A Two-Nations Budget?

After taking office last June, Tory Prime Minister Edward Heath promised to launch a "revolution so quiet and yet so total" that it would turn Britain once more into a competitive economic power. By easing the oppressive burden of taxation, he hoped to restore incentive to executives and galvanize workers out of the "I'm all right, Jack" mentality that has hobbled productivity for decades. Though he could hardly dismantle the Labor-built welfare state, he did begin to pare some of the benefits and increase the cost of social services.

Last week the Tory government carried its quiet revolution--or counter-revolution--a long step further. In the House of Commons, Chancellor of the Exchequer Anthony Barber unlocked the customary faded red leather case embossed with Queen Victoria's monogram, "VR," and produced the new budget. It is an economic program designed to get Britain out of what Barber describes as "the ruts we have been following": an economic growth rate of only 2%, an inflation rate of 8% and rising unemployment that currently has 750,000 Britons out of work. In a two-hour speech that brought Tory M.P.s to their feet and sent the London stock exchange index to the biggest one-day rise in its postwar history, Barber announced tax cuts of $1.3 billion, favoring high-wage earners and intended to stimulate "initiative, enterprise and effort."

Some Relief. In an effort to raise the growth rate to at least 3%, corporation taxes were lowered to 40% (under Labor, the high was 45%). Inheritance tax exemptions were liberalized. As a first step toward a reform of Britain's "confiscatory" income tax system, as he called it, Barber put a 75.4% ceiling on tax rates for those in the $50,000-and-above range (v. the 91.25% rate that applied under Labor). There were lesser cuts for those in the middle-income brackets. Additionally, the elderly had their pensions boosted by 20% and exemptions for minor children were raised by nearly $100.

There is little doubt that Britain's tax structure has discouraged skilled workers from boosting their earnings by overtime, penalized executives, and driven high-paid artists out of the country --Noel Coward to Switzerland, the Rolling Stones to France, and Peter Sellers to Ireland. While launching the tax reforms, the Conservatives are also taking some painful steps toward making social services more selective. This week the government is ending cheap welfare milk to expectant mothers and preschool children. Increases in school meal prices, prescription fees in the National Health Service, dental charges, fares on the nationalized railways and rents on subsidized housing have all been put in motion since the Tories came to power. Even the cost of Barber's higher pensions for the aged will come from higher payroll contributions from workers.

Can Heath really restore dynamism to Britain by giving the relatively well-to-do a bigger break than the relatively hardup? Theoretically, such an approach might be just what is needed. Politically, it might prove a bad gamble. Labor was quick to alert Britons to the implications of the cutbacks. "It is a budget for strengthening inequality," said ex-Chancellor of the Exchequer Roy Jenkins. Former Prime Minister Harold Wilson touched an even more sensitive nerve. He charged that Barber had created a "two-nations" budget, recalling Disraeli's famous label for the Britain of haves and havenots.

This file is automatically generated by a robot program, so reader's discretion is required.