Spring Sunshine

Labor's one-beer tax cut

Before going to the House of Commons to deliver his 13th budget message last week, Chancellor of the Exchequer Denis Healey, strolling in London's St. James's Park, stopped to pat an April snowman on the head. "I think I shall produce a little sunshine to brighten up the spring of our recovery," he declared. "It's a bit cold, but summer is on the way."

Next day it became clear that Healey's budget had not produced as much sunshine as Britons would like. The St. James's snow had melted all right, but the stock market plummeted, the recently resuscitated pound slipped again and the Liberals began to mutter threats of ending their pact with the Labor Party unless Healey came up with some bigger tax cuts. Reflecting the general mood of Britons, Conservative M.P. William Clark scowled: "The budget is a damp squib."

The budget, Labor's first serious salvo in a campaign for the election that Prime Minister James Callaghan may call as early as this fall, was supposed to offer something for everybody--as indeed it very nearly did. The beetle-browed Healey, who once urged that the government raise taxes on wealthier Britons "until the pips squeak," was all smiles and charity this time. "I do not call for any sacrifices," he said. Indeed, the budget increased old-age pensions, froze the price of school lunches and ordered free milk for kids aged seven to eleven. That was a tweak at Tory Leader Margaret Thatcher, who had ended free milk when she was Minister of Education, earning her the sobriquet "Thatcher the Milk Snatcher."

More important, Healey also raised the thresholds of taxable income, liberating some 360,000 families at the poverty level from taxes altogether and softening the bite on low and middle income citizens--though only slightly. The average British family man, who earns $7,410 a year and gives up fully 20% of that in taxes (compared with 14% for the median U.S. taxpayer), can look forward to keeping an additional $3.50 of his weekly pay; that is about enough for one extra beer a day at the local pub.

The trouble was that Healey's fine-tuning of the budget seems to have been so carefully calibrated that few could get excited about it--and the British get more excited about budgets than most people. "Too cautious," groused a Trades Union Congress chieftain. "Politically timid," grumbled Confederation of British Industry President John Greenborough. Healey himself was partly to blame. Expansive and voluble, he is given to flights of optimism. For example, he has predicted a drop in the inflation rate this year to 7%--down from the present 9.1% rate and a peak of 26% three years ago--for so long that if it is achieved, as expected, it will be anticlimactic. Similarly, the budget dominated the news for days before its presentation, and the result was something less than Britons had been primed to expect.

For one thing, everyone--not least the Labor Party--is breathing easier about the economy these days, thanks in large measure to North Sea oil. Callaghan and Healey are banking on further improvement in the economy as a powerful weapon to offset the campaign themes that Tory Thatcher is developing on immigration, with its appeal to racial fears, and law-and-order. Callaghan's chances of remaining in No. 10 Downing Street are now about even with Thatcher's moving there, a remarkable turnaround for a man who was 22 points behind Thatcher in the opinion polls 18 months ago.

The Tories, for their part, are faced with trying to salvage a situation in which Labor walked off with their ace card: tax cuts. Said Thatcher of Healey's budget: "His conversion to tax cuts is election-deep." Already the Tories are crying that the Callaghan-Healey largesse did not go far enough. Laborites also concede that Thatcher unleashed a powerful issue in immigration. Observes Home Secretary Merlyn Rees: "She lost the Asian vote, but she gained the British working class."

The crucial battleground for the upcoming election, however, is likely to be newly oil-rich Scotland. With its commitment to the establishment of a Scottish assembly to deal with a wide range of Scottish matters, Labor hopes that it will pick up a large thank-you vote. In an important by-election in Glasgow last week, Labor won handily, a comforting indication that the Scottish Nationalists' bandwagon is not rolling. The Nationalists, however, have traditionally been drawn from the right, and there is always the chance they might decide to return to their Tory home. As a result, party leaders from both sides are doing everything short of learning to play the bagpipes in order to woo the Scots.

Though the outcome of any general election is impossible to call right now, some savvy politicians are making a prediction: another hung Parliament, with neither party gaining a majority on its own. Once again the betting is that the splinter groups--the Liberals, the Ulster Unionists, the Scottish Nationalists--will hold the power to set the course of government.

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