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Budgets 1979 - 19921979 (April) Budget (Denis Healey)A 'Caretaker Budget' introduced after the government had lost a vote of confidence and an election had been called. It merely allowed taxes to continue to be raised until a new government introduced its budget. It was framed with the co-operation of the Conservatives.1979 (June) Budget (Sir Geoffrey Howe)The first Budget of the new Conservative administration was introduced very quickly after the election. It represented a major change of direction for the economy. The increased reliance on interest rates and monetary policy to control inflation and a shift in the base of taxation towards taxes on spending rather than on income were two important aspects of this.Sir Geoffrey Howe had been `Shadow Chancellor since 1975. In his first Budget he raised VAT from 12.5% (on 'luxury' items) and 8% (on most other goods) to a single rate of 15%. The basic rate of income tax was cut to 30% (from 33%) and the top rate from 83% to 60% on 'earned income'. The government set a long term aim for the basic rate of 25% (achieved in 1988). Reductions in public spending were announced. The Chancellor states that 'we cannot go on avoiding difficult choices'. The changes in VAT were seized on by the government's critics as evidence that the Conservatives had betrayed an election campaign promise contained in a press release that Labour allegations that they would double VAT were unfounded. Other measures announced by the Chancellor included an increase in interest rates from 12% to 14%; an increase in prescription charges from 20p to 45p and a major relaxation of exchange controls. 1980 Budget (Sir Geoffrey Howe)Increases in prescription charges and indirect taxes; broad reductions in public spending announced but more resources would be made available for the police and defence. James Callaghan described it as the 'meanest since 1931'.
1981 Budget (Sir Geoffrey Howe)The budget speech of the 10th March 1981 delivered by Chancellor of the Exchequer, Geoffrey Howe, is seen by many commentators to have been the most significant of all those during Mrs Thatcher's premiership. The nub of the budget was cuts in public expenditure and increases in personal and indirect taxation. Notably a windfall tax was levied on bank profits and North Sea Oil. The 25p lower rate of tax, introduced by Labour in 1978, was abolished.
Sir Geoffrey Howe told the Commons that 'to change course now
would be disastrous'. The new Leader of the Opposition, Michael Foot, condemned a 'no hope budget produced by a no hope Chancellor'. These announcements came at the bottom of a deep recession. They were in a diametrically opposed intellectual framework to the Keynesian economic orthodoxy which had prevailed since the 1940's, and a change of policy was being urged on the Prime Minister by many of her own supporters, including members of the government . Mrs Thatcher's refusal demonstrated more clearly than ever her commitment to monetarism. One week after the budget was delivered, during a debate on the budget resolutions, the Conservative member Christopher Brocklebank-Fowler crossed the floor of the House (to join the SDP). Only one, relatively minor, concession was made to potential rebels.1982 Budget (Sir Geoffrey Howe)This Budget contianed no dramatic moves. Personal allowances and thresholds were raised by 2% more than the 12% required to match inflation during calender 1981. Tobacco, alcohol and petrol duties were all raised. Child Benefit was increased (by 60p to £5.85) and unemployment benefit and state pensions would also rise. The employers' national insurance surcharge would be cut by 1% to 2.5% from August.This Budget was delivered after unemployment had reached 3 million. Although the 1981 Budget had marked a decisive break with the past and a political victory for Mrs Thatcher over the 'wets' in her party, the Conservatives still remained unpopular in the polls (the Falklands War was some weeks away). The Chancellor painted a gloomy picture of the economy in his Budget, reflecting that it was no longer the case that all our buses, cars and motorbikes were made in Britain from British steel. The former minister Sir Ian Gilmour had advocated a £5 billion package of reflation and he condemned 'almost a neutral Budget'. The Leader of the Opposition, Michael Foot, declared that the budget showed 'no proper understanding of the scale of the unemployment catastrophe.' 1983 Budget (Sir Geoffrey Howe)A pre-election budget. Sir Geoffrey Howe 's last Budget saw tax allowances raised by 14%, 8.5% more than inflation. Increases in social security allowances announced. Overall the tax reductions amounted to about £2,000 million for individuals and £750 million for business.The Chancellor may have disappointed by the failure to reduce the basic rate (unchanged since 1979) to which he replied that "It cannot be put right in one Budget or even one Parliamnet'. 1984 Budget (Nigel Lawson)Nigel Lawson's first Budget (he had been promoted from the Department of Energy after the 1983 election) was hailed by Conservative MPs. The Chancellor offered them some progress in his aim of 'radical tax reform' and abolished the national insurance surcharge, raised some personal allowances by more than inflation, cut coporation tax, made home-buying a little cheaper by raising the threshold for stamp duty, abolished the investment income surcharge and cut the top rat of transfer tax. The only qualm from the government benches concerned the abolition of life assurance premium tax relief.The Leader of the Opposition, in his first Budget reply, spoke for about 25 minutes and declared that:"this is a budget which does more for the City of London than it does for the country'. The Chancellor 'gave away' about £750 million - around half the amount he had hinted would be available at the time of the 1983 Autumn statement. Mr Lawson also raised tax allowances. Excise duties were increased.
