§ The tax measures that I am about to announce are consistent with the medium-term strategy and the overall budgetary framework. They also take account of the changes in the balance of the economy that have come about over the last year. Many are made necessary only by the impact of inflation upon the tax system. One of the many reasons why we need to master inflation, it may be thought—though not perhaps the most important—is that it would enable Chancellors to make much shorter Budget speeches.
§ Three developments in particular have influenced me: high pay settlements, high oil prices, and the high exchange 1464 rate. Together, those developments have swung the balance strongly in favour of consumers and against companies, in particular against those companies facing competition from overseas, whether in home or overseas markets. Consumers have lost something as a result of the increase in oil prices. But the great majority have more than made up for this by big pay increases and the benefit they have received from income tax cuts, the high exchange rate and lower prices for imported manufactures. In 1979 average personal after-tax incomes increased by 20 per cent. while the profits of companies not engaged in North Sea operations fell by over 5 per cent. in money terms, and, of course, by much more in real terms.
§ In deciding the balance of my tax changes I see a stronger case for reducing the real burdens on companies and small businesses than on private individuals. Of course, not all companies have lost out. The oil companies are making large windfall profits. The banks are gaining from high interest rates. Some of these are in a position to contribute more by way of taxation. The financial position of most sections of business will be eased as interest rates come down. So far as tax changes are concerned, I shall concentrate the limited funds available to me on encouraging enterprise and on relieving specific pressures which are particularly damaging or unfair.