Norman Lamont all but predicted our EU divorce back in 1994. Now the former chancellor argues that in 20 years’ time we will have forgotten we were ever in it, writes Alec Marsh
‘As a former Chancellor I can only say that I cannot pinpoint a single concrete advantage that unambiguously comes to this country because of our membership of the European Union… I do not suggest that Britain should today unilaterally withdraw from Europe. But the issue may well return to the political agenda.’
With these words, spoken at a fringe meeting at the Conservative party conference in Bournemouth in 1994, Norman (now Lord) Lamont spelled out an unspeakable truth that had been quietly eating away at parts of the British establishment since the 1970s. He also spelled the end of his political career. By saying what was then politically unsayable, this respected, if not much-loved, recently departed occupant of Number 11 Downing Street set the pyre for the dreams of a political class that since the 1960s had worshipped at the altar of European integration – as well as for his political amanuensis David Cameron, whose own career was duly extinguished by the flames of last year’s referendum outcome. On the night of that 1994 speech, Lamont recalled bumping into Cameron, who had worked for him in the Treasury as a special adviser: ‘[He] cut me dead,’ Lamont wrote in his memoir. ‘Like him, most people didn’t want to speak to me.’
But Lamont had the last laugh.
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Twenty-three years later, as Britain begins its Brexit negotiations, it’s hard to see Lamont’s Bournemouth speech as anything other than perspicaciously prescient. To the astonishment of the world – him included – Brexit is now happening. And among Britain’s mainstream political elites he was the first to call it publicly. He was not one of the individuals that Cameron was later to decry as ‘swivel-eyed loons’. He was part of the mainstream.
What does he make of his intervention now? ‘I think the speech planted a bit of a seed and led people to think about it,’ reflects Lamont, 75, his once famous white and black ‘badger’ hair now paled to an even ivory. ‘The fact that I, as an ex-chancellor, who’d seen the colour of their eyes, was prepared to contemplate withdrawal had an impact at the time.’
The eyes in question belonged to the European finance ministers with whom Lamont, chancellor from 1990 to 1993, had – along with the prime minister of the day John Major – negotiated Britain’s opt-out from the single currency. Lamont recalls: ‘It became perfectly clear to me that most of them [the European finance ministers] wanted to have the political unification of Europe. Now, of course, this wasn’t the first time I’d heard this, but when I got to the negotiations over the Maastricht Treaty the penny dropped: this wasn’t rhetoric, this was for real. And that was the epiphany.’ A second epiphany soon followed: ‘I remember being struck by the fact that Switzerland exported per capita much more to the EU then we did, and was not a member. So why did we have to pay £20 billion a year for the privilege? You know, I think in a way the EU is a big confidence trick.’
Some confidence trick. Since 1994 alone, 16 countries have joined the EU, with a further five queuing up. Curiously, Lamont does not regard himself as a diehard Brexiteer. ‘Before the referendum, I wasn’t sure whether I would vote to leave or not,’ he admits over a cup of tea at his house in Notting Hill. After all, he notes, Britain had the opt-outs from the euro (the one he negotiated), the Social Chapter and the Schengen Agreement, so we were ‘half out’ already. ‘But when the referendum came, I didn’t really see the point of continuing with this, and the dangers of getting sucked in – we may be safe now with our opt-outs, but that could change in future, and I just decided, “I’m going to vote No.”’
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So he did, along with 17,410,741 other Britons. How did he celebrate – with a bath? (He famously did just that after Britain left the ERM.) ‘I stayed up until about 3am, and at that point the lead had been oscillating, it wasn’t clear what was happening,’ he says. ‘When I woke up, Leave had won, there had been a sudden switch. And I was extremely pleased, but mildly terrified!’ Why? ‘My thought was: “How will it happen?” I want it to happen, there’s no mistake about it.’
A year on, Lamont is clear on what needs to be done. Britain needs an agreement. ‘I don’t think it’s impossible to get an agreement, but it relies on the Europeans acknowledging that everything that is a cost to the UK is a cost to them, and that an agreement is mutually beneficial. I believe in the end that good sense, led by Germany, will prevail.’ He puts the chances of a deal at ‘better than 50 per cent’, but cautions: ‘Britain has got to be prepared to walk away if necessary. I don’t advocate walking away for one minute, but you’ve got to have a fall-back position.’ Moreover, the job of negotiating our exit has ‘unquestionably’ been made harder by the outcome of the election on June 8, in which Theresa May received a ‘tremendous hammering’ from the electorate. ‘The government’s in a weaker position than it might otherwise have been,’ he states, ‘and there will probably have to be more compromises. The one thing that is clear is that the public voted for Brexit – that still stands, although there are different views about the type of Brexit.’
