Frack to the Future

Posted On: 
10th July 2014

More active than many peers half his age, Lord Lawson is busier than ever. And from shale gas to wind farms, from tax cuts to EU reform, the former Chancellor’s views are taken seriously in both the Treasury and No 10

"I think it’s appropriate that George Osborne is dieting,” Nigel Lawson says, with a knowing smile.“Controlling public expenditure is about saying ‘No’ and sticking to it. And dieting is exactly the same.”

As a former chancellor of the exchequer and the author of his own best-selling diet book, Lord Lawson of Blaby knows whereof he speaks on the issue of belt-tightening. And with a sprightliness and energy that belie his 82 years, one of the Tory party’s biggest of big beasts is relishing his role as a troublesome
éminence grise.

The recipient of
The Housemagazine’s Lifetime Achievement Award earlier this year, he’s helped redraft the UK’s banking regulation, runs a thinktank on climate change and is a constant critic of HS2 and the EU. A regular attendee in the House of Lords, Lord Lawson appears to be more politically active than at any time since his departure from Margaret Thatcher’s Cabinet 25 years ago. Far from resting on his laurels, he’s as focused on the future as any new intake MP.

Energy policy is one of his chief passions, not least since the creation of his own Global Warming Policy Foundation in 2009. But his keen interest in the issue stretches back to the early 1980s, when he was Margaret Thatcher’s energy secretary. With the coal strike looming, Lawson sought to redefine the way the UK bought and sold energy. Given the way the subject has soared up the political agenda of late, does he think he was ahead of the game?

“I do, if I may say so,” he says. “If you want an impartial witness, the leading energy economist in this country is Professor Dieter Helm, who has written the definitive account of British energy policy since the war. He says that the 1982 speech which I made to a meeting of the International Association of Energy Economists in Cambridge was the most important speech ever made by an energy secretary and it defined the whole of our energy policy for a long time to come.”

The main thrust of that speech was to say there is no reason to treat energy any differently from any other area of policy, despite the habit of British governments to interfere in the largely state-owned industry. “A sensible energy policy should be part and parcel of our economic policy,” Lawson says. “And just as our economic policy was to give the state a reduced role and to give market forces a greater role, so that should apply to energy as well.” Crucially, he prepared the ground for the gas and electricity privatisations to come.

The former chancellor has long defied the conventional wisdom on climate change too. When the world was congratulating itself on the Kyoto Treaty in 2004, Lawson was among those who wrote a letter to the
Timeswarning of uncertainties in the science. Last year, he won a bet with Oliver Letwin that Kyoto would expire without any successor in place.

“I was not the first, but I think that certainly I realised very early on that this had been accepted as gospel by people who had not done any proper analysis,” he says. “It’s a new religion. That is why it is so difficult to change people’s minds, because they are not interested in the facts – it’s a belief system.” The Treasury still strong in his bones, he says the real issue is not so much the science as the policy response and a proper cost-benefit analysis. “What is the extent of the damage? And how does it compare with the benefits from warming? Because there undoubtedly are benefits, even the IPCC [International Panel on Climate Change] accepts that; it’s where does the balance lie?

“Then there is also the political issue that because it’s an extremely costly policy, it means we go from relatively cheap and reliable energy to relatively expensive and unreliable energy. And you’re not getting any benefit on the climate front because there isn’t a global agreement.”

One Cabinet minister who was brave enough to voice claims that there could actually be benefits from global warming was Owen Paterson. The Environment Secretary’s remarks to a Tory conference fringe last year caused uproar among some green groups. But Lawson is a big fan and says Paterson should not be moved in the coming reshuffle.

“I would be disappointed to see him moved out of government, not just because of this issue but because I think he’s one of the best ministers in the Government. I think he did a very good job in Northern Ireland and I think that he understands the countryside and farming very well, but he also has a very good mind. It would be a great loss to the Government, which needs all the talent it can get.”

He points out that conservation is a key Conservative belief. “Owen Paterson is very conscious of that. The green issue is not just one issue. If you get hung up on the evils of fossil fuel and as a result you litter the countryside with wind farms, not only is that economic nonsense in energy terms, but it is not environmentally friendly either. Solar farms, too, they are appalling environmentally. Wind turbines kill really serious numbers of birds.”

Of course, one of David Cameron’s first acts as Tory leader was to underline his ‘green’ credentials with his infamous trip to the polar ice cap. Lawson understands why David Cameron felt the need to ‘rebrand’ the Conservatives, but clearly feels it was misguided. “Margaret Thatcher, even though she was a really great prime minister, I think the country had got tired of her, as it gets tired of almost anybody after a long period of government,” he says. “But it was largely about her manner, not her policies. So there was no need to get a whole new raft of different policies in a great rebranding exercise. But the ‘hugging huskies’ and all that was part of the rebranding and of ‘going green’ in general.

