A dangerous job at the Exchequer

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The melancholic departure of Norman Lamont from the Treasury once again emphasises the golden rule for up-and-coming politicians: steer well clear of the Chancellorship. Of the 13 Chancellors since Peter Thorneycroft in 1957, only two have left the job in reasonably happy circumstances - Geoffrey Howe in 1983 and John Major in 1990. All the others left with their reputations damaged or ruined.

Four were beheaded by the electorate - Reginald Maudling in 1964, Roy Jenkins in 1970, Tony Barber in 1974 and Denis Healey in 1979. Four resigned - Peter Thorneycroft over public spending cuts in 1957, Derick Amory through exhaustion in 1960, Jim Callaghan after devaluation in 1967, and Nigel Lawson after rows with Margaret Thatcher in 1989. One sadly died - Iain Macleod in 1970. And two were unceremoniously dismissed - Selwyn Lloyd in 1962 and now Norman Lamont.

Of all the Chancellors since the late 1950s, only two have eventually made the premiership - John Major, who was not at the Treasury long enough to have his reputation damaged, and Jim Callaghan, who took nine years to live down the 1967 devaluation. With a track record like that, it is surprising that Ken Clarke did not ask the Prime Minister on Thursday for a job with better prospects, say, Secretary of State for Northern Ireland.

The truth is that all those who have grappled with the failures of the British economy since the war have come off second best. No Chancellor, with the possible exception of Geoffrey Howe, can be rated as both an economic success and a political success. Very few can be rated as either.


Norman Lamont, believe it or not, will eventually be judged more favourably on both counts than this weekend's snap obituaries have suggested. Politically, the Tory Party has been quick to forget that Mr Lamont's first Budget skilfully defused the poll tax crisis while ensuring that there would be no council tax crisis to follow it. This took a bit of doing. A year later, his second Budget set a trap for Labour by introducing the 20p income tax band. The fact that the Opposition fell straight into it was an added bonus.

Economically, Mr Lamont will of course always be associated with the recession and the ERM debacle. Yet on neither issue did he really have any room for manoeuvre. The recession can be traced back not just to the 15 per cent interest rates imposed by his predecessor, but to the inflationary policies pursued by the Lawson/Thatcher combination from 1985-88. Once those key policy mistakes had been made six or seven years ago, the rest of the story was largely unavoidable.

Similarly with the ERM. As regular readers of this column will know, the links between the ERM and the recession were far more complex than the Tory Europhobes now suggest. For the first 12-18 months of sterling's membership, the ERM clearly hastened the process of reducing base rates. Only in the final six months did the opposite apply.

And what would Mr Lamont's critics have had him do during this latter period? Devalue sterling and remain within the system? Clearly not. Increase interest rates to head off the speculative attack on sterling? Hardly. Leave the ERM voluntarily, in advance of Black Wednesday?

Well, this is presumably what the Europhobes now say the Government should have done. But a voluntary withdrawal from the ERM without the political cover of force majeure was never remotely feasible. For one thing it would have led to several Cabinet resignations from the Europhile wing of the party, probably including Messrs Heseltine and Clarke. I doubt that the Major administration would have survived.

The niceties of these arguments are, of course, far removed from the stuff of everyday politics. What really did for Norman Lamont had little to do with substance, and much to do with the fact that the man has an inventive turn of phrase. He has indelibly written four phrases into the lexicon of British political quotations, possibly a record number in such a short space of time. He is the man who said unemployment was a price worth paying for low inflation; who first spotted the green shoots; who sang in the bath; and who regretted nothing.

The ironic thing about these phrases, which contributed greatly to the loss of political credibility that cost the Chancellor his job, is that all of them can be defended. Quite clearly, inflation could not have been controlled without some loss of jobs. Although there is room for discussion about how many jobs should have been sacrificed to make how much gain in inflation, the pretence that there is no choice to be made (a pretence to which other politicians are prone) is an absurdity.

Meanwhile, the 'green shoots' speech in October 1991 has turned out to have been remarkably prescient. From virtually that moment onwards, output stopped declining, and within a few months it had started to rise. Admittedly, it did not feel as if the recession had ended for quite some time, but the phrase 'green shoots' simply implies that the very beginnings of a recovery process were under way. This is precisely what had occurred.

What about singing at bathtime, shortly after Black Wednesday? Many held this remark to have been flippant and a little improper, in view of the losses to Britain's reserves that had been suffered in the defence of sterling. There are clearly parallels here with the euphoric mood of Harold Wilson immediately after the 1967 devaluation. Ben Pimlott, Wilson's superb recent biographer, says that the Prime Minister reacted bizarrely to the devaluation, and made his disastrous 'pound in your pocket' broadcast when in a 'strange mood of post-battle elation'. Perhaps Mr Lamont also suffered from battle fatigue, but in fact his remark about singing in the bath showed that he had very quickly appreciated the opportunities for lower interest rates, a competitive currency and faster growth in exports (see graph) which sterling's departure from the ERM involved.

(Graph omitted)


One of Mr Lamont's achievements is that he not only recognised this very rapidly, but also instantly delivered the policy change that the economy needed. Many people may say that this was all very obvious, but they have overlooked the experience of many other countries - Italy, Spain, and the Scandinavians - where governments continued to act as if they remained inside the German mark bloc for months after they were expelled from it. This applies, too, to other senior British politicians who continued to hanker for an early return to the ERM long after this had become impractical.

Finally, the je ne regrette rien remark in the Newbury by-election campaign. Time after time, this has been replayed completely out of context on the television news bulletins, making Mr Lamont look insensitive and rather frivolous. Almost never has it been explained that the Chancellor was replying to a light-hearted question, which was whether he now regretted singing in the bath. Seen in this context, his reply becomes rather a good joke, though one which a colourless and safety-first politician probably would have avoided.

I am afraid that the repeated showings of this remark wholly out of context - taken together with frequent mentions of the 'Threshergate' affair long after it was shown to be absolutely without foundation - suggests to me that the press was simply out to get Mr Lamont. And get him they did.