Britain`s Conservative government set the stage Tuesday for a national election campaign by cutting the income tax and other levies. The opposition Labor Party denounced the move as an attempt to bribe voters.
Prime Minister John Major is expected to go to Queen Elizabeth II on Wednesday or Thursday to request the dissolution of Parliament and announce an election for April 9. His government`s term expires in July, but Major has decided to go for an election now even though the Conservatives are trailing Labor in the polls by just over 1 percentage point.
The Conservatives are counting heavily on the tax reductions to boost their popularity, despite Labor charges that the Conservatives have mismanaged the economy and deepened the current recession, the worst in Britain`s postwar history.
Chancellor of the Exchequer Norman Lamont announced the widely anticipated tax cuts in presenting his annual budget to Parliament. He said the tax rate for the first $3,440 of income would be lowered to 20 percent from 25 percent. This, he noted, would benefit particularly those taxpayers with low incomes.
For most taxpayers, Lamont said, the cut will amount to $4.54 a week.
The income tax cut was the highlight of a series of measures that also included halving taxes on new cars, increasing support payments to poor retired people and raising taxes on gasoline, tobacco and alcohol.
Labor Party leader Neil Kinnock welcomed some cuts but said the budget seeks ”to bribe voters with borrowed money they will have to repay.”
”It is a panic-stricken, pre-election sweetener,” he said. ”For the sake of a few weeks of an election campaign, the government is trying to saddle taxpayers with many years of debt.”
Kinnock argued that voters were more interested in improved public services than in tax cuts. Labor has promised to improve services if it comes to power, and the Conservatives argue this would mean higher taxes.
Labor announced before the speech that if it won the forthcoming election it would reverse any income tax cut.
Lamont said his proposals represented ”a budget for the recovery.” He predicted the economy would recover slowly but steadily in 1992.
The chancellor produced gasps in Parliament when he said the government deficit would double this year to a record $48 billion. This is due to a combination of tax cuts, a drop in tax receipts as a result of recession and higher welfare costs due to a 9 percent unemployment rate.
Lamont said inflation, now at 4.2 percent, would come down to 4 percent this year and 3 percent next year. He predicted that Britain`s economy would grow by a modest 1 percent in 1992.
But some economists said growth might be only half that much. They said there was disappointment in financial markets over Lamont`s failure to give a bigger boost to economic recovery.
