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.
U.K. ECONOMY STRONGER THAN AT BUDGET, LAWSON SAYS