U.K. ECONOMY STRONGER THAN AT BUDGET, LAWSON SAYS
The U.K. Economy looks stronger than it
did only last month, when the government unveiled its budget
for fiscal 1987/88, Chancellor of the Exchequer Nigel Lawson
said.
    He told Parliament that "all the indicators that have been
published since the budget confirm that, if anything, we are
doing even better than I suggested then." The budget was
unveiled on March 17.
    "The PSBR (Public Sector Borrowing Requirement) has come out
lower than I forecast in the Budget. Inflation, too, is lower
than I suggested ... (and) the current account of the balance
of payments is also performing better, so far, than I
predicted."
    The budget foresaw inflation easing to 4.0 pct at the end
of this year after peaking at around 4.5 pct. Lawson said at
the time that the overall 1986/87 PSBR would be around 4.0
billion stg. It was in fact lower, at 3.3 billion stg.
    He had also projected average GDP growth in calendar 1987
of 3.0 pct after 2.5 pct in 1986. Lawson today said "output
appears to be rising, if anything, rather faster."
    Speaking during a House of Commons debate, he said, "by the
end of this year we will have registered the longest period of
steady growth, at close to 3.0 pct a year, that the British
economy has known since the (Second World) War."
    The 1987/88 budget contained a proposal to cut the basic
rate of taxation by two pence, to 27 pence in the pound.
    Lawson today reaffirmed that the government aimed to
further cut the standard rate to "no more than 25p." He said that
that objective "should not take too long to achieve."
    Turning to policies proposed by political opposition
parties, Lawson said those advocated by the Labour Party would
entail extra public expenditure of some 34 billion stg.
    That, he said, "would require either a doubling of the basic
rates of income tax or more than trebling the standard rate of
(valued added tax) VAT," which is currently 15 pct.
    On value added tax, Lawson noted that the Conservative
government promised back in 1984 not to extend VAT to food.
    "Beyond that, the incidence of taxation has to be determined
in the light of the budgetary needs at the time, and no
responsible government could conceivably take any other
position," he said. Labour MPs have accused the Conservatives of
planning VAT increases for some essential consumer goods.
    Lawson reiterated his belief that reductions in taxation
can often produce higher, not lower, revenues  "thus leading to
the scope for still further reductions in taxation."
    Lawson said "inheritance tax is expected this year to yield
almost 50 pct more in real terms than Capital Transfer Tax did
in 1978-79. The yield of Capital Gains Tax is forecast to be 80
pct higher in real terms, and Stamp Duty up by 140 pct."
    He said that "the greatly increased yield of Corporation
Tax, reflecting greatly increased company profitability, is
clearly connected with the reform of Corporation Taxation I
introduced in 1984, which brought the rate of tax on company
profits in this country to the lowest in the industrialised
world."
 REUTER
