Your Money: Blackmail and bribery? Never!
Sunday 01 December 1996
The perception was that Kenneth Clarke's Budget, short of the amiability and jokes aimed against Labour, was rather a boring affair, one directed primarily at calming the markets and preventing any sudden interest rate rises in coming weeks.
Now, of course, the jury is still out on that one. More important is whether the Budget was, in fact, boring at all. I tend to disagree with this view.
Mr Clarke's speech was one of the most overt pitches for the skilled working class vote made in virtually any Budget for almost a decade.
Consider the evidence. The last time the Conservatives tried to woo this particular constituency, it was done by selling off council houses and privatised companies' shares at massive discounts. Tax breaks to skilled workers were a by-product of the greater giveaway to rich people.
This time, things have been different. For example, the Government has increased the personal allowance from pounds 3,765 to pounds 4,045 - three times the rate of inflation. The 20 per cent tax band has been expanded by pounds 200, twice the rate of inflation.
By contrast, his more unpalatable proposals are to be phased in over two years - starting in 1997 or even 1998. Profit related pay (PRP) is one obvious example.
In recent years, PRP had become a useful tax avoidance scheme for many companies, while failing to achieve the Government's stated aim of making employees feel more responsible for their company's fortunes. So Mr Clarke is scrapping it. At first sight, this is counter-productive: there are almost four million people who will be disaffected by this announcement.
Except that his plans won't kick in for at least two more years. Many companies are indicating that they expect to make up some or all of their employees' foregone income.
There is, however, one important difference between then and now. The relative paucity of Mr Clarke's generosity shows how little he had to give and how far he is boxed in by the conflicting demands of hard-done- by taxpayers and the City.
Even more important than this is the question of whether it will work. Will pattern makers in Birmingham and plumbers in Bristol forgive Mr Clarke's government for all the previous tax rises, the pain of negative equity and the job insecurity they have suffered from in the past few years?
If they do, their memories will be very short indeed.
Alliance & Leicester is in the news again over its objections to a proposed Bill which may remove rights enjoyed by de-mutualising building societies.
The Bill proposes that should the society go on the takeover trail after its stockmarket flotation next year, it could lose its own protection against other predators. Not surprisingly, Alliance & Leicester is miffed. It threatens - sotto voce - to delay its flotation, and with it a free shares handout worth pounds 1,000 to each of its 2.4 million members.
I am in full support of its strategy and do not for one second believe it to be a bid to blackmail the Government. Indeed, I go one stage further.
Since the A&L is clearly too puny to hack its way with all the other companies on the FT-SE 100 shares index, who themselves do not enjoy similar protection, it should abandon its flotation plans forthwith. I am sure its members will back the board in this decision. After all, what is a mere pounds 1,000 a head when such important principles are at stake?
Steve Lodge is back next week
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