In interviews about Nigel Lawson I have discovered a lot of journalist uncertainties about shadowing the DM and seeking to join the Exchange Rate Mechanism. Let me tell you more of what I know, based on the advice I gave Margaret as her Economic Adviser /Head of Policy  Unit in the middle period, and as an informal adviser in the later years.
I argued that ERM membership would be destabilising. When the pound was rising money would be created to sell pounds, swelling sterling money and credit. This would prove inflationary. When the pound wanted to go down the Bank would buy up pounds. This would be contractionary. I wanted the government to stick with the Medium Term Financial strategy Nigel Lawson had helped to create. Margaret agreed and thought her new Chancellor accepted the position.She made her view clear.
It later became apparent  to me that despite the MTFS in place, despite the PMâs wishes, and despite the absence of any formal statement to Parliament of a change of economic policy control the Treasury and Bank were shadowing the DM. Interest rate moves seemed to be related to maintaining the exchange rate. I appreciated this was an inconvenient view for the PM but she came to believe it. One day when I was with her in the study she turned on the news only to hear the BBC claim a policy shift based on DM fluctuations. In later years Treasury pressure to join the ERM worsened the relationship with Number 10 more.
It was a sadness that a good reforming Chancellor who worked well with a reforming PM and her advisers on tax cuts and privatisation got into a fight over using the DM exchange rate as the economic control. In the later Thatcher years following the  DM led to excessive money and credit creation and to inflation. The Treasury who never much liked tax cuts tried to blame them for the inflation. In the 1980 s the Treasury and Bank worked closely together and Ministers were involved in interest rate and money policy.
The ERM led to the economic problems of the early 1990s, undermined the Conservative reputation for economic  competence and was the reason for the defeat in 1997. The irony was this bad economic  policy  was supported by the other main parties, the CBI and TUC.
April 6, 2023
Indeed but just “undermined”? It totally destroyed the Tories relative reputation for economic competence and buried them for 3+ terms making us suffer the dire Blair and Brown. This made even worse as the foolish John Major never even admitted the stupidity of and the pointless damage done by his mad policy as Chancellor & PM. Nor did he even apologised to the people who lost their homes, businesses, marriages and even lives. Alas Osborne, Hammond, Sunak as Chancellors have continued to destroy the Tories reputation for economic competence. This with their tax, borrow, print, piss down the drain, over regulate and their mad, expensive intermittent energy policies. Plus their idiotic market rigging in transport, energy, schools, universities, healthcare, housing…
Just listened to perhaps Lawson’s last interview on the Planet Normal Podcast. He sensibly said he thought Mervyn King was good at the BoE but since then…
April 6, 2023
Shadowing the D-Mark was a precursor to joining the ERM. There was a belief that more fixed exchange rates would help to reduce Cost Push inflation by making it difficult to increase prices and wages. Perhaps some saw it as a return to the post war Bretton Woods system.
April 6, 2023
+ 1
April 6, 2023
Oh, so it was the ERM, and not Toxteth, Brixton, and many other areas ablaze, the Poll Tax riots, the militarised state force police in the Miners’ Strike, the IRA Mainland bombing campaign, the viewers and listeners being denied hearing the actual words of interviewees, soaring crime, etc., etc., was it????
The country under the Tories always gravitates to a nightmare dystopia – as we see yet again today.
April 6, 2023
None of your examples affected the economy like the ERM project did.
Do some research before making yourself look foolish NHL
April 6, 2023
Good morning.
So the Treasury never much liked tax cuts. That is because they, much like the rest of the State, do not live in the real world where you are subject to the harsh realities of competition and recession. To them taxers are necessary to subisidise the ever growing State and party promises. The Private Sector as many of us have pointed out, is seen by the State as nothing more than a Cash Cow.
Yesterday many other posters asked why did, Lord Lawson shadow the DM ? Unless anyone really knows, it is a secret he has taken with him. Even so, it was an action that was to lead to where we are now.
I for one have few complaints.
April 6, 2023
It seemed he acknowledged that German inflation was lower than our own and he presumably thought that their strong exchange rate was mainly the cause of that, so he wanted to mimic that with the ÂŁ. More that than being a Europhile, it seemed to me at the time.
