Interview
Counting the cost 13 April 2009 As the UK economy goes into nosedive, Mandy Rhodes interviews the former Chancellor of the Exchequer, the Rt Hon Lord Lamont of Lerwick Sitting opposite an icon is always unnerving but up close and personal with a man who was once demonised as the most loathed politician in the land and portrayed as a Dracula-like puppet for Spitting Image is positively scary. But in reality Lamont is, thankfully, a much cheerier character than his reputation would suggest. He laughs a lot, is solicitous and very open about the past, albeit with a slightly skewed interpretation that absolves him of any blame. And despite his cut-glass accent, Lamont is also Scottish which always helps. He is the only son of Daniel, a surgeon, and Helen Lamont, both of whom are now dead. His father was posted to Shetland during the war where he met his wife and where Norman was born and educated until he won a scholarship to Loretto where he boarded from the age of 11. He says he considers himself “100 per cent Scottish”. “People always ask me whether I feel Scottish and I say, you don’t need to sound like Rob Roy to be Scottish. It’s where I belong and it is where I feel comfortable.” Maybe it’s because he can see his Chancellor’s baton, when he presided over one of the worst recessions to befall the UK, about to be passed to another Scot that has relaxed his mood, and for a man previously accused of being insouciant, this has encouraged a spot of introspection. For Norman Lamont was the most obvious casualty of Black Wednesday when Britain’s membership of the European Exchange Rate mechanism was officially suspended and our economy was plunged into recession and unemployment rose to frightening levels. The date was September 16 1992 and Lamont, along with Prime Minister John Major, announced they would hike up interest rates to 15 per cent, in what turned out to be a futile attempt to ride the foreign exchange markets and keep the pound moving in line with the mighty Deutschmark. Lamont subsequently became a figure of national hate as businesses shut up shop and the ranks of the unemployed swelled. His unpopularity was only exacerbated by the fact that he appeared to accept no blame or show contrition for the unfolding crisis. He now denies that he didn’t care and says this impression has been more about a misrepresentation of him and scurrilous media misquoting than reality. In fact, he seems genuinely hurt. “Doing what I had to do was like fighting a war…people get hurt in a war,” he says. “My notorious remark about unemployment being a price worth paying was taken out of context.  Of course, unemployment is a tragedy and an absolute tragedy for every individual involved but all I was trying to do, and it seems rather clumsily at the time, was to explain that unemployment was going to rise and people should expect it to rise but of course, it is a terrible thing and I wouldn’t wish it upon anyone. All I was trying to be was realistic and prepare people for that awful eventuality.” Clumsy or cack handed, he was also reviled for apparently singing in the bath on the morning of Black Wednesday and for later saying he regretted nothing and for apparently prematurely claiming that he could see green shoots of recovery in the beleaguered economy. In fact in reality, he was asked at a press conference in Washington, a full fortnight after Black Wednesday, why he was so cheerful and he replied: ‘Well, it is a very beautiful morning, but it is funny you should say that. My wife said she heard me singing in the bath this morning.’ And the ‘je ne regrette rien’ comment was a reply the following spring, during a by-election campaign at Newbury, to the question ‘Chancellor, which do you regret most, seeing green shoots or singing in the bath?’ And at the risk of sounding like Lamont’s uncritical champion, the context for the green-shoots remark was indeed his insight that the first signs of economic recovery, assisted by the lower exchange rate and lower interest rates that went with freedom from the ERM straitjacket were apparent, to him at least. “Look, Black Wednesday was just another day as far as I was concerned at the time. We were living through very turbulent times and what people never ever see about Black Wednesday in this country was that what happened in Britain, happened in Sweden, Finland, Norway, Spain, Portugal, Ireland, Italy and eventually France and it was just as much an international a crisis as Gordon Brown is saying this one is. I was always more conscious of that and saw the crisis as a European regional crisis, to some extent, by the consequences of German reunification so I always saw it rather differently and continue to do so to this day.” He insists that without the high interest rates Britain would never have rid itself of high inflation which so troubled the economy in the Seventies and Eighties. And he cavalierly asserts that what he did was right. “I think my understanding of where we were going turned out to be right and it all worked out, albeit not how the Government planned it and I saw that things would work out well and for that reason, I was