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By Paul Goodman
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Screen shot 2013-03-13 at 08.38.15To the Carlton Club yesterday evening…for a Taxpayers' Alliance's dinner to celebrate the 1988 budget, the silver anniversary of which takes place this year.  That's the one in which Nigel Lawson, the then Chancellor, cut corporation tax from 27p to 25p, raised personal allowances by twice the rate of inflation, cut the basic rate of tax from 27p to 25p and – in the best-known measure of all – the top rate from 60p to 40p.

The dinner can thus be seen as a call to George Osborne to follow this example (though the Chancellor has made his own cut in the top rate, and is following the example of another well-known Thatcher budget – that of 1981, in which Lawson's predecessor, Geoffrey Howe, cut the growth in spending and raised taxes).  Lawson himself was present, and addressed the dinner.  So what did he say?  He told those present that:

  • There is no "growth button" for the Chancellor to press.  Indeed, Lawson was scornful of those Chancellors who set themselves grandiose goals, such as reforming the British or world economies (a dig at Gordon Brown, surely).  I read his position as being that Chancellors have limited powers and should believe in limited government – but use those powers decisively to set the right tax and spending framework.

  • Political strategy was entirely absent from Lawson's speech.  I don't think he mentioned the Labour Shadow Cabinet of the period once.  There was no reference to outfoxing the Labour leadership, outwitting the Shadow Chancellor, setting the baseline, dividing lines or any of the rest of it.
  • The measure in his budget of which was the least proud was the rise in personal allowances – because, in simple terms, he would rather have a lot of people paying a little income tax each that a few people paying a lot between them.  He thus by implication disapproves of the Coalition's focus on taking people out of tax – part of the subject of the debate between Robert Halfon and Andrew Lilico on this site over the proposed 10p tax band.
  • A Government has most authority immediately after a general election. 
    That's why he reformed business taxes radically in his first budget,
    that of 1984, after the 1983 election, and reformed personal taxes in
    his second post-election budget, that of 1988.
  • He stressed that he kept public spending under control during his time as Chancellor. His memoirs remind us that it grew by 0.6% when he was in office, though as he notes "it was somewhat easier for me than for Geoffrey Howe, who initially had to cope with a recession".

It's tempting to conclude from all this that Lawson, the man who acted from principle, was a rather unpolitical Chancellor and that Osborne – the man who's been immersed within his party almost since University – is by far the more political of the two.  I think that depends what one means by "political".  Lawson seemed to me to have a very acute sense of political timing.  His axiom is: work out clearly what you want to do, and do as much as possible right at the start.

Act from principle, certainly – and don't worry too much about what the opposition is doing and thinking.  But act at the moment of maxiumum strength and your opponent's moment of maximum weakness.  Above all, realise what you do and don't have the power to do.  Chancellors and government can't create wealth – that's for business and people.  But they must use the tax and spending framwork to set the conditions under which wealth creation can happen.

If Lawson had a message about the coming budget at all, I read it as the punchline to one of the best-known jokes in the world: "I wouldn't start from here."

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