, April 7. The British Chancellor of the Exchequer (Mr; Denis Healey; yesterday offered an unprecedented Budget deal to Britain’s trade unions: he would lower taxes, he said, if they accepted a 3 per cent limit on wage increases for the nation’s work force.

I lie unions have until June to accept the Chancellor’s offer, made on the first day in office of the new Labour Prime .Minister (Mr Callaghan). It would involve even greater restraints than the present £6 ($11.20) a-week voluntary limit in pay rises, which amounts to about 10 per cent on the national wage bill, but the tax concessions would be retrospective to vesterdav.

If the unions refused to take up the offer, the whole nation would have to bear a heavier income-tax burden, the Chancellor said.

The first reaction from the! genera! secretary of the! Trades Union Congress, Mr J Len Murray, was: “I will not commit us to accept only 3 per cent on what we have heard so far . . . The Chancellor has shown no flexibility- of the kind necessary to sort >ut wage differentials.” Lord Allen, the general| secretary of the Union of! Shop, Distributive and Allied, Workers, said that the pro-; posed 3 per cent curb was a, very low limit. The Conservative Leader; of the Opposition (Mrs Mar- > garet Thatcher) accused Mr; Healey of having turned; over to the unions the re-| sponsibility for decisions onl taxation which affect the en-> tire nation. “That seems to! me to be taxation without 1 representation,” Mrs Thatcher said. She added: “The country; has been offered a big borro-’ wers’ Budget from a soft-op-tions Chancellor. Confidence; in Britain’s future has been! transformed downwards, and the country’s problems ; seem far worse than they! were two years ago.”

Mr Hugh Scanlon, the; leader of Britain's huge en-j gineering union, said that the ' deal was so stringent as to I be almost unacceptable. In a leading article. “The; 3 imes” says today: “Mr Hea- i ley’s conditional Budget, now ; awaiting approval from the; unions, is nothing short of a ■ major constitutional change.i Tn this modern world, governments ruled by armies are ■ common, but governments I ruled by trade unions are a I rarity.” Other newspapers criticise i Mr Healey for doing nothing to cut Government spending —budgeted for at £56,400m —and his estimated annual deficit of nearly £12,000m. The “Financial Times” ex-1 presses the view that Bri-! tain’s labour leaders have been offered a good deal. I The promised tax reliefs! were in the scale of allow-, ances granted before earn-' ings become liable to tax.! For example, a single person’s tax-free allowance was raised from £675 ($12601 to £735 ($1370), and for married persons, the relief was; raised to £lOB5 (S 2100 from £955 ($1780).

As news of the Budget; measures, including the! rough bargain on wage re-; straint, reached the foreign! exchange markets, sterling; picked up from a record lowfigure a few hours earlier. Dealers said that the lack of; reflationary measures in the! Budget was encouraging. The pound rallied to close at, $U51.8617, having touched; 5U51.8515 in a bout of pre-! Budget nerves. “Guarantee to workers” Mr Healey said that he intended to guarantee that the working population as a whole did not suffer by accepting the 3 per cent deal, and that if the unions were ready to make an even .greater pay sacrifice, the tax ■ relief w-ould be greater. The Chancellor announced ; immediate help for old ; people and families: tax allowances for the aged and ! children would both be increased, at a cost of £37ora i(s69om) to the government. Mr Healey offered a further £930 ($1740) in direct tax concessions, conditional on union acceptance of the lower pay limit for next year. He offset £37om (s69om) loss to the Exchequer bj’ imposing higher duties on beer, spirits, wines, and cigarettes and a one-penny (1.8 c extra tax on petrol, making the average cost of the latter 70 pence a gallon. Mr Healey said that there would be no tax increase on pipe tobacco. Amid laughter, he said: “Many pipe smokers are retired, or about to retire, or to be redeployed.”

Mr Healey offered one important concession to conIsumers by cutting taxes on I items like colour televisions, i washing machines, furs, and ' jewellery, w-hich had hith- ! erto been placed in a luxury ; class. Value-added tax on j items like this was reduced •from 25 per cent to 12) per j cent. Concessions to industry The Chancellor gave some ; encouragement to industry. ! and took further action to alleviate unemployment by ’ doubling to £2O ($37.3m) a jweek the compensation paid I to firms to keep redundancies ; down. | Corporation tax remains i unchanged at 52 per cent, i but there will be tax concessions for small businesses, j Mr Healey said that his ! Budget was aimed at helping those who most needed it. ■ Besides the tax relief to fam- ! Hies with children, old age pensions would be increased !in November: for married couples, by £3.39 ($6.16) to i £24.50 ($45.70) a week; and 1

for single people, -bv £2 I ($3.73) to £15.30 ($28.60). New measures would be introduced next year to tax fringe benefits for directors, such as company cars, and those earning more than $9325 a year. Heavy borrowing Mr Healey painted a relatively optimistic picture of Britain's chances of restoring to health its balance of payments. bringing down inflation to less than 10 per cent by next winter, and reducing unemployment from the present level of 1,261,000, or 5.5 per cent of the total work force. But he forecast that the public-sector borrowing re- , quirement for the coming financial year would be I £12,000m ($22,400m) — even worse than the alarmingly I high £10,750m ($20,100m) for ! 1975. On the balance of pay;ments, the Chancellor pointed to a marked improvement of nearly $3730m in the deficit since the record bad year of 1974 and last year.