§ The Chancellor of the Exchequer (Mr. Denis Healey)
A central objective of Government policy is to continue the attack on inflation. To maintain a continued fall in inflation through to 1978 we shall need agreement between the TUC and the Government on how to pursue the attack on inflation while permitting greater flexibility in pay negotiation in the period after July 1977. I hope it will be possible for us to reach agreement on this in time for me to take account of the outcome in settling the levels of income tax in the next Budget.
If at the time I settle my Budget for 1977–78 I judge that without increasing the PSBR above £8middot;7 billion there is scope for tax reliefs and if, as I expect, a satisfactory agreement has been reached with the TUC and the CBI on the next pay round, then I propose to use the available margin to reduce the present burden of income tax, which I believe to be too heavy. [HON. MEMBERS: "Who made it too heavy?"]
In this context there are also important questions, which I shall want to consider with the TUC and other interested bodies, concerning the interrelationships between changes in earnings, social security benefits, pensions and rates of direct and indirect taxation.