“I think it was a great mistake. I think that, without really admitting it, I think they are trying quite hard to row back from that. But of course it’s always hard to row back from anything you’ve made a big splash about, but it’s all the harder because of the Coalition.”

Given his own enthusiastic backing for the expansion of the City during the Thatcher years, it’s perhaps not surprising that the former chancellor is not over-keen on the Coalition’s rhetoric about “rebalancing the economy” at the expense of financial services. “I think that is foolish and unwise,” he says. “The only sort of rebalancing I would like is to see the north of England share more in the economic success. But the way to do that is not by building this absurdly expensive High Speed 2, for which there is no sensible case at all.

“The way to do it is by developing shale gas resources in the north of England, particularly in the north-west,” he adds. “We need to go for that. If you look at what’s happened in the United States, it has completely transformed the economies of some of the poorest parts of the United States. We could have that here.”

George Osborne is resolutely behind HS2, but he does appear to have listened to people like Lawson and others who strongly support fracking. How often do the pair of them talk? “I do see him from time to time, but George sees quite a lot of people so I have no special locus,” he explains. The informal ‘council of former chancellors’ (Howe, Lawson and Lamont) no longer meets Osborne, however. “When I see him, which is only infrequently, I see him just
à deux.”

A key area where the Coalition has been largely in agreement is on tax cuts. But as a reforming chancellor himself, Lawson believes his party will be able to do much more on personal taxation if it governs alone. “There is in the short term a conflict between cutting taxes and cutting borrowing. In the medium term, you can do both. When I was Chancellor, I abolished the budget deficit altogether and even got a surplus and at the same time I cut tax rates. So it can be done. But it takes a little time,” he says.

As someone who has written party manifestos in the past, he adds that “what you need to do is indicate very clearly the direction of travel” in 2015, rather than any pledges on specific rates. Crucially, he’s content with Osborne’s current thinking about the need to cut income taxes. “I think the present chancellor is very much taking this on board.” Lawson’s tax cuts, not least his slashing of the top 40p rate in 1988, famously sparked rapid economic growth. Does the current consumer boom, coupled with a similar house price spike, feel anything like the late 1980s and early 1990s?

“I don’t see a problem now. I think all these things need to be watched very carefully. I do think that the time has come for two things, because the economy is going well. The first thing is to wind back this rather artificial scheme of Help to Buy. The ceiling should be cut back to £300,000. And I also do think that the present interest rate of half a per cent, that is basically a crisis rate. It came in because of the economic and banking crisis, and now we are coming out of it we need to move to more normal rates. The sooner we make the first move, which would only be to go from half a percent to three quarters of a per cent, the better.”

Interest rates soared under his successor Norman Lamont, but he says that was “because they joined the ERM at the worst possible time”. By contrast, he’s remembered for the ‘Lawson boom’. Is that now a phrase with which he’s comfortable? “I’ve got used to it. And booms are certainly better than busts!” he replies. “But I think there’s a lot of nonsense spoken about it.” He rejects the idea that it was the inflationary pressures of the Lawson boom that forced him to shadow the Deutschmark. “That’s totally misguided. We had an inflationary problem in this country before we got into office,” he points out, referring to the record 26% under Labour in the 1970s. “When we got into office, it was still in double figures and the Treasury forecast was that it was due to rise.”

Lawson says that it was because “inflationary expectations were embedded in people’s minds” that he decided to allow sterling to shadow the Deutschmark. “We tried various ways to get inflationary expectations out of the system. It worked, but it worked very slowly and I was anxious that we should make more progress. And at that time, the country where they had no inflationary expectations at all – because they absolutely had a paranoia about inflation – was Germany, with their history during the Weimar period and all of that and also the inflation that happened after the war that’s often forgotten.

“They had a Bundesbank which had only one aim, which was to stop any hint of inflation coming. So I took the view that if for a time we piggy-backed on the Bundesbank, that would help; if that could be credible, that would help eradicate inflationary expectations in this country.”

Does he have any regrets about that, not least because some Eurosceptics say it was the move that foreshadowed the later disastrous ERM decision? “There was nothing political about it; it was entirely a means of trying to bear down on inflation. That’s all it was,” he says. The birth of the single currency was another matter entirely, Lawson stresses. “How you handle your own currency and abandoning your currency, they are two completely different things.”

It was another former Spectator editor-turned-MP, Boris Johnson, who urged David Cameron to go for an in/out EU referendum, long before No 10 was committed to the idea. Does he think it would be a good idea for Boris to return to Parliament? “Yes, I do. I think that Boris has a very special appeal to all sorts of voters who otherwise might not find the Conservative party very appealing, and therefore I think it would be excellent to have him on the team,” he says.

