A VACUUM OF POLICY AND LEADERSHIP

Simon Heifer on the worst