April 6, 2023
Indeed Nigel Lawson falling for the irrational group think in government that the ERM/EURO was out of character for a usually logical man like himself. Why would anyone think two very different countries could fix interest rates in this way. It shows the very real dangers of irrational group think, this even for fairly rational people, After all unlike circa 90% of our current MPs and others in government he did not fall for the climate alarmist and “renewables” lunacy. Though you could argue it led to the partial Brexit we have now. But Starmer will surely slowly lock us back in if he can. Sunak is doing this anyway.
Current (and recent) deluded group think delusions within government:-
Net Zero/Climate Alarmism, the anti-car and van agenda, state sector virtual monopoly healthcare, state virtual monopoly schools and universities with little freedom of choice, tax levels at the current absurdly high rates and complexity, HS2, vast and misguided red tape, the open door immigration with zero quality or safety controls, the police who fair to address nearly all real crimes, the idea you can actually change gender if you want to by wishing it, rapists in women’s sport and prisons, the idea that electric cars save C02, the idea that a bit more plant and tree food C02 is a bad thing, the idea that CO2 levels are some kind of World thermostat.
April 6, 2023
Another group thing delusion is the idea that the UK government can hide the substantial vaccine damage that has been caused. This when these deaths, injuries and large falls in fertility are all around the World.
See “The misplaced attacks on Bridgenâs speech to the UK Parliament” on the HartGroup.org site today.
April 6, 2023
Nothing has changed then?
People, departments and outside organisation all with their own hidden agenda’s doing their utmost to undermine policies and create mayhem.
Still not held responsible and accountable. When will we ever learn from history?
April 6, 2023
It’s fascinating, to note just how many on the Right claim to be psychic, that is, to know the contents of others’ minds and their intentions, based on no evidence whatsoever
It’s what gave us that triumph of reason and logic, the Ducking Stool.
April 6, 2023
It’s the Socialists who have devised and imposed Thought Crimes on us. You can even be arrested now for standing still somewhere and supposedly “praying silently” ….. with no evidence whatsoever that (a) you are praying (b) what you are praying about or (c) who whom/what you may, or may not, be praying.
April 6, 2023
@Donna; Except the original “Sus law” dates from 1824, long before Socialism…
It has traditionally been the right who have kept and tighten such laws, it has traditionally been the true Socialist who have revoked such laws (along with overbearing censorship), or at least made their reach far less.
Note I said true socialist, the Blair govt that imposed Thought Crimes on us was only notionally socialist, in fact Blair remove such references from New Labour, replacing the red flag with the red rose, revoking Clause 4 etc.
April 6, 2023
It’s not a matter of Right or Left, lad. Politicians lie, and we just have to try and read between the li(n)es, that’s all.
April 6, 2023
Of course itâs based on evidence! And in retrospect itâs merely deduction that produces these conclusions. Indeed predicting the future – what you would call âpsychicâ is a matter of learning the expensive lessons of the past and not repeating the disasters.
Lawson obviously thought shacking the ÂŁ to the dâmark would lead to an improved economic positions for the U.K. he thought he would not win the argument to try it (he was right) so did it unilaterally. It failed. He learned that lesson and opposed the entry of the ÂŁ into the Euro. He worked for Brexit which blew up the whole globalist strategy – well Putin is finishing off that great work.
Thatâs why I admired Lawson. It takes courage to admit your error and reverse your opinion.
I repeat that, based on the facts at the time and since, JR would have been a very much more successful Chancellor. JR has just as much strength of character as had Lawson, Tebbit etc and he would have stood against the institutions very successfully. He would have been able to rebut their arguments and establish the correct pecking order in the Treasury – the Chancellor is the Boss not the pen!
That was Mrs Tâs greatest mistake, and that is why the Thatcher era, where Monetary policy was guided by Monetarism for the most part, was merely a passing phase.
Incidentally that other great Grantham character, Isaac Newton PROVED monetarism worked a few years before the Thatcher Government deployed it. Had his âpredictionâ not been based on numbers – which donât lie – I would have said he was âpsychicâ.
In fact monetarism is a âlaw of the natural worldâ.
April 6, 2023
Try condemning the people who run these institutions rather than the institutions themselves otherwise what’s the point?
April 6, 2023
The point is that these institutions are the ones where change is needed from lefty groupthink. Naming the people won’t change their approach; changing the people will. The challenge is getting people who tend towards sensible money making private sector jobs into these institutions.
April 6, 2023
@DOM; “the people who run these institutions”
If you mean the currency speculators in the City, I agree.
April 6, 2023
@DOM +1
That also works everywhere, Russia is not its President, the Peoples of the European Nation are not the same as their rulers- manipulators.
