‘Black Wednesday? It was a small crisis . . . ’
25 years after we fell out of the ERM, Norman Lamont says:
BLACK Wednesday was a ‘pretty s ma l l crisis’ compared with subsequent events, Lord Lamont said this weekend ahead of the 25th anniversary of the day Britain crashed out of the European Exchange Rate Mechanism, popularly known as the ERM.
‘It doesn’t seem like 25 years ago, it seems like 100 years. I don’t have emotions about it. I think it was a pretty small crisis compared with what happened subsequently,’ Lord Lamont told Financial Mail.
Then plain Norman Lamont, he was Chancellor on September 16, 1992, when all efforts to prop up the pound failed.
These included raising interest rates to 15 per cent, though the hike never took effect, and spending billions buying sterling on international currency markets.
Despite these frantic measures, the UK came out of the ERM and speculators i ncluding George Soros, who made £1 billion, profited by betting against the pound.
‘It had bad political effects but actually the economic effects were entirely benign. It was really white Wednesday,’ said Lord Lamont, who famously claimed to have been singing in the bath after it happened.
‘I think we benefited by not rejoining the ERM but we also benefited from a period of being in it, because we dramatically reduced inflation. Unfortunately, the major beneficiary from that was Gordon Brown as Chancellor.
‘It was costly for the Conservative Party but economically it was the right course of events.’
Lord Lamont said that if he were Chancellor now, he would concentrate in the autumn Budget on reducing the deficit.
‘I would be trying to get over the message that seems to have got lost in the last election – that actually it is not a question of austerity, it is living within our means.
‘I don’t like the world austerity. I am not afraid of the word. It has become a dirty word, but compared with what Ireland had to do or what Greece had to do, we have had a walk in the park,’ he said.
‘We have got to reduce our deficit. I think the Chancellor is up for that and will reaffirm that in his Budget, I certainly hope so.’
The late Baroness Thatcher, he said, would be ‘appalled by the consequences of the financial crisis’.
‘I think she would be very keen to get the deficit and debt down. The debt is a danger and a threat.’
If he were still in Number 11, Lord Lamont said he would take action to help young people get on the housing ladder.
‘ The shortage of housing for young people is the number one problem and I worry about people getting disillusioned with the way the economy works.
‘Of course, the Government argues that the changes to Stamp Duty only penalised those at the top but I am sceptical because it is percolating down. I would have another look at Stamp Duty. I’m also not very pro the actions against buy-to-let.
‘ The shortage of housing has affected rents so we have a problem of high rents. How can we solve it? Reform Stamp Duty, encourage the rental sector and above all liberalise planning.’
He said that the recent slowdown in the UK economy is a result of temporary nervousness over Brexit and that he believed issues around trade and the EU divorce bill will not be resolved until after the German election on September 24. ‘ I think there is a greater than 50-50 chance of an agreement. I am in favour of an agreement rather than just walking away.
‘We could live with walking away but I am not an advocate of it. I have no idea what is a reasonable bill for divorce and if I did I wouldn’t say.’
He predicted Brexit as far back as t he 1990s because he was alarmed at talk of a single currency and political union.
‘My friends said it was just rhetoric, but I realised there was a significant element among European countries that were deadly serious about creating a state called Europe. I personally find that not something I want to live in.
‘I don’t believe you can operate democracy over a multi-lingual, multi-cultural entity, you don’t have the cohesion of society there. I felt this would end in disaster.’
‘The Germans like the identity of Europe because they don’t like to be overtly nationalistic. At the same time they don’t want to be subsidising other countries or to give up control over their own finances. So they resist ideas from France like a European Ministry of Finance.’