Surplus Prompts Thatcher to Call for Tax Rate Cuts

The Conservative government unveiled on Tuesday a sweeping reform of the British tax system, slashing rates for higher income groups in a move that provoked an uproar from the parliamentary opposition.

Prime Minister Margaret Thatcher’s government also announced a $5.55-billion budget surplus, the country’s first in almost 20 years.

“Shame, shame!” and “Rich man’s budget!” opposition members shouted as Chancellor of the Exchequer Nigel Lawson presented the annual spring budget statement to Parliament.

A Scottish legislator, Alec Salmond, was expelled after he called the budget an “obscenity” with tax cuts instead of extra spending on health and welfare services.

The budget served notice that in her third consecutive term as prime minister, Thatcher’s faith in her 9-year-old capitalist revolution is undimmed, and that the socialist opposition can expect few concessions.

Proceedings Suspended

Lawson said the government would abolish four income tax brackets, leaving just two, of 25% and 40%, in the fiscal year beginning April 1.

Tax rates currently range from 27% to 60%.

Lawson’s statement was repeatedly disrupted by opposition lawmakers, especially when he announced a huge tax cut to 40% for top earners.

“Tax breaks for the rich, poll tax (a new property tax) for the poor and nothing in it for the health service--it’s an absolute and utter obscenity!” shouted Salmond, of the Scottish National Party.

A few minutes later, the deputy speaker of the House of Commons was forced to suspend proceedings as shouting continued. Four uniformed nurses were ousted from the public gallery for yelling at Lawson.

Custom dictates a respectful hearing of budget statements, but Labor Party leader Neil Kinnock described Lawson’s budget as a “tragedy.”

“This is puny, marginal and negligible for the average people in our society,” he said.

‘One of Simplest Systems’

He claimed that the surplus came from Britain’s North Sea oil sales, taxes on a “massive expansion” of household credit debt, and “the once-and-for-all selloff of national assets”--a reference to the sale of state-owned industries to the private sector.

But Lawson said: “This major reform will leave us with one of the simplest systems of income tax in the world.”

The proposed tax changes are part of Thatcher’s long-term overhaul of the tax system and resemble recent reforms in the United States and Canada.

Thatcher’s goals have been to reduce and simplify taxes and transfer the tax burden from income to spending.

The spring Budget Day is when the government announces how it will raise its revenue. The government last autumn announced its planned expenditures of $290 billion for the fiscal year ending March 31, 1989.

The budget proposals must be approved by Parliament, where the Tories’ 102-seat majority in the 650-seat House of Commons guarantees their passage.

Lawson told the House that the public service borrowing requirement, the most commonly used measure of Britain’s budget deficit, would be in surplus of $5.55 billion in the year ending March 31, when the government spent $273 billion.

It was only the second surplus since the early 1950s. The last, in 1968-69, was about $1.1 billion.

The government most recently had forecast a deficit for the current year of $1.85 billion, down from an original forecast of $7.4 billion.