Lord Norman Lamont was Member of Parliament for Kingston-upon-Thames 1972-1997, Minister for Trade and Industry 1981-85 and Defence Procurement 1985-86, Financial Secretary to the Treasury 1986-89, Chief Secretary to the Treasury 1989-90 and Chancellor of the Exchequer 1990-93.
This interview took place on 17 January 2022.
Q: Can you tell us about your role in growth and regional policy during the period from the late 1980s to 2015?
My first job was in the Department of Energy for a couple of years. That was very specific on nuclear energy and gas and perhaps not so relevant to what we’re discussing. After that, I went to the Department of Trade and Industry (‘DTI’), where I was responsible for regional policy, and also nationalised industries. After that I went to the Treasury and was Financial secretary, Chief Secretary and Chancellor.
Q: Was regional policy in your brief for your whole period at the DTI, 1981-85?
We spent a lot of time redefining the regional map because Keith Joseph had done a lot of work on this in opposition, and he had come to the conclusion that automatic regional policy as distinct from selective assistance was wasteful, didn’t create additionality, and had an overall adverse effect on competitiveness. I think I’m right in saying that over 50 per cent of the country was covered by one of the three tiers of assisted status. We spent a lot of time cutting back the map so that there were fewer areas that qualified for the top tier. I can’t remember how many tiers we ended up with, but it was to make more concentration on selective assistance rather than automatic assistance.
Q: Those areas dated back to the 1930s?
I think the map was redrawn, if not comprehensively, amended quite regularly. When I look back now, there’s an enormous amount left to the government’s discretion. There are arguments for automaticity, not to the huge proportion of the map covered in the early 80s, but to certain black spots. I think that is something that is worth considering. It’s what Nicky Kaldor called a devaluation for the regions.
Q: What is your overall evaluation of regional policy over the past 40 years – the key successes and the key frustrations?
I do strongly support the concept that the PM has of levelling up. We have these terrible left-behind towns and urban areas. It is a phenomenon to some extent common to all the advanced industrial countries, including the United States and including countries of the EU. It does vary, country by country. But the extent to which it varies probably reflects the industrial structure of different countries. If you had a lot of steel or textiles, or a lot of shipbuilding. But it’s something that does distress me. I spent a lot of my life living in a fishing port very much affected by the decline of the fishing industry. I can hardly believe how it has gone backwards during my lifetime, despite many initiatives and subsidies. It is very difficult to know what you can do.
We can all identify the problem, but when I think about what to do: you can come up with grants which we’ve had, which have failed to deal with the problem. You can have a lot of emphasis on education skills and training. You can do a lot, by the greening of places, as Michael Heseltine did in Liverpool. You can give help to people to start small businesses. But sometimes it’s just chance, serendipity. You get an entrepreneur in a particular town who has a gift, and suddenly that town benefits.
Q: In the early 1980s, what was the objective of regional policy?
The objective in the redrawing of the map was to cut the bill down and to try to sharpen up regional policy so that it was concentrated more on a smaller number of really genuine black spots. That was the object. And it may have succeeded in that. What was the overall macro effect? I don’t know. I haven’t done a study of it.
Q: How much, did regional policy change from being only about efficiency to trying to deal with the consequences of the manufacturing job losses following the 1979-81 recession?
It was trying to deal with them. But industrial policy was also trying to moderate the rate of change and to ensure that you had a residual core that was competitive. For example, if you took the steel industry, we were conscious that we were losing jobs. But we said to ourselves, the jobs that will be left will be sustainable, will be permanent. Whereas at the moment everybody’s job is in danger because the steel industry had so much overcapacity worldwide and we were so uncompetitive.
That’s how I remember seeing British Steel and the motor industry. One just didn’t know quite what one was going to end up with. And one hoped that one was buying time, one was making up for some – this was real intervention – some management failure in the past, by providing government money to invest in new models. Again we thought the industry would shrink. But we also hoped that by regional policy we could attract Japanese investment into the motor industry, which as it turned out, was a great success.
Q: Was the focus in this period less on regions and more focused on sectors and industries and trying to bring in new investment?