1985 Budget (Nigel Lawson)Raised tax allowances substantially - by about 10%, 5% more than indexation would require, so taking about 800,000 families out of income tax. Higher rate thresholds were alo raised in line with inflation. Major reforms in national insurance contributions were introduced.Instead of the NI contribution being levied on the whole of an individual's income once the threshold was reached, new lower marginal bands were substituted. These were paid for by removing the ceiling on employers' contributions, making all earnings subject to the 10.45% levy rather than just paying up to £265 per week. The ceiling for individuals was retained. These changes were financed by increases in excise duties. VAT was extended to take-away hot meals. The price of a car 'tax disc' breached £100 for the first time. A major constraint on the government's financial room for manoeuvre was the effects of the miners' strike - which had just ended.The Chancellor stated that it had cost the government £2,750 million in extra borrowing and had reduced national output by 1% during 1984. 1986 Budget (Nigel Lawson)Reduced the basic rate of tax to 29% (the first cut since 1979). Capital Transfer Tax was reformed so that only those gifts made in the years before death were to be liable as counting in the deceased's estate.New tax reliefs for individuals and companies giving to charity ('give as you earn') were announced.As part of Mr Lawson's declared theme of 'popular capitalism' the new Personal Equity Plans (PEPs) would allow individuals to 'shelter' £2,400 per annum in UK equities. 1987 Budget (Nigel Lawson)This budget was followed by a general election in June. Reductions in taxation announced by Mr Lawson came to £2,600 million in total whilst he still forsaw a reduction in government borrowing of £3 billion.The basic rate of taxation was reduced by 2% to 27%. A variety of excise duties, which had normally been increased every year, were frozen. It made the later expansion of personal pension provision possible (with changes allowing 'additional voluntary contributions' coming in October and for the new personal schemes taking effect from 1988). In this budget Nigel Lawson claimed that the government had cut taxes, cut borrowing and raised public spending. Other changes included the abolition of the tax on on-course betting, further reductions in inheritance tax, more incentives for profit related pay and a cut in the duty on unleaded petrol. Child Benefit was frozen in cah terms for the first time.The Leader of the Opposition offered voters a radically different priority. He told the Commons that it was a 'bribes budget' and: "The government have chosen across-the-board cuts in taxation. The Opposition and the British people want across-the-board cuts in unemployment'. Nigel Lawson delivered a record short speech - 59 minutes, the shortest since Disraeli in 1867.
1988 Budget (Nigel Lawson)Reduced the basic rate of tax by 2% to 25% and reduced the higher rates of taxation to 40%. A new ultimate objective of a 20% basic rate declared. Multiple tax relief for home buyers was to end in August. The Budget speech was marked by a series of interruptions and the outbreak of 'grave disorder'.
The Deputy Speaker, Harold Walker ordered the suspension of the House
. 1989 Budget (Nigel Lawson)Delivered against a very difficult background, with interest rates at 15% and a sterling crisis. A fairly neutral budget, it left excise duties unchanged. Nigel Lawson's last budget.1990 Budget (John Major)The first budget to be televised and John Major's only budget. Introduced TESSAs (Tax Exempt Special Savings Accounts) and separate taxation (announced in 1988) for husbands and wives came into effect. Some observers were surprised that Mr Major did not raise taxes significantly but instead continued to rely on interest rates to control inflation. Mr Major had, after all, coined the phrase 'if it isn't hurting, it isn't working'. Monetary targets remained unchanged.There was also a small change in the arrangements for qualification for income support for poll-tax payers which was doubled to £16,000. However there were significant interruptions from Scottish members who demanded to know why this was not being introduced retrospectively in Scotland (which had had the Community Charge for a year longer than England and Wales). 1991 Budget (Norman Lamont)Raised VAT by 2.5% to 17.5%, the proceeds being used to reduce the poll tax or community charge bill by £140, through the 'Community Charge Reduction Scheme'. The move surprised most observers and was welcomed by the critics of the tax. The Leader of the Opposition, Neil Kinnock, described it as the 'biggest climbdown in modern political history'.Mr Lamont also took the opportunity to levy tax on the private use of company mobile phones, 1992 Budget (Norman Lamont)The Budget was delivered the day before the general election was formally announced but formed an important part of the election campaign. Norman Lamont surprised observers by announcing a new rate of income tax of 20p on the first £2,000 of taxable income, rather than the reduction in the basic rate that had been expected.
This new band, it was said, would, over the long term, be expanded upwards until
it represented the standard rate. Some commentators were disturbed that the PSBR
had risen to £28 billion. Norman Lamont also announced that the annual
spending and tax plans would in the future be combined in one budget
statement in the autumn - the new
unified budget. Return to the top of this page
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