1988 United Kingdom budget

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1988 (1988) United Kingdom budget
Presented15 March 1988
Parliament50th
PartyConservative Party
ChancellorNigel Lawson
‹ 1987
1989 ›

The 1988 United Kingdom budget (sometimes referred to as the Giveaway budget)

Deputy Speaker Harold Walker
was required to suspend proceedings in what was described as an outbreak of "grave disorder".

Overview

Lawson believed the

Corporation tax was also reduced from 27% to 25% for smaller companies.[5] Inheritance tax was simplified, with the four rates between 30% and 60% replaced by a single 40% rate, while the threshold at which inheritance tax was levied was raised from £90,000 to £120,000.[5] It was also confirmed that multiple mortgage interest relief would end from August 1988.[3][4] Rates of Capital Gains Tax were aligned with those for income tax,[6] while any Capital Gains Tax on assets owned before 1982 was written off.[2] Finally, excise duty was raised, with 1p on beer, 4p on wines and 3p on a packet of 20 cigarettes, but remained unchanged on spirits.[5]

Reaction

The budget was welcomed by Conservative MPs, but as the extent of the tax cuts became apparent, Labour MPs were heard to chant "shame" and "What about the National Health Service?". The 105-minute speech was beset by frequent interruptions, including one from Alex Salmond of the Scottish National Party, who was suspended from the House after describing the statement as "an obscenity", breaching parliamentary convention in the process. Further interruptions ultimately led Harold Walker, the House of Commons Deputy Speaker, to suspend proceedings for ten minutes because of "grave disorder having arisen in the House". Further afield, the budget was met with disappointment from companies in the City of London, which had hoped for stamp duty on share deals to be abolished.[4][5] In the short term, Lawson's reputation was boosted, adding weight to his argument that the best way to control inflation was for the UK to join the Exchange Rate Mechanism, something with which he was at odds with Prime Minister Margaret Thatcher. But economic turmoil lay ahead.[1][2]

Legacy

Far from slowing down, economic growth was actually accelerating, fuelled by a property boom that saw house prices increasing by 20% a year. This was further exacerbated by the changes to mortgage interest relief which prompted an increase in the number of mortgages taken out by unmarried couples and friends keen to get on the property ladder before the changes came into effect. The number of mortgages increased by a fifth during the second and third quarters of 1988 compared to the same period in 1987, and within a few months of the 1988 budget, interest rates had doubled. By then, inflation had increased significantly, and the UK was running its largest ever balance-of-payment deficit. Many first-time buyers had taken out mortgages worth 95% of the value of their property, and ultimately found themselves in negative equity when house prices began to fall in 1989.[1][3]

The

financial deregulation had been responsible for increases in lending, particularly to the housing market.[1] But, in a 2018 Telegraph article in which he acknowledged the 1988 budget as "one of the most controversial Britain has seen", Tom Clougherty, of the Centre for Policy Studies, described it as "one of the most successful" and one that Lawson's successors were "still essentially colouring in the map that he drew".[2]

One of the announcements from the 1988 budget to survive into the 21st Century was the 40% rate of Capital Gains Tax, which was changed to 18% for all taxpayers in the 2008 budget. The 1982 write-off date for asset ownership also continued to be used.[2]

See also

References

  1. ^ a b c d e f "Budget Briefing: Budget blunders". BBC News. 9 March 1999. Retrieved 23 November 2022.
  2. ^ a b c d e Clougherty, Tom (20 October 2018). "Thirty years on from the Lawson Budget, the Tories need to rediscover their faith in tax cuts". The Telegraph. Retrieved 23 November 2022.
  3. ^ a b c O'Connor, Sarah (20 March 2023). "Budget 2013: Best and worst measures from the past". The Financial Times. Retrieved 23 November 2022.
  4. ^ a b c "Budgets 1979–1992". BBC News. Retrieved 23 November 2022.
  5. ^ a b c d e "Bygone budgets: March 1988". The Guardian. 3 March 1999. Retrieved 23 November 2022.
  6. ^ "OTS Capital Gains Tax Review: Simplifying by design". GOV.UK. Retrieved 23 November 2022.