Nigel Lawson passed away on Monday 3 April, since when, especially in right of centre publications and other media outlets, the eulogies have been piling up. Even before his death Tom Clougherty, writing for the Centre for Policy Studies in 2018, was asserting that Lawson’s 1988 budget was “one of the most successful” and that Lawson’s Conservative successors were still “essentially colouring in the map that he [Lawson] drew”. Additionally Rishi Sunak was quoted on 4 April as saying that when he was at the Treasury he had a portrait of Lawson hung in his office.
Clearly as chancellor (1983–89) Lawson was one of the big beasts at Westminster and one who has had a significant impact on Conservative thinking on how to manage the economy. But whilst the plaudits have piled up, we need to be aware that many on the centre and the left of UK politics regard Lawson’s influence as baleful – almost wholly injurious to the development of the UK economy.
Tuesday 4 April’s World at One on Radio 4 had an item that illustrates vividly how opinions might differ regarding Lawson as chancellor: effusive praise from David Cameron with more measured and critical tones provided by Will Hutton.
The prototypical neoliberal chancellor
What were the key strands to Lawson’s economic thinking? Essentially he was a ‘small stater’, keen to shrink the size of the role the government played in the economy. Public spending was to be reduced where possible and the private sector’s role expanded. So Lawson was a key proponent of Margaret Thatcher’s policies of the privatisation of several previously nationalised industries. Shrinking the state gave rise to the opportunity to cut taxes.
In 1927 the US supreme court justice Oliver Wendell Holmes, in handing down a judgement, included the words: “Taxation is the price we pay for civilisation”. Where we reduce the government’s income from taxes and hence its agency, we are in danger of becoming a less civilised country. (We may note that Denmark, where the government’s tax take from the economy is the highest in Europe also happens to come out top on the UN Index of Happiness).
In his 1984 budget, Lawson started the cutting of income tax and shifted the ‘burden’ of taxation from direct taxes such as income tax (that are progressive) to indirect taxes (that are regressive). In consequence some of the weight of taxation was shifted from the shoulders of high earners onto the shoulders of the poor. Later budgets took the top income tax rate down from 60% to 40% and the basic rate from 30% to 25%. At the same time the allowance for inheritance tax was raised, so estates were less heavily taxed on the passing of one of the rich.
Readers can easily appreciate how Lawson became and remained the darling of the Tory right.
A fundamental criticism of Lawson’s changes is that the benefit went to the strong whilst the weak were punished. Additionally we may note that he was dangerously insouciant about the state of the UK’s external balance of payments. In 1984 the balance of payments deficit stood at 1% of UK gross domestic product. By 1989 this had risen to 5% of GDP.
Privatise the gains …
In 1995 Hutton published a book The State We’re In that was very critical of Conservative economics under Thatcher. What showed up then – and what remains a significant weakness in the economy – is the UK’s very poor record for providing training for those in industry and commerce. Hutton writes (p.187):
“Nigel Lawson, for example, says in his memoirs that he always argued strongly in cabinet that training should be the responsibility of the private sector and that his contribution was to raise profits so that industry could afford it.”
Under Thatcher and Lawson the Industrial Training Boards and the Manpower Services Commission were scrapped. This is all a matter of the ‘private good – public bad’ thinking that has bedevilled us ever since. The privatisation of the water industry and the railways might have taken place after Lawson had left office – but followed on from the thinking he had set in train. A further snippet from the Hutton book (p.183) records that at one point the UK Treasury produced a report that concluded that reducing marginal income tax rates had virtually zero impact on people’s willingness to work. Hutton adds:
“…this so offended the prevailing orthodoxy that the then Chancellor, Nigel Lawson, tried to prevent the report from being published.”
A legacy
Not to be outshone by his seismic impact on UK economic performance and also on Tory economic thinking, in his latter years Lawson focused his interests on representing the interests of the fossil fuel industry with unswerving dedication. In 2009, he founded the Global Warming Policy Foundation and also sat on the board of Net Zero Watch. Given the appellation “climate-denier-in-chief” by Adrian Ramsay, he maintained his radical climate scepticism and unwavering support for petrochemical interests until his passing.
Given such a legacy, Lawson will be conspicuous by his absence in the opaquely funded chambers of Tufton St.
