Britons got their fist dividend from North Sea oil today, a package of tax cuts and pension increases worth $1.6 billion.
To underscore the dramatic chance in the nation's fortunes, a confident Denis Healey, chancellor of the exchequer, told the House of Commons that Britain would pass up the next $360 million slice of its huge loan from the International Monetary fund.
Healey also announced that vacationers and businessmen would be permitted to spend more abroad, since the country does not need to hoard its foreign currency.
All this amounts to the opening shot in the Labor government's re-election campaign. No one knows how soon Prime Minister James Callaghan will call a national election but Healey drew laughs when he said today's bundle was part of an 18-month economic program. The opposition Tories hope and expect an election will be held by next fall at the lastest.
There was little question, however, that Healey's mini-budget today was a blend of economics and politics - stimulus for a sluggish domestic economy but also Christmas pudding for the voters.
This represents a stunning turnaround from a year ago, when the pound plunged to $1.56 and Healey desperately sought an IMF loan to keep it from falling further. Now the pound has reached $1.78 and the government is busy shooting away foreign currency to keep the pound from rising more.
It is this change in the oversesas accounts, with British oil replacing Arab crude, that has given the government "Between now and the first part of the maneuver room to make today's tax cuts.
Until now, the average citizen has benefited little from the new financial state of affairs. Inflation is still around 14 per cent, although it is coming down. Output is stagnant, so unemployment hangs above 6 per cent and is even higher if measured by U.S. standards.
But this is the native land of economist J. M. Keynes and belief in the master's magic persists. So the extra spending power from tax cuts is expected to stimulate demand, output and jobs.
The bulk of the package the tax cuts, enlarge the personal exemptions or tax free income each Briton is allowed. Healey made this retroactive to last April, the start of the budget year. That way, every taxpayer will get a rebate around the start of December just in time to help with the Christmas bills.
The average single man will collect $17.80 and another $1.15 a week thereafter. The average couple will pick up $62.30 and save another $1.85 each week.
This does nothing for those who pay no taxes, so Healey will give 10 million pensioners a $17.80 bonus, again just in time for Christmas.
The world at large is likely to be most impressed by Healey's decision to stop drawing on the IMF loan. He has already collected $1.9 billion of the $3.9 billion credit, which means $2 billion is unspent.
London was due to get another $360 million next month and this is what Healey is foregoing. Assuming things continue as they are - and the oil flow is increasing almost daily - no more will be taken.
In another move to reduce Britain's swollen reserves of foreign currency, Healey will let vacationers spend over $1,000 abroad and allow businessmen a daily outlay of $178. The limits had been $575 for tourists and $133 for businessmen.
All this will come as no surprise to those who understood the impact oil would have here. Instead of importing 2 million barrels a day and paying out in current prices, $14 a barrel in foreign exchange. Britain will be producing 1 million barrels of North Sea oil daily by the end of this year. Sometime in the first half of 1979. Britian's output will match demand and from then on the country will be an exporter of oil.
This balance of payments bonanza is the prize at stake in the nect election. Callaghan is not required by law to call one until October 1979, but to avoid getting boxed in, he is unlikely to wait until the last minute.
The tories provately expect a fall election next year but Callaghan could wait until the spring of 1979, hoping to provide even more stimuli for the economy at home.
Healey said today that if new union contractors call for wage increases near the government's 10 per cent target, he would make fresh tax cuts even before the next regular budget in April.
The government is keenly aware that its past three years of rising unemployment, climbing prices and falling living standards are a legacy that must be wiped out if Labor is to have any chance of holding on for the golden oil years ahead.
But as Healey repeatedly emphasized all these projects depend critically on containing inflation, on wage restraint. So far, the government has had better luck than it expected and most wage deals have been near the 10 per cent mark. Whether they will stay there is the central political and economic question here.