Nissan's decision to come to the North East was nearly ruined by a Conservative cabinet row, confidential papers have revealed.
Margaret Thatcher had to intervene to prevent the abolition of certain tax breaks scuppering the massive jobs deal.
Documents published by the National Archives today reveal serious concerns in the cabinet that then-Chancellor Nigel Lawson did not appreciate how damaging his tax changes would be to the deal.
For nearly three decades the Conservatives have cited the Nissan deal as proof the party is committed to the North. But notes passed to Mrs Thatcher in 1984 show advisers thought the Chancellor was “naive” and raised concerns that Mr Lawson may prevent Sunderland securing the jobs.
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.
Mrs Thatcher was reportedly instrumental in the deal, personally lobbying the company’s long-time boss, Katsuji Kawamata, and Japan’s prime minister, Yasuhiro Nakasone.
In the run-up to that year’s Budget, a Cabinet rift between Nigel Lawson, the chancellor, and Norman Tebbit, the trade and industry secretary, 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.
Under the old rules, the Government would build the Sunderland factory and lease it to Nissan, and private companies would do the same with the machinery that would fill the plant.
But under the Chancellor’s 1984 Budget, Nissan would face additional costs of between 30 million US dollars (£18.3m) and 45 million US dollars (£27.5m) by 1986 which would take years to recoup.
The change is said to have threatened to damage the project, and exposed Mrs Thatcher to accusations of a “breach of faith”, Norman Tebbit told the prime minister. In a letter on February 27 1984, he wrote: “If Nissan does indeed pull out, it would clearly be a pity in terms of the project itself; and, of greater importance, would be harmful in terms of our policy of attracting further inward investment of Japan.
“More central to our economic policy, there is a also a risk that withdrawal by Nissan could endanger the case for the budget package itself.
“There is the further point, which must be for you to judge, of the political consequences in light of your own personal and crucial involvement in the negotiations. There is a danger that Nissan might interpret the fact that agreement with them was signed in full knowledge of impending taxation changes which would seriously affect the project as a breach of faith.”
Mrs Thatcher wrote in the margin of Mr Tebbit’s letter 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 the Nissan problem could be ignored for two years, when the added costs would be felt.
“My own view is that whether (Nissan) decide in 1986 to take (the project) up will depend on a whole range of factors that will only be apparent in 1986,” the Chancellor wrote. On a note attached to Mr Lawson’s submission to the prime minister, Andrew Turnbull, one of Mrs Thatcher’s advisers, labelled the Chancellor “naive”, adding: “The argument that this can all be left until 1986 is not very strong.”
The Budget, described by experts as Mr Lawson’s most radical for its shake-up of corporation tax, included the removal of capital allowances. The trade and industry secretary, with the support of the prime minister, successfully demanded a special deal for Nissan.
Last night North East Conservative Euro MP Martin Callanan said the letters show how committed Mrs Thatcher was to securing investment into the North East.
He added: “We should all be grateful for that. Decades later, we continue to see the rewards of her, and her Conservative government’s, persistence in bringing Nissan to the region with hundreds of direct jobs and thousands more in the supply chain.
“To remain competitive and attract more of this kind of private sector investment today, we must get rid of some of the European red tape that holds us back. Mrs Thatcher recognised that and so must we.”
Iron Lady’s plans to send in troops
Margaret Thatcher secretly considered calling out the troops at the height of the miners’ strike amid fears union action could destroy her Conservative government, according to newly released files.
Government papers from 1984, released by the National Archives, show ministers were so concerned at the outbreak of a national docks strike while the miners were still out, they considered declaring a state of emergency.
Plans were drawn up for thousands of service personnel to commandeer trucks to move vital supplies of food and coal around the country.
It was probably the closest Mrs Thatcher came to defeat in her battle with the miners but the scheme was never implemented as the dockers’ action petered out after less than two weeks. The epic, 12-month confrontation between the Conservative government and the National Union of Mineworkers (NUM) and its left-wing president Arthur Scargill was one of the defining episodes of the Thatcher era.
It saw some of the worst industrial violence the country had witnessed, with hundreds injured in brutal picket line clashes between police and miners, and ended in crushing defeat for the NUM.
From the outset both sides were clear there was more at stake than the plan by the state-owned National Coal Board (NCB) to close 20 loss-making pits which triggered the start of the strike in March 1984.
Mr Scargill declared the NUM was engaged in nothing less than a “social and industrial Battle of Britain” while at No 10, one official wrote it was “a unique opportunity to break the power of the militants in the NUM.”
By the summer both sides appeared locked in a lengthy war of attrition, until early July when the sudden escalation of a local dispute at Immingham docks into a national strike appeared to offer the miners the chance of a breakthrough.
In No 10 John Redwood, head of the policy unit, warned the NCB’s position was “crumbling“ but said giving in to the unions would be “the end of effective government” in Britain. “The Left’s aim is to pave the way for the ultimate defeat of the Government by destroying its policies and its credibility,” he wrote in a memorandum to Mrs Thatcher. “Its purpose is to oppose and destroy.”
While the immediate crisis for the Government quickly passed, some ministers feared the struggle was not going their way. Since 1981, ministers had been secretly preparing for the showdown with miners which many believed was inevitable - covertly building up coal stocks at Britain’s mainly coal-fired power stations to enable them to outlast a strike without disruption to electricity supplies.
However on July 25, in a letter marked “SECRET & PERSONAL”, trade and industry secretary Norman Tebbit wrote to Mrs Thatcher expressing concern that coal supplies were set to run out by mid-January.
“My concern is that, on our present course, I do not see that time is on our side,” he wrote. “On present trends it will become clear sometime in the autumn to miners on strike that the end of the dispute is approaching, and they will be fortified in their resolve. My own guess is that we may come to that point as early as October.” He concluded: “I believe it essential that we should continue to present our existing public face. But it is just as important that we should be utterly realistic among ourselves about what is actually going to happen.”
Assured, however, that power supplies could be maintained well into the following summer, Mrs Thatcher stuck doggedly to her guns.