Margaret Thatcher’s third Chancellor, John Major replaced Nigel Lawson after he resigned in October 1989. Formerly a banker with Standard Chartered, he became an MP from the 1979 election.
Major had previously been Foreign Secretary, a post he was promoted to only in July 1989. His term as Chancellor lasted just 13 months, after which he became Prime Minister following Mrs Thatcher’s loss of her party’s leadership in November 1990. .
His only Budget in 1990 was set against the backwash of the ‘Lawson boom’. Inflation at the time was 8.1% (RPI), on its way to a peak of 10.9% in September 1990. Bank Base rate was 15%, although it was cut to 14% shortly before Major changed jobs.
In the Budget he announced:
- That he had “decided to abolish stamp duty on securities late in 1991-92 to coincide as closely as I can manage with the introduction of paperless trading.” Stamp duty reserve tax was also to be abolished at the same time. Even though the Finance Act 1990 legislated for both to disappear, eventually the new paperless system (TAURUS) was shelved and the necessary Treasury Order to name the ‘abolition day’ was never made;
- Increased fuel duty by 2p a litre on petrol and 2.4p on diesel.;
- Granted tax relief for one-off charitable gifts of £600 and above – the start of what became gift aid;
- Scrapped the composite rate of tax which applied to bank and building society interest and meant that all interest was paid net of a notional (and non-reclaimable) basic rate tax . Under composite rate tax (which was set at below basic rate) non-taxpaying depositors effectively subsidised their tax paying counterparts;
- Raised the Personal Equity Plan (PEP) contribution limit by 25% to £6,000, of which up to £3,000 could be in unit trusts or investment trusts;
- Launched the Tax Exempt Special Savings Account (TESSA), a five year deposit-based tax-free savings scheme with a maximum overall investment of £9,000, of which £3,000 could be invested in year 1 and up to £1,800 a year thereafter. The aim was to increase the savings ratio.
In his final full month as Chancellor, John Major and his successor as Foreign Secretary, Douglas Hurd, persuaded Margaret Thatcher to support entry to the Exchange Rate Mechanism (ERM), a move which she had resisted for many years. The conflict had been one of the causes of Nigel Lawson’s resignation and was later to lead to Major’s successor, Norman Lamont, suffering ejection from the ERM on Black Wednesday in September 1992.
What he said
“I don’t have a shred of regret about entering the exchange-rate mechanism.”
The mood was grim during during John Major’s short tenure at the Treasury. Amid warnings of recession, the country witnessed the ‘Poll Tax Riots’, an ambulance workers’ strike, the Iraqi hostage crisis and an upswing in IRA attacks. On the upside Manchester United won a replayed FA Cup to win a total of seven titles, women began to serve on operational warships for the first time and summer temperatures peaked in August at 37C in Cheltenham.
|March 1990||‘Dub Be Good to Me’ Beats International|