Norman Lamont took over as Chancellor in November 1990 under John Major’s premiership. His term as Chancellor was dominated by the fallout from the ‘Lawson boom’: when he entered office inflation was running at over 10%, base rate was 14% and a recession was underway.
Lamont held office when the UK was forced to leave the European Exchange Rate Mechanism (ERM – a precursor to the Euro) on Black Wednesday (16 March 1992), just two years after joining during Major’s tenure as Chancellor.
What he did
- In his first (March 1991) Budget he announced:
- An increase in VAT from 15% to 17.5%;
- The abolition of higher rate relief for mortgage interest and, as a slight quid pro quo, an above-inflation increase in the basic rate band;
- That all profit related pay up to £5,000 would be tax-free, rather than the 50% that had previously applied;
- A flat £200 tax charge on something that he described in his speech as “what I regard as one of the greatest scourges of modern life…. the mobile telephone.” He went on to hope that “as a result of this measure, restaurants will be quieter and the roads will be safer.”
- By the time of his second Budget in March 1992 (a month before a general election won by the Conservatives), base rate had fallen to 10.5% and inflation was abating. Lamont allowed the deficit to double for the coming year, allowing for some pre-election sweeteners:
- An increase in inheritance tax reliefs for unquoted shareholdings;
- The end of the £3,000 cap on unit trust investment in a PEP: 100% unit trust PEPs for the full £6,000 maximum became possible, giving a new lease of life to Mr Lawson’s creation and setting the shape for today’s ISAs.
- Creating a 20% starting rate tax band, £2,000 wide, as a move towards 20% basic rate. At the time basic rate was 25%.
- In his final Budget in March 1993, Mr Lamont followed the post-election tradition of raising taxes to control the deficit:
- The rate for mortgage interest relief was cut from 25% to 20%;
- From 1994/95 the tax relief rate for the married couple allowance was set at 20% rather than marginal rate.
- Dividend tax was reformed (sound familiar?) with the rate of tax chargeable and accompanying reclaimable tax credit cut to 20% from 25%. This set the precedent for Mr Brown and, eventually Mr Osborne to further reduce dividend tax credits.
- The zero rate of VAT on electricity and gas was replaced with an 8% rate in 1993, rising to standard rate the following year.
After a dire by-election result, Lamont was fired in May 1993 and John Major replaced him with Ken Clark. After losing his seat in 1997, Norman Lamont was made a life peer. He has recently been vocal in favour of Britain leaving the EU.
What he said
“Rising unemployment and the recession have been the price that we have had to pay to get inflation down. That price is well worth paying.” May 1991
“…what we are seeing is the return of that vital ingredient – confidence. The Green shoots of economic spring are appearing once again.” October 1991. Statistics later proved him right, but at the time the comment was widely criticised as fantasy.
“Je ne regrette rien” In April 1993 Lamont was asked at a press conference whether he regretted claiming to see “the green shoots of recovery”. He replied by quoting the Edith Piaf song a comment that went down well with the press corps, but not the UK public.
The recession of the early 1990s saw music culture stuck between the end of punk and rise of Britpop and the Spicegirls. In July 1991 Bryan Adam’s ‘Robin Prince of Thieves’ theme song broke the record set in 1955 for longest time at No 1 at 16 weeks.
|March 1991||The Clash ‘Should I Stay or Should I Go’|
|March 1992||Shakespeare’s Sister ‘Stay’|
|March 1993||2 Unlimited ‘No Limit’|