April 6, 2023
As well as the Major Boom and Bust, the ERM fiasco led directly to Sir James Goldsmith and the Referendum Party (which I supported). That resulted in a pledge from all the main parties that we would not be taken into the Euro without a Referendum and without that pledge, Blair would almost certainly have done it on the back of his massive majority. (What a shame his son is not a chip off the old block and is such an Eco Nutter.)
It also directly caused Nigel Farage’s change of career, from City Trader, to politician. So the ERM cloud had a wonderful silver lining – and the Not-a-Conservative-Party has been paying the price for its EU Treachery ever since.
April 6, 2023
Nigel Farage had long since joined UKIP. He never supported the Referendum party. The Referendum Party offered no route to a salary.
Pretti Patel, however, offered to work for Goldsmith. She was later rewarded with a Tory seat. Unusual that – generally of you have supported a different party you are excluded by Central Office. Perhaps she was more helpful than I imagined.
April 6, 2023
A Norfolk MP on Farage’s programme this evening who’d been solid UKIP said the Conservatives there accepted him enthusiastically. They wanted a Brexiteer.
April 6, 2023
From my memory it was not just financial incompetence of the economy that got the Conservatives voted out, it was one political scandal after another, and the apparent arrogance of those in power at the time, who thought they could treat the voters with contempt, with their sense of entitlement to power.
Times do not seemed to have changed much in 25 years, indeed it seems to have got worse, as now we have no logical alternative, as all Political Parties seem to want to follow the same course.
Reply The Conservative poll rating collapsed on news of the ERM disaster and never recovered. The Labour Sleaze campaign made little difference to the low poll ratings caused by the ERM
April 6, 2023
Alan, Newcastle University seem to agree with you https://www.ncl.ac.uk/press/articles/latest/2021/11/conversationsleaze/
Labour may be keen to have a new Sleaze scandal-led campaign with only a little rebuttal because the Tories believe the sleaze didn’t cause the problem (hence why they’re happy to string Boris up within). It isn’t just about the money, I have heard people saying with their energy credits they’re actually better off and are saving the extra money because they’re concerned energy is never coming down again!
April 6, 2023
Marriage to the DM seemed to me symptomatic of the BoE’s and Treasury’s bigger plan for integration with the EU and membership of the Euro. This is a fate we only missed thanks to Cameron’s miss judgement of offering a referendom, for which I thank him. I think it was a mistake to leave the gold standard. It or a basis of GDP would seem a better measure to set currency by than the casino where to the operators movement is more important than stability.
April 6, 2023
Absolutely, yes – thank you Dave! đ
Gold is an interesting discussion. Many see it as ‘Real Money’ – and it is noteable that some things (oil for instance) cost pretty much the same in gold (by weight) today that they did many decades ago (unlike the petro dollar). For a change of perspective, the price of Gold hasn’t increased at all, it’s just that you need a lot more FIAT currency to buy it these days. Gordon B sold a large chunk of our Gold for $275 an ounce and now it’s over $2,000. I suspect he did it because Gold doesn’t generate income but I don’t own Gold for income, I hold it as Insurance.
If large parts of the world decide to return to some form of Gold-backed currency standard, then the UK will find it very expensive to trade with them. FIAT currencies give the illusion of wealth but only while folk who have (or make) the stuff we need are willing to accept our printed paper. Unfortunately you can’t print Gold.
IanT
April 6, 2023
Adopting the gold standard helped to collapse the Roman economy – and thus Rome. So many assets deployed in obtaining and storing gold instead of creating wealth by doing and producing things.
April 7, 2023
I’m not an expert on the Roman economy Lynn but I thought that part of the problem was that the Romans debased their coinage, such that eventually there was very little silver left in it. An ancient version of money printing.
I understand there are issues with a gold-based system but there are very obvious temptations with FIAT currencies too. Unfortunately, our Central Bankers have been extremley foolish over the past 30 years or so, with our political classes seemingly too financially illiterate to see where this must end. There is no good way out of this hole, as the Romans discovered.
April 6, 2023
The real question is surely, why was it the UK could not make the ERM work when all the original first entrants to the forthcoming Euro did, what was it about the attitude of our govt or City that caused this? I suspect the problem were the speculators, who had been given far much slack rope (lax regulation).