He remains confident that Britain will thrive regardless. ‘Britain in ten years’ time will be probably more or less where it would have been anyway,’ he says. ‘I’m not saying leaving will bring golden boxes of good fortune raining down on us, but I don’t believe it will do us any harm.’ Indeed, Lamont believes the City will go from strength to strength, too. ‘It gives the City the opportunity to do what it inevitably has to do, which is to become a global platform,’ he comments, adding: ‘I suspect in 20 years’ time people will have forgotten we were ever members of the European Union.’
That is quite an epitaph for the EU, not to mention the dreams of his more Europhile predecessors and peers.
What of the euro? ‘It will stagger on,’ he says, pending a crisis like Italian debt. ‘The basic problem,’ Lamont adds, ‘is that the EU is permanently half-pregnant: it’s neither just a gathering of nation states, a loose confederation, nor is it an integrated federal model.’ This is because of Germany, which ‘needs the European identity’ for historic reasons but ‘wants to guard its own national interests, [so] doesn’t want to have to subsidise other countries… to guarantee other countries’ borrowing’. As a result, he says, ‘there won’t be a common banking and insurance system, there won’t be mutualisation of sovereign debt’. ‘In 20 years’ time,’ Lamont concludes, ‘the European Union may be looking very similar to where it is today, still half-pregnant, but no baby.’
Prior to this interview I asked one long-time observer of the British political scene for his assessment of Lamont: ‘Norman Lamont,’ he fired back, ‘is intelligent, spiky, emotional, vengeful, resentful, ideological, cause-driven, seldom impartial, unreliable, good company, independent-minded, and always worth listening to.’ So now listen to this: Brexit notwithstanding, we should expect some pain.
‘We’re probably going to go through a period where the eurozone may be growing more quickly than Britain,’ Lamont explains. ‘Everybody’s will say that’s because of Brexit, but it probably would have happened anyway.’ And Brussels would be foolish to crow, he warns: ‘We see the seeds of the next period of disequilibrium in the eurozone,’ he notes, pointing to the prolonged period of easy money in the eurozone and predictions of 5 per cent inflation in Germany. ‘Mrs Merkel complained the other day that the euro was too weak; this is causing inflation and overheating in Germany, and the basic flaw [of the euro is] being re-emphasised again. Interest rates can’t be right for Germany and the south at the same time.’ Tonic for Rome is poison for Berlin.
It’s these flaws of the single currency, which are so reminiscent of the flaw of the ERM (the ‘Eternal Recession Machine’, as Norman Tebbit put it), that Lamont believes we all should perversely be grateful for. ‘Perhaps the most important consequence of the ERM was that it solidified opinion against joining the euro because people were able to see the conflict between the interest rates that Germany and Britain required at the same time.’ Germany was booming after reunification, Britain was in recession. ‘You couldn’t reconcile the two. That experience made the British very hostile to the euro.’
So who deserves most credit for achieving the Brexit referendum outcome? Lamont doesn’t skip a beat: ‘Maybe Helmut Kohl [the former German chancellor] and Doctor Schlesinger [the former president of the Bundesbank],’ he offers dryly, the faintest inkling of a smile in the corners of his mouth. He also credits the intellectual foresight of the controversial late Conservative politician and thinker Enoch Powell, and the UKIP headliner Nigel Farage for popularising many of the principled arguments of others. ‘He [crystallised] them for the ordinary man in the pub,’ asserts Lamont. ‘Nigel Lawson played a part. I think it was a movement by a lot of people, but the most original, most important figure was Enoch.’
That might come as surprise to many. So, if you agree that this was the biggest decision since 1945, who should have the empty plinth on Trafalgar Square and take the credit? ‘Maybe you should rotate all the people,’ he suggests with a wintry smile. ‘Rather as they rotate those terrible modern sculptures.’ What about Lamont himself? He bats this off. ‘I don’t need to be there,’ he insists.
Lamont’s own record in office was and remains controversial, of course. As chancellor he oversaw the fiasco of Black Wednesday on 16 September 1992 (when Britain crashed out of the ERM and burned through £3.5 billion in the process), but he is credited with getting inflation under control. He also targeted government policy around achieving an inflation target, secured, as said above, the opt-out from the single currency, and introduced a lower 20p tax bracket, as well as getting a handle on public finances. These remain at the cornerstone of current government policy. However, they are offset by the pain clearly experienced by many during the 1990s recession. How does he feel about it now?
‘You know, I’ve thought long and hard about it: basically I can’t see how I could have done anything differently, because I didn’t have many options.’ This pointedly references the fact that as chancellor he inherited Britain’s membership of the ERM and the financial straitjacket it implied. ‘Am I happy about it?’ he asks. ‘I did try and persuade Major twice that we should leave the ERM because it had fulfilled its purpose. It was very controversial, still is very controversial.
