By Jock Bruce-Gardyne
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Additional info for Mrs Thatcher’s First Administration: The Prophets Confounded
Shares in the National Freight Corporation would be offered to the public. And there was the prospect of additional revenue from two sources: 'we must ... be prepared to switch to some extent from taxes on earnings to taxes on spending'; and 'restoring the will to work ... involves bringing unemployment and short-term sickness benefit within the tax Cabinet of Conflict 29 system'. That was about it: not much straw for Sir Geoffrey and his men to make their bricks from. Nevertheless the Budget they came forward with just five weeks after the election victory marked a major change of course by any standards.
It was assumed that the economy would grow by 2! per cent a year on averagealmost seven times the actual rate of growth over the four preceding years; that UK labour costs in manufacturing would rise by less than those of our competitors; that costs incurred by the public sector ( the 'relative price effect') would grow more slowly still; and that the cost of servicing the government debt, after rising very modestly in 1979 and 1980, would stabilise and then fall. In the short term it was also assumed that earnings would rise by 7 per cent in 1979, for the simple reason that that was the figure calculated to be consistent with the government's 5 per cent pay ceiling.
The modesty of these proposals reflected sharp divisions of opinion. Jim Prior made no secret of his scepticism about the scope for transforming Britain's industrial relations through changes to the statute book: what had appeared in the manifesto had represented, as far as he was concerned, inescapable sops to the strength of public feeling against union power. His scepticism was shared by John Biffen, usually classified at the other end of the party spectrum, although for different reasons. Jim Prior dreamed of a time when trades union leaders would socialise with him as freely and openly as they had done with Michael Foot, and was determined to prevent the erection of legislative barriers to the creation of such cheerful harmony.