Tributes to Nigel Lawson have so far fallen into two camps: laments over the pipsqueak stature of today’s politicians against his intellectual (and physical) heft, or demands Rishi Sunak follow his hero’s example. Drinking every time the 1988 Budget is mentioned could make for quite a fun game – but, in essence, it’s the same old demand for tax cuts yesterday, in suitably funereal packaging.
Apologies to our Deputy Editor, but writing the former is to state the obvious. Blame declining educational standards, MPs’ reduction into glorified social workers, the loss of talent to finance (for which Big Bang bares some responsibility), that candidate selection now involves a hamster wheel of local councillors, or general disillusionment with politics: the difference in quality between modern politicians against those of Lawson’s era – let alone to the man himself – is stark.
He was the most influential politician of modern times not to have become Prime Minister. Despite Gordon Brown’s game of Russian Roulette with boom and bust and Kwasi Kwarteng’s tax-cutting sugar rush, his agenda of monetary control and microeconomic reform still underpins today’s economic order – despite Andrew Bailey’s best efforts.
That his legacy is still intact might come as a surprise to some of those who have been lauding his achievements this week. How can we still be living in Lawson’s world if taxes are at a 70-year high? Wasn’t he the man, in 1988, who cut income tax to 40 per cent and aimed to abolish a tax in every budget? What continuity does that have with the high-tax, high-spending regime over which ‘Sunak the Socialist’ presides? Etc, etc.
If the answer is not obvious to readers, may I shove under their noses Lawson’s own words? ‘Rishi Sunak is the only candidate who understands Thatcherite economics’, ran the title of a Telegraph article he penned last summer. James Forsyth – Sunak’s St Paul – pointed out, it was a sign of the importance of Thatcher’s achievements that ‘who honours the Great Handbag best?’ was a topic of debate in a leadership race 30-odd years after she had left office.
As Sunak (ha ha) says in tomorrow’s Spectator, he was ‘trailing in the polls at the time’ and Lawson had little to gain from sticking his head above the parapet. He did so to make the same point (if I can be smug) that I tried (and failed) to hammer home to readers throughout the contest: that ‘the only way to substantial, lasting reductions in taxation was first to tackle inflation.’
He explained that ‘markets’ reaction to a government that is seen as improvident is to demand higher rates of interest’ – and that ‘the currency of the country will tend to weaken’. Those getting a sense of déjà vu about the mini-Budget are entirely justified. Yet Lawson was both reading the tea leaves and harkening back to the folly of one of his predecessors: Anthony Barber’s ‘dash for growth’ in 1972.
Lawson had seen what happens when a Chancellor sets an ambitious growth target, indulges in fiscal loosening, and was forced to U-turn as inflation spiked and the public finances crumbled. One would have hoped that Kwasi Kwarteng – once who wrote a book about Margaret Thatcher’s early years – would have been aware of his predecessor’s predicament, rather than embarking on the largest fiscal loosening since, erm, Anthony Barber. In Kwarteng’s case, the inevitable reversal came rather more quickly.
What this illustrates is the difference between those who label themselves ‘Thatcherite’ against those who actually served in her government. The former continue to peddle a bastard Reaganism based on big tax cuts and a willingness to let the deficit look after itself. The latter – including Lawson, Norman Lamont, Peter Lilley, and Michael Howard – believe that runs contrary to what Thatcher did in office. They backed Sunak accordingly.
Focusing on the 1988 Budget neglects the previous nine years of government before it. The first priority of Thatcher, Lawson, and Geoffrey Howe was to bring inflation under control. So in 1981 taxes were raised to address the costs incurred by rising interest rates – since ‘public expenditure cannot be brought under control in an inflationary environment’.
That tax cuts could only be financed when the Government had the revenue to afford them was a belief of both Thatcher’s and Lawson’s. Those currently preoccupied with his slashing of the top rate of income tax in 1988 ignore that he did so whilst announcing a budget surplus. By contrast, Kwarteng announced his £20 billion-odd package with a pre-existing budget deficit of £27.6 billion.
Lawson was vindicated. Our dabble with Trussonomics showed that those proposing tax cuts without spending cuts is fundamentally unserious and historically misinformed. Lawson warned George Osborne that it is much easier to get Tory MPs to endure higher taxes than it is to get them to cut spending. The failure to do so over the last twelve years is the reason why there is no bandwidth for tax cuts now.
You should ignore those using Lawson’s memory to argue for the same unfunded tax cuts he opposed. If the right-wing entertainment industry ignores what he did in government, how the tax cuts he made were feasible only after years of retrenchment, and why they cannot be pulled out of a hat now, they have forfeited this right to be heard – especially after last year’s farce.
Of course, Truss only won the leadership because the siren calls of tax cuts were more attractive to Tory members than Sunak’s proscription of pain. But he became Prime Minister two months later because his warnings – and thus Lawson’s – were wholly proved correct.
Sunak’s lessons from Lawson and Thatcher were not limited to economics. A crucial element is the importance of strategy. Lawson formulated the medium-term financial plan to bring down inflation, spending, and taxes. He began the stockpiling of coal as Energy Secretary which enabled the Government to go to battle with miners. As John Hoskyns detailed in Just in Time, it was this dogged preparedness that was key to Thatcher and Lawson’s ultimate success.
Sunak was the same age when he became Prime Minister that Lawson was when he first entered Parliament. Lawson spent his twenties and thirties climbing the greasy pole of journalism; Sunak spent it getting rich. Hence his occasional political naivete – and why, in this angry age, he so easily found himself labelled a ‘socialist’ by those who should have been his natural allies.
Yet his recent successes suggest a coherence of strategy that both his two immediate predecessors lacked. When we complain that today’s politicians are far beneath Lawson’s calibre, I don’t think we’re being entirely fair. After all, few of the facets of decline mentioned above apply to the Prime Minister – a reason why, perhaps, he received his hero’s blessing. Hanging that picture behind his desk in Number 11 was not in vain.