‘The best thing I ever did was the 1993 budget, which was the most unpopular by miles, but it really sorted the public finances out, and Ken Clarke [his successor as chancellor] didn’t have to do anything really. Andrew Turnbull [permanent secretary to the Treasury from 1998 to 2002] once said we built the house and Gordon Brown put the roof on it.’ Who does he think has been the best chancellor since him? Lamont pauses. ‘Let me think about that,’ he says at last. Pause. ‘Probably Kenneth Clarke,’ he announces finally. Why’s that? ‘Well, he kept the ship steady,’ he declares with finality.
He finds it easier to be more effusive about two of his predecessors at the Treasury, Geoffrey Howe (‘dogged, rather low-key, a real sense of where he was going… heroic’) and Nigel Lawson (‘a more colourful, more dashing figure… did a lot of supply-side reforms and tax reforms’). ‘The two together were formidable,’ he remarks.
And so, as he is not afraid of pointing out, was the economy that he bequeathed to Clarke and then Brown. The UK economy was growing at 3.2 per cent in the final quarter of 1993, interest rates were at 5.5 per cent, and inflation was under 2 per cent. In the end, though, he took the fall for Black Wednesday and, to a degree, for the pain of the recession he inherited. But he didn’t go down without fighting: in his resignation speech on 9 June 1993 he made the defining political attack of the era. ‘We give the impression of being in office but not in power,’ he told MPs. The Major government struggled on but never shrugged off the Lamont critique.
As long-term watcher of money both in his political career – prior to becoming chancellor he was chief secretary and financial secretary to the Treasury – and his non-political career – he is now an adviser to Stanhope Capital and BC Partners, as well as being the PM’s trade envoy to Iran (‘David Cameron appointed me, and I’ve not been sacked yet,’ he says) – what is his investment insight in this age of cheap debt and soaring equity markets?
‘We’ve been living through one of the longest bull markets and people understandably keep asking themselves, “Where are we in the cycle?”’ he says, noting that the question is ‘almost unanswerable’. ‘I always remember what Margaret Thatcher used to say: “The unexpected always happens, and the inevitable never.”’ In particular, don’t underestimate the impact of politics, he says, citing the 2001 destruction of the Twin Towers and the invasion of Iraq, among others. ‘I’m quite apprehensive about the political effects of Trump,’ he says. (Will the president last a full term? ‘I don’t think he will, actually.’) ‘The only safety is diversification: you need to form a portfolio on the basis [that] you can’t foresee the future and the unexpected always happens.
The interview draws to a close; we stop to look at some of his photographs and other curios of a lifetime in politics. I remark that there are three pictures of him with Mrs Thatcher. ‘That’s a bit of an accident,’ he replies apologetically, pointing out that one was a recent gift. There’s also a photo of him with Bill Clinton; did he approve of the 42nd president? ‘I liked him,’ he answers. ‘Anyway, he was a good fiscal conservative.’ On the bookshelf are two small busts of Benjamin Disraeli, the great ‘One Nation’ Tory prime minister. ‘Everybody’s got a Disraeli,’ he comments.
The many books lying about include the new tome by Yanis Varoufakis, the left-wing, motorcycling former finance minister of Greece, with whom Lamont struck up an unexpected friendship. Finally he shows me a photograph of the government benches in the House of Commons from the Thatcher era. ‘That’s Margaret,’ he says with clear affection. ‘That’s Major… guess who the women in red is?’ he adds with a chuckle. Several rows back is Edwina Currie; she’s looking down at the back of Major’s head, I notice. Lamont himself is in the picture, standing over by the Speaker’s chair and looking up at the camera. He looks happy.
Downstairs Lamont has a bronze head Charles de Gaulle, complete with kepi. ‘I’m a huge admirer,’ Lamont explains. ‘I’ve got his autobiography, Mémoires d’Espoir, which begins with the words: “France is a living entity. She responds to the call of the centuries. Her boundaries may change, but her eternal soul remains the same…”’
As this recitation hovers mid-air I recall that it was De Gaulle who very famously issued an emphatic ‘Non’ to Britain’s original application to join the European Economic Community in 1963, peculiarly making him a sort of paleo-proto-Brexiteer, and setting the tone arguably for the fractious membership that eventually occurred. ‘De Gaulle also was a great peacetime leader in a way that Churchill wasn’t,’ adds Lamont. ‘He completely reformed France as president, so, you know, he saved his country twice, actually.’ And, from a certain perspective, Britain, too.
Alec Marsh is editor at Spear’s
Photography by Fred MacGregor
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