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By Root 2920 0

question arises whether at some point now or later I should have sacked Nigel. I would have been fully justified in doing so. He had pursued a policy without my knowledge or consent and he continued to adopt a different approach from that which he knew I wanted. On the other hand, he was widely — and rightly — credited with helping us win the 1987 election. He had complete intellectual mastery of his brief. He had the strong support of Conservative back-benchers and much of the Conservative press who had convinced themselves that I was in the wrong and that only pettiness or pig-headedness could explain the different line I took. Whatever had happened, I felt that if Nigel and I — supported by the rest of the Cabinet — pulled together we could avert or at least overcome the consequences of past mistakes and get the economy back on course for the next general election.

But this was not to be. Whatever I said in the House in answer to questions about interest rates and the exchange rate was given a construction to suggest that either I was not endorsing Nigel’s views or that I was protesting too much — and so unconvincingly — my adherence to them. In these situations you just cannot win. Nigel was extremely upset over my remarks at Prime Minister’s Questions on Thursday 12 May. Though I warmly supported him and his public statements I had not repeated Nigel’s view that further exchange rate appreciation would be ‘unsustainable’.

Geoffrey Howe was now also making mischief. From this time on it became clear to me that Nigel and he — by no means on friendly terms in earlier years when there was a good deal of jealousy between them — were in cahoots, and that of the two Geoffrey was the more ill-disposed to me personally. Earlier — in March — Geoffrey had made a speech in Zurich which was widely taken as siding with Nigel against me on the question of the exchange rate. Then on Friday 13 May he quite gratuitously slipped into his speech to the Scottish Party Conference in Perth the remark, apropos of our commitment to join the ERM ‘when the time is right’, that: ‘We cannot forever go on adding that qualification to the underlying commitment.’ This led the press to widen the perceived rift between me and Nigel over the ERM once more. I was not best pleased. When Geoffrey imprudently telephoned me the morning after his speech to ask for a meeting at which he and the Chancellor should come to see me later in the day to ‘settle the semi-public dispute’, I told him that I would be seeing Nigel later in the day to discuss the markets — which Geoffrey’s own remarks had unsettled. But I was not seeing them together. I told him three times — since he did not seem to take it in and persisted in his attempt to contrive a meeting at which he and Nigel could get their way — that the best thing he could do now was to keep quiet. We were not going into the ERM at present and that was that.

I spent Sunday at Chequers working on a speech I was to deliver to the General Assembly of the Church of Scotland: there was some mirth when my speech writers and I were discovered down on our knees in an appropriate posture, though drawing on the resources of sellotape rather than the Holy Spirit. But, following the news reports during the day, I was also aware of just how damaging the constant media reports of splits and disagreements on the exchange rate were becoming.

Nigel arranged to see me on the Monday. He wanted to agree a detailed formulation for use by me in the House to describe our policy. I had been told by the Treasury in advance of the meeting that Nigel wanted a further interest rate cut. For my part, I had become appalled at the size of our intervention in the money markets which was clearly still failing to hold sterling at the level Nigel wanted and which, in spite of assurances from Nigel, I feared might prove inflationary. But I had got part of what I wanted — which would ideally have been a pound which found its own level in the markets — in that sterling had been allowed to rise to DM3.18. So I was not unhappy to have the suggested