Mr Healey cuts taxes as 'reward for sacrifice' The Chancellor of the Exchequer yesterday p.resented his cautious autumn.stimulus to the economy as a package of reward for the recent sacrifices "of. the British people. The measures, estimated to cost ?1,040m for: higher personal allowances and a ?10 bonus for pensioners, provide immediate tax cuts, ?400m aid for the construction industry and other increases in public spending. Mr Healey held out the promise of more relief in the April. Budget if workers keep to a moderate line.of pay settlements. He said Britain would not take up the ?310in in In.ternational Monetary Fund dra.wing rights next miionfth. At the end of Mr Healey's 21-1minute speech -Sir Geoffrey Howe, QC, -Conservative Treasury spokesman, described the measures as "a Budget of repentance ",. . ... f.?- -14, -.Ilz1 'i- I --- I? ia s d r'iss for e' 'Xtrfi wark ?4. I s.. . .1 - . m an By Fred Emery Political Editor. The Government's cautious autumn stimulus to the econbomy turned out to, be a " Budget, of. reward" for Britons' recent sacrifices. The phrase was Mr Healey's as be chaampioned' before the Commons yesterday a pro- gramme dominated by large income tax cuts, promised to be in pay packets in time for Christmas shop- ping four weeks hence. Old age pensioners were also given a tax-free Christmas bonus of ?10. Those two measures amount to ?15040m out of a total cost to the Treasury of the stimuli in the present year of E1,090.5m. Mr Healey also announced that the same income tax reliefs, indexing personal allowances to the rise in retail prices, wvould continue next year. At that time further measures would take effect: the relief of.small business taxation, but 'principally the iljection of ?400m into government -spending on new construction. The one criticism heard of the. measures from the Labour benches was that the aid to the construction industry could not take immediate effect. Mr Healey's answer was that he had already provided ?100m last July and even that had not yet taken effect. [Tax insoectors told the Chance]- lor last night that they could not carry out the extra work involved in his measures. without some sort of reward." "The Government has until November 7 to come up with something ", Mr Tonv Christopher, an official of the Inland Revenue Staff Federation, said.] The total estimated cost, for the 'next 18 months. of the measures pro- posed by Mr Healey yesterday and in July was ?3,347m and he held out the promise of more at next Apr:l's Btidget but only if people stuck to moderation in pay settle- ments. He gave a .warning that if settlements ." edged up towards, say, 15 per cent, and the rate of inflation moves back into double figures ", there would be less scope for fiscal relaxation next year. Once more Mr Healey placed the nation " at a turning point ", although he expressed contfidence that his 'imeastiges:wo'tld help people to choose r u-, Mr Healey talking to Cub Scouts-from Avon in Downing Street before yesterday's announcements. the better course: to build on the "gains they have already wvon ". It was the core of Mr Healey's presenitation that the tax reliefs he offered yesterdav and earlier this ye-ar, coupled wvith the Government's pay guidelines, wvould produce an overall increase this year of 161 per cent in average earnings. Put that against wvhat he called an increase in retail prices which is nowv well on its course for single figures" next year and it meant "some increase in living standards in the current pay round ". He wanted both sides in negotiations to "give full weight to that ". His reasoning ran thus. A married man on average earnings gained a 2{ per cent rise, through the 12 per cent increase in personal dl'owances, backdated to last April. Add the effects of last spring's Budget, and the percentage rise was nearly 6l per cent; then take in the 10 per cent guideline wage increase for the present round, and the prosperous total emerged. By contraszt, he could not offer so much relief in thle unemployment figures. While his measures should raise output by 0.5 per cent in the first quarter of next year, rising to about 1 per cent in the fii-st quarter of 1979, they wvould, by conventional arithmetic, produce only a.30,000 and 170,000 increase in employment res- pectively wvithl the reductions in unemployment slightly less. Mr Healey's other immediate reliefs were in exchange contrcls. Some slight adjustments ivere 'made for firnis but. mbst ey&eatching was his increase in the personal foreign currency allowvance for holiday travel from ?300 to f500 a journev. Other reliefs concerned the needy and small businessmen. Increases, effective next month, in national insurance pensions and other social security benefits, will be tax-exempt. Mr Pardoe, for the Liberals, wvas quick to claim credit regarding small businesses, but Mr Healey gave it to Mfr Barnet, his Chief Secretarv, and Mr Lever, Chancellor of the Duchy of Lancaster. The threshold for liability to capital transfer tax is increased from ?15,000 to ?25,000. The threshold for the aDvportonment of- trading itcome to close companies is raised to ?25,000, this to encourage profit retention in businesses, and more relief for small businesses wvas belld.out by the Chan- cellor in next Aprii's Budget. Continued on naie 2. enl .2 'Budget of repentance' criticism is rejected Continued from page 1 Mr Hiealey, dark-suited, ebul- lient and relaxed. had an easy time-with the opposition Front Bench. Sir Geoffrey Howe, QC, spokesman on Treasury gffairs, saw it as a " Budget of repent- ance "' and the beginning of the election campaign,. but he was not'sharp-edged. It gave Mlr Healey his " Bud- get-of reward" riposte, and his triumphant " it seals -the victory of. thtis Government in linuidat- ing the legacy " from the Tories. Outside the Mouse Mr Healey was scornful of suggestions in tbis newspaper, aniong others, that his Budget was electioneer- ing. Had it been so be would have given much more, he would reply. Instead, as he put it to the House, it was Eritain's contribution to the collective effort of Western recovery. He explained that it was part of the Governmentfs programme "for - economic expansion spreading over 18 months "-a phrase causing instant Tory mirth. However, Mr Healey apparently meant one and a half fiscal years, not election timetables. Except for one reference to the pound's dollar rate now beiag up 10 per cent over a year ago, Mr Healey did not look back over those dark times. In fact it was a year to the day that he and the Prime Min- ister wvere besieged by the sterling crisis, with the pound falling to $1.59. He clearly savoured coming to the House with the good news. The basic message was that he had headrooam for raising the public sector borrowing require ment under the Governmentfs International Monetary Fund limits. Financial strength enabled the Government not to take up any further tranches of the V3,900m stand-by credit with the IMF. It was not quite the (lay when Mr Healey plans to tell the fund what to do with its stand-by, but clearly that day is in sight. *Mr Healey said his. measures *ould raise the borrowing reQuirement to an estimated E7,500m this financial year, and rbout ?7,000m in 1978-79. Both those. figures were within the "headrOmM", understood to be nbGut f8,600m. - Mr; ealey cutstaxes as' 'reward for sacrifice'