next election in the early 1990s could be fought
with lower interest rates, sound money, a strong
economy and a return of confidence.
Norman Lamont began to talk about green
shoots of recovery in the summer of 1991, but by
the spring of 1992 no recovery had appeared.
Thus the Conservatives were left fighting the elec-
tion in April 1992 in the midst of a recession. The
pundits said that the Conservatives would do well
just to remain the largest party, with the Liberal
Democrats holding the balance and Labour not
far behind the Conservatives. It was even possi-
ble that Labour would win outright. When all was
gloom around him John Major fought an upbeat
election campaign, projecting once again a rea-
sonable and likeable personality, the sort of man
you can trust. Neil Kinnock, the Labour leader,
who had done so much to reunite his party, to
expel the militant extremists and to convey a
moderate, caring outlook, also campaigned with
warmth and verve. But to overturn the huge
Conservative majority was a mountain no party
had successfully climbed before. When the results
of the 9 April election were in, Labour had made
large gains but not enough to become the party
of government. Surprisingly, the total Conserva-
tive vote had not fallen from the number cast for
Margaret Thatcher in 1987.
The Liberal Democrats’ hopes of forcing
through a system of proportional representation
were dashed. Neil Kinnock’s leadership was over.
The new Conservative government expected a
long period of political stability.
John Major’s Cabinet made it a priority to cure
the economy once and for all by reducing infla-
tion to the same low levels as prevailed in France
and Germany. The discipline of the ERM with its
fixed exchange rates and resulting low pay awards
was among the weapons. At the Maastricht
summit in December 1991 Major scored a per-
sonal triumph in securing for Britain the special
terms it wanted. At home after a short period of
pain Britain was expected to move out of its
longest recession since the war. Inflation came
down sharply in 1992, but unemployment con-
tinued to rise. The green shoots of recovery had
long ago withered and the landscape remained as
desolate as before.
The Labour Party in July 1992 under the lead-
ership of the newly elected John Smith gained
greater credence by calling for a change of policy.
Everyone blamed the Germans, who were financ-
ing East German recovery by spending money the
government did not have instead of substantially
raising taxes. The result was high interest rates in
Germany and misery all around. But Britain’s ills
ran deeper. Major with his winning personality
and nice smile was elected as a less formidable and
more flexible replacement for the Iron Lady.
But in economic policy Major attempted to act
as the Iron Man. Britain, he declared, would play
a role at the ‘heart’ of Europe. At the centre of
the government’s policy for defeating inflation
and making Britain fully competitive was the
decision to link the pound with the least infla-
tionary currency in Europe, the German mark,
through the ERM at a fixed rate of exchange. In
September 1992 John Major faced a humiliating
retreat. The exchange rate could be held no
longer and Britain left the ERM. In practice this
led to the devaluation of the pound. It was a
political disaster of a magnitude few governments
since the war had suffered. The credibility of the
prime minister, of the chancellor of the exchequer
and indeed of the whole government was
damaged. The issue of closer ties with Europe,
of moving towards political and financial union
by the end of the century, had already split the
Conservative and Labour Parties. But a majority
in both had favoured the moves towards this
goal embodied in the Maastricht Treaty. Now
the anti-Maastricht groups in both parties took
heart from the debacle. It had become clear, and
the narrow victory for ratification in France con-
firmed it, that there were many people through-
out Europe who felt deep misgivings about
European union and the loss of national sover-860 WESTERN EUROPE GATHERS STRENGTH: AFTER 1968
Parliamentary elections, 1987 and 1992
1987 1992% Seats % SeatsConservatives 42.2 376 41.8 336
Labour 30.8 229 34.2 271
Liberal Democrats 22.6 22 27.9 20