They were the power couple who changed the fortunes of this country and were admired across the world: Nigel Lawson who died this week and Margaret Thatcher who died 10 years ago this month.
Nigel provided the intellectual heft and economic expertise to what became known as Thatcherism. Margaret – while sharing his economic principles – gave not just her name but the leadership and moral purpose. Why did they fall out?
When an overtly well-matched couple splits up it often mystifies as well as pains friends devoted to both. That was certainly how I felt when Nigel resigned as Margaret’s Chancellor. Having been researcher and speechwriter for both before entering parliament, then becoming Nigel’s PPS and later Economic Secretary to the Treasury, I had assumed that they were inseparable.
What made the rupture particularly incomprehensible was that it was about a European issue – whether to enter the European Exchange Rate Mechanism (ERM). People assumed that meant Nigel was then a Europhile. As a result, they were astonished when he not only endorsed Brexit but chaired the Leave campaign.
In fact, he was always (like me) a ‘British Gaullist’: a useful label for someone who loves European culture (Nigel lived in France until recently) and wants the maximum trade and cooperation with our European neighbours, but believes that sovereignty – the power to make our own laws – is paramount. I recently found an article I cut out from the Financial Times in 1966 titled “At Last a Europe worth joining” by a journalist called Nigel Lawson. It welcomed President de Gaulle’s success in winning the Luxembourg Compromise giving member states a veto – meaning Europe could develop as co-operating independent nations rather than a supranational authority.
To Lawson, ERM membership was a discipline to control inflation. He had found money supply targets too wayward. He also believed that within the ERM it would be easier to fend off plans for a Single Currency. By contrast, Thatcher worried that it would take Britain nearer that objective to which she was equally opposed. She was also persuaded by Alan Walters that the ERM would create perverse incentives exacerbating the inflation/deflation cycle.
So, the Lawson and Thatcher row was not about different enthusiasm for European integration – both were against (unlike Geoffrey Howe). It was about tactics of thwarting the planned Single Currency and whether fixed exchange rates help control inflation. Unusually, though Lawson might have been correct about tactics, Thatcher was proved right on the economics.
Unfortunately, Lawson upset Thatcher by not telling her he was shadowing the Deutsche Mark to prepare for joining the ERM. It may seem incredible that she did not know. But he never mentioned it at our Treasury ministerial meetings. I learned about it from the newspapers – even though my ministerial responsibilities included ‘international economic relations’! I then asked officials whether we could leave the ERM, if we joined. The Chancellor told me this was above my paygrade and only he, the permanent secretary and chief economist dealt with such matters.
Thatcher in turn upset Lawson by making Walters her economic adviser – which would not have been a problem had Walters kept his views for her ears only. But his outspokenness made the rift with Lawson public. The Chancellor decided either he or Walters must go. In fact, both went – followed inexorably (but not intended by Nigel) by Geoffrey Howe and the Lady herself.
Given he opposed the euro on grounds of sovereignty, it should have been no surprise that Lawson supported Brexit. He also attributed much of Thatcherism’s success to pruning and simplifying regulations. Without Brexit we could not do the same for the huge body of EU regulation. He saw that as Brexit’s main economic benefit – far more valuable than negotiating trade deals.
The other fashionable, but intellectually shallow, doctrine he opposed was climate alarmism. As the energy secretary who prepared for the miners’ strike, he knew secure, low-cost energy is vital. His best-selling book, An Appeal to Reason: a Cool Look at Global Warming foresaw that costs of preventing modest climate change could far exceed the benefits. Latterly, he took no comfort in seeing those costs coming home to roost, and the growing acceptance that once again his penetrating intellect is proving correct.