It was important to have investment coming in, obviously, but I don’t think it was very sector focused. We were conscious we had this massive employer in the motor industry which was desperately uncompetitive and shredding jobs. But one of the things we did was to try to pick out key people from the management market worldwide, who could turn these things around. It so happened most of them were not British. We had Ian MacGregor in the steel industry. Graham Day in the shipbuilding industry. Michael Edwards in the motor industry. But we also managed to attract in the motor industry a lot of Japanese investment.
Q: Was there a debate within the DTI at the time about what the policy objective should be?
The policy was to partly cut the cost because it was a burden on the rest of the economy. It was also to shrink these industries down to a size that was competitive. But in the case of shipbuilding, one had more or less concluded there wouldn’t be very much left at the end of the day. I remember Keith Joseph, saying ‘You know, the problem we have in this country is one party is in favour of too much change too quickly, and the other party is in favour of too little change too slowly.’
Q: Talking to some of the people who were in the DTI in the 1980s, they argued they saw an advantage to new investors like Nissan going to a greenfield site or greenfield region, a place where the car industry didn’t have a history. Do you remember those kinds of conversations?
I don’t but I can imagine that thinking existed. One of the things that was surprising was one thought that there might be a problem with skills, and actually, the Japanese demonstrated how you could, in an area that had no people with the relevant skills, they managed to train them up to standards that were as good as any elsewhere in the country. That was remarkable.
Q: Did you expect at the time that the process of adjustment within local economies would be more rapid than it turned out to be?
We were expecting it would be a long-term change and there would be problems. But alongside this sector specific focus, we were hoping that jobs would appear elsewhere in the economy. Keith’s great observation was, ‘Jobs will happen if allowed.’ People were always, when we were in opposition, saying to us, ‘Where will the jobs come from?’ To which Keith would say, ‘I don’t know where the jobs will come from. Jobs will happen if allowed.’ By this, he meant provided the tax and regulatory rules encourage enterprise.
We also had a policy of advance factory building. There used to be a body called the English Industrial Estates Corporation. I think that goes back under one name or another, to the 1930s. You can build factories, but, the fact you’ve got a spanking new factory in an area where people basically don’t want to go, is only of limited attraction.
Q: Did Enterprise Zones emerge in this period?
Yes, but I think they only had limited success. Wasn’t there one in Gateshead that became a successful shopping centre? There were one or two that succeeded, but I don’t think they did generally make a huge difference. It’s quite interesting in the debate in the Conservative party today about freeports, people seem to have totally forgotten that years ago we had something similar. But when you raise this point, they say, ‘Ah, but there weren’t any tax advantages, really.’ There were modest ones, say on business rates, but a lot of it was deregulation.
Q: How did your perception of regional policy shift over the course of the 1980s?
Well, I didn’t really have a continuing focus on it because I went to the Ministry of Defence where we had a sort of industrial strategy, but that was much more to do with procurement. I was there with Michael Heseltine. And Michael, was very keen to… he saw procurement as a way, which I didn’t, of influencing industrial structure. I don’t think someone like Keith would have been against the government being an intelligent purchaser. But Michael was more dirigiste. The whole tension in the Weston saga was, ‘Are we going to have a European capability or an American capability? Are we selling our birth right to a lot of Americans overseas?’ So there was a bit of industrial strategy there. But I don’t think that was shared in the government, generally, as a wider objective. Once I moved to the Treasury, I was spending all my time thinking about taxation.
Q: Did you find that the either the DTI or the Treasury at official level had to be persuaded to think in this different, non-interventionist way?
Actually, I found the DTI officials extremely good. By and large, civil servants don’t obstruct policy. I was not conscious of foot dragging in any way. Possibly some people at the most senior level might, at the very top, might huff and puff a bit and say, ‘Is this realistic?’
Q: Of course at the very beginning of the 1979 government, there was the big intervention in British Leyland?
We didn’t have any choice. You couldn’t have hundreds of thousands of people unemployed just like that. . We had a lot of problems clearing that state aid with the European Commission. I’ve been intrigued by the control of subsidy bill the current government have brought forward because the government can’t quite make up its mind whether the new subsidy regime that they’re introducing is a Brexit dividend or whether it’s a restraint on government. What I’m worried about is the absence of a discipline on government in this area. But to my astonishment, for a Brexit government, some of them are saying, ‘Ah, with one bound Jack is free and can subsidise everything.’