“Nobody’s perfect. It’s possible to point to aspects of Boris which you would perhaps feel uneasy about, but overall he’s a great plus.” And does he feel that the Mayor could even one day become PM? “I think that’s a big unknown. But anyhow it doesn’t arise. My goodness, 2020 – we don’t even know what’s going on in 2015, do we? Let’s see what happens in 2015, that’s the next election. I do think that if we are the largest single party, we should not try and form another coalition, but we should form a minority government as Stephen Harper did in Canada very successfully.”

If they can govern alone or in coalition, many Tories see a 2017 EU referendum as the key event of the next parliament. But is there a danger of an historic split in the party if the Prime Minister ends up recommending an ‘in’ vote after securing minor changes in Brussels?

“I think in the short run, David Cameron’s referendum pledge has united the party enormously, and I think it is the right thing to do. In terms of party management it has helped a great deal. We will just have to see when the time comes. There are two things which have to be assessed. First of all, what reforms – if any – he has been able to secure either of the European Union as a whole or of Britain’s position within the Union. And, in the light of that, does he have a case for recommending an ‘in’ vote or not? He will have to make his own judgement on that and the Cabinet will have to discuss it and make their judgement. I am convinced that – I may be wrong, but from my knowledge of the European Union – that nothing of any significance is negotiable. Not least because anything of significance requires treaty changes and treaty changes have to be agreed unanimously, so it’s no good just getting one or two countries on side, so I don’t think it’s on. But we shall see.”

And Lawson stresses that it won’t just be up to the PM or the Cabinet to decide the party’s line. Asked about the risk of the party rejecting a weak set of agreements and preferring a ‘Better Off Out’ position, he says: “I think he will take that into account.”

“Although as of now his position is that he’s firmly committed to recommending an ‘in’ vote, he’s a great optimist and he thinks he can negotiate all these changes. But I think he will have to reconsider his position in the light of what he is able to secure. He will know too that he has either got to persuade the parliamentary party overwhelmingly (there will always be dissent)…or else he’s got to reconsider his own position on this issue.

“Because the logic of his position is clear. He has said the European Union as it exists at present is seriously unsatisfactory, therefore some major changes need to be made. The logic of that position is that if you don’t secure these major changes, you leave the European Union. Not in any hostile frame of mind. As you know, I live in France and I have nothing against Europe as such.

“But you just have to say it is not in Britain’s interest to remain there. And of course it is made all the more likely by the creation of the eurozone, and they are also changing the qualified majority voting rules. We will find ourselves outside the eurozone…our influence on European Union law is bound to be less than it has in the past. There will be a solid eurozone bloc vote. If we oppose anything we will be overridden.”

So, does he envisage the PM consulting the parliamentary party on the in/out decision in 2017, just as it appears the 1922 Committee will be consulted in 2015 in the event of any plans for another coalition? “I think you’re right to draw parallels between the two,” he replies. “I think he will. Whether he does it through formal consultation or informally, I think he will need to do that.”

As he freely admits, Lord Lawson has no problem with European culture, as opposed to its institutions. He spends Monday to Thursday in the Lords and the rest of the week at his home in rural France. “It’s a complete contrast, and very deliberately so,” he explains. “It is a double life. I live in a particularly peaceful, tranquil area. I can relax, I can recharge the batteries, I can think and sometimes write. I’m in the middle of nowhere.” And far from being a Little Englander, he likes the fact that there aren’t many fellow English speakers nearby. “When I moved there 12 years ago, there weren’t very many Brits there. They have increased, but it’s not like the Dordogne or the south of France where there are lots of Brits or nationalities of other kinds.”

With a weekly airline commute to France, the long trek in and out of departure and arrivals lounges keeps him fit. “I have to go backwards and forwards travelling and the walking at airports is the exercise I take.” Despite the temptations of vintage wines and fine Gallic cuisine, his trim figure also proves he practices what he preaches on the dietary front, though he confesses not to know anything about the 5:2 diet adhered to by George Osborne. “Dieting is all about self-discipline, and you want to find a form of self-discipline which you can live with. What it’s all about is eating less and drinking less, it’s as simple as that.” And the economic metaphor is never far away.

“It’s appropriate that George Osborne is dieting, not because he needs to diet more than other people, but because one of the most important jobs of the Chancellor is to control public expenditure, particularly now that you have this enormous deficit, but at all times. It’s always been part of the Treasury’s DNA.”

His own appetite for controversy seems unsated, however. And in his ninth decade, he shows no signs of easing up. “For a very old man I’ve got, if anything, too much on my plate.” And despite his Protestant work ethic, Lord Lawson is certainly no puritan. “I do obviously have a private life as well,” he adds, with a mischievous smile. “I don’t want you to think that I’m just some Stakhanovite.”