Nigel Lawson: Osborne’s success story in spite of global economic woes

I KNOW that George Osborne is very anxious to go down as a tax-reforming Chancellor. This year, he has lived up to that with the reform of the annuities system in the spring Budget and the reform of the stamp duty system in this autumn budget because that is what it is. Both of them are substantial and, in my view, welcome reforms.

On the wider issues emanating from the Autumn Statement, nothing is perfect in this wicked world, but by any reasonable standards the British economy is a success story. It is a success story despite, I have to say, the difficulties of conducting economic policy in coalition with the Liberal Democrats.

It has made the task immensely harder and I hope that this will not continue and we will be able to conduct policy untrammelled by this complication; it is difficult enough without them.

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It has also been a success story despite the public deficit having been halved. It is still too big but it has been halved, which puts into perspective the views of the naive Keynesians.

I welcome in particular the consensus we now have between the two major parties that it is important to continue to bear down on the deficit. The two parties may have different ideas about how this should be done, but there is a consensus that it needs to be done.

One of the signs and proofs of the success of the British economy is to be seen across the Channel. The difference between the British economy and the economies of the rest of Europe is striking.

There are two main reasons for this. One is that we are not members of the eurozone, which is a disaster. I regret that because I do not wish our neighbours to be suffering under the regime, but there it is.

The other reason, which is probably more important, is that the massive range of supply side reforms brought in by the Conservative governments of the 1980s have made the British economy far more flexible than any other economy of Europe.

Fortunately, most of those supply side reforms have stuck. They have endured because even the Labour Party can see that they were successful in the 1980s and have remained a great strength for this country.

Looking ahead, much has been said about the warning lights flashing about the world economy.

The world economy is tremendously important to a major trading nation such as ours, but it is very much a mixed picture. There is both bad and good.

On the bad side, there is the eurozone, which I mentioned a moment ago, and also the problem of Japan going back into recession despite a massive Keynesian boost. The good is that the emerging world is still powering ahead.

Obviously, no one would expect China to continue at the huge rate of growth it was achieving, but it is still growing and so is much of the emerging world. The other thing is the reduction in the oil price, which is hugely beneficial.

What do we need to do to continue with our success? There are two areas of importance. We have to do far more to clean up the British banking system, which is so important to us as a great world financial centre and to the rest of British industry.

The other thing is that we have to radically change our energy policy.

We have an absurd energy policy, predicated confidently by the Department of Energy and Climate Change and its Secretary of State (Ed Davey) on an inexorably rising oil and gas price. In fact, the price has fallen and since the things that made it fall continue to exist, it is likely to continue to be weak.

We have moved from a market-driven energy policy to one of state control of everything – and largely unaccountable state control.

It is damaging for British industry, damaging for the poor and it is deterring investment in electricity and energy generally.

We have to move back to a market policy for energy.

That said, I warmly commend my successor-but-five, George Osborne, on his Autumn Statement and on his stewardship of the economy over the past few years.

Lord Lawson of Blaby is a former Chancellor of the Exchequer who spoke in the House of Lords yesterday on the Autumn Statement. This is an edited version.