Leading Article: Shabby and unconvincing

WHAT are we to make of our beleaguered Chancellor? It is now more than three weeks since the pound fell ignominiously out of the European exchange rate mechanism. In the immediate aftermath of those shocking events we were less inclined than most other newspapers to declare Mr Lamont a busted flush who had to be removed before a semblance of credibility could be restored to the conduct of macroeconomic policy. We had supported sterling's membership of the ERM and were unconvinced, even with the benefit of hindsight, that there was anything more that the Government could have done to deflect the overwhelming forces which it encountered on Black Wednesday. The recessionary weakness of the British economy and the increasingly wide differential between US and German interest rates had left the pound exposed and almost defenceless. While regretting some of Mr Lamont's understandable but deeply counterproductive German bashing and silly talk of a British monetary policy to serve British interests, we still did not join in last week's crescendo of calls for his resignation. It was foolish to suppose that a new monetary policy could be constructed overnight, but, more importantly, Mr Lamont has one exceptional quality which his detractors are inclined to ignore - a seriousness about inflation that is found in few British politicians.

After yesterday's performance by the Chancellor, it is, however, becoming increasingly difficult to carry on giving him the benefit of the doubt. Mr Lamont's principal defect is that, at a time when clear leadership is required by his party, the country and the international money markets, he appears incapable of giving it. Mr Lamont's speech to the conference was shabby and unconvincing. He gave the party no new information about how a post-ERM policy will look other than to reveal that the Government will 'have something we have never had before - a specific target for inflation'. There is no harm in that, but there is also very little use in it given

that today's monetary indiscipline may not impact fully on inflation for three or even four years.

The shabby part of Mr Lamont's speech was his attempt to hit all the Eurosceptical buttons he supposed would please the party conference. Not only was he taking a considerable risk with the loyalty of the Prime Minister, who by contrast is expected to come out fighting today, but he notably failed to convince the Tory right either, whose backing he rather pathetically seems to be seeking. At the very moment when he was telling the conference: 'We must not go back into the ERM unless and until it is right for Britain', he was releasing a letter to the chairman of the

Treasury and Civil Service Committee saying: 'The Government has made clear its intention to resume Britain's membership of the ERM.'

In the same letter he goes on to say that he has no intention of 'setting interest rates in relation to domestic criteria and then letting the exchange rate go where it will'. But in his speech he made the very different statement that he will merely take the level of the exchange rate into account when setting interest rates.

Not for the first time in the last few weeks, Mr Lamont is to be found saying different things to different audiences. His ambiguities are neither clever nor responsible. He is failing to construct a policy which will restore confidence in the management of the economy and he now stands in severe danger of losing the support of the relatively few friends he has left.