Free Bang!: A History of Britain in the 1980s by Graham Stewart Page B

best to curb inflation that Labour and the Conservatives most clearly demonstrated their contrasting views over whether
Britain needed a more or less interventionist state. Labour announced that it aimed to cut inflation to 5 per cent. This would be achieved not just by continuing to work with and involve the unions
in setting pay policy norms, but also by giving the Price Commission greater statutory powers forcibly to cut prices where, in its judgement, they were higher than they ought to be. The
Conservatives did not conceal their belief that relying on the opinions of a price-fixing committee to curb inflation was nonsense. They would scrap the Price Commission. As for wages, what pay the
private sector set for its employees was its own affair – it was not for the state to determine. The Treasury should set targets for the money supply, rather than income norms, for ‘to
master inflation, proper monetary discipline is essential, with publicly stated targets for the rate of growth of the money supply’. 23 This
was not entirelythe great dividing line that many on both sides made it out to be. Albeit with mixed results, the Labour government had also been actively pursuing monetary
targets since 1976, while being coy about trumpeting the fact too publicly. What was different was the centrality the Tories gave to monetary discipline. Even here, though, there was caution. The
CBI still supported an incomes policy and it was not until after the Winter of Discontent that the Conservatives ceased being ambiguous about whether they would persevere with the policy in
government. This was a victory for Thatcher, who saw incomes policies not only as a means whereby the unions would always have a lever on economic policy, but as a mechanism that focused national
attention away from the indicator that really mattered. As she told an audience in March 1979: ‘Only when we stop being obsessed with pay and start being obsessed with productivity are we
going to prosper.’ 24 Focusing on the money supply would prove an alternative obsession. But part of its appeal was that it came part and
parcel with reducing the size of the state: public spending would be cut, as would government borrowing and taxes.
    Taxation was the last of the five main battlegrounds dividing the parties, and the one on which the Conservatives believed they were on the strongest ground. While Labour skated over their
fiscal intentions, its manifesto was nevertheless not embarrassed about proclaiming that ‘The Labour Party’s priority is to build a democratic socialist society in Britain’
– which was presumably not going to be achieved by giving taxpayers a slice of their money back. Indeed, Callaghan went into the election promising a new burden on top of the already
historically record-breaking level of income tax. This came in the shape of an annual wealth tax on those who had more than £150,000 squirreled away. The very idea was naturally anathema to
the Tories, who announced they would cut the top rate of income tax to the European average (which was at the time around 60 per cent). They also undertook to raise the threshold at which those on
low incomes paid tax. But there was a sting in the shape of a switch from taxing income to taxing spending. As Labour pointed out, increasing VAT would both be inflationary and would
disproportionately affect those on lower wages, for whom the shopping bill consumed a relatively larger share of their income.
    MORI’s private polling, commissioned by Labour, showed that the Conservatives led on every policy issue except the National Health Service and industrial peace. On the two issues cited as
the most important by respondents – taxation and law and order – the Tory lead over Labour was 30 per cent. 25 This was especially
important because cutting taxes was the centrepiece of the Conservative campaign. Yet the apparent support for tax cuts was far less clear-cut when the question was