The 1981 United Kingdom budget was delivered by Geoffrey Howe, the then Chancellor of the Exchequer, to the House of Commons on 10 March 1981. It was Geoffrey Howe's third budget and the second of the first Thatcher ministry.[1] The budget represented a strongly monetarist response to the stagflation and high government borrowing which the UK was suffering at the time. The budget speech lasted for 91 minutes.[2]
 | |
| Presented | 10 March 1981 |
|---|---|
| Parliament | 48th |
| Party | Conservative Party |
| Chancellor | Geoffrey Howe |
|
‹ 1980 1982› | |
Background
editThe budget was given during a time of significant economic malaise in the United Kingdom, with unemployment having increased by almost one million in the prior 12 months and inflation running at around 15%.[1]
Measures
editThe budget increased net taxes by £4 billion (in 1981 prices).[3]
A new 20% tax on North Sea oil was introduced.[1]
A one-off windfall tax on certain bank deposits was introduced, in the form of a 2.5% levy on deposits of banking businesses, charged by reference to non-interest bearing sterling deposits in excess of £10 million averaged over the final three months of 1980.[2] The tax was estimated to raise £400 million in total revenues (in 1981 prices).[1]
There was no increase in income tax personal allowances or tax rate thresholds, resulting in a significant real-terms income tax rise as inflation was around 15% per year at the time.[1]
The 25p rate of tax introduced by Labour in 1978 was abolished.[4]
Duties were raised significantly, with duty on petrol increased by 20p per gallon, duty on a packet of 20 cigarettes increased by 13p, duty on beer increased by 4p, duty on spirits increased by 60p, and duty on wine increased by 12p.[1]
Reception
editThe budget was highly controversial.[2] A number of Conservative MPs walked out of the Commons while the chancellor was still speaking.[1] The leader of the Opposition Michael Foot said of it "This is a budget to produce over three million unemployed".[1]
A group of 364 economists wrote a letter to The Times newspaper which was strongly critical of the budget and expressed the view that there was "no basis in economic theory or supporting evidence" for its measures, and that it threatened the UK's "social and political stability".[5][6][7][3][8]
One week after the budget was delivered, the Conservative member Christopher Brocklebank-Fowler crossed the floor of the House to join the SDP during a debate on the budget resolutions.[4]
See also
editReferences
edit- ^ a b c d e f g h "Bygone budgets: March 1981". The Guardian. 3 March 1999. Retrieved 20 March 2013.
- ^ a b c "Chancellor spares no one in struggle to beat inflation". The Glasgow Herald. 11 March 1981. Retrieved 20 March 2013.
- ^ a b "How 364 economists got it totally wrong". The Daily Telegraph. 15 March 2006. Retrieved 21 March 2013.
- ^ a b "Budgets 1979 - 1992". BBC. March 1997. Retrieved 20 March 2013.
- ^ Blake, David (30 March 1981). "Monetarism attacked by top economists". The Times (60, 889): 1. Retrieved 18 September 2024 – via Internet Archive.
- ^ "Economy: Letter of the 364 economists critical of monetarism (letter sent to academics and list of signatories) [released 2012]". Margaret Thatcher Foundation. Retrieved 15 September 2024.
- ^ Booth, Philip, ed. (2006). Were all 364 Economists Wrong?. London: Institute of Economic Affairs. p. [1]. Retrieved 14 September 2024.
- ^ "Were 364 economists all wrong?". BBC. 14 March 2006. Retrieved 20 March 2013.
Further reading
edit- "Economy: The 1981 budget - memoirs extract". Margaret Thatcher Foundation. Retrieved 21 March 2013.
- "Economy: Letter of the 364 economists critical of monetarism (letter sent to academics and list of signatories) [released 2012]". Margaret Thatcher Foundation. Retrieved 15 September 2024.
- "Commentary (The Times) Budget: "Beating inflation key to recovery" (Hayek letter on the 364 economists) ["lost generation of British economists ... panicky mob"]". Margaret Thatcher Foundation. Retrieved 16 September 2024.
- "Commentary (The Times) Budget: "Beating inflation key to recovery" (Harris letter on the 364 economists) ["charge sheet of those responsible for ... economic decline"]". Margaret Thatcher Foundation. Retrieved 16 September 2024.