Everyone had known since the devaluation of sterling four months ago that Britain would have to produce a tough budget this spring in order to re establish international confidence in the pound. But, as Britons discovered last week, no one had guessed quite how tough. In a commanding and convinc ing 135-minute speech, Chancellor of the Exchequer Roy Jenkins spelled out new fiscal measures that are the most se vere since the Depression year of 1930. They will levy on already heavily bur dened Britons a total of $4 billion in new taxes during the next 21 months. Said the Times of London: "Nasty—but necessary."
Blunt & Brutal. Jenkins, who took over the chancellorship last November after James Callaghan quit in humiliation because of the devaluation, reject ed the half measures with which Prime Minister Harold Wilson's government in the past has tried to cope with Brit ain's worsening economy. Instead, he struck squarely at the most bothersome aspect of Britain's financial weakness: a balance of payments deficit that reached $1.3 billion last year. He hopes to turn that deficit into a $1.2 billion surplus this year by the blunt and bru tal method of taking money from British pockets. If the British have less buying power, he reckons, they will import less, export more.
Britons, who already pay among the world's highest income taxes (a top executive with a $14,000 annual salary hands over $4,100 to Her Majesty's cof fers), now face higher purchase taxes on thousands of consumer items from liquor to lollipops, TV sets to autos. The tax on Scotch rose 300, to $4.80, lifting the total purchase price of a bottle to $6.48. Because of the tax, cigarettes rose 20, to 670 a pack (total tax: 450), and gasoline increased 40, to 730 for an imperial gallon (total tax: 470). The new levy added a penny to ice-cream cones. New price: 70.
The bite on an average black-and-white TV set increased by $8, to $50, pushed up the total purchase tag to just above $200. The government's cut on a $4,860 diamond bracelet is now $1,620 v. $1,080 in pre-Jenkins times; not surprisingly, the jewelers passed the increases along to the customers. The new $1,270 tag on British Motors' Austin Mini reflects a $48 rise in the old $233 purchase tax. Not forgetting the rich, Jenkins also imposed a new one-year levy on investment income, creating a situation in which a man who earns $48,000 in dividends will have to pay nearly $16,000 in taxes.
Due' to taxes and devaluation, Qrit-ons can expect their cost of living in 1968 to increase at least 5% and possibly more. But Jenkins also announced that he intends to hold Britain's wage increases to a maximum of 3½% for another 18 months. That grim arithmetic means that Britons will not get enough extra money to meet the rising costs. As a result, for the first time in 17 years, the British will experience a downturn in their standard of living.