Jeremy Warner: Walters was mainly wrong about the ERM

The death of Sir Alan Walters closes the chapter on one of the most fascinating periods of recent British economic history. Sir Alan's position as economic adviser to Margaret Thatcher was always a source of deep resentment to the Treasury and its then Chancellor, Nigel Lawson, but this alternative source of economic decision-making was just about tolerated as long as he said nothing publicly.

Unfortunately, when it came to the European Monetary System, Sir Alan couldn't keep his mouth shut and eventually he penned an article for the Financial Times fulminating against it. In Nigel Lawson stormed to say up with this he would not put. Lawson went first, but Sir Alan was forced to resign shortly afterwards too.

Ironically, Mrs Thatcher then went ahead and joined the ERM anyway. Conventional wisdom these days is that this was an extremely bad idea, which greatly exaggerated the effects of the recession of the early 1990s. I would beg to differ. ERM membership succeeded where all else had failed in finally exorcising inflation from the UK economy. The outcome was more positive than generally assumed.