During a series of hostile questions about his forecasting abilities, Mr Lamont rounded on Giles Radice, Labour MP for Durham North, accusing him of trying to get 'cheap laughs'. But Mr Radice said that there was nothing 'cheap' about the events under discussion. 'Given all your erroneous predictions and all the words you have had to eat, wouldn't you agree the best service you could give to the British economy is to resign?' Mr Radice said. 'I don't agree with that, thank you very much]' the Chancellor retorted.
Opening a two-hour session before the committee, Mr Lamont said the Government had not wanted to leave the European exchange rate mechanism and intended to rejoin when the requirements of German and British monetary policy were more in step. Repeating his intention to take into account a range of indicators, he said monetary policy would not be on auto-pilot. Its objective would be to secure low inflation, while growth would depend on supply-side improvements.
Brian Sedgemore, Labour MP for Hackney South and Shoreditch, urged the Chancellor to respond to criticisms in yesterday's Financial Times that 'perhaps (neither) this committee nor anybody else can take what you say seriously on economic policy because you are a dishonest person who gets Treasury civil servants to fake economic projections and statistics for political purposes'.
Mr Lamont replied: 'That is not correct.' Mr Sedgemore continued: 'Given the way you exercised your judgement during the sterling crisis, it is probably the last judgement on earth that the markets are going to believe.' Mr Lamont replied: 'I don't accept that for one minute. And I have yet to have it demonstrated to me . . . what judgement was wrong during the week leading up to Black Wednesday.'
Completing the most aggressive exchanges, Mr Sedgemore told the Chancellor that the markets, international financiers, some senior figures at the Bank of England and in Whitehall no longer had confidence in him. 'You pushed people out of work and homes in pursuit of a policy in which you did not believe. Then when that policy failed, instead of apologising you went home and sang in your bath as though this terrible humiliation for our country was some kind of extraordinary private joke. Can you really claim that such conduct fits you to be the Chancellor of the Exchequer of our kingdom?'
'That is complete nonsense and I totally reject it,' Mr Lamont replied. 'I have followed a policy, amid very considerable difficulty in the last two years, of bearing down on inflation.' Despite immense pressure to change, he had stuck by the policy and there had been 'a very rapid and quite remarkable reduction' in inflation from 10.6 per cent to 3.5 per cent. 'So I believe that the credibility of the Government with the financial markets - its determination to stick with a policy of countering inflation - will be high.'
Mr Lamont said it was the Government's intention to resume ERM membership 'in due course, but only when a number of important conditions are met. Perhaps the most fundamental point is that we would not be prepared to rejoin until the requirements of German and UK monetary policy are much more aligned than they are today.' Tension between monetary policy in Germany as a consequence of reunification and the needs of monetary policy in the UK had grown since ERM entry two years ago, Mr Lamont said. He rejected an assertion by Mr Radice that he had jettisoned the ERM at the first opportunity and repeatedly stressed in reply to Nicholas Budgen, Conservative MP for Wolverhampton South West and a critic of ERM, that no proposal for the devaluation of sterling had been made to him.
Mr Budgen suggested the Chancellor had known 'perfectly well from the Germans that they were prepared to agree to a realignment'. But Mr Lamont replied: 'I had always made it clear that we did not think devaluation was the right policy for this country. And I remain convinced that within a fixed exchange rate system, my judgement on that was right.'
Mr Lamont said that he believed the exchange rate was 'a very, very important element' of monetary policy. 'I don't believe we can let the exchange rate go. It will add to the price level. It will add to inflation as a result.' But he told the committee that monetary policy was only one element of the economic strategy and could not be used to push up the rate of growth. This depended on supply-side improvements, including freeing the labour market, promoting competition and entrepreneurship and removing excessive regulation.
Replying to Alan Beith, the Liberal Democrats' economics spokesman, Mr Lamont said: 'I don't believe in kick-starting the economy by some artificial stimulus or device.' Increasing government spending would not be right. Although he would do his best to safeguard capital projects, it was overall control of spending and what could be afforded that mattered.
The committee returned repeatedly to the issue of rejoining the ERM, with Mr Radice alleging that Mr Lamont had changed his tune by writing in his letter to the MPs of an intention to resume membership, and telling the Conservative conference that the pound would not go back 'unless and until' conditions were right.
'It is a completely different tone that you take,' Mr Radice said. 'You say different things to different audiences and that is why you are not trusted any more.'
'Thank you very much for that charming question,' Mr Lamont replied. 'That is quite wrong. There is no logical difference between 'unless and until' and 'only when' as used in the letter.' Re-entering the ERM was not a question of what one person might want. 'It isn't practical to return to the ERM until there is greater symmetry between the needs of policy for this country and Germany.'