Major’s cover-up bid on Black Wednesday

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BY BEN GLAZE THE vast effort to cover up the scale of the economic disaster of Black Wednesday is laid bare today.

John Major’s government sold almost $40billion of Britain’s foreign currency reserves in a bid to prop up the pound.

Official figures at the time showed a “minimal” loss to reserves of $2billion.

Papers released by the National Archives outline how the state of the reserves was concealed, and how Chancellor Norman Lamont was “increasingly anxious” about this.

Sterling fell out of the European Exchange Rate Mechanism on September 16, 1992. It came despite interest rates being hiked by 5 per cent in a day and was a blow to Tory Prime Minister Major who,

BLOW PM John Major as Chancellor, took Britain into the ERM two years earlier. Figures finally released by the Treasury in 2005 under Freedom of Information laws showed reserves fell from $18billion to a negative balance of $16billion over August and September 1992. A letter to No10 from Lamont’s then private secretary Jeremy Heywood dated November 26, 1992, outlined the Chancellor’s strategy for rebuilding this.

The government borrowed cash to buy back foreign exchange through “forward swaps” worth around $12.5billion.

The amount borrowed was partly disguised by using a “secret negative forward book”. Its opaque nature meant the only way to pay back borrowed cash was by quietly using sterling to buy back foreign currency, or “creaming off ”.

The letter states: “The forward book could be run down either by public borrowing or lower gross reserves.

“But having disguised this part of the operations, it would now be very difficult to explain the real reason we were now undertaking further borrowing or revealing lower gross reserves. That points to non-publicised ‘creaming off ’.”

An accompanying memo from Mary Francis in the No10 private office says: “He [Lamont] is increasingly anxious about the way it is being used to conceal the actual state of the reserves.”

The estimated final loss to the Treasury was £3.3billion.

It would be very difficult to explain now

JEREMY HEYWOOD ON CONCEALED BORROWING