The Conservatives did not loose the 1997 election because of the economy, that was by then booming again, there was a real feel good feeling, and didn’t New Labour benefit from the Major/Lamont years at HMT! The party lost power due to a combination of sleaze (hence the so called ‘Battle of Tatton’), infighting within the party regarding the UK’s place in the EU, and the simple charisma of Tony Blair compared to John Major.
Reply You are badly informed. Italy crashed out of the ERM, several currencies could not keep up with the DM at the time. The ERM disaster pushed the Conservatives down below 30% in the polls and never recovered thereafter before 1997.
April 6, 2023
ERM was the expert groupthink policy of the late 80s and early 90s. All the experts with few exceptions thought it was obviously the right thing to do, and were very dismissive of anyone who disagreed. And more or less the whole political and media establishment also favoured it. And of course the left wing Labour Party and the unions.
But it turned out to be a very silly idea. Like lockdown – we saw just the same dynamic there.
April 6, 2023
Silly Ideas – Lockdown, the EU, net zero, the climate change act, the millennium dome, HS2, 50% to go to university and get ÂŁ50K of debt for a usually worthless degree, the dire communist NHS…
April 6, 2023
Blair became an antonym of charisma.
April 6, 2023
As memory serves, Nicholas Ridley called the ERM “a German racket”. A bit unfair but very many French and Itaian people might have agreed.
April 6, 2023
Entirely fair! Germany made billions trading in a currency way below the value of what their own currency would have been. Thatâs why Germany has had a massive trade surplus while beggaring her neighbours who fell for the scam.
Ridley became a popularist overnight, so the British knew the truth.
April 7, 2023
Yes, it’s very much ‘Beggar thy Neighbour’ Lynn especially the Italians I’m afraid.
April 6, 2023
Apparently the Home Office are ‘planning’ for 99,500 dinghyists to cross the Channel this year. Presumably if the extra 500 who would make a six figure total arrive then they won’t be able to cope.
Meanwhile GB News presenters are now openly laughing at the daily spectacle of local representatives complaining that their area is ‘totally unsuitable’ for migrant accommodation and there must be ‘somewhere else’ that is ‘not in my back yard’.
It is obvious to anyone with a grasp of arithmetic that ‘rescuing’ and housing 500 a day whilst deporting a handful is untenable in the long term, and that some time after the Election we will be presented with an amnesty dressed up as beneficial to the economy. Whether politicians are guilty of short-termism or outright dishonesty on this outcome is a matter of opinion.
April 6, 2023
Exactly.
April 7, 2023
I’m pretty sure it’s Short-Term Dishonesty Beresford – I don’t think they care about the long term. They won’t be around to worry about it.
April 6, 2023
Discussion between Chancellor and Treasury.
Chancellor: I want to cut tax.
Treasury: Tax is our income. We donât want a pay cut!
Chancellor: Your pay isnât cut. Itâs the tax thatâs cut.
Treasury: So we receive the same amount of income?
Chancellor: Yes, and you pay less tax on it.
Treasury: No way. Tax is our income. We wonât accept a pay cut!
Chancellor: Erm⊠now what?
April 6, 2023
@Bloke; Such rhetoric does nothing but display just how poor the elected politicos must have been in your hypothetical govt! After all didn’t a PM once suggested Governments govern, civil servants serve; or were those comments only directed towards Company Managers and troublesome Trade Unionist?
April 6, 2023
Everyone working performs a service. Governors decide what action should be taken and Civil Servants have responsibility to implement. Constructive opinions help, but obstructions hamper.
April 6, 2023
Its a sad demonstration of the Politicians desire/need to manipulate that in the end costs us all more, a lot more.
The market works on simple supply and demand, it has its ups and its downs. Politicians at times, seemingly well meaning, try to manipulate the market, for no other reason it seems other than personal and egotistical ends. It always ends badly, it always costs the âplebsâ(read taxpayer) more.
Free enterprise and a free market work extremely well and cost us all a lot less than the alternatives. However, along comes the politician looking at the next election and manipulates, that then distorts leads to retaliation and gets out of hand.
The old âchestnutâ – its the economy stupid, and the economy only works without the manipulation and political indoctrination.
April 6, 2023
John Major was a double fool.
A fool because he believed (still does) in the benevolence of the EU, and a fiscal fool for trying to mould the British economy into the straight jacket of the ERM, especially at the high exchange rate he went in.
BoE and the treasury have a very pronounced EU bend, which brought down Truss, difficult to cure.
