PM intervened to save threatened Nissan deal

The Prime Minister had secured a pledge for massive inward investment from Nissan, the first Japanese car company to enter the UK, by promising favourable tax breaks to the firm’s president.

The plan, agreed in January 1984, eventually resulted in the construction of a manufacturing plant in Sunderland where more than 6,000 people are still employed.

But in the run-up to that year’s Budget, a Cabinet rift between Chancellor Nigel Lawson and Trade and Industry Secretary Norman Tebbit threatened the project.

The former proposed a series of dramatic changes to corporation tax, including the abolition of capital allowances which permitted the tax-free purchase of industrial machinery.

The provision was a major selling point for the UK and used by Mrs Thatcher as an incentive to persuade Nissan to invest without unfeasibly high first-year costs.

But under the Chancellor’s 1984 Budget, Nissan would face additional costs of between $30m (£18.3m) and $45m (£27.5m) by 1986 which would take years to recoup.

Mrs Thatcher wrote in the margin of a letter from Mr Tebbit that she agreed the “position looks extremely serious” and scrawled “so do I” next to the line: “I continue to see this as a greater problem than the Chancellor suggests.”

Her intervention placed Number 10 at odds with Mr Lawson who argued that the Nissan problem could be ignored for two years, when the added costs would be felt by the company.

The final Budget included the removal of capital allowances. But Mr Tebbit, with the support of the Prime Minister, successfully demanded a special deal for Nissan that would be modelled on Regional Development Grants.