On 5 October 1990, Britain entered the ERM: on 16 September 1992, ‘Black Wednesday’, Britain left the ERM. These two events and the years between them were crucial in recent British politics. They are the source of the divisions in the contemporary Tory Party and all the leading participants are obliged to state and restate what they said and did then in much the same way that the members of an earlier Tory generation had to spell out the position they’d taken over Munich. And just as Chamberlain’s deal at Munich was immensely popular for a short time and then reviled, so the conventional wisdom in October 1990 was that the ERM was a fine thing (our entry was acclaimed by the whole of the press as well as by Neil Kinnock and John Smith): a view which held until, roughly, September 1992, when the conviction grew on all sides that it had been a colossal mistake. Few will argue with John Major’s asssumption that the 1997 election was lost on Black Wednesday. But when the conventional wisdom shifts so fast the temptation for a politician to retouch his (or her) biography must be close to overwhelming.
In this respect John Major scores better than most; indeed, his sense of himself as a decent, reasonable chap is evident throughout his book, as is the mixture of lameness and naivety which was his undoing. Yet he works hard to qualify his position (‘As far as the ERM was concerned, I was not, personally, a determined advocate in principle’) when it showed no sign of being thus qualified at the time. Margaret Thatcher, as Major points out, has been a great deal less honest. In 1985 she had forced through the Single European Act, which committed Britain to ‘progressive realisation of economic and monetary union’, but later decided that she had always been flatly against such a thing, a belief she sustains with such ferocity today that she reviles Major but sent her husband along to attend the launch of Lamont’s book – Lamont and Major have not been on speaking terms for six years now – to show where her favours lay.
Norman Lamont, who served continuously at the Treasury from 1986 to 1993 – a period when first Lawson and then Major consistently argued for the ERM – tries hard to pretend that he was too busy dealing with the fairies at the bottom of the garden to notice any of it. He claims that when Britain entered the ERM he turned to a Treasury official and asked, ‘What have we done this for?’ adding: ‘I don’t think I would have given up the flexibility of the exchange rate.’ Given that he’d been Chief Secretary to the Treasury and a Cabinet minister for the previous year this is hard to believe. He then goes on:
Some years later, when asked about joining the ERM, I realised I couldn’t remember in which year it happened. Was it 1989? No, it must have been 1990, the same year I became Chancellor – that is a measure of how remote the decision to join was from me. It seemed to belong to a different era, but in fact it occurred only eight weeks before I became Chancellor.
Our hero evidently doesn’t realise how ridiculous this sounds. Perhaps the memory was so painful it had to be denied – that at least is the charitable interpretation. (Anything less charitable would run into legal difficulties.)
In fact neither account gives us the rich cheesiness of the truth. The Thatcher Cabinet was not one in which men of intellectual vision or anyone possessed of a killer instinct and a cutting political edge could be tolerated: anyone who showed any sign of that kind of talent was, like Michael Heseltine, bound to come to grief. By 1987, when the Leaderene had won her third straight election, the Cabinet was stacked with rabbits, nerds and characters with sufficiently low testosterone levels to endure repeated handbagging. Crucially, when Thatcher announced that she was going to take advantage of her victory to bring in the poll tax – which no one else much believed in or liked – they simply nodded it through as the Local Government Finance Act of 1988. Meanwhile Thatcher had become increasingly anti-European and not even a prolonged siege by the Treasury and Foreign Office (Nigel Lawson and Geoffrey Howe) could get her to moderate her hostility to the ERM.
The key to everything that followed was the poll tax, due to come into operation in England on 1 April 1990. As the date neared and the riots and demonstrations became more frequent, the full lunacy of the thing was clear to all save Thatcher. A major recession had begun, unemployment was rising sharply, inflation was 8 per cent and going up, and the bank rate had been raised to 15 per cent in a desperate attempt to shore up the pound, which had fallen badly as the huge payments deficits caused by Lawson’s boom reached unsustainable levels. When the boom collapsed, producing a house price implosion and the misery of negative equity, the nemesis of Thatcherite economic policy was evident to one and all. The result was political catastrophe. By April Gallup put Labour ahead of the Tories by 51.8 per cent to 28.1 per cent, with Kinnock ahead of Thatcher by a 40-23 margin. Most remarkable of all, the electorate, which in January 1990 had said by a margin of 50 to 36 that they expected the Tories to win the next election, had by April swung to a 56-23 majority prophesying a Labour victory. In the May local elections the Tories won just 505 seats to Labour’s 1721, leaving Labour in control of 31 out of 33 metropolitan districts. Thatcher was on the ropes and it was entirely her own fault.