April 6, 2023
Indeed but the rate you choose today will nearly always be the wrong rate an hour later and even more wrong a year later.
April 6, 2023
Yes. The rate is irrelevant, fixing is wrong,
April 6, 2023
More fool me, I went and joined the Conservative party to have voice to stop us joining the ERM , naively thinking the party wanted to hear the views of its members, rather than just be unpaid labour to stuff letter boxes with party literature. It was a campaign I kept up to our exit, the last response I got from my MP Jeremy Hanley dated 1st Oct 1992 I kept, in it he says…”Since you wrote much has happened to stabilise the exchange rate and I believe the wisdom of us pulling out the the ERM for the time being has been demonstrated……As to your suggestion that there should be an Independent British Central Bank , I am not sure that necessarily be feasible….”
I suppose it makes me feel a little bit better knowing much much better people than me were also being ignored , like yourself and Mrs T , but in light of the damage our ERM membership did to the country, it would be nice to have a list of all those who inflicted the policy on us.
April 6, 2023
The ERM, the precursor to the Euro, was a political construct not an economic construct and can only survive long-term with an undemocratic authoritarian government.
CAGW/Net Zero is also a political construct with no scientific basis which will require an authoritarian government to implement.
There is no empirical evidence for the catastrophic worsening of weather either in frequency or intensity. The IPCC scientists, all paid by political institutions/governments, hide behind a 3000+ page report that no-one reads and we are gaslighted by politicians who write erroneous and alarmist summaries which bear no relation to this report and by the MSM who propagate false stories such as âthere will be no summer Arctic ice by 2013â (BBC 2009) or âthe oceans are boilingâ (ex vice president Al Gore at the WEF/Davos summit in January this year).
In fact the one piece of real science, based upon real data and not false modelling, by Happer & Wijngaarden shows that increasing CO2 produces negligible additional greenhouse warming because of IR saturation. Published in 2019 the IPCC have not refuted their findings but have simply ignored it.
Net Zero will bring an even far bigger economic crash than did the ERM on Black Wednesday.
April 6, 2023
Indeed May’s moronic gift of net zero is a time bomb.
April 6, 2023
On a similar point to many previous threads about advisors and civil service changes, Sir JR is it true that Mr Lawson used to terrify his Treasury civil servants by having an encyclopedic knowledge of financial statistics which they had to keep looking up?
April 6, 2023
Sir John,
The one good thing to come from crashing out of the ERM was that it led to a healthy scepticism of aligning sterling to other currencies. I well remember William Hague’s slogan to keep the pound, during an otherwise lacklustre electoral campaign. This became a key policy of UKIP and resonated with the general public. Fortunately Gordon Brown was reluctant to join the euro despite Tony Blair’s enthusiasm. Keeping the pound despite all the pro-EU establishment pressure to join certainly made our departure from the EU much easier.
April 6, 2023
If Gordon Brown thought he stood a chance of becoming EU President the “Five tests” he devised to stop Blair doing it would have magically been met in very short order.
Remember him slinking off to Lisbon to sign the Constitutional Treaty in a cupboard after all the other Leaders had signed, hoping we wouldn’t notice.
April 6, 2023
Manipulation how ever well meaning it starts out – is still manipulation. It is generally done to enhance personal political ego at the expense of someone whoâs less able to protect themselves from it impact.
One case in point would be the CAP, all good, protects the food supply lines inside the EU. However, the surpluses it creates then get to get dumped on other Nations. Seemingly good to start, cheapish food, but totally undermining their own capability to feed their people from within â the recipient of the dumped goods pays twice over.
OPEC is a Cartel to undermine/manipulate the markets, a practice that is criminal in most Nations of the World. Yet we have to endure because of the political ego of our own political class.
Net Zero, the personal evangelistic banner of Boris Johnson and his/this Government. Its about a politicians personal manipulation of a people â because they can. If it was a ârealâ situation that really needed to be sorted, then efforts and energies would be placed on creating viable alternatives. Instead what do we get, punishment on top of punishment. The best this Government has come up with âlets import moreâ, punish those that work and pay taxes, with less work available and more taxes to pay. Even at the visible end all we get indoctrination and manipulation, the poorest in society have to fund the richest, with subsides on electric cars and so on.
April 6, 2023
‘maintaining the exchange rate’ should be manipulating the exchange rate, then the question why? Always the answer is the same personal gratification at someone elseâs cost.
