Why Thatcher gave in: Treasury papers reveal sorry saga

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Larry Elliott and Ashley Seager
Thursday February 10, 2005
The Guardian

The story of how the Conservative government took the fateful decision to join the exchange rate mechanism and set itself on the road to financial disaster and political nemesis revealed in the official papers on Black Wednesday is a tale of a prime minister at odds with her chancellor.

It is also the tale of Treasury officials who failed to see what German reunification could do to the ERM; of bad advice from the Bank of England; of the pound being scuppered by the Germans. Above all, it is the story of how the Tory party condemned itself to the political wilderness when, against a background of mass unemployment and record home repossessions, the government spent $39bn (around £20bn) in a vain attempt at defending sterling on September 16 1992.

It is not yet the full story. Large chunks of the record published under the Freedom of Information Act have been withheld. But some gaps have been filled by documents erroneously sent to the BBC.

The long countdown to Black Wednesday began in the mid- 1980s. The documents recount how Nigel Lawson, then chancellor of the exchequer, decided that Britain should join the ERM. Margaret Thatcher, however, disagreed.

http://politics.guardian.co.uk/foi/story/0,9061,1409630,00.html