The previous EU regime is portrayed by ministers as bureaucratic and slow. The fact is that Britain had a much smaller percentage of aid than France or Germany under the EU regime. That’s portrayed as a bad thing, but at the time we regarded it as good. We were sparing in the applications that we made. But I do remember the saga of getting the aid to British Aerospace/British Leyland deal. It did take rather a long time, because it was so big. But of course, the Commission saw there was no alternative really, no government anywhere in the world could have an industry, a firm as big as British Leyland, just going in one go.
Q: Can we ask you about your period as Chancellor and the regional composition of the 1990-91 recession?
It was one of the ironies of the 1991 recession that it was a Southern recession. It affected Conservative voters and white-collar workers who never thought their jobs would be in any jeopardy. And suddenly their houses were worth less and their jobs were being shred whereas traditional Labour areas, were doing much better – it was a services recession more than an industrial recession.
Q: As the economy started to recover, were there regional objectives in dealing with the consequences of that recession?
I don’t think we ever looked at it in that way or tried to deal with it in that way. I did make a whole series of interventions in the housing market, which may not have had any great effect and which have been copied by other governments since.
The focus was very much on macro – my life as Chancellor was dominated all the time by endless looking at the statistics to see when there were some ‘green shoots’. It became about every month’s figures, waiting with bated breath.
Q: Did the Heseltine push on urban regeneration in the 1990s all happen after you left the Treasury?
Yes, but Michael was very good at doing that sort of project. Even during Margaret’s time, when he was Secretary of State for the Environment: he did a lot, the whole Docklands project was pushed by him, and then he copied it later in Liverpool where I don’t think it was quite as successful. I’m not saying it had no impact, but Docklands was a spectacular success.
Q: If you think about the period from your time at DTI working on regional policy through to your chancellorship and what Michael was doing in environment, and then MOD and the DTI, was there a philosophical difference?
If you remember, Michael made a famous speech at the Conservative Party Conference. He said he would intervene before and after and during breakfast. There was a difference in view between myself, and Keith Joseph and him. Margaret, was determined to keep him away from the Department of Industry. I think Michael modified his position a bit, he became a great advocate of privatisation. And he was always a great advocate of contracting out in the public sector.
Q: How would you describe the philosophical difference?
I think Michael was more an interventionist. He believed strongly that if you get all the important people together in one room, you can sort everything out. Whereas I was always sceptical of that. I abolished the National Economic Development Council. I’m sure he strongly disapproved of that. It’s an important point vis-a-vis Michael, that he was one of the first people to support, in fact, I think he may have invented the idea of elected mayors. He was certainly a very early advocate of it. That is another approach to regional inequality, which I confess I didn’t give a lot of time thinking about when I was in office. I was wrong.
Q: What did you think about the effectiveness of local government?
What did I think about the effectiveness of local government? My answer to that would be not a lot, I didn’t have a high opinion of the efforts of local government vis-a-vis industry. But whereas local government may not work very well in attracting industry, it is possible if you find one gifted person it may be easier to develop an environment that is very business friendly or suddenly makes an area attractive. I’m quite interested to see how the elected mayor experiment goes.
Q: What are your reflections on what we’ve seen since the 1990s – the regional development agencies, combined authorities and elected mayors?
Well, I don’t think we know the answer yet, is my answer. I’m watching the devolution to mayors to see how they do. But I imagine some will do well, and some will do less well. We haven’t come up with a system that actually can deal with this terrible issue of the left-behind towns. I think you’ve got this great concentration on cities, whereas some of the cities have done quite well. Manchester may have done quite well. But the problem is most severe in towns, maybe towns of 100,000 or 200,000-people. That’s where it has proved very, very difficult.
Q: The post Maastricht arrangement for regional policy in the UK was very heavily influenced by European cohesion funding – in your time as chancellor were you heavily involved in negotiations around the regional development aspect of Maastricht treaty?