never dismayed. The recession of the early 1990s had a purpose which was to get inflation down and was a recession we had to have. “This recession is a crash, an accident, the one we had although it was painful, very painful, was, to some extent, a consequence of the Government being determined to get inflation down so one never lost one’s sense of purpose, or at least I didn’t, or a sense of direction. What would be terrifying if one was Chancellor now is just trying to stop something happening whereas we knew where we were going and after Black Wednesday, we had even greater opportunities and I thought the whole thing worked well to the advantage of the country and one of the beneficiaries, of course, was Labour who inherited a very strong economy but that’s how it is. “Yes, I was made to look foolish but I saw advantages for the country so I sleep perfectly soundly in my bed.” But in the end, blind faith or not, none of this was any good to him personally. He was intimately associated with the second-worst recession since World War II and although he offered to resign, at the time, it was politically expedient for the Government for him to remain in post and deflect blame from the PM. It was a demeaning period for him and the following spring he was sacked from the Treasury. There remains the nasty whiff that he was basically hung out to dry. Speaking years later at a conference, he told the audience that long after he had stopped being Chancellor, he got in a taxi and the driver said, ‘Mr Lamont, I saved your life! I was driving up St James’s Street one day and you were crossing the street and a man in the back said: Five hundred quid if you run the bastard down.’ All of this long-lived antipathy seems a little unfair on the genial man sitting across from me, sipping on a diet Coke, in the plush boardroom of the Balli Group where he sits on the board. Here is a man who, as Chancellor, presented three Budgets which all met the objectives that he had set for them; the first in 1991 was designed to take the sting of the poll tax; the second in 1992, by introducing the 20p income tax band, helped the Tories to win the election and the third in 1993, unpopular though it undoubtedly was, made a significant step towards reducing the budget deficit. And he was, afterall, no supporter of the ERM in the first place but operated according to the wishes of his Government. But then Norman Lamont is nothing if not robust. Short and dapper and with a twinkly smile, he is surprisingly warm and friendly but with little time for small talk and a reluctance to delve into his private life; rather old school, in fact. He is a difficult interviewee, only in that he waits for the question rather than expanding of his own volition but is more than happy to give an opinion and is not afraid to mischievously drop others in it. He is often described as feline, with a permanent cat-got-the-cream expression on his face, which hints at hidden secrets, a certain sangfroid. He is clearly stung by experience but is philosophical about the past. “I think people do like to have someone to blame almost for everything but I find I get a perfectly friendly reception from the public wherever I go, which just shows a lot of words are written and printed and have not much effect. “One of the problems in this country is that we don’t really have newspapers, we have comics. I think that what is important in the long run is that people look at what you have achieved rather than just believe what they read. We came out of my recession very strong even though I had basically inherited an Alistair Darling-type economy. Thankfully, history is not written by the tabloids.” Does he feel bitter that his achievements are overshadowed by failure and that he is remembered for Julian Clary’s fisting remark, the fact that a sex therapist called Miss Whiplash rented a flat from him and he later evicted her using taxpayers’ money, that a newspaper investigation proved he didn’t handle his creditcard bills very well, or his controversial support of the former military dictator of Chile, General Augusto Pinochet and as the politician that Spitting Image considered so indiscernible from the rest of a grey Cabinet that they placed a yogurt carton on top of his puppet’s head to distinguish who he was? He laughs: “Obviously, what one achieves is only known to oneself but I think a lot of economists do recognise that actually, I took some very tough decisions after Black Wednesday in terms of rebalancing the budget, setting a framework for the Bank of England, which left Brown with a pretty golden inheritance and that has been stated by many, many economists so perhaps, what the populace remembers and what economists remember are very different. I would rather not have found myself in the situation I found myself in but don’t think it could have been handled any differently.” It’s true, time can be a healer but perhaps Lamont’s biggest legacy was to wipe out, in a single day, the Tory’s reputation for economic competence and within his own party, he was always been scapegoated for that. Does he think that too often politics get in the way