Kenneth Clarke took over as Chancellor when his predecessor, Norman Lamont, was finally sacked by John Major in May 1993 following “Black Wednesday”, when the UK unceremoniously left the Exchange Rate Mechanism, the precursor to the euro. He had held several previous ministerial positions at Health, Employment, Education and Science and, before becoming Chancellor, as Home Secretary.
His term as Chancellor ran for four years from May 1993 to May 1997, after which the General Election brought in Tony Blair’s government with Gordon Brown as Chancellor of the Exchequer. His era benefited from the recovery of the early 1990s recession and ironically, it was Clarke who enjoyed the blooming of the “green shoots of economic spring” which his predecessor had been derided for spotting.
In an an echo of what Philip Hammond has just announced in this year’s Autumn Statement, Clarke moved the Budget date from spring to autumn arguing, as the latest Chancellor has, that this gave more time for consideration of Budget measures. Clarke’s first Budget was in November 1993, eight months after Lamont’s final set piece. Thus 1993 had two Budgets, as will 2017.
What he did
His first Budget was a harsh one, aimed at tackling the deficit (more shades of déjà vu…):
- The main income tax allowances were frozen, although the 20% lower rate band was increased by £500, with the basic rate band cut by the same amount;
- Tax relief for mortgage interest (on the first £30,000 of loan) was cut from 20% to 15% from the same date;
- The Business Expansion Scheme (BES), which had been a cat and mouse game between product providers and the Inland Revenue (now HMRC) was shut down from the end of 1993. In its place, Clarke announced the Enterprise Investment Scheme (EIS) with a 20% rate of relief rather than the full relief offered by the BES;
- A future consultation paper on another investment incentive – Venture Capital Trusts (VCTS) – was announced;
- Insurance Premium Tax (IPT) was introduced from October 1994 at a rate of 2.5% – about a fifth of the level proposed in November by Mr Hammond;
- The launch of self-assessment (from 1996/97) was announced.
So, this was Ken Clarke’s first Budget. We’ll be looking at what he did during round two next time.