Lamont accused of ERM fudge

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The Independent Online
CONFUSION over the Government's policies for economic growth and re-entry into the European exchange rate mechanism (ERM) persisted last night after Norman Lamont, Chancellor of the Exchequer, had undergone a two-hour grilling from the Commons Treasury Select Committee.

Mr Lamont repeated that the Government planned to rejoin the ERM when greater symmetry had been restored between the British and German economies. He also suggested that interest rates would not be used to 'kick-start' the economy - something that was not in his gift.

But John Watts, the loyalist Conservative chairman of the committee, said the Chancellor had 'slightly fudged' the question of ERM membership, adding that the preconditions put a return 'well into the future - if at all'.

Mr Lamont also vehemently denied that Germany had requested a devaluation of the pound in the days before Black Wednesday, a move which might have allowed sterling to stay in the system.

The Chancellor said his new policy framework was not 'too discretionary, too judgmental and too arbitrary' since leaving the ERM. He said he would pursue low inflation, based on a target for the amount of cash circulating in the economy, and on information from other indicators such as the value of bank accounts and house prices. He added he still regarded the pound's strength as 'very important'.

Mr Lamont said he would use his judgement in deciding when to change interest rates, arguing that it was unrealistic to run policy by 'auto-pilot'. He pledged to 'do his best to safeguard capital projects', such as road and hospital building, when discussing allocation of the pounds 244.5bn total for public spending in 1993-4.

City economists said they were not much wiser about how the Government would conduct economic policy, but added that Mr Lamont had done nothing to rule out an early cut in interest rates - perhaps this week. The financial markets showed little reaction. The FT-SE index of 100 leading company shares closed 16 points higher at 2,557.2. The pound was unchanged against a basket of other currencies.

John Smith, the Labour leader, attacked Mr Lamont for giving no indication of his policies for growth, unemployment or industry. He told Channel 4 News: 'There is a ministerial paralysis and what I found appalling about his performance was that there was no conception of what is happening to ordinary people in this country.'