of sound economic judgement? “I think that is always the great problem for Chancellors of the Exchequer because you are dealing with huge issues and see that the country has to come first and politics should come second. Chancellors are always accused of being non-political and people say you are not taking account of the politics but often, you can’t, and fiddling around with the economy to take into account some byelection or whatever, can do great damage. I think politics shouldn’t intrude and I think it is a bit at the moment because I think that Brown is open to the same accusation that Obama is getting, that they are both of them, by nature and instinct, big spenders and they are reengineering the economy, saying it is to deal with the crisis but actually, it’s because they quite like doing it. “The two crises are very different. I think one has to remember Thatcher’s law that the unexpected always happens and just when you think you have sorted something and it can’t get any worse, then something unexpected comes along and your in-tray, instead of being called impossible, becomes unbelievable. At a time of crisis, you go from hand to mouth and can lose clarity.  “The Prime Minister is subject to a lot of criticism and you could say that no more boom and boost was just a phrase and what does it matter but I think it mattered in two ways; some people believed him and acted accordingly and secondly, he believed it and ran the Government’s finances on the basis that there would never be another slowdown and all the time he was Chancellor, I kept saying to myself, ‘this man is running incredible risks’.” Lamont says he started to worry about the potential for an economic crisis in 2006 when he became concerned about escalating house prices and the role given to the Bank of England. “I really could not believe that house prices – and I had read the arguments about planning permission, immigration, shortage of land, densely populated areas, etc – could be so high and be sustainable and I have never been persuaded by the case. “The important thing about housing is that it represents two thirds of banking collateral so once you get a housing crash, you get a banking crash although I have to admit, I didn’t see it on the scale it has now happened. “It’s ridiculous to present this as an American problem that spread here. HBOS didn’t get into trouble because of American house prices; it got into dif- ficulties because of British house prices. Even if British banks bought securities based on an American house, this was British banks making investment decisions themselves. “We are going to face a second banking crisis, which is why the Government has put so much money in to the banks. We have had this decline in property prices and we have had this effect of sub-prime mortgages but we still have to see the bad debts that will come from the recession which will create a new wave of problems for the banks and that still has to be lived through. “Although some banks have got into trouble on continental Europe, this is largely an Anglo-American crisis and when people talk about this being a global crisis, we have caused the crisis for other countries. I basically agree with the European stance of having no more fiscal stimulus and I am on their side, not the Americans.” Having been there, seen it and bought the recession T-shirt, how does he feel Alistair Darling will be feeling at the moment? “I am sure he is very anxious…I wrote to him when he became Chancellor, wishing him well and luck but I have certainly been amazed at how things have turned out and he must be pretty anxious because the risks in the present situation are huge and it’s not enough to say we are in a very difficult situation so therefore we can do anything because you could make the situation much worse by creating another crisis, a crisis of debt for the country and I think they are walking a tightrope, so I would think he is a pretty worried man. “I think it’s very difficult being Chancellor of the Exchequer if the PM is your immediate predecessor and held that job for a decade. The temptation for Brown to interfere all the time must be there and I don’t think Alistair is the master of his own ship.” How would he have handled things differently? “Under my watch, several things would have been different, one, we would have had tighter control of government borrowing and secondly, we would have had different responsibilities for the Bank of England, in that the Government decided to target inflation, excluding housing, when I gave the remit to the Bank of England, which is the one Brown inherited, he took housing out of it and I think that was quite a mistake, actually and in addition, the Bank, in setting interest rates, was required to look at money and credit which it isn’t now and thirdly, I think the system of regulation would have worked better if it had remained with the Bank of England. “There are also some things that I would not have even looked at. The Lloyds HBOS takeover, for instance, was a fiasco. I think nobody knew what HBOS contained or they didn’t do suf- ficient due diligence and secondly, they were at