At which point the Treasury (Major, Lamont) and the Foreign Office (Douglas Hurd) realised that Thatcher was so weak, and so desperate to avoid yet more interest rate increases, that if they wanted to push her into the ERM, now was the time to do it. In this spirit she was told that a judicious series of leaks suggesting that Britain would join the ERM later in the year would cause pressure on the pound to subside. It was child’s play, a few months later, to point out that, having now massaged the pound all the way back up to the three Deutschmark level, Britain really did have to go into the ERM or face a complete collapse of confidence. So the real reason Britain entered the ERM was the poll tax, the gutless way the nerds and rabbits of the Tory Party had allowed the Leaderene to go ahead with it – and then the way the Treasury and FCO took advantage of the straits to which it reduced her. None of this is to be found in either Major’s or Lamont’s book.
The real reason Britain left the ERM two years later is not to be found either, though again Major comes a bit closer than Lamont. By this time a combination of factors was putting pressure on the ERM’s weakest currencies, the lira and the pound. The markets were unnerved by the close-run French referendum on Maastricht and the Bundesbank’s hiking up of interest rates to throttle the inflation caused by Kohl’s one-for-one reunification deal between the Deutschmark and the Ostmark. Everything would depend on the Bath meeting of Ecofin (the monthly meeting of EU finance ministers and central bankers) with Lamont in the chair. Major and Lamont had spent two years telling everyone – you might just about guess this if you read Major but you’d never suspect from Lamont’s account – that ERM membership was roughly as necessary as oxygen and as inevitable as gravity. So from their point of view the whole purpose of the meeting was to make Helmut Schlesinger, the Bundesbank president, lower German interest rates. All summer long they had complained to Kohl about Schlesinger’s unhelpfulness. By the time they got to Bath Lamont could see his political career being spiked by Schlesinger and, despite being in the chair, became very emotional with him.
Journalists love Lamont because he is a wild, dangerous, indiscreet and humorous fellow. What other minister rents out his basement flat to a ‘sex therapist’? Or ends his political career by voting against his own party out of sheer rage? (Of the newspaper report that he was drunk when he did this Lamont merely says: ‘I wasn’t drunk, but I might as well have been.’) Schlesinger, Protestant, correct, buttoned up, and infuriated by Lamont’s hectoring, turned to the German Finance Minister, Theo Waigel, and said: ‘I think we should go now.’ Lamont, in a panic, could not hold back and soon Waigel, too, was on edge: ‘Norman,’ he said, ‘we are not doing this ten times.’ Lamont’s own rendition of this scene is as follows: ‘I am told that I put my request to Dr Schlesinger to cut rates four times in all . . . apparently he later complained that no one had ever spoken to him in his life like that before. Well, perhaps he had not lived very fully.’ Major writes of the need to send someone down to Bath ‘to calm Norman’.
Thereafter both Lamont’s and Major’s accounts are much the same: Schlesinger goes home, makes ‘irresponsible remarks’ about sterling; they protest to Kohl without effect; they jam interest rates up 3 per cent in a day to 15 per cent and then back down again the next day. Nothing worked, the markets just kept pulling sterling down until they finally and very expensively conceded defeat. Major, perhaps without quite meaning it, reveals more of his real feelings. Apparently he phoned his financial adviser, Sarah Hogg, who was on a walking tour in the wilds of Scotland. Ms Hogg found that the only secure phone she could get to was at a police post in a prefab at the Braemar Highland Games. ‘Prime Minister,’ she bawled into the crackling phone, ‘I don’t think we can rely on the Germans.’ The two police constables she’d bullied into allowing her to make the call were in the room. According to Major, they ‘knew what was what in world affairs’, and responded in chorus: ‘Dead right.’ This is about the level of the thing: WW2 comic stuff.
In fact Schlesinger did far more. Neither Lamont nor Major has anything to say about this, but they surely know what happened. Mortally offended by Lamont, he told a room full of people that he wanted Britain out of the ERM because he no longer wanted to be in any arrangement which brought him into contact with the Brits and, more specifically, with Norman Lamont. This conversation was rapidly leaked to George Soros and sundry other market-makers, who responded by placing huge one-way bets against sterling. As far as they were concerned they were betting on an already decided race – and so it turned out. Among currency dealers the curse of Schlesinger – and the gigantic fortunes it created for a few insiders – has legendary status.
Major’s book is very much better than Lamont’s – better researched, better written and far more appealing. Nothing can quite compete with the description of his childhood: a wayward showbiz father, illiteracy, adultery, unsuspected half-siblings, and then financial catastrophe which ends up with the family of five jammed into two rooms with leaking ceilings in a tenement house in Brixton owned by ‘Uncle Tom’, who turns out to be John Major’s unacknowledged half-brother, the result of yet another of his father’s liaisons. There is something endearingly Dickensian in the way Major discusses his relationship with the house’s other tenants: a cat burglar who gives him bets to place with an illegal bookie hidden away in a tunnel at Loughborough Junction station, and a Jamaican who is jailed in the end for stabbing a policeman. As for Uncle Tom – in showbiz like his father – he sings gloriously, understudies Harry Secombe as Pickwick, gets drunk, falls down stairs, gets sacked and never sings on the stage again, but instead enthrals the young John Major with musical evenings in their Brixton tenement. Both the cat burglar and the Jamaican have delicious girlfriends who are probably no better than they should be. The cat burglar’s girl disappeared whenever he went to jail but when he was there ‘used to walk around in her underwear, which was something of a novelty in the Fifties but added pleasurably to my education’.
