§ Beyond these decisions on income tax and public expenditure in 1978–79 I have left myself freedom to make further changes in the 1978 Budget according to developments in the economy, and particularly the prospect for inflation. If economic and financial circumstances permit, I intend to make some further reduction in the burden of personal taxation. For example, as I explained in my Budget Statement last March, there is a strong case for reducing the poverty flap by progressively raising the personal tax thresholds until they stand clear above the levels of the main social security benefits. There is also a strong case for introducing a reduced rate band of tax.
§ However, there can at this stage be no assurance that the economic situation will in fact permit a further net reduction in taxation, over and above the major reliefs which I am announcing this afternoon. The scope for any further move in this direction—and a reduced rate band of tax, in particular, could be very expensive—will depend crucially on the development of the economy between now and next April, and above all on the trend of pay settlements, measured against the Government's guidelines.