Prime Ministers and Chancellors

In a contribution to BBC Radio Four’s regular programme ‘Today in Parliament’, broadcast on 14 February, Alistair Lexden reflected on the relationship between the two people on whom the success of any government almost invariably depends.

He quoted Nigel Lawson’s resignation letter to Mrs Thatcher in October 1989: “The successful conduct of economic policy is possible only if there is, and seen to be, full agreement between the Prime Minister and the Chancellor of the Exchequer”. Ten years earlier at the outset of Mrs Thatcher’s government, these two strong-minded politicians had been in full agreement—in partnership with Geoffrey Howe, her first Chancellor—about the new free-market policies that Britain needed.

Over the years the three began to diverge on some crucial economic issues. It was that which led to the breakdown of trust between Lawson( who remained in broad sympathy with Howe) and Mrs Thatcher, though she did not want him to resign when he did. The parting between them was precipitated by a row about  the role of a political adviser—in this case Alan Walters at No 10. Lawson demanded his sacking. Mrs Thatcher said: “If Alan were to go that would destroy my authority”. The same goes for Chancellors: the sacking of their political adviser(s) at the command of the Prime Minister has exactly the same effect.

But such crises have their origins, not in the advisers, but in disagreement about fundamental elements of economic policy. How can Prime Ministers and Chancellors keep in step with each other? Some  Conservative Prime Ministers—Macmillan and Heath are obvious examples—had Chancellors who did their bidding, though if Iain Macleod had not died within weeks of his appointment Heath would not have had everything his own way and the government might have been more successful as a result.

To ensure that he had his way, Macmillan dispensed with his first Chancellor, Peter Thorneycroft, who wanted public spending cuts—and with his third, Selwyn Lloyd, when he decided that more expansionist policies were needed.

John Major sacked Norman Lamont in May 1993 because the latter’s loss of authority, caused by the crisis surrounding  Britain’s withdrawal from the EU’s Exchange Rate Mechanism a year earlier, had not been repaired. Major described Lamont in his autobiography as “a bird with a wing down”. There can be no doubt that his successor, Ken Clarke, retained his authority in the difficult circumstances that the Major government faced.

There are dangers in following the route that Macmillan and Heath took to ensure agreement with their Chancellors. The latter need to command authority in and outside Parliament. When John Major took over from Nigel Lawson he was conscious that “I looked as if I were her placeman.” No Chancellor should be in that position. Strong mutual respect and confidence between Prime Minister and Chancellor are essential for good, stable government. But even when that is achieved—as it was between Lawson and Thatcher in the mid-1980s—it can prove impossible to sustain.