The Labor government yesterday opened its bid for re-election with $4.7 billion of tax cuts for almost everybody.
Parents, farmers, middle managers, small businessmen, the very rich, pensioners - all were singled out for some relief by Chancellor of the Exchequer Denis Healey.
Healey and Prime Minister James Callaghan are hoping the stimulus will cut the jobless rolls and give Britain a 3 percent gain in output. That is not much by the standards of former "mircale" countries but it would be the highest in five years here.
Because th U.S. economy is about eight times teh size of Britain's, Healey's tax cuts would be the equivalent of more than $37 billion in America. In other words, Healey is cutting taxes proportionately by about 50 percent more than President Carter.
Margaret Thatcher, the opposition conservative leader, derided Healey as a "late convert" to tax cuts and complained his conversion was "only election deep."
Whether the program will catch enough votes is a question. Britons have suffered three hard years under Labor and the world slump with their incomes falling about 6 percent. When they vote, will they remember those years or the better and latest year and some months?
An equally intriguing question is then Callaghan will risk a vote. He could call for one this spring but neither the by-elections nor the opinion polls are encouraging him. The conventional view is that Callaghan will go next fall. But the prime minister's intimates say he wants to wait until a year from now.
Now, is the government is giving the average family worker earning about $140 a week a tax cut of about $3.40. It will take six or nine months before the average man feels the difference, spends some of his extra money and thereby stimulates output and jobs. So the logic of waiting is strong.
Callaghan is running a minority government with less than half the seats in the Commons, but he does not seem in much danger of being forced to an election through continual defeat in the House. To achieve that, Mrs. Thatcher must get backing from all the wsizeable minority parties at once: Scottish Nationalists, Ulster Protestants and Liberals. Such a combination does not seem likely.
The Liberals are currently in a formal alliance with Labor. Healey went out of his way yesterday to praise their economic spokesman, John Pardoe, and include one of Pardoe's hobby horese in his budget.
In private, Callaghan carefully woos the Ulster Protestants by enforcing the status quo in Northern Ireland. That assures Protestant workers of their near-monopoly of better paying jobs, the crucial but unspoken issue in the bloody province.
So there is a strong chance that Callaghan will pick his own election date. He must go to the polls by October 1979, five years from the last election.
Yesterday's budget had one tax increase, for social - not revenue-raising - purposes. Healey will push up the levy on high-tar cigarettes by as much as 13 cents a pack. That would cost the most heavily nicotined smokers almost $1.20 for a pack of 20.
Apart from tax cuts, Healey offered what looked like about $3 billion in spending increases, mostly for pensioners and parents. The precise amount and effect of this can't be determined without recourse to documents that the Treasury here does not make public.
The biggest tax relief creates a new bottom bracket on the first $1,400 of taxable income. From this sum, Inland Revenue will now collect 25-percent instead of 34 percent.
Another big portion of Healey's program raises the income exempt from taxes. For example, a married couple now will enjoy $2,900 tax-free, a gain of $150.
The well-off vote, too, and Healey did not neglect them. He trimmed their capital gains tax a bit. More immportantly, the horrendous top bracket tax of 83 percent will now bite on taxable incomes above $43,000 instead of $39,500.
Policy here as everywhere in the West is schizophrenic. The tax cuts and spending increases to expand output and jobs are classic Keynesian devices. But at the very same time, Healey announced that he had instructed the Bank of England to raise its basic lending rate from 6.5 percent to 7.5 percent. That is pure Milton Friedman and works in preciselty the opposite direction, raising interest costs on mortgages, for business and every group that borrows.
All Western countries are riding two horses at once, simultaneously worried about inflation and unemployment. The jobless here are currently put at 1.4 million, about 5.9 percent as the British count it but several percentage points higher in U.S. terms.
The underlying inflation rate is 7 percent. That would worry British price increases running close to 30 percent at one point, the present performance gives Healey a chance to congratulate himself and the unions who have held down their wage demands.