New Times,
New Thinking.

  1. Business
  2. Economics
28 June 2018updated 09 Sep 2021 3:55pm

Nigel Lawson: “Globalisation has made it much easier for people to avoid paying tax”

The former Conservative chancellor and Brexiteer remains a proud architect of Thatcherism - but he is less impressed by some of the immoral behaviours that the free market aided.

By Alec Marsh

Next year it will be three decades since Nigel Lawson closed the door of 11 Downing Street behind him for the last time, after six years that many regard as the most pivotal chancellorship in post-war history.

In the generational interval, the economic plan that Lawson left in place – the Thatcherite formula of fighting inflation and promoting private enterprise – has fundamentally held sway in this land. Neither the Blair decade nor ill-fated Gordon Brown addendum made much difference: the trains that Lawson had wished to be privatised were duly sold off, and continue to run on denationalised track. The shops that in the 1980s drew their shutters down at lunchtimes on Wednesday now open seven days a week. What’s more, this Thatcherite tonic has become one of Britain’s greatest exports, ushering in profound economic and social change around the world. In the words of the American political philosopher Michael Sandel, “we have drifted from having a market economy to being a market society.”

So Lawson’s is a big political legacy, one further inoculated with his ardent position on the EU. In 2013 he became the most high-profile establishment convert to Brexit, when he announced in the Times that the EU had become a “bureaucratic monstrosity” and the “case for exit was clear”. He then served briefly as chairman of Vote Leave in 2016 – and continues his work in the House of Lords, commuting from his home in France.

At 86, Lawson, therefore, remains a big beast of politics, an active public figure who has been around long enough to see himself become part of history: doubtless he’ll soon show up on an episode of The Crown. The man himself steps silently into the stately meeting room in the House of Lords and takes us in: his unblinking scrutiny exudes weariness, perhaps, and a formal severity redolent of an era that used surnames, foolscap and rotary dial phones. We shake hands. There’s a tight-lipped smile.

I begin by asking him about his reforming Budget of 1988, which, in a sense, was the crystallisation of the nine years of Thatcherism that preceded it. Chancellor Lawson scrapped a complex hierarchy of five higher-rate tax bands ranging from 40 to 60 per cent and replaced them with a single rate at 40 per cent.

Select and enter your email address The New Statesman's quick and essential guide to the news and politics of the day. The best way to sign up for Morning Call is via morningcall.substack.com Your weekly guide to the best writing on ideas, politics, books and culture every Saturday. The best way to sign up for The Saturday Read is via saturdayread.substack.com
Visit our privacy Policy for more information about our services, how Progressive Media Investments may use, process and share your personal data, including information on your rights in respect of your personal data and how you can unsubscribe from future marketing communications.
THANK YOU

“Excessive rates of income tax destroy enterprise, encourage avoidance, and drive talent to more hospitable shores overseas,” Lawson told MPs, who were in uproar. By the time he had sat down he had also set a flat rate of Inheritance Tax at 40 per cent and laid the way for a future 20 per cent basic rate by lowering that to 25 per cent. It was a major simplification of the tax system, one intended to stimulate Britain’s enterprise culture, which it did. In his memoirs Lawson noted: “Every taxpayer in Britain would remain the majority shareholder in his or her own income and capital.”

Lawson is satisfied that his schema is still intact. But back in 1990 there were 1.7 million higher-rate taxpayers, compared with 4.2 million today: is he concerned that too many are now paying 40 per cent?

“People now realise that the idea of going back to the higher rates… would not have any merit at all and would do considerable harm,” he starts before getting to the point. “I would like to see the threshold raised so fewer people are paying the 40 per cent. But of course the problem is that pressures on expenditure are very great indeed at the present time, particularly on the health service, for the very specific reason that people are living a lot longer and elderly people get ill, and the longer they live the iller they tend to get.” As a result, he doesn’t see any further change to the threshold in the “short term” until economic growth supports it.

Isn’t he concerned about the supply-side impact of this tax creep – that it will undermine the enterprise dynamism of the economy? He replies by noting that the enterprise economy is affected by taxation and red tape: “We tend to be excessively regulated, particularly because of the regulations coming from Brussels. It is excessive and there are huge supply-side economic gains to be secured from Brexit, provided we don’t do a stupid Brexit, which means we are still bound to all their regulations, which some people would like to see.”

This “some people” includes half the Conservative cabinet, and possibly Theresa May. So is Lawson worried that Britain will get Brexit wrong? “Yes I am,” he replies candidly. “She [May] repeated on a number of occasions that no trade deal was better than a bad deal, but she has allowed herself now to be manoeuvred into a position in which it appears that any deal is better than no deal. That is disastrous.”

Is he now a Brexit pessimist? “I wouldn’t call myself a Brexit pessimist, but I am very concerned about the muddle that the government has got itself into,” he states carefully. “This is partly, of course, a consequence of the lack of a clear majority in the House of Commons.”

Lawson doesn’t blame Mrs May for calling the election in 2017. “Unfortunately the election was messed up. People who are in politics ought to be aware that nothing can be taken for granted, and to produce a manifesto that went out of its way to make enemies and to produce a campaign which hadn’t been properly thought out and which was hugely unimpressive was crazy. It wasn’t necessary.”

