This week, Margaret Thatcher’s long-running Chancellor of the Exchequer Nigel Lawson died aged 91 – an iconic figure of the 1980s. During his time as Thatcher’s money man, I spent a year, 1983-84, living in the same student house as his nephew. I remember he wisely avoided the local fish and chip shop for a week after Lawson slapped value added tax (VAT) on hot takeaway food in 1984. A tax that directly impacted working-class people in Liverpool, where I was studying.
Lawson pursued an agenda very much in line with the Prime Minister’s aim to re-fashion Britain. His legacy is indisputably with us today and even the opposition Labour Party has left it largely untouched. In essence, he pushed for large-scale privatisation of state-owned companies and deep cuts in income tax. Though accompanied by rises in indirect taxation like VAT. Combined with deregulation of the City of London this released the Big Bang, which propelled London to the centre of global finance, and created the “yuppie boom”.
Nigel Lawson: 1980s Tory Chancellor takes us from boom to bust
He personified the excess and get-rich-quick ethos of the 1980s. Initially his policies seemed to work. The sky-high unemployment of the early 1980s began to fall along with the yawning budget deficit. But the UK’s trading position with the rest of the world weakened although, along with the decline of manufacturing industry, this didn’t concern Lawson. The rebalancing of the UK economy away from manufacturing was regarded as a largely welcome development. Even if the country had been the cradle of the Industrial Revolution.
Then it all began to unravel. For two years in the late 1980s I worked in the City of London, trying to become a yuppie. I hated every last minute of it. But I recall vividly when the stock market crashed on Black Monday, as it came to be known, in 1987. Though this was a global meltdown, it signalled trouble ahead for Lawson. However, he soldiered on regardless slashing income for top earners from 60% to 40% the following year. As ever with these cuts in direct taxation, there was a sting in the tail.
Lawson made the fateful decision to abolish double mortgage tax relief for couples buying a new home. This led to a surge of house purchases as people banded together to get on the property ladder while still claiming that tax relief. Unsurprisingly, house prices surged dramatically. Many of my friends rushed to buy. Wisely, I decided to continue renting. Best decision of my life! This was a bubble about to burst.
The Lawson Boom ended with the decade as inflation rose and interest rates climbed to an astonishing 15%. Unemployment headed upwards again. And the 1990s kicked off with a miserable, prolonged recession and a wave of repossessions of homes. By this time, I had become a financial journalist. I also bought a flat at half its Lawson Boom price, which had been voluntarily repossessed. In other words, the previous owner had thrown their keys through the letterbox and walked away from their own home. This was a sad but common occurrence at the time.
DISCOVER: The high youth unemployment of the 1980s
Nigel Lawson bows out as the 1980s closes
Whereas Tony Blair’s Chancellor, Gordon Brown, ceaselessly coveted the keys to Number Ten, Nigel Lawson showed no visible interest in being Prime Minister. He exercised considerable power and influence as Chancellor and seemed happy to shape policy from Number Eleven, Downing Street. His eventual resignation resulted from Thatcher’s appointment of an economic adviser, Professor Alan Walters. Lawson found himself competing for Thatcher’s ear on financial policy and finding the situation intolerable, threw in the towel.
His exit from the government was closely followed by a departure from politics altogether. He was largely unmourned, even by MPs on his own side. Lawson had never bothered to cultivate support among backbenchers and had made it very clear when he regarded fellow politicians as idiots. Following his resignation, he lost several stone in weight. At the time, I found this an appropriate physical metaphor for the end of his era. The bloated Lawson Boom was followed by years of recession and the end of the yuppie era.
But his political and economic ghost will linger with us for a lot longer. About a year after he left Number Eleven – Thatcher was forced out of the premiership by her own MPs. The 1980s was well and truly over.