Back from the Brink: The Inside Story of the Tory Resurrection. Peter Snowdon
process – and was furious when they urged Major to intervene further to keep sterling in the ERM. ‘They all sat around umming and hawing and saying, “Should we put interest rates up?”’ he recalls. ‘Well, of course it offended me hugely, because I felt it was my decision and the recommendation of the Governor of the Bank of England was that our membership of the ERM was over and we should recognise it.’37 At 7.30 p.m. Lamont made a brief statement in the central courtyard of the Treasury. ‘Today has been an extremely difficult and turbulent day … The government has concluded that Britain’s best interests can be served by suspending our membership of the exchange rate mechanism.’
Lamont had lost confidence in Major. ‘I don’t know why the Prime Minister didn’t attempt to defend himself more,’ he says. ‘We never attempted to get across to people that this was a crisis that began in Germany and spread to every country in Europe. In the same week that we spent nearly all our reserves, every other European central bank did the same. They all devalued, like us.’38 Major concedes that not enough emphasis was given to the presentation of the government’s position. His terse exchanges with the German Chancellor, Helmut Kohl, were lost in the reports of the events, but this does not excuse the fact that Major failed to make his case sufficiently. The government did not look as if it was in control of events. The damage to the Conservatives’ credibility in managing the economy was immense, but the political ramifications were even greater. Black Wednesday had a shattering effect on John Major’s confidence, and the confidence of the party in him.
The crisis had been highly instructive for the new special adviser at the Treasury. After the election, Cameron had left the CRD to help write speeches for the second most senior minister in the government. As Lamont made his brief statement outside the Treasury that evening, Cameron looked on in the full glare of the cameras. He had witnessed the day’s chaotic events from a front-row seat. ‘He would be conscious of how rough politics can get, but he would have also seen what the opportunities are that are sometimes thrown up by great setbacks,’ recalls Lamont. ‘We had a great political setback, but it presented us with an economic opportunity; I think he understood that very well.’39 Indeed, Cameron did not believe that that day spelled the end of the government. ‘He didn’t think at the time, “Well that’s it, the Tories would be out of power for twelve years – it’s all over,”’ recalls a friend. Instead he came away with a heightened awareness of the dangers of a fixed rate mechanism and all that that would entail for a single European currency. Black Wednesday was a formative day for the future Conservative leader, not least in shaping a sceptical outlook towards closer European integration.
Major did not ask for Lamont’s resignation as Chancellor, but he did come very close to tendering his own in the week that followed. ‘I was ready to resign,’ he says. ‘I had written a resignation letter and a broadcast, and I thought that it was probably right to resign.’40 He told Ken Clarke, his preferred successor, to prepare for an imminent leadership election. Only after a senior Downing Street official, Stephen Wall, spent two hours talking him out of it did he resolve to carry on.41 ‘I thought it was my mess, I ought to clear it up,’ Major recalls. Neil Kinnock had resigned after the election, and Labour’s new leader, John Smith, accused Major of being ‘a devalued Prime Minister of a devalued government’. The government would never apologise for the ERM débâcle, believing that it had been right to enter it in 1990, as all political parties had agreed at the time (with the exception of Mrs Thatcher and her closest advisers).
Despite the myth that the Conservatives’ opinion poll ratings dropped overnight on Black Wednesday, it took a while for the public to register their full dissatisfaction with the government. The party’s average rating fell by a mere two percentage points, from 38 to 36, between September and October 1992.42 It was the following year that was in fact the annus horribilis. The public finances were in a parlous state, as the budget deficit grew. The Conservatives had promised during the election that they would ‘continue to reduce taxes as fast as we prudently can’, and had promised specifically that there were ‘no plans and no need for an extension of VAT’.43 But now Major and Lamont realised that they would have to raise taxes and cut spending. In March 1993 Lamont’s budget included tax rises, including the imposition of VAT on fuel. It pushed public support for the government over the edge. By May the party’s average poll rating dropped below 30 per cent, and it would stubbornly remain there for the next four years.44 Major’s personal ratings as Prime Minister went into even steeper decline than the popularity of his party.
Lamont’s 1993 budget came to be seen as a necessary evil, restoring confidence in the City by placing the country’s finances on a more even keel without endangering the recovery. However, there would be a price to pay for the broken promises. A string of by-election defeats, beginning with Newbury in May 1993, began to erode the government’s perilously small majority. During the Newbury campaign, Lamont uttered the infamous words ‘Je ne regrette rien’ when asked by a reporter whether he regretted making comments about ‘green shoots’ of economic recovery. Having taken account of the views of the City and other senior ministers, Major realised that he had to appoint a new Chancellor, and on 27 May Lamont resigned from the government, after having been offered the position of Environment Secretary. Embittered, he felt that he had been made the fall guy. Yet it was Major who carried the responsibility for holding on to his Chancellor for too long after Black Wednesday.
The Poison Begins to Flow
As the public’s confidence in the Major government declined, the unity and discipline of the parliamentary party began to fragment. Inside the precincts of Westminster, the party became transfixed by Britain’s relationship with Europe. Having soured relations within the higher ranks of the Thatcher administration, the European question infiltrated the veins of the parliamentary party like poison. The Maastricht Treaty, which Major had signed three months before the election, now had to be ratified by Parliament, and a growing number of Conservative MPs were implacably opposed to the Treaty, despite the negotiated opt-outs on the Social Chapter and the single currency. A battle royal was in the making.
The 1992 general election had vastly changed the complexion of the Conservative parliamentary party, which had shifted in a more Eurosceptic direction. There were fifty-four newly elected Tory MPs, many of whom could be described as ‘Thatcher’s Children’ rather than ‘Major’s Friends’. Some of his closest allies, such as Chris Patten, had lost their seats, and Major now had to contend with a new generation of MPs who had come into politics inspired by the Euroscepticism of Mrs Thatcher’s Bruges Speech. For them, opposing a federal Europe was just as important as, if not more important than, party unity. The newly ennobled Baroness Thatcher gave them succour, as did a number of other former ministers now residing on the backbenches. No sooner had the first Queen’s Speech of the new Parliament been delivered, containing a Bill to ratify Maastricht, than the former Prime Minister gave her most important speech since leaving office. Speaking in The Hague, she set out her vision for a radically different Europe from that envisaged by Major’s government, calling for powers to be removed from Brussels and returned to nation states.
For senior ministers who represented an earlier generation of pro-European thinking, like Douglas Hurd, the Foreign Secretary, and Ken Clarke, who succeeded Lamont as Chancellor, the omens were not good. The question of Europe had now become inextricably linked with Mrs Thatcher’s downfall. ‘It stemmed from the bitterness after Margaret’s removal from office,’ says Ken Clarke. ‘She became very bitter when she lost power, and her immediate entourage persuaded her that there had been a plot and revenge had to be taken. She lurched to the right and became even more Eurosceptic than she had been in government. This was all taken up by faithful young acolytes who hadn’t served in her government but took up bizarre views which they thought were Thatcherite.’