The blistering budget

Njcholas Davenport

"I always think better under pressure," Mr Healey told us in the

tijanorarna programme, but the b udget ue presented after a few weeks' pres!urised preparation gave the lie to the uoast. It was badly thought out and '31"npletely irrelevant to our present industrial crisis. The economic need of the hour is to sWitch resources from the home trade !13 the export trades, to keep down industrial costs, to push up industrial investment and try to get back to economic growth and fuller etnployment. It might be said that Mr pealey has made everyone so much ess well off — low incomes as well as — that the coming slump in the consumer trades will drive manufacturers in despair to the export market. But he has put up their manufacturing custs to an alarming extent. Coal Prices go up by 30 per cent, steel by 25 Per cent, tin plate by 15 per cent, railway freight by 15 per cent and 11113loyers' contribution to national Insurance by 44 pence. All this on top of the price rise in oil. To make matters worse he has raised corporation tax to 52, Per cent and so stripped the profits, aiready cut by price and profit margin controls, out of which industrial investment has to come. And in spite of tile fact that industry as a whole is rffering a severe liquidity crisis — the c°flomist claims that British corn flies face a financial deficit of around ,e,s,000 million this year — Mr Healey as actually asked companies to add 50 Per cent to their ACT (Advance Corporation Tax used to be 33 per cent of the dividend paid and it now becomes dVirtually 50 per cent). Surely the madtest thing to do is to put fresh budgeLarY burdens on hard-pressed industrial ccunpanies when they are trying to restore investment and growth. The P3I has told Mr Healey that these dens will cost industry over £1,000 Nihon of which less than half can hultiMately be passed on in higher rrices• Mr Healey's departmental Juniors just ignored the warning.

, Next, the budget may be more or !ess neutral in its 'demand' effects but

is definitely inflationary. The relief Y way of food subsidies, which are „sUPPosed to reduce the retail price inb'ex by I/ per cent, is more than offset ,Y die increases in the price of petrol, `„obacco, whisky, gin, wine, soft drinks, 'Weets, ice cream, rail fares, coal, e..lectricity and stamps. These price I,ocreases will probably spark off the _threshold' wage agreements in a tTs°rIth or so. These agreements gave e workers an extra 40p per week if abe retail price index reaches 7 per cent phc've its level at the beginning of uj'ase 3 (it was 185.4 on October 16) us another 40p per week for each

Pe another point the index may rise unr,

No'l, the end of Phase 3 (next vernber). In February 1974 the index aS 1951. and the 'threshold' operates rusvherr it is 198.4. As the inflation is now /Irking at over 20 per cent p.a., the inflationary cost of implementing the 'threshold' agreement in 1974 may be heavy. It would, of course, have been less expensive to the nation to add to the supplementary benefits for the poorer half, but the Government had committed itself to food subsidies in its election manifesto. These food subsidies, costing £550 million, mean that the borrowing requirement of the public sector has only been reduced to £2,700 million,' which remains a potential factor of monetary inflation. Coming to the 'soak the rich' clauses of the budget, it was very proper to wipe out the tax concessions granted by Mr Barber to the rich. I have always objected to these concessions in this column and have never understood why the Tories were so stupid to hand out so much ammunition to the franc-tireurs of the Marxist left. That the rich could be allowed to reduce their tax liabilities by charging any amount of interest on loans from money lenders — raised often for purely speculative purposes — or by handing over capital to their children separately assessed or by raising mortgages of any size on any number 'of houses — was always a scandal. But it is one thing to eliminate scandalous tax concessions: it is another to confiscate investment income from honest 'people who have inherited — after estate duty paid — the savings of their 'parents. The investment income surcharge of 15 per cent used to start at over£2,000. Mr Healey has reduced the start to £1,500 and with the increase of 3 per cent in income tax. which he has imposed, it means that the biggest investment incomes give up 98 per cent — that is, a top earned rate of 83 per cent plus 15 per cent investment income surcharge. To allow the very few very rich only 2 per cent of their large incomes is bordering on confiscation.

This has been done of course, to please the TUC idea of 'redistribution of wealth.' The 'social compact' between the Government and the TUC is in effect a social plot. The plot is obviously to destroy private wealth, and the capitalist system which generates it, without a bloody revolution. This after all is what the Labour Party has pledged itself to do under Clause 4 of its constitution. It will dawn on the decent simpleminded voter sooner or later that you do not make the poor appreciably any richer by confiscating the wealth of the very rich. But if you destroy the wealth-creating system of private enterprise you will make everyone very much poorer. As it is virtually only private enterprise which produces the goods for export, and the 'invisible' overseas income, which help to pay for imports, the destruction of the private enterprise system implies that Britain could be bust before it can be rescued by the oil genii of the North Sea. Perhaps that is why the Government

felt unable to go to the IMF and had to ask the banks to arrange a $2,500 million loan in the Euro-dollar market.

Many people have been deluded by

this budget but not the Stock Exchange. The day after the budget the FT index of ordinary shares fell by 12 points and it has kept on falling until, as I write, it is around 265, having been 338 at the end of February. The market value of ordinary shares fell 321 per cent last year which was equivalent to a paper loss of £20,000 million. The destruction of the capital market seems to be intended by Mr Healey because he has gone out of his way to double the stamp duty — from one per cent to 2 per cent — which will merely tend to stop'switching', freeze

business dealings and drive siness to other As the S business dealings and drive siness to other As the S

financial centres. Stock Exchange contributes largely to our me by pr 'invisible' income facilities for foreign investors Mr Healey is

n simply adding to the deficit o our balance of payments. A strange antic even for an ex-Communist Lord of the Treasury. I fear that the Cambridge School of Economics, now dominated by leftist socialists, has had a disastrous effect upon the pressure-thoughts of Maoist Healey. When Professor Kaldor claims on BBC television that Mr Healey will be one of the greatest Chancellors of

century he is surely bringing this centnging a

ridicule on school which, as an old v hitherto e hithe Keynesian, I have revered. a a This budget is blister on the body 'economic. It will fester and burst, upsetting not only private enterprise but the Government as well.