The Chancellor of the Exchequer's non-committal statement displeased many party members, who shouted back that there should be no ERM re- entry 'ever'. Heckled and given a far from enthusiastic standing ovation, Mr Lamont said that interest rates would be set to meet the unchanged objective of reducing inflation.
In making his judgement he would be guided by a full range of monetary indicators, including house prices. 'Winning the battle against inflation. Tackling public spending. Getting the fundamentals right. Sticking to our guns - that is how we are going to restore confidence,' he said.
The Chancellor told party representatives that he had reflected countless times on the events of the last few weeks: 'I can only say that . . . I have not heard a single thing that might have been done or handled differently that would have produced a different outcome. Now the pound is floating again. And it is clear that we must not go back into the exhange rate mechanism unless and until it is right for Britain. I know that saying this does not make me very popular in Europe or in Brussels. So be it. It is my job to do what is best for this country.'
In a departure from his text, Mr Lamont admitted sterling was 'devalued'. Inside or outside the ERM, the policy objective must remain the same - 'to bring our underlying inflation rate down to the levels enjoyed by our major world competitors'. The new policy would have a specific, quantified target for inflation, a full range of indicators against which to judge progress and the tightest possible control of spending and public-sector pay.
House prices were one of the strongest signals in the late 1980s that inflation was rising, he said. 'And I shall very much want to take into account the level of the exchange rate. That doesn't mean that I will be setting a target for the exchange rate. But in a great trading economy like ours, the level of the exchange rate is a signal we cannot ignore.'
The recession had gone on 'far too long', causing hardship to families and small businesses. He did not pretend to have 'a magic wand to put things right'. Britain was not alone in this - presidents Bush and Mitterand, Chancellor Kohl and the Japanese prime minister each faced difficult economic problems. 'If anybody thinks there aren't problems in Germany they don't know what's going on. Over the last year, industrial production has fallen twice as fast as in Britain. And in Japan it has fallen five times as fast.
'But in this country we must never let frustration lead to despair.' Retail sales were up in the second quarter of the year to the highest level for more than a year, manufacturing production increased in the first and second quarters of the year, and exports were at near-record levels. 'You don't hear much of that in the good old British media.'
Mr Lamont said the floating pound meant British exports had suddenly gained a huge competitive advantage. Business had the opportunity to increase sales, expand turnover, improve profits and plough the money back into more jobs and higher investment. He rubbished Labour's recovery package as 'just a series of begging letters for more and more money', and said once borrowing was brought down the Government would continue to cut taxes.
In a peroration couched in heroic phrases but heard in silence, Mr Lamont said that he did not accept the honour of the chancellorship in the expectation of an easy life. He did not believe that Britain was condemned forever to be uncompetitive.
'We are a stubborn people, but courageous. We have shown what we are made of again and again throughout our long history.
'This is also a great and enduring party and we have faced down storms like this before. If we do not lose heart, we can transform the gloomy prophecies of today into the achievements of tomorrow.'Reuse content