a point when the UK property market was declining very quickly and so what they bought was deteriorating but the Government should never have suspended the rules of competition to allow this to happen and they did away with the public interest in the long term for a short-term reason and the short-term advantage turned out to be illusory. “I wasn’t enthusiastic about nationalising Northern Rock and I’m not sure it needed to be preserved in its original form. I would have preferred, with all these bank rescues, for us to have put all the toxic debt into one bad bank and over a period of seven or eights years, gradually sold that off. Obviously, that would have been expensive and politically embarrassing but better than giving this impression of simply limping along and trying anything and everything. “I think it was inevitable that the Government should let Dunfermline go because they had run out of ammunition but I was shocked at what the company were engaged in, in terms of buying sub prime, etc and hard questions have to be levied at the FSA over this one in particular. “I feel sad and I also feel alarmed. We will come out of it but we might not get back to where we were for several years, if ever and people will live with lower levels of debt for a very long time. Next year we may start to see the beginning of growth and maybe the next year stronger growth but I don’t think we will make up to where we were for five or six years.” What then does that mean for his young prodigy, David Cameron who worked for Lamont as an adviser during Black Wednesday and the two remain extremely close? “What Cameron and Osborne face is even more horrendous than what Mrs Thatcher faced and it is extraordinary. I see them both quite regularly and I think their feeling is, like mine, that things could deteriorate but we are hoping for an upturn next year. “They will obviously have to tighten borrowing, they have to look for spending cuts and I am sure they are not going to come out with long detailed lists now because that would put them in a difficult position politically but I think they have made it crystal clear that they would have to take a tough approach. “Having Clarke back was a good move and all of us, and it is publicly known that all the previous Chancellors have regular meetings with David and George, so they have the benefit, for what it is worth, of the access to the experience of those of us that have lived through it before.” Ah, yes, now on the experience question… “Brown had no experience and Blair hadn’t even been a minister so this lack of experience argument isn’t an argument that holds water. David worked for me as an adviser and speech writer and is extremely clever and able and will be a very good Prime Minister.” While he clearly relishes still having influence, he is adamant that he will not return to active politics. He is currently, in addition to his role as a working peer, a director of, and a consultant to, various companies in the financial sector. As someone who had worked for the financial services firm N M Rothschild and Sons and was a director of Rothschild Asset Management before entering politics, why choose politics over money? “People go into politics as a mixture of altruism and egotism, they want to do things for the common good but also enjoy the process and excitement of politics and I have worked in the business of the City and politics and I think politicians are, in general, very well motivated and want to contribute something, which is not always true of the businessmen I meet who are in it to create wealth for themselves. “I think someone said that Conservative Governments are too terrified of Trade Unions and Labour Governments are too impressed by wealth and bankers and I must say that Mr Blair’s addiction to hobnobbing with the wealthy and the famous was rather undignified. I found it a little unbecoming for a Prime Minister to be always chasing the razzle dazzle all the time. I think Brown has much less of that in him but it was certainly a very unattractive feature of New Labour and actually, although some people say that Mrs Thatcher encouraged the era of greed, Mrs Thatcher was never impressed by wealth. Mrs Thatcher, strangely enough, was very sceptical of people on large amounts of money and whether they needed it and I can remember several incidences of her questioning whether they were worth it. Wealth was not something that impressed her.” I ask him what he thinks the Iron Lady herself would make of the economic crisis we find ourselves in and without hesitation, he leans forward and says, quite conspiratorially: “I can tell you exactly how she feels. Mrs Thatcher is appalled by the current situation, very concerned about it indeed. I spoke to her very recently and her attitude is this is how it always ends with Labour, this is how it always ends.” Related articles: Moore of the same 5 September 2010 Taking power 5 September 2010 What Labour did next 25 June 2010 A liberal view of life 11 June 2010 The Alexander Technique 28 May 2010 See all articles in this category Submit a comment |
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