April 6, 2023
Nigel Lawson, just another Chancellor who did not understand how the economy worked, Furthermore, he was one of several senior cabinet ministers who were far more interested in lining us up to join the ERM and subsequently the Common Market i.e. the nascent state of Europe than doing their day jobs. ‘Lawson’s boom’ disrupted so many people’s lives as well as damaging the economy; the failure to reverse the damage as soon as it became obvious what was happening was as a consequence of hubris, the mark of the man.
April 6, 2023
So who got to Nigel Lawson and persuaded him to change his mind? What was the opposite reasoning for shadowing the DM and joining the ERM (joining the Euro currency?).
April 6, 2023
It was Reality.
April 6, 2023
Most of us regret that we don’t have a Tory government with the vision of the Thatcher governments. She was so right as was the government, to follow a tax cutting agenda.
Why is it possible for the Treasury to overrule the PM?
The EU has been a disaster in so many ways for Britain – How many hundreds of ÂŁBillions have been lost to following their rules, their standards, and getting hooked into their legalities.
It would seem now that the current government has totally surrendered totally to the Treasury and external forces, which is why it seems like they are doing as they are instructed, acting out the part of a government in power.
With HMG not able to influence it’s own policies spells disaster for the UK.
April 6, 2023
We do not have a Tory Government of any description we have a ConSocialist one probably to be replaced soon by an even worse full blown Socialist one Labour, SNP, Libdims, the Green, Plaid coalition or even worse.
Unless they get their act together in the next year but zero sign of this from Sunak or Hunt.
April 6, 2023
@Bryan Harris the EU is/was a protectionist racket. Everything is geared to ensure the strong with influence do not have to compete on the same level playing field as the rest of the World. I was always amused when Trump had a beef with the EUâs inequality, the EUâs import duty on US Cars is 400% greater than the other-way around. The EU called foul when Trump suggested the equalisation of duty on cars and set out to increase with punishment duties on other US goods.
April 6, 2023
Another case in point of indoctrination and manipulation comes to mind with the CBI Conference (the Confederation of British Industry) taking place. The starting point is they are a noisy bunch that get to politically manipulate on a false pretence. They are for the most part not British, Industries or otherwise. They do not even represent the majority of British Industry.
In political speak they are a large outfit based on the World Wide turnover of foreign owned and based Companies. That is not the same as comparing their size in the UK with the UK Industry as a whole – they(the CBI) are minnows.
Yet the Blob, this Conservative Government dance to the CBIâs tune before those that are based, live, work and pay taxes in the UK.
April 6, 2023
“Britainâs biggest oil and gas producer has confirmed plans to axe one fifth of its workforce, blaming Jeremy Huntâs windfall tax for deterring investment.” Who would have guessed that would happen
April 6, 2023
JR
April 6, 2023
NLH,
Most intelligent people form their opinions on past, and present statements and actions plus their best guess at what the future might hold. Difficult with Starmer because he flip flops with monotonous regularity. Nothing in doubt about UK socialism, it has trashed the economy big time on every occasion it has been in power. The big problem for anyone of a right leaning is that you could not put a cigarette paper between any of the current parties in the HoC. Our host and 100 others are still Conservative, Rishi is trying to appear Conservative with elections in mind, but real Conservatives out in the electorate are yet to be convinced.
April 6, 2023
@agricola; “Difficult with Starmer because he flip flops with monotonous regularity”
Trouble for “real conservatives” like you agri, many see that as a virtue, not handicap. Look what happened to Mrs T when she stopped listening to reasoned advice, argument and what rational plebs on the High Street actually thought – “Section 28” or the “Poll Tax” anyone?
“[socialism] has trashed the economy big time on every occasion it has been in power”
As have the Tories! By 1964 the economy was already to hot; Ted Heath had totally crashed the economy by Feb 1974; and how many recessions did the Tories over see 1979-1997, four was it, one caused massive unemployment, the other three of them crashed the housing market; Even the 2007/8 UK Banking crash was rooted in the lax regulation that the Tories had put in place. As for 1945, who ever had won that election would have faced the same economic storms, there was a reason why Churchill wanted the coalition to continue, and why when faced with an election his manifesto was very hedged.
April 7, 2023
A good movie to watch over Easter about the Banking Crash 2008 is The Big Short. Itâs a film about the banking crash and when was the scam first seen. It explains how the financial crisis of 2007â2008 was triggered by the United States housing bubble. Brown was keen to copy the socialists in the States under Clinton, opening up mortgages to people with low credit scores and none.