You’re quite right. The regional map had to be negotiated. I’d forgotten about that when I was talking about the early 80s. But all that had to be negotiated with the EU. I don’t recall when I was being Chancellor being very conscious of having to spend a lot of time on that. I was deeply involved in Maastricht, but I have little recollection of that ever crossing my desk. But it must have done at some point.
Q: Were there other ministers who stand out from your time in government as being particularly interested in regional policy?
We haven’t talked much about deregulation and help for small businesses. David Young was very imaginative in coming up with measures on the skills and training front, and also help for small businesses. When you talk about towns like Blackburn, Bolton or Grimsby, I do think help for small businesses, help for ‘would-be’ entrepreneurs, encouraging people who come from council estate backgrounds to think that they could start a business, be an entrepreneur, changing the culture and the climate, that is one way you can sometimes get something going in an industrial wasteland. And who knows, a little business may become a medium sized business. I mean, 1 in 100. So I think the David Young’s initiatives were important and he did a lot on deregulation. I’m a bit cynical about Conservatives banging on about deregulation. They know the word, but when you say, ‘Well, what regulations?’ Well, that’s about the end of it. But, David Young was himself one of the few people who was capable of finding little regulations, specific ones and calling them up before the Cabinet, and getting them altered.
This is quite important. Faced with very bleak prospects, few people think: ‘I could form a business. I could try my hand. I could give it a go.’ You know, it wouldn’t occur to them: ‘Could I set up a little shop, or a cafe?’ And maybe now we’re in the world of new technology. Some app or something relating to the internet. That’s internet businesses. But that’s all possible now.
And one of the things that is happening is technology making distant communities more viable. I spent my first years of my life in Shetland. It has been revolutionised by the internet. When I grew up, we used to have a plane coming once a day and sometimes it might not come for a week if the weather was bad. You didn’t have television. But it is now much more connected. And you get professional people, entrepreneurs starting businesses in rural areas.
Q: Can we ask you about the role of London?
I think in some ways, the prosperity and growth of London is harmful to the rest of the country, but I don’t see what you can do about it. Maybe the effect of HS2 isn’t going to be what its strongest supporters allege, and it’s actually going to be greater connectivity to London not from London. The UK is much more capital-dominated than other countries, partly because of financial services.
Q: When you were in the Treasury did you think about the regional pattern of infrastructure spending when signing off the Jubilee line?
Well, I personally wanted the Reichmann brothers to pay for it. But I couldn’t persuade Mrs Thatcher that they should, if not pay for it, then pay a much larger proportion than they did. I had fierce arguments with Mrs Thatcher who felt I was being very hard on the Reichmann brothers who were great entrepreneurs. But I argued that the value in capital uplift was huge to them and they should have made a larger contribution.
Q: But other cities didn’t have comparable investments in their core infrastructure – was that a contributor to regional imbalance?
Yes, I think so. But don’t forget the success that Michael had achieved with Canary Wharf already. Having got the Canary Wharf project into existence, it made no sense not to connect it to the rest of London. The one thing followed from the other.
Q: Were there any other countries you look to as inspiration for the way in which our economy is run?
I was very conscious of the North-South divide, but I’ve observed every time I went to other places, whether it was Marseille, Lyon, Naples, Buffalo, every country has this problem. In Europe, maybe the Germans have got a more even spread – their black spots are maybe less black than some of our black spots.
Ideologically, the government I felt closest to was the German government. The phrase the social market economy was a phrase coined by Ekhardt and was picked up by Keith Joseph. Rather oddly, when people other than Keith Joseph used the phrase social market economy, it provoked a lot of criticism in the Conservative party. But I’ve always thought the phrase ‘social market economy’ was very apposite – indicating that one believed in market forces within a framework of law helping achieve certain social objectives. That seems to me what government is about.
Q: Reflecting back on your experience in government, what do you think are the most important lessons today?
I think levelling up is difficult. You can go through a list, it’s five or six things. I didn’t mention infrastructure and transport. Skills. Help for entrepreneurs. Advance factory building – I don’t think that does much good. The greening of a city centre. There’s an element of chance in why one town is more prosperous than another. But, I have come full circle and wondered whether a system with a degree of automaticity in it wouldn’t be better. I suppose if you singled out 10 towns where you could get an automatic grant, you would have howls of anguish from 50 other towns.
ENDS