13th November 2020
Once upon a time there was a controversial government adviser in Downing Street.
The controversy was not just about clashes of personalities, though that was certainly also present.
The controversy was in respect of competing visions of the UK and its place within the (then) European Economic Community.
On one hand the adviser, and the prime minister whom he was directly advising, believed that both economics and common sense meant that the United Kingdom should not participate in the exchange rate mechanism (ERM).
Sterling should float freely so as to find its own level, as one could not ‘buck the market’.
On the other hand the Treasury, headed by a chancellor who later (and ironically) was to become a Brexiter, wanted the United Kingdom to be part of the ERM – even though it was plain that the ERM was (and was intended to be) a prelude to monetary union.
(If memory serves, the proposed name of the new currency was still then ecu – the European Currency unit – rather than euro.)
And so what was on one level a clash of personalities – which was lapped up like milk by the newspapers of the time – was supercharged by it also being about a fundamental disagreement about UK and its place in the EEC (now European Union) project.
It was this split and row that, more than the then prime minster’s famous Bruges speech (which was actually quite mild in content) that perhaps marked the start of the divisions in the Conservative party that continued for another thirty years, up to and beyond Brexit.
The adviser was, of course, Sir Alan Walters, and the prime minister and chancellor were Margaret Thatcher and Nigel Lawson respectively; and the date was 1989.
Walters was forced to resign, as did Lawson, and – in a sequence of events which flowed from those two resignations, Thatcher herself resigned the following year.
At about this time United Kingdom also entered the ERM, despite the misgivings of Thatcher and her supporters.
And when, with Black Wednesday in 1992, those sceptical of the ERM believed themselves vindicated when the United Kingdom abruptly had to leave the mechanism.
That sense of vindication then fortified and informed what was then called ‘Euro-scepticism’ at each stage of the development of the EEC into the EU and beyond.
Here it was significant that the Maastricht treaty was negotiated, signed and ratified around the same time.
And so those who sought to ‘push’ UK into the ERM were seen by Euro-sceptics as the same as those who promoted the integration of EU more generally, and so Black Wednesday was seen as discrediting the wider European project.
Thatcher and Walters were seen by ‘Euro-sceptics’ as having been ‘proved right about Europe’.
(I recall all this, as I was a Euro-sceptic at the time too.)
Now, as I type this, there is another row in Downing Street about an adviser, which is in part about a clash of personalities and in part also about the basis of the United Kingdom’s relationship with the EEC/EU.
It may well be that the current drama will be inconsequential, but such dramas – as in 1989 – can also be momentous in their consequences and implications.
And this especially may be the case as the United Kingdom is only days away from ending the Brexit transition period with or without a deal and in the midst of a pandemic emergency.
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On the chronology:
Lawson resigned first on 28th October 1989 and then later that day (by telephone from the USA) Alan Walters resigned.
This has more in common with Sajid Javid’s resignation than any more recent event.
By 1989, Lawson had abandoned monetary targets in favour of shadowing the Deutschmark.
Although the ERM had come into existence in 1979 – the Labour government with Healy as Chancellor had decided not to participate – the really significant commitment to monetary union was made by Kohl and Mitterand after the Fall of the Berlin Wall as a condition of France supporting German re-unification. This was a year after Lawson’s resignation.
Good to be reminded that so many domestic controversies have their roots in the political watershed of 1978/79, when England moved decisively to the Right.
Alan Walters began to advise Mrs Thatcher shortly after the 1979 general election, of course, and was prominent at the time for an obsession with money supply theories about inflation (which lay at the root of the ERM problem).
Interesting that wage inflation was (and is) seen as bad, but asset inflation is nowadays regarded as a public good.
I wonder what he would have made of it all?
As the Americans like to say; what goes around, comes around. This time though it is not just about the EU and our relationship with that institution, rather it also speaks to the defeat of Trump because now it is pretty certain that the Irish family roots President-elect will not countenance a deal on trade or anything else whilst the UK government has a bill before Parliament which could result in the reinstatement of a border in Ireland.
Why is that significant? Because the Cummings et al vision for the UK post-Brexit was ineluctably tied to America’s apron strings, the first stage f which was to get a trade deal with them ahead of the EU to replace the trade lost with the EU.
That looks not just unlikely now, it looks completely impossible without retrenchment of the Internal Market Bill. So if you are Cummings or Cain faced with Johnson, who is no doubt being told what will happen if we lose our trade deal with the EU and because of that, won’t get one with the US is frantically suing for some sort of deal with the EU – contra to all article of faith in Vote Leave, if you are they, you walk, there’s nothing left in prospect but a complete shambles that will make the word omnishambles require a replacement with something more drastic to reflect what is actually happening.
No wonder that Johnson is self-isolating this week and possibly next as well if he can get away with it – because as sure as eggs is eggs there is going to be a deal with the EU – they have a choice not to do a deal but not one they want to make and Johnson wants to be off-limits as this volte-face takes place,- who said COVID was a nuisance??
Whilst agreeing trade terms is an economic imperative for our country, not agreeing terms that compromise ‘Vote Leave’s promises is a political imperative for our Government.
And Brexit teaches us that politics trump economics.
So an equally convincing arguments is that Mr Johnson is hiding because he is prevaricating.
(I’ve just sold nearly all this year’s lamb crop prematurely, into a market that takes your view; I take the gloomier view – Brexit voters don’t care about jobs lost, but do care about arguments being lost.)
Walter, I completely agree with you that where Brexit is concerned politics has triumphed over economics from the very beginning of this debate – the question is – to what extent will this continue to be the case when the real economic costs of a No-deal Brexit arrive beginning in January? (Assuming that is where we end up.)
Particularly one not mitigated by a Trump/US deal, (it is doubtful, and fanciful to think that such a deal in the face of an island border in Ireland would actually have happened, Trump was always about weakening the EU not strengthening the UK, for which he gives not one jot.)
I do not know the extent to which Cummings and Cain’s departure represents a volte-face on the part of the Johnson administration, but Trump’s defeat and Biden strident support for Ireland in this debacle means that not only are we reigned against the EU, but also the Americans.
As Oscar Wilde may have written had he been alive: To lose one, massively significant trading partner, Mr. Worthing, may be regarded as a misfortune; to lose both looks like carelessness. If Johnson is rethinking, he better get on with it!