I warned our bank manager about this at the time and he said âthere is nothing more secure than housesâ. But when men I knew without an o level maths between them were suddenly giving out mortgages in the UK without full checks on earning capabilities like confetti, concentrating on their personal commission I knew it would blow. This occurred ten years after Blair ousted the Tories, the freeing up of mortgages with Brownâs favourite suppliers Northern Rock and the RBS triggered their downfall.
April 6, 2023
The BofE must not be able to pursue its own independent position . The link to Government policy is an important part of our democracy and controls need to exist . Germany has always had the vital position in the economics of the EU but it also has to deal with its war history – Poland has signaled this background . Margaret’s “No No No ” at the time made me feel very satisfied .
April 6, 2023
@Bert Young +1
That goes for all entities that are paid or subsidised by the ‘taxpayer’. The BoE is not held responsible for or accountable for its mistakes and continuous taxpayer bailouts â they are in fact rewarded in pay, honours and otherwise for incompetence.
There was a time we all though that we elected Governments to protect our(the taxpayers) interest, not for them to ring fence their job-for-the-boys mentality.
April 6, 2023
@Bert Young; But had the UK accepted the invite to join the fledgling EEC back in the mid 1950s it is highly likely the UK would have had that vital position in the economics of the EU, since claimed by Germany.
As for Mrs Thatchers “No No No” speech, whilst it no doubt made some feel very satisfied, by 1988 it was also making many feel very isolated and fearful of the future (just as many now feel post Brexit), for example those older Brits who had used their redundancy or early-retirement payments buying places in the sun!
Reply The EEC was always a Franco German construct. They held meetings to agree outcomes before the EEC plenaries.
April 6, 2023
@JR reply; Indeed it was, even more so after the UK refused to join. so what. My point was it could have been a tripart’, Anglo-Franco-German, construct!
April 6, 2023
đđ€Ł I remember a newly elected Labour Government sending a Minister (of Agriculture I believe) to an EU meeting. They believe it would be smooth as silk – all socialists together.
The Europeans kicked him around a bit and he came back and declared that âthey will not co-operate because we are Britishâ!
April 6, 2023
Apparently Lord Lawson admired the fact that Germany had low inflation and thought that the U.K. could achieve similar by joining the ERM.
That kind of competitive urge which puts policy dogma way ahead of the needs of the population.
How could successive govt.s have managed to make so many so miserable in so short a time?
(Not that govt.s have ever dealt in happiness. Never. Ever.)
By sticking blindly to said dogma and never listening to advice.
However, advice is hard to swallow when one is enthused by unwarranted certainty.
And naysayers ( Iâm usually one) are not welcomed!
And the descent into misery and servitude continues.
April 6, 2023
I tried to comment yesterday but my computer went mad at what I said. So I will tone it down and try again.
Apparently Nigel Lawson pointed out the economic problems involved in demonising carbon dioxide and trying to go ‘carbon neutral’.
I said it is a great shame that the Conservative Party did not learn from him.
There is absolutely no reason for western countries to stop using fossil fuels.
Carbon dioxide is a beneficial gas that encourages plants, including food plants to grow, worldwide.
We have absolutely no reason to be ashamed of our history of leading the industrial revolution.
In fact the whole carbon neutral idea (religion) is designed to undermine western, advanced, economies.
April 6, 2023
John, are you concerned the Covid Lockdowns are the new ERM (although they were greatly supported at the time by a vast majority with your opposition parties wanting more and more lockdowns and support, and PPE, and Ventilators, etc.)
April 6, 2023
Sir John, I am sure you are right in what you say today about the sad history of the exchange rate mechanism and the damage that following it did to our nation.
April 6, 2023
Thankyou for the history SJ. However it confirms my suspicions at the time that it was the Treasury rather than our elected Ministers that were the most instrumental in this economic disaster. Here, some 30+ years later, I find NOTHING has changed in that department and the only person to try to do something about those unelected faceless men was ‘brutusised’ along with our last PM for being too Conservative.
We should be very concerned over those who seek to control us and our country to destroy democracy.
April 6, 2023
‘Margaret agreed and thought her new Chancellor accepted the position’
For those not aware, the new Chancellor, Lawson’s successor, was John Major.âHe was to blame.âWhat’s less clear to an outsider is how much he was fervently in favour of the DRM versus being too weak to hold back the Treasury’s keenness.
