The Lawson Boom was the macroeconomic conditions prevailing in the United Kingdom at the end of the 1980s, which became associated with the policies of

Margaret Thatcher Margaret Hilda Thatcher, Baroness Thatcher (; 13 October 19258 April 2013) was Prime Minister of the United Kingdom from 1979 to 1990 and Leader of the Conservative Party from 1975 to 1990. She was the first female British prime ...

Nigel Lawson Nigel Lawson, Baron Lawson of Blaby, (born 11 March 1932) is a British Conservative Party politician and journalist. He was a Member of Parliament representing the constituency of Blaby from 1974 to 1992, and served in the cabinet of Margaret ...

. The term ''Lawson Boom'' was used by analogy with the phrase "The

Barber Boom Anthony Perrinott Lysberg Barber, Baron Barber, (4 July 1920 – 16 December 2005) was a British Conservative politician who served as Chancellor of the Exchequer from 1970 to 1974. After serving in both the Territorial Army and the Royal A ...

", an earlier period of rapid expansion under the tenure as chancellor of

Anthony Barber Anthony Perrinott Lysberg Barber, Baron Barber, (4 July 1920 – 16 December 2005) was a British Conservative politician who served as Chancellor of the Exchequer from 1970 to 1974. After serving in both the Territorial Army and the Royal A ...

in the

Conservative Conservatism is a cultural, social, and political philosophy that seeks to promote and to preserve traditional institutions, practices, and values. The central tenets of conservatism may vary in relation to the culture and civilization in ...

government of

Edward Heath Sir Edward Richard George Heath (9 July 191617 July 2005), often known as Ted Heath, was a British politician who served as Prime Minister of the United Kingdom from 1970 to 1974 and Leader of the Conservative Party from 1965 to 1975. Heath a ...

. In his

1987 File:1987 Events Collage.png, From top left, clockwise: The MS Herald of Free Enterprise capsizes after leaving the Port of Zeebrugge in Belgium, killing 193; Northwest Airlines Flight 255 crashes after takeoff from Detroit Metropolitan Airport, ...

and 1988 budgets, Lawson cut standard rate income tax from 29p to 25p and cut the top rate to 40p. He did this because he believed that the economy was slowing down to a more sustainable rate, and "projected a huge surplus that justified his income tax cuts". In reality, the economy was accelerating out of control, inflation began shooting up, and the interest rate cuts had caused a 20% increase in house prices. Just a few months later he had to double interest rates, the UK was running its largest ever balance-of-payments deficit, and inflation began shooting up. Critics of Lawson assert that a combination of the abandonment of

monetarism Monetarism is a school of thought in monetary economics that emphasizes the role of governments in controlling the amount of money in circulation. Monetarist theory asserts that variations in the money supply have major influences on nation ...

, the adoption of a de facto exchange-rate target of 3

deutschmarks The Deutsche Mark (; English: ''German mark''), abbreviated "DM" or "D-Mark" (), was the official currency of West Germany from 1948 until 1990 and later the unified Germany from 1990 until the adoption of the euro in 2002. In English, it was ...

to the pound, and excessive fiscal laxity (in particular the 1988 budget) unleashed an inflationary spiral. The economic boom saw strong economic growth during the second half of the 1980s, sparking a sharp fall in unemployment, which was still in excess of 3 million at the end of 1986, but had fallen to 1.6 million (the lowest for some 10 years) by the end of 1989. In 1990,

Shadow Chancellor of the Exchequer The Shadow Chancellor of the Exchequer in the British Parliamentary system is the member of the Shadow Cabinet who is responsible for shadowing the Chancellor of the Exchequer. The title is given at the gift of the Leader of the Opposition and ...

John Smith referred to the period as the "Lawson boom" in a

House of Commons The House of Commons is the name for the elected lower house of the bicameral parliaments of the United Kingdom and Canada. In both of these countries, the Commons holds much more legislative power than the nominally upper house of parliament. T ...

debate, in which he said The "dash for growth" had failed to save the Conservative government from electoral defeat at the hands of

Labour Labour or labor may refer to: * Childbirth, the delivery of a baby * Labour (human activity), or work ** Manual labour, physical work ** Wage labour, a socioeconomic relationship between a worker and an employer ** Organized labour and the labour ...

in the 1964 general election, and was followed by a difficult period for the economy (during which unemployment nearly doubled) in the second half of the 1960s. The "Barber Boom" a decade later had contributed to a recession and was a factor in the Conservatives losing to Labour again after the February 1974 general election and was a major contributing factor in the subsequent

1976 sterling crisis The 1976 sterling crisis was a currency crisis in the United Kingdom. Inflation (at close to 25% in 1975, causing high bond yields and borrowing costs), a balance of payments deficit, a public spending deficit, and the 1973 oil crisis were co ...

. The inflationary pressures of the Lawson Boom were one of the reasons given for the UK's entry into the

European Exchange Rate Mechanism The European Exchange Rate Mechanism (ERM II) is a system introduced by the European Economic Community on 1 January 1999 alongside the introduction of a single currency, the euro (replacing ERM 1 and the euro's predecessor, the ECU) as ...

in October 1990, a move that was supposed to help restrain inflation (which had been approaching 10%) in the UK by "importing" the anti-inflationary credibility of the

Bundesbank The Deutsche Bundesbank (), literally "German Federal Bank", is the central bank of the Federal Republic of Germany and as such part of the European System of Central Banks (ESCB). Due to its strength and former size, the Bundesbank is the mos ...

. However, the economy fell into its third recession in less than 20 years, with unemployment coming close to 3 million by the end of 1992, even though this time the Conservatives managed to gain

re-election The incumbent is the current holder of an office or position, usually in relation to an election. In an election for president, the incumbent is the person holding or acting in the office of president before the election, whether seeking re-ele ...

See also

References

Further reading