History of England 1-6

But first, the currency question had to be addressed. Both Nigel Lawson, the chancellor, and Geoffrey Howe, now foreign secretary, believed that entry into the Exchange Rate Mechanism could no longer be delayed. Thatcher was unconvinced, but the big beasts were not to be cowed. On 25 July 1989, they warned that they would both resign over the issue. The challenges had begun to mount. When they flew out for the Madrid Summit later that day, an arctic silence prevailed between Thatcher and Howe. At the summit, Thatcher surprised the rebels, agreeing that Britain should enter the ERM. A month later she removed Howe from the Foreign Office, but if she recognized that the anger she felt towards him was now being reciprocated, she did not show it.

On 26 October, Lawson resigned, a decision long in the brewing. In the end, he had been undermined by Sir Alan Walters, Thatcher’s economic adviser, who questioned his judgement in an article for the Financial Times. Keeping sterling pegged to the fortunes of the Deutschmark had become Lawson’s obsession, and even rising inflation could not divert him. It was a rare lapse: he had been responsible for lifting almost a million of the poorest out of the tax system, for sowing and irrigating growth and investment on every side. His was a remarkable talent and the prime minister could little afford the loss.

When John Major was summoned to Number Ten, in order to replace Lawson as chancellor, he found the nation’s unbendable leader ‘close to tears’. She had never been so outfaced, and now a frightened little girl broke through the carapace. A more superstitious woman might have begun to study the signs: 1990 was full of disquieting omens. By-election results appeared to predict a Conservative defeat. On 30 July, Ian Gow, Thatcher’s former parliamentary private secretary, was killed by the IRA. Resignations, defections and conspiracies seemed to loom in the shadows. A month after Lawson’s resignation in October 1989, the unthinkable happened in the form of a challenge. Sir Anthony Meyer bid for the leadership. Thatcher received almost ten times as many votes, but the tremors of dissent were unmistakable. The next of many resignations came about largely by ill luck and unthinking flippancy, when in July 1990 Nicholas Ridley resigned over a faux pas in which he had compared European Monetary Union with the Third Reich. As with so many such blunders, much depended on context.

On 5 October 1990, Major and Thatcher announced Britain’s entry to the ERM. Major beamed, while Thatcher slipped on her patient smile. She had wanted inflation brought down first, while Major had argued that ERM membership would achieve that. Inflation was then running at 10.9 per cent. Nonetheless, euphoria flowered in the press and in the City. It would take only a few years for the flower to shrivel. The Rome Summit was held at the end of October. It was ragged and unsatisfactory, and Thatcher was not impressed by the Italian chair. At last, Thatcher openly opposed stage two of the Delors Report. She had envisaged the ‘ecu’, as it was still termed, as a currency that would run in tandem with national currencies, but now it seemed as if it would be imposed. Whatever lay over the hill could not be seen, but Thatcher saw smoke rising, and that was enough for her.

When she returned to the House, Thatcher found it in savage and mocking revolt. Baited by both Kinnock and Paddy Ashdown, she turned and bit. ‘Mr Delors said at a press conference the other day that he wanted the European Parliament to be the democratic body of the Community, he wanted the Commission to be the executive and he wanted the Council of Ministers to be the senate. No, no, no.’ It was intoned with utter finality. Howe, for one, was appalled. If it was hard for many to see how her position differed materially from his, it was clear enough to him. In her Bruges speech, Thatcher had spoken approvingly of the use of the ecu. Now, an unfathomably deep crevasse had opened.