Britain's Conservative government introduced an austere budget today committed to holding down inflation and creating "the conditions for more jobs," but rejecting demands for a big increase in public spending to attack record unemployment.
The failure to forecast any specific dent in the 13 percent unemployed, or almost 3.2 million out of work, contains political risks for Prime Minister Margaret Thatcher. Her government has been slipping recently in the opinion polls and many moderates in the party privately disagree with her tough approach.
However, financial analysts here generally reacted favorably to her determination to maintain tight control over money and spending, and to a new package of relatively modest tax cuts and tax reforms.
Thatcher and her treasury secretary, Chancellor of the Exchequer Nigel Lawson, may also get an important boost from a coincidence of timing in which the budget was published just as the British pound suddenly soared in relation to the dollar.
Analysts said the pound's jump from a historic low of $1.04 just two weeks ago to $1.14 today is likely to mean a 1 or 2 percent drop in mortgage and other interest rates, which had risen to a record 14 percent in recent months as the pound's value dropped steadily.
The rise in mortgage and interest rates, opposition politicians say, is alienating many normally Conservative, home-owning voters from Thatcher's government.
Analysts said most of the decline in the dollar's value was attributable to signs of a weakening U.S. economy, such as the temporary closure of savings-and-loan associations in Ohio.
Forecasting a fifth consecutive year of growth for Britain's economy, Lawson said, "If it were possible to create jobs simply by boosting government borrowing and spending there would be no unemployment in the world today, for nothing is easier for a government than to borrow and spend. Impatience is a bad counselor," he told the House of Commons.
Lawson said "we cannot instantly inculcate the spirit of enterprise," which critics say Thatcher has been trying to promote here for six years without much success, "and we cannot prevent trade unions from pricing their members out of jobs." British wage increases still run beyond the 5 percent inflation rate and beyond productivity gains.
But Lawson said his tax cuts and reforms would "promote enterprise and employment." The main proposals involve raising slightly the threshold at which income tax begins, removing the contribution for national insurance coverage for the lowest paid workers, and expanding a youth training program.
The key government hope behind these changes, analysts said, appears to be that unemployed people will be more tempted to take low-paying jobs, since the taxes on them will be reduced.
David Owen, leader of the opposition Social Democrats, said the budget virtually guaranteed unemployment would continue to rise. Many main opposition Labor Party leaders said the failure to move more imaginatively in terms of greater public spending, even if it meant a deficit, suggested a Conservative disregard for those out of work and a concern only for those voters who held a job and were not touched by economic despair.
Several opposition and union leaders invoked U.S. economic expansion as an example to be followed here. But Alan Greenspan, former economic adviser to several U.S. presidents, said Thatcher's hold-the-line policy on inflation was most important and he doubted that Britain could undertake a Reagan-style policy. He said the huge U.S. deficit is only financed by the enormous flow of foreign currency to the United States and that Britain would be unable to attract such funds.