‘In the 1980 s the Treasury and Bank worked closely together and Ministers were involved in interest rate and money policy.’
As it should be.âAn independent central bank is a daft idea.âAndrew Lililco gave reasons at the time: https://conservativehome.blogs.com/centreright/2008/05/the-last-piece.html
A key one is monetary policy should change with fiscal policy; they work in concert for the political aim.âWaiting until lagging data suggests fiscal policy is having an effect, rather than believe one political party’s predictions over another, so monetary policy should adjust is far too late.
Politicians favour central banks being independent because they have someone else to try to blame for inflation.âVoters rarely fall for it.
April 6, 2023
Well one could argue that Thatcher was to blame for appointing a man as daft as John Major as Chancellor. A man who achieved three O-level passes in History, English Language and English Literature, Odd that he even got an interview?
April 6, 2023
đđ€Ł major is exactly what Central Office want. Stands on his hind legs, wears a suit well and is malleable.
April 7, 2023
Quite. And yet Major’s rapid rise without trace through several briefly held important ministries was a running joke in Parliament at the time.
April 6, 2023
The barge isnât even secure accommodation, its just a cheaper hotel tied to a dock, everyone is still free to come and go âŠundocumented âŠwhat a shambles
April 7, 2023
Glen – it is intentionally a shambles. It is not supposed to actually work, you know.
April 6, 2023
Dear Sir John, I am puzzled by your reasoning. Inflation is caused by excess demand or by shortage of supply (most often imported hydrocarbons over the past 50 years). Why is it that when the economy is reasonably buoyant, inappropriaely low interest rates would stimulate inflation by raising buying power but widespread tax cuts that raise buying power (unless accompanied by similar spending cuts) would not?
Reply If the deficit is fully funded tge bonds sold withdraw the money from private sector use
April 6, 2023
Re reply: Good point in general Sir John but I doubt if it would be one for one, especially as the Budget was still in healthy surplus in 1988-89.
April 6, 2023
Home Office â 5th April 2023
Illegal Immigrants â 437
Boats â 10
That immigrant barge in Dorset is full with an extra 138 waiting on the gangway for the next hotel
April 6, 2023
Dear Sir John, The Uk’s entry into the ERM was bound to be a disaster because we entered at the wrong time, at the wrong exchange rate and for the wrong reason. At the time sterling was propped up by emergency high interest rates and, as some of us argued at the time, well above a sustainable rate . And the CBI wanted the entry rate to be even higher because ERM entry was viewed as the Government’s main weapon to cut inflation.
As you suggest, it was a bad idea anyway. But this was not so obvious in the mid-1980s, when its supposed aim of reducing exchange rate risk to boost EC trade, stability and growth was more plausible.
The monetarist part of Nigel Lawson’s Financial Strategy never really got going, partly because the Bank of England was opposed to it but mainly because the 1979 oil shock had both boosted inflation and boosted the pound as a sort of North Sea petrocurrency. The 1981 Budget marked the end of the original monetarist policy.
The Bank of England was still not on board with Government strategy until the later 1980s so it was understandable that Nigel Lawson fished around for another anchor for monetary stability.
As eventually became clear, the ERM proved to be a failure for almost all its members except Germany, unless viewed as the stepping stone to the euro – which perpetuates many of its flaws.
April 6, 2023
I thought there was a policy request of our host one or two posts per day.
April 7, 2023
Indeed, incontinence is unfortunately usually a problem past a certain age.
April 6, 2023
A very insightful piece – thanks Sir John.
The role of Chancellor is surprisingly key. It seems that only someone with a knowledge of how the Treasury and the Bank work, and a determination to thwart them if necessary can really succeed as Chancellor (if the definition of success is the prosper the UK economy).
Liz Truss needed to do a lot better than Kwarteng. She should have kept him as Minister without portfolio, and given him a ‘No. 10 Growth Unit’ to do blue-skies stuff out of harm’s way, and put a far more dependable team in No. 11, including our host – though probably not as Chancellor, because the media would have cut up too rough.
April 7, 2023
“The irony was this bad economic policy was supported by the other main parties, the CBI and TUC.”
That was no irony – it was the policy of the Kohl government and of the Bundesbank – and the CBI and TUC, who benefited hugely from the EU’s state corporatism, swallowed all the propaganda fed them by the ever-schmoozing EU-elite, as they tried to tie the UK into their crazed monetary union scheme, fanned by the presence of Major and Clarke at the Treasury.