Lord Willetts is President of the Resolution Foundation. He is a former Minister for Universities and Science, and his book a University Education is published by Oxford University Press.
Nigel Lawson is one of my political heroes. My very first job in politics was working for him as his research assistant when he was an Opposition Treasury Spokesman in 1978. I had already been offered a place in the Treasury as an official, and it agreed that before joining that October I could spend the summer working for him. That meant that when I arrived as an official I found having to work out the answer to a Written Parliamentary Question I myself had drafted. I then worked again for him as his Private Secretary when he was Financial Secretary to the Treasury.
Looking back, he was extraordinarily open and patient with a naive young man. He was always willing to explain exactly what he was thinking and why. He was unstuffy, witty and kind. I got to know him through his son Dominic, who captured brilliantly in the Sunday Times last weekend also how funny and charming his father could be. He was amused by life and extraordinarily tolerant.
One of his greatest admirers and someone he himself won over with charm and wit as well as sheer intellectual power was of course Margaret Thatcher. After the Treasury, I moved to the Number Ten Policy Unit, and saw them both close up when he was Chancellor. They did not always agree but, until their relationship broke down towards the end of his Chancellorship, he was one of the few people who could win her over.
I remember, for example, her summoning a meeting with him on compulsory private savings for pensions. She was keen on the idea but Nigel wasn’t. She said “Nigel – saving for your pension is compulsory in Switzerland.” He immediately replied “But Margaret, in Switzerland everything which isn’t forbidden is compulsory.” She dropped the idea. It was one of his regrets that he wasn’t able to persuade her to drop the idea of the Poll Tax.
She had genuine affection for him as well as enormous respect. I went back to work for her during the 1987 general election, and for some reason she became worried that his hair was too long and so he didn’t look serious enough in his TV interviews. I remember a phone call when she delicately tried to persuade him to have a haircut. And on that she succeeded.
He was of course a key figure in the heroic economic reforms of 1979. Within a year, Conservatives had swept away pay controls, price controls, dividend controls and exchange controls. It was one of the great revolutions in British economic policy and was the foundation of the surge in growth of the 1980s.
Nigel was Geoffrey Howe’s key ally in achieving that. But it was Nigel’s intellectual rigour above all which drove it. He linked fiscal policy and monetary policy in one single coherent account, the Medium Term Financial Strategy. His Mais lecture of 1984 was another high point, arguing that the role of micro-economic policy was not to manage inflation through all the old controls which had been swept away: it was instead to promote growth through supply side reform. That remains as true now as it was then.
The obituaries capture his extraordinary combination of charm and intellectual power. Behind some of them there is also the question of why we can’t now just repeat what he did 40 years ago and cut taxes now. But that is to ignore the range of what he did as economic circumstances changed. He was a great tax-cutting Chancellor, but he was willing to raise taxes and never believed that tax cuts just paid for themselves. When there were exceptional profits being made by the banks, he was the Treasury Minister who steered through the one-off Bank Tax. He believed that rates of capital tax and income tax should be aligned. He succeeded in bringing down the higher rate of income tax to 40 per cent, but increased the rate of Capital Gains Tax to match that as well.
He had extraordinary intellectual boldness which drove the economic reforms of the 1980s. But he also enjoyed the benefit of North Sea oil tax receipts. There was also very favourable demographics with a surge of young people entering the work-force, but little increase in the number of pensioners or children.
Nigel was very aware of the -ong term trends working to offset the demographic dividend he enjoyed. That was why he wanted to control pension spending. For over a decade, the state pension only rose with prices – the biggest expenditure saving of the Thatcher Government: now we have the expensive Triple Lock instead. He was always worried about the cost of the NHS. But nowadays the new demographics of the Tory Party with its focus on increased spending for its older voters makes his tough approach much harder.
He had the confident pragmatism of the true believer. He was a stern monetarist who then advocated Britain joining the ERM. He observed that the Wets who were against tough financial policies were also often pro-European, and so pro the ERM. It meant tying our monetary policy to Germany’s, and so would be the one monetary anchor which the Wets might approve of.
It was monetary policy which led to the break-down of his relationship with Margaret Thatcher. He thought she willed the ends not the means. She was keen on ways of controlling the money supply but without putting up interest rates. We ended up trying a range of different monetary rules. The same problem may now happening to fiscal policy with the frequent formulation of new rules sometimes with perverse effects. The current focus on the size of the national debt rather than balancing the current budget has led to cuts in public investment which damage our long term growth prospects.
He was sharply sceptical of the conventional wisdom. But that scepticism was kind, unstuffy and humorous. And it was combined that with an extraordinary creativity in coming up with an alternative. He was undoubtedly one of the most powerful intellects ever to have served as Chancellor and for me it was a great privilege to work for him.