A great deal of attention has been focused on Major’s humiliation at his own educational failures but it’s not really surprising that he drifted through school in a trance. The miracle is that he got where he did despite this background – the dodgy South London world of the Lavender Hill mob or of Minder. As you read these pages you realise how easily Major might have ended up a petty criminal, a copper’s nark, a seller of iffy cars – rather than the man who made Jeffrey Archer a life peer. Major feels he was let down by ‘the bastards’ in his own party, while Lamont feels he was badly treated all round.
It is Lamont, curiously, who puts his finger on the things that matter: the controversy over Europe and the great political sea-change that ended the Major era. Major gives a detailed account of both the 1992 and 1997 elections but Lamont hits the nail on the head: ‘Sometimes,’ he writes, ‘one had the feeling that the country and the newspapers had not really wanted a Tory victory in 1992. This was the victory we were not meant to have.’ The country, it’s true, was fed up but, like a horse refusing a jump, the electorate got cold feet at the last minute trying to imagine what a Kinnock government would be like. Then, when the sleaze and the faction-fighting began in the wake of Black Wednesday, everyone remembered that it could all have been avoided, if only they had stuck to what they’d been feeling three weeks before the election. So Lamont is not quite right after all. There was a moment when the country and the papers wanted Major to win but all too soon they realised that the victory was indeed one the Tories ‘were not meant to have’. It was the same with American voters, conned by Nixon in 1972, and then, post-Watergate, refusing to have anything to do with the Republicans; and the same again when they turned away from Clinton in 1994, were seduced back in 1996 and were repaid with the endless sleaze of 1997-98. The result in each case was exasperation: a sense of having fumbled the chance to be rid of someone who really should have been got rid of and who then makes a fool of you by reminding you why didn’t like him in the first place. When the electorate feels that it was hoodwinked into voting for something that it knew better than to vote for, the backlash is pretty much inescapable: hence the Blair landslide of 1997 and the impending landslide for George W.
‘Europe was the issue that destroyed John Major’s Government,’ Lamont writes. ‘Even if other issues mattered more to the voter, because of its effect upon the Conservative Party, Europe became the most important one.’ It’s hard not to feel some sympathy for Lamont as he records Major and Hurd’s endless obfuscations, their pretence that the single currency was not a fateful step towards federalism, that ‘Britain was winning the argument in Europe’ and so on. But he could have started very much further back. The fact is that all the big moves over Europe were made by the Tories. They decided that Britain should not join when the EC was formed in 1957. Then in 1961 they changed their minds and finally, under Edward Heath in 1971-73, they took Britain in. Similarly, it was under Tory Governments that Britain’s contribution to the EC budget was revised and that the Single European Act and Maastricht were signed. Labour has never done more than tag along behind.
The problem goes back to the start. When Heath took Britain in he claimed that he had ‘the full-hearted consent of the British people’. This was dishonest. Nobody was asked until the semi-rigged referendum of 1975, when the ‘yes’ side was taken by all three party leaderships, the whole of the press and all of the big money, and the choice was in any case all but meaningless, given that getting out of Europe was by then virtually impossible. At every juncture the electorate was promised that there would be no sacrifice of sovereignty – but there invariably was. Each time the politicians said, OK, we may lose some sovereignty but it’s a good deal economically, while pro-Europe businessmen said: OK, it may make life difficult for us economically but it’s worth it politically. Even when we got as far as the Single European Act and Maastricht there was no shortage of politicians to assure us that this was the end of the line, that the EU would have to deepen before it could broaden by taking in new members to the east, and that everything was just as it ought to be, when it never was.
It was always perfectly obvious that sovereignty was at stake; that the Euro-enthusiasts wanted federation, that they wouldn’t stop till they got it; that the EU would keep on and on expanding eastwards and that the Commission was hopelessly bureaucratic. There has been a persistent refusal to tell the truth about these issues – which is why the Tories, the party to whom it falls to make the key decisions in the matter, are now in such a mess. Instead of holding a (probably slanted) referendum on the common currency years after it has come into existence, the Blair Government should determine now whether the country wants full integration with Europe or the alternative preferred by Conrad Black and Robert Conquest – joining the US, Canada and Mexico in Nafta. God knows what the answer would be but at least we will have been asked a real question. As it is, we have a quarrel between varieties of fudge, a settled determination not to let the electorate decide anything until the dice have been loaded and a lot of politicians who have made any number of promises they had very little intention of honouring, who have changed their minds, and sat on the fence, anxious to tell us that they are only concerned with principle and have been badly treated. No wonder the rest of us would far rather hear about Uncle Tom, the Jamaican desperado, the cat burglar and their various delicious girlfriends.