What about Theresa May, then? Is she a good prime minister? For most of the conversation so far Lawson has looked straight ahead, as if addressing the far wall, but now looks straight at me – there’s a glint in his eyes: “I think she’s a good woman,” he says, holding my gaze. His mouth is perched in a resolute beak-like posture that isn’t quite a smile. Three, four, five seconds pass…

“But one facing a massive challenge?” I suggest. “Oh yes, it’s a huge challenge,” he agrees heartily, and settles his gaze back in the direction of the wall and the photographer.

Taking my cue from “huge challenge”, I turn to 1979 – when few would argue that the incoming Tory government faced anything less. The Tories’ medicine for Britain, back then billed as “the sick man of Europe”, was controversial but popular – as Lawson readily points out, four elections including a landslide were won in 1979, 1983, 1987 and 1992 “based on the record”. In his memoirs, he quoted Jim Callaghan, the outgoing Labour prime minister, on the subject of 1979: “You know there are times, perhaps once every 30 years, when there is a change in politics. It then does not matter what you say or what you do. There is a shift in what the public wants and what it approves of.”

Back then, the sea change was for Mrs Thatcher. What about now? Does Lawson recognise that after 40 years of Thatcherite-style politics, we may be seeing a new era? First he notes that it’s not quite 40 years yet, then he adds: “If the Conservatives fall from office it will not be because of the attractions of Corbynism, it will be because of weariness with the Conservatives and the feeling that they are not a very impressive government at the present time.”

Unsurprisingly, he’s convinced that a Corbyn government would be “an absolute disaster for the country”. “I think that that is the view of most of the British people,” he concludes. “If you had a Blairite Labour Party – and I’m not a great admirer of Tony Blair but he was politically very skilful – then that would be a much bigger threat to the Conservatives.”

A bit like getting Monet to appraise the rise of Cubism, I ask if Lawson accepts that many people don’t think the Thatcherite legacy is working any more? “A lot of people have stupid ideas,” he replies, with a smile. “That’s always been the case.”

Next I recall something else he wrote in his memoirs: “I suppose nowadays nobody of any significance calls himself or herself a socialist, except perhaps between consenting adults in private, without at least a twinge of embarrassment…” Lawson cuts in. “That was pre-Corbyn,” he asserts, offering another part-smile.

So what’s going on? Should taxes do more to ameliorate the sense of injustice: is he worried about it? Yes, he is. “I think the sense of injustice is real,” says Lawson. “But if we can get – by whatever means supply-side – the economy to be performing better so that the average man and woman feel that things really are getting better, then they’re going to be less concerned about the captains of industry and big bankers doing so well. It is the contrast which is causing resentment.”

But has society become too unequal? “It will always be unequal: some people are cleverer than others, some people are better-looking than others. Equality doesn’t exist in the real world.” What about executive pay? After all, the average FTSE 100 chief executive is paid 129 times more than their staff. Lawson nods: “These people are grossly overpaid. The difficulty is not that you can’t see a problem,” he smiles. “The difficulty is that the cure might be worse than the disease.”

He continues: “Globalisation has made it much easier for people to avoid paying tax, or avoid paying much tax.” Rather surprising since Lawson was an early advocate of globalisation – he encouraged Geoffrey Howe, his predecessor, to abolish exchange rate controls in 1979, which he described as “the first significant increase in market liberalisation undertaken by the Thatcher government” and allowed “UK firms to invest where they liked”.

He adds: “There has also, I think, among a large section of the population, including some very rich people, been a decline in moral standards.” The financial crisis of 2008 is a case in point: “One of the contributory factors was misbehaviour by all too many bankers, appalling behaviour which in an earlier age, even if they could have behaved that way, they wouldn’t have done so. Moral standards do matter. Banks don’t behave badly, it’s bankers who behave badly – and bankers who get away with it scot-free, so there is a problem there.”

As well as moral revival, part of Lawson’s remedy for society is tax reform: “One reform which is crying out to be made is to change the system by which we tax companies,” he says. “Taxing company profits for big firms is readily avoidable and they avoid it. The only thing that stops them is naming and shaming, but it is all too easy for a large corporation.”

There is no point trying to win an international position on this, he reckons. Instead: “We’ve got to act on our own, and the solution is to shift the burden of taxation on companies away taxation of profits, which they can fiddle, and to taxing sales, which is not readily avoidable.”

There is also work to be done by Philip Hammond and others to promote the supply side of the economy – “every bit as important now as it was then” – which would be helped by the deregulation that Brexit could deliver. So, nigh on three decades since leaving government, does Lawson still call himself “a Thatcherite”? “Oh yes,” he replies cheerfully. “I haven’t changed.”

Alec Marsh is the editor of Spear’s magazine. This piece appears in the July/August issue

Content from our partners
The death - and rebirth - of public sector consultancy
How the Thames Tideway Tunnel is cleaning up London
The UK has talent in abundance. We need to nurture it