Why Cameron’s stockbroking heritage explains his love for Lawson

David Cameron this week outlined his admiration for Nigel Lawson's period in the Treasury. This is consistent with his stockbroking heritage.

David Cameron this week outlined his admiration for Nigel Lawson’s period in the Treasury. But is this consistent with his earlier commitments to tackling inequality or the stockbroking heritage he boasted about?

On Wednesday, the Times reported comments made to a gathering of top financiers:

[Cameron said he] was in favour of flatter taxes. “I’m a Lawsonian, basically,” he said. Under Nigel Lawson’s Chancellorship, income tax was cut and other taxes were simplified, but some indirect taxes went up.

The Institute for Fiscal Studies’ ‘Poverty and Inequality in the UK‘ report contains the critical information about Lawson’s years in No. 11 from 1983 to 1989. As the chart below shows, Lawson’s tenure saw the sharpest rise in income inequality that Britain since records began.

As Sunder Katwala at Next Left has recently pointed out, the result of Lawson’s tax policies:

“was massive redistribution to help those at the top while regressive taxes like VAT went up. That Lawsonian approach did not reverse, but instead contributed to, stark increases in poverty and inequality, which Dave is famously against.”

The reason for this dramatic increase is explained by the chart below from the same IFS document. The chart explains how incomes have changed across the distribution. It compares the Labour government (bar chart) with the last Conservative government (black line). It clearly shows how over the respective period, top earners did better under the Conservatives.

income-growth

Perhaps this is why Cameron was careful to use his Huge Young Memorial lecture to say:

“That doesn’t mean we should be fixated only on a mechanistic objective like reducing the Gini co-efficient, the traditional financial measure of inequality or on closing the gap between the top and the bottom …

“And we should focus on closing the gap between the bottom and the middle”

After all, attacking the top would mean attacking his heritage. From the same Times article:

“My father was a stockbroker, my grandfather was a stockbroker, my great-grandfather was a stockbroker.”

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