The 1981 United Kingdom budget was delivered by

Geoffrey Howe Richard Edward Geoffrey Howe, Baron Howe of Aberavon, (20 December 1926 – 9 October 2015), known from 1970 to 1992 as Sir Geoffrey Howe, was a British politician who served as Deputy Prime Minister of the United Kingdom from 1989 to ...

, the then

Chancellor of the Exchequer The chancellor of the exchequer, often abbreviated to chancellor, is a senior minister of the Crown within the Government of the United Kingdom, and the head of HM Treasury, His Majesty's Treasury. As one of the four Great Offices of State, t ...

, to the

House of Commons The House of Commons is the name for the elected lower house of the Bicameralism, bicameral parliaments of the United Kingdom and Canada. In both of these countries, the Commons holds much more legislative power than the nominally upper house of ...

on 10 March 1981. It was

's third budget and the second of the

first Thatcher ministry Margaret Thatcher was Prime Minister of the United Kingdom from 4 May 1979 to 28 November 1990, during which time she led a Conservative majority government. She was the first woman to hold that office. During her premiership, Thatcher moved ...

. The budget represented a strongly

monetarist Monetarism is a school of thought in monetary economics that emphasizes the role of policy-makers in controlling the amount of money in circulation. It gained prominence in the 1970s, but was mostly abandoned as a direct guidance to monetary ...

response to the

stagflation Stagflation is the combination of high inflation, stagnant economic growth, and elevated unemployment. The term ''stagflation'', a portmanteau of "stagnation" and "inflation," was popularized, and probably coined, by British politician Iain Mac ...

and high government borrowing which the UK was suffering at the time. The budget speech lasted for 91 minutes.

Background

The budget was given during a time of significant economic malaise in the United Kingdom, with unemployment having increased by almost one million in the prior 12 months and inflation running at around 15%.

Measures

The budget increased net taxes by £4 billion (in 1981 prices). A new 20% tax on

North Sea oil North Sea oil is a mixture of hydrocarbons, comprising liquid petroleum and natural gas, produced from petroleum reservoirs beneath the North Sea. In the petroleum industry, the term "North Sea" often includes areas such as the Norwegian ...

was introduced. A one-off windfall tax on certain bank deposits was introduced, in the form of a 2.5% levy on deposits of banking businesses, charged by reference to non-interest bearing sterling deposits in excess of £10 million averaged over the final three months of 1980. The tax was estimated to raise £400 million in total revenues (in 1981 prices). There was no increase in income tax personal allowances or tax rate thresholds, resulting in a significant real-terms income tax rise as inflation was around 15% per year at the time. The 25p rate of tax introduced by Labour in 1978 was abolished. Duties were raised significantly, with duty on petrol increased by 20p per gallon, duty on a packet of 20 cigarettes increased by 13p, duty on beer increased by 4p, duty on spirits increased by 60p, and duty on wine increased by 12p.

Reception

The budget was highly controversial. A number of Conservative MPs walked out of the Commons while the chancellor was still speaking. The leader of the Opposition

Michael Foot Michael Mackintosh Foot (23 July 19133 March 2010) was a British politician who was Leader of the Labour Party (UK), Leader of the Labour Party and Leader of the Opposition (United Kingdom), Leader of the Opposition from 1980 to 1983. Foot beg ...

said of it "This is a budget to produce over three million unemployed". A group of 364 economists wrote a letter to ''

The Times ''The Times'' is a British Newspaper#Daily, daily Newspaper#National, national newspaper based in London. It began in 1785 under the title ''The Daily Universal Register'', adopting its modern name on 1 January 1788. ''The Times'' and its si ...

'' newspaper which was strongly critical of the budget and expressed the view that there was "no basis in economic theory or supporting evidence" for its measures, and that it threatened the UK's "social and political stability". One week after the budget was delivered, the Conservative member Christopher Brocklebank-Fowler crossed the floor of the House to join the SDP during a debate on the budget resolutions.

Background

Measures

Reception

See also

References

Further reading