9 - Continuity and Change in British Conservative Taxation Policy, c. 1964–88

Summary

In March 1988 the UK Chancellor of the Exchequer, Nigel Lawson, introduced the first budget of the 1987–92 Parliament. The centrepiece was the abolition of all rates of income tax over 40 per cent. There were at that time five such rates, with a maximum of 60 per cent. Lawson, Chancellor from 1983 to 1989, was a key figure in a Conservative government which had just won its third successive election victory. He was in a triumphant mood, boasting that he had ‘radically reformed the structure of personal taxation, so that there is no rate anywhere in the system in excess of 40 per cent’.

Others were less impressed. Alex Salmond, a Scottish National Party MP, interrupted Lawson to declare that ‘this Budget is an obscenity’, and was suspended. Shadow Chancellor John Smith described the budget as ‘an outrage … immoral, wrong, foolish, divisive and corrupting’. When Lawson announced the abolition of the higher rates, grave disorder arose in the House, and the Speaker suspended the sitting for ten minutes, an almost unprecedented event during a budget speech.

Press comment upon the changes was likewise not all favourable. Hugo Young in The Guardian wrote that the budget represented ‘the final disappearance of the last vestiges of the post-war consensus … [such that] fairness and social justice, as registered through the tax system, have ceased even to be the pretended aspiration of the Conservative Party’. The Financial Times (with more than a few wealthy readers itself) noted ‘dramatic gains for the rich’. Scholarly analysis has been similar. Sven Steinmo thought that ‘Margaret Thatcher was perhaps Britain's toughest bully … [she and her ministers] plotted a head-on attack on the distribution of the tax burden’ to help the rich. Martin Daunton echoes this in his comprehensive history of the politics of taxation in Britain from 1914 to 1979, detecting a distinct shift in the Conservative approach between the 1960s on the one hand and the post-1979 period on the other, ‘from an opportunity state to an enterprise society’. During the 1960s policy was not based on ‘crude anti-statism’, but sought to combine competition and compassion. By 1979, ‘the pursuit of incentives at the cost of social integration became possible’.