Even with Donald Trump’s drama in the courts of New York, the death of Nigel Lawson, UK chancellor of the exchequer from 1983-89, made front-page news. This was a measure of his impact on British politics, where his powerful intellect and drive made him one of the most influential politicians never to become prime minister.
He was, with Keith Joseph and Geoffrey Howe, one of the main architects of ‘Thatcherism’: a belief popularised by Prime Minister Margaret Thatcher in markets, privatisation, low taxes and limited government.
Lawson was involved in the Thatcher project from the very beginning to almost the very end. Although not a cabinet minister in her first administration, as financial secretary he was hugely influential in developing the medium-term financial strategy designed to control money supply, limit public spending and bring Britain’s rate of inflation down.
As energy secretary, he became a powerful advocate of privatisation, a policy that had never featured in the Conservative manifesto of 1979. He became an evangelist for popular capitalism and wider share ownership.
Sometimes people wrongly thought of Lawson as a technocrat rather than a politician. While he had little patience with political tittle tattle, he always thought strategically, and was something of a master of political strategy. His budgets accorded with his philosophy but were also designed with an eye on elections. His sense of direction was shown when he built up coal stocks at power stations in preparation for the second miners’ strike in 1984-85. He later described the costs of that strike as ‘a very good investment’.
To those who did not know him, Lawson might appear rather forbidding. The truth was very different. He had a strong sense of the ridiculous and was not averse to making fun of himself. I remember one of his birthday parties where he appeared in a velvet dinner jacket and began to entertain everyone singing like Noel Coward in Las Vegas. He appeared on satirical television show ‘Have I Got News for You’ and made wry comments about his nemesis Alan Walters, Thatcher’s adviser.
It was in his six years as chancellor that he set out to transform the British economy into one of faster growth, lower taxes and a smaller state. His defining moment was the 1988 budget when he cut the top rate of income tax to 40% from 60% and the basic rate to 25% from 27%.
But he didn’t just cut taxes. He reformed and simplified them. He abolished four different rates above the top rate and introduced independent taxation of husbands and wives, abolishing a 180-year-old rule. He aligned the rates of capital gains tax with those of income tax. The latter was not so popular with Conservative MPs but to him was a logical part of a package of lower taxes.
Lawson never had any time for special pleading by vested interests. When the 1987 stock market crash happened in the middle of the sale of part of the government’s stake in BP, he ignored protests from the City and insisted the losses were borne by the underwriters.
Some politicians recently have praised Lawson’s tax cuts and attempted to use his memory to advocate policies which he strongly opposed. At the time of the September 2022 Conservative leadership election, he made it clear tax cuts should depend on getting inflation down first and be matched by cuts in spending. He declared Rishi Sunak, now prime minister, to be the only candidate ‘who understands Thatcher economics’.
Many people were puzzled by Lawson’s attitude to Europe. He supported joining the exchange rate mechanism, but also backed the UK’s exit from the European Union and for a time was chairman of the ‘Vote Leave’ campaign during the 2016 referendum. He was a Gaullist who became increasingly eurosceptic as European integration developed.
His support for the ERM had nothing to do with Europe and came after he lost faith in targeting monetary aggregates as an anti-inflation policy. He felt that anchoring the pound to a strong currency like the Deutschmark would drive down UK inflation. He did not remotely believe in the euro.
It was this attitude to the exchange rate, together with the activities of Walters, that led to his so-called ‘falling out’ with Thatcher and his resignation. I tried hard to persuade him not to resign but had the impression he felt he had been chancellor long enough.
It has to be admitted Thatcher had a point in her concern about policy. Economists still argue about the causes but inflation at the end of his period in office was again nudging double figures. Despite his departure from the government, Lawson always retained the highest regard and affection for Thatcher. He felt together they had achieved great things.
Lawson’s energy remained irrepressible. He was highly active after his elevation to the House of Lords in 1992 and became one of the leading sceptics in the UK about the accepted theories of global warming.
It is sometimes said that individuals cannot alter the course of history. Nigel Lawson was the exception. He made a true difference to economic policy-making in Britain and the wider world.
Lord Norman Lamont of Lerwick is a Conservative Member of the House of Lords and a member of the OMFIF Advisory Network. He was UK Chancellor of the Exchequer from 1990-93.