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Lord Norman Lamont: 'There is very little the Chancellor can do'

Former Chancellor and cabinet minister under Margaret Thatcher Lord Lamont | UK Parliament

8 min read

Lord Lamont knows better than most the challenges of navigating an economic crisis. With reports the government is being urged to appoint the ex-chancellor as part of a task force to tackle the current cost of living crunch, John Johnston gets the benefit of his experience

Rising inflation. Slow growth. An economic downturn accompanied by falling living standards. A Conservative government mired in a colourful array of scandals – and the sitcom Friends must-see youth TV.

Sitting in the central London home of Lord Lamont discussing approaches to reducing inflation, it might be the early 1990s all over again, were it not for the pinging of his iPad.

The former chancellor certainly sees parallels between the current situation and the economic scenario he worked within during his 14 years at the top of government during the premierships of Margaret Thatcher and John Major.

Appointed chancellor  in November 1990, Lamont was given the unenviable task of dealing with the crisis which had pushed Britain into recession and threatened to demolish the government’s claims of economic competence.

Three decades later, Lamont is surrounded by columns of books that span subjects from economics to a profile of Saudi Crown Prince Mohammed bin Salman  – a sign of his continuing deep engagement with current affairs. But as we settle down to speak, the former chancellor jokes that despite his many years’ experience, he may not have enough to say to fill our interview.

Thankfully, it takes little prompting for Lamont to offer his sobering analysis of the picture his successors – “Thatcher’s children” – now face, as cash-strapped Britons radically rein in spending and, in the process, hold back the economy.

We can’t protect everyone, but you really have to protect the most vulnerable

“The situation is quite worrying, to put it mildly, and I’m not sure the public are conditioned for what is about to hit them. And that is obviously these huge increases, not just in energy prices, but there could be very severe food price inflation, and food shortages, leading to [further] food price inflation.

“What you will see, I fear, is that there will be a shift from discretionary consumer spending to spending on essentials, and this will be a drag on the economy.”

There have been reports that some in Downing Street are advocating for Lamont, alongside fellow former chancellors, to return to the government as Treasury advisers, to provide insight on navigating the crisis. 

Despite being weeks away from his 80th birthday, he remains active both as a peer and in the business world, and the prospect of providing sage advice to Sunak seems plausible. But given the hypothetical chance to step back into No 11, Lamont is more descriptive than prescriptive on the current turmoil.

“In one sense, because it comes from outside the British economy, there is very little the Chancellor can do, but what he is obviously trying to do is to protect people’s incomes up to a point. The Spring Statement was probably a first instalment, and there will have to be further measures. We can’t protect everyone, but you really have to protect the most vulnerable.

“And while of course I think it was important to help people in work, we’ve also got to help those people who are not in work, those people who are on benefits, and there will need to be further help.”

Having faced scorn for his infamous statement in 1991 that unemployment had been a “price well worth paying” to control inflation, his insistence that the Treasury must take further steps to protect the most vulnerable is, perhaps, surprising. But when pressed on the point, he is equally firm that governments should not shy away from being honest with the public about the bumpy road ahead.

“It’s always difficult for the government to admit, but in a sense it’s a wiser thing to admit, rather than just close your eyes to what is about to happen,” he says.

“The Chancellor has been faced with the most extraordinary set of circumstances, obviously first with Covid, then the post-Covid inflation, and then the war [in Ukraine] on top of that.

“I used to think I had quite a difficult time as chancellor but, difficult as it was, this is a multiple of that.”

Margaret Thatcher's Cabinet in 1989 [Alamy]

Lamont’s own ministerial career came to an end as a result of the fallout of Black Wednesday, when Britain dramatically crashed out of the European Exchange Rate Mechanism. He later claimed the change gave him the freedom to lay the foundations for a sounder economic approach, but he was heavily criticised for comments at the time when he claimed to have sung in the bath in the weeks following Britain’s exit, and later quipped “je ne regrette rien” when asked about the comment. But the damage that soaring inflation can inflict on a government is a lesson he has clearly not forgotten.

“I strongly think that [it will impact their election prospects] and politicians and the public have, to some extent, forgotten how corrosive inflation is, and it was extremely unpopular.

“Inflation both in the 70s and in the early 80s was well into double figures, nudging 20 per cent at one point. Obviously, that was a very sharp fall in the value of people’s money. The Conservative Party is heavily dependent on older voters for its support. They’re going to feel this extremely hard. That’s where we are getting near to a 1970s-type situation,” he says.

“I did hear a senior member of the government say at a meeting on one occasion early on that: ‘Well, of course the public know we are not responsible for this situation, so they will back us with whatever we do.’

“I thought: if you think that, you’re living in a very unreal world. There is a French proverb: ‘Those who come to tell us we are not well governed will never lack a welcome.’”

Living in a smart terraced house in an affluent area of west London, many of those staring down the barrel of falling living standards could rightly conclude Lamont already occupies an “unreal world” in comparison to the ordinary person, but it’s a world away from the current occupant of No 11 – a multi-millionaire with a portfolio of homes.

He's trying to create enough headroom that he can cut taxes before the next general election

Drinking tea from a plain white cup – he doesn’t “do coffee” – Lamont presents a sharp contrast to Sunak who has become renowned for his expensive hoodies, and £180 “smart mugs”. But it’s clear he feels sympathy for Sunak, who has endeavoured to burnish his Thatcherite credentials but has largely been denied the opportunity to demonstrate them. 

Around the room are several happy reminders of Lamont’s time in government, and he laughs at a picture of himself and Thatcher where the photographer’s angle made it appear as if the former prime minister was gently caressing his face. It’s obvious Lamont also recalls the tougher moments, where his own political ambitions were curbed by outside events.

“That is Sunak’s own personal worry. He obviously styles himself as a low-tax Tory, he would like to be a low taxing chancellor, I’m absolutely certain of that, and he’s trying to create enough headroom that he can cut taxes before the next general election,” he says.

“It’s a very difficult situation that he’s been placed in… a lot of Conservatives are saying: ‘Oh the government has abandoned a low-tax, small-state policy.’”

Lamont’s experience presents a very real warning for Sunak, who is reportedly being briefed against by some Cabinet colleagues. Lamont’s resignation – an effective sacking – soured his relations with Major for years and, in a break from tradition, he was snubbed in the ex-PM’s resignation honours, only later awarded a peerage by then-Conservative leader William Hague. Their icy relations would eventually thaw, and the presence of a photograph in his living room of them together during their time in government would suggest they have mended bridges.

Decades later, the pair were on opposite sides of another political argument, as Lamont – an early and vocal supporter of Brexit – made the case for further detachment from the European Union.

When I ask Lamont about the muted Brexit benefits announced in the Spring Statement – a minor change to VAT rates for environmental groups – there is an almost imperceptible stiffening in his posture.

Rather than looking for a Brexit “dividend”, he says achieving political independence from the EU was sufficient. Pressed on some of the more controversial campaign claims, such as the infamous £350m on the bus or Boris Johnson’s assertion that energy bills could be slashed, he bats them away on technicalities.

As we finish, Lamont says he hopes he hasn’t been too gloomy about the current economic picture, and is quick to reiterate his insistence that he has “a lot of sympathy” for the government’s position, a sentiment he believes is not shared by some on his own side.

“Conservative backbenchers have been a bit unrealistic in their criticism of the government,” he says.

“It behoves Tory MPs to be a bit patient about this. Obviously, Sunak was trying to appeal to them and give them a little meat with his income tax policy. I appreciate how they feel under pressure, but we’ve got to face the reality of the situation.”

A few hundred yards from his front door, a woman is plugging her electric car into a charging point on a lamppost, a stark reminder of how much has changed since the 1990s. Can Lamont’s lessons from history still provide a model for the current world? A few streets away, a resident is dropping tins of food into a local supermarket’s foodbank collection box. The Guardian front page warns Britons face a “Bleak Friday” of soaring energy costs. Things are, perhaps, not so different after all.

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