Britain Sugar Bowls and Election Fever

By Michael S. Serrill

"Budget day" in Parliament is always tinged with politics, a time when the government's Chancellor of the Exchequer tries to sweeten his economic plan for the coming year with at least a spoonful of sugar. But last week, when Chancellor Nigel Lawson arrived at the House of Commons with his 25-page budget, he brought along an entire sugar bowl. In a somber, 59-minute speech, Lawson cut taxes, pared government borrowing and placed Prime Minister Margaret Thatcher in an excellent position to call national elections as early as June.

In a package that he said "errs on the side of prudence," Lawson announced a drop in the standard income tax rate, from 29% to 27%. By shrinking the government's borrowing plans from $11 billion to about $6.4 billion for the forthcoming fiscal year, Lawson predicted that mortgage and other interest rates would fall. And in an omission designed to appeal to working-class voters, the Conservatives held back additional taxes on alcohol, cigarettes and gasoline.

Labor Party Opposition Leader Neil Kinnock denounced Lawson's presentation as a "bribes budget," charging that the plan "has little to do with the general good and everything to do with the general election." Leaders of the Alliance, a union of the Social Democratic and Liberal parties, were no less critical. Said Social Democratic Leader Dr. David Owen: "The Chancellor talks a lot about prudence while handing out the goodies."

But even Thatcher's most bitter enemies cannot deny that the economy is rebounding smartly. Consumer spending rose by 5% last year, while inflation simmered at a low 3.4%. The output of the once sickly manufacturing sector is up by 5%. The government even predicted last week that the 11.9% unemployment rate would fall below 3 million by July, which would be the first time that had happened since 1984. But both opposition politicians and some economists were skeptical of the claim, and noted as well that Lawson's tax cuts came about largely because record corporate profits and a surge in consumer spending combined to pour an extra $8 billion in revenues into government coffers.

Until recently Conservative strategists were urging an October date for elections, which must be held by the summer of 1988. With the Tories' popularity soaring, however, the balloting could be moved up to June. A Mori survey published Sunday showed that if the election were held now, the Conservatives would win 39% of the vote, Labor 33% and the Alliance 26%.

An early trip to the polls is all the more attractive because of the disarray in the Labor Party, which has been battered by the divisive antics of its far-left wing and by its calls for unilateral nuclear disarmament. Kinnock will try to recover ground this week when he is set to meet with President Reagan in Washington and tell him that he supports keeping U.S. cruise missiles in Britain as long as U.S.-Soviet arms-control talks continue. Meanwhile, Thatcher will burnish her foreign policy credentials when she travels to Moscow next week to confer with Soviet Leader Mikhail Gorbachev.

Some Laborites feel that the best they can hope for in an early election is a "hung" Parliament, with the increasingly popular Alliance holding the balance of power. But if the economy continues to improve, thus vindicating the redoubtable Prime Minister's tough policies, Margaret Thatcher may not have to call the moving vans to 10 Downing Street for at least another few years.

With reporting by Frank Melville/London