THE BUDGET
ALL CAPITALISTS NOWADAYS
Ferdinand Mount explains
why Mr Lawson is a better politician than he looks
LIKE bowls and snooker before they were on television, capitalism has traditionally been a minority sport in this country, one usually pursued by middle-aged men in waistcoats, many of them hailing from Commonwealth countries such as Canada and Australia. We are familiar with 'saving for retirement' and 'paying off a mort- gage'; these are dignified occupations. We are also at home with any form of straight- forward gambling — Supermac's premium bonds were instantly accepted. But risk capitalism is something different and a little daunting. Phrases like 'a nation of shareowners' do not yet trip off the English tongue, even Mr Lawson's. A Budget designed to make capitalism popular is therefore an oddity. In fact, there has never been another one.
Yet Mr Lawson had quite a little success with it. He was barracked through the bit about the world economy, barracked through the bit about monetarism, but when he came to the changes in the tax system which are to transform us all from spendthrift frogs into merchant princes, the Opposition fell strangely silent. Even the abolition of the tax on gifts inter vivos provoked only a tepid jeer. Yet the virtual restoration of the old death duties means that estates will now again break up only where His Grace really cannot stand the sight of his eldest son. All the levelling work of the Labour governments of the Sixties and Seventies is now undone.
But that is really less interesting than Mr Lawson's introduction of an English ver- sion of the French Loi Monory. Well, the Chancellor says that the Loi Lawson is `wholly different in structure', but that he expects it to be 'every bit as successful'. Now the traditional line of the Inland Revenue is that the Loi Monory has not really been so successful and that such success as it has enjoyed is because France's capital markets are underde- veloped. Among us sophisticated British investors, so the Somerset House line used to run, a Loi Lawson would merely be a tax cut for the rich, since the poor would not take advantage of it. This, like all objections to the encouragement of mass capitalism, is essentially a coal-in-the-bath argument. The yobs, we are supposed to assume, are too dumb or too greedy to develop the investor's arts of patience and restraint. They Want It Now.
The same applies to encouraging ordin- ary people to undertake their own personal pension schemes. This, we are told, may be all very well for sophisticated self- employed entrepreneurs such as you or me, but the average brickie would simply get taken for a ride by one of those appalling young men in the City. (By the way, there was no Appalling-Young-Man tax in the Budget, as some had hoped — a wonderful rich vein of envy and loathing has been opened up by the convulsions in the City.) Mr Lawson now promises that personal pension plans will receive the same tax privileges as retirement annuities. This is yet another example of how the Chancellor has ricocheted from his vain pursuit last year of 'fiscal neutrality' to 'tax breaks for one and all'. Indeed, with a bit of ingenuity the enthusiastic would-be capitalist of average means need scarcely pay any tax at all. He invests up to the limit in his Personal Equity Plan, he does the same with a Personal Pension, he invests in several Business Expansion Schemes, he has a £30,000 mortgage on his house, he doesn't drive and he lives off VAT-free food. By the time he is 50, he will be awfully rich and thin. The interesting thing, I think, is Labour's reaction to all this. Five or ten years ago, their response to the encourage- ment of risk capitalism would have been that, if not morally repulsive, this kind of thing was totally irrelevant to the lives of `working people and their families'. yet even the noisiest backbenchers seemed a little subdued and fearful on Tuesday as if, after the sale of council houses and the flotation of British Telecom, there were no depths to which the British working-class could not be tempted to sink. Mr Kinnock rather steered clear of the whole area in his instant response to the Budget, which is the nastiest half-hour in every Leader of the Opposition's year. It was another uninspiring performance. In- sofar as he said anything at all, what be said was: 'There is an alternative. Yes, Spending (fortissimo). There is only one thing more expensive than spending, and it's not spending.' All week, Mr Hattersley has been trying to disentangle himself from the Treasury's pseudo-official calculations of the cost of Labour's spending plans at £24 billion. And once again, Mr Kinnock, under only a modest degree of pressure, begins to sound like a deranged pools winner of another era. I somehow feel that, faced with a Budget like this, Lord Wilson or Mr Callaghan would have been able to work up a more convincing moral indignation. Meanwhile, Mr Lawson is preparing to square the middle classes next year with a reduction of the standard rate of income tax to 25p in the pound. This year's penny off the standard rate is a mere flexing of the muscles. On this week's arithmetic, he could just about afford it, since the Gov- ernment's general stance looks rather more austere than it did this time last year. And for the first time, Mr Lawson dared to say out loud what most of us have been mumbling for months, that an oil price cut is, on balance, quite uncomplicated good news. Lower energy prices all round do outweigh the lost oil revenue to the Exche- quer.
Apart from unemployment, the Treas- ury sky is as cloud-free as it ever is, which is not to say the political risks are any less. If unemployment does not begin to fall later this year, I suspect and hope that the Government will be forced to add to its battery of special measures for the long- term unemployed; they really do not cost much per person after deducting the sav- ings on social security. There is one other nasty package lurking under the table — the taxation of husband and wife. Like Sir Geoffrey Howe before him, Mr Lawson has simply gone through the avoiding motions of publishing a Green Paper and retiring to a safe distance. Nobody seems to care much for the present system which favours the married working couple over the unmarried working couple and favours both over the married couple where the wife stays at home. On the other hand, any system which improves the relative position of the stay-at-home wife can be described as 'forcing women back to the sink' or 'penalising the working wife'. Feminists, Women's Institutes, lesbians, social workers, tax lawyers and Prime Ministers lurk behind every tax table, all bristling with indignation. The wise Chan- cellor tip-toes into the background. The rest of the year, the general view of Mr Lawson sees him as a rather awkward Politician, brilliant of course, but insensi- tive, with little instinct for how ordinary People tick, and still not entirely trusted by the City. The rum thing is that, come the Budget, he does rather well each time. Partly, no doubt, because he genuinely understands what he is talking about, Which always helps, but also because he is not too lofty to throw in any sentimental gunnuck that comes to hand — tax relief for victims of the Nazis, for talking books for the blind and 'distress alarm equipment for the handicapped'. In these concessions and others, I detect the hand of a Chancel- lor who has the self-confidence to override wtnher e objections of the Inland Revenue, even e the objections are based on the most intellectually rigorous principles. On char- ities.he seems to have yielded not to the tnisgtvings of the Revenue about extending relief to one-off donations from indi- viduals is as well as companies but to the charities themselves who prefer the steady Income from covenants — a rather feeble attitude, I think.
Still, Mr Lawson has made a beguiling Budget out of scanty materials. The big prize is a serious cut in the present level of real interest rates which are still ludicrously high. To have any hope of that, he had to appear stern as well as imaginative, and he did not do too badly. In other words, Mr Lawson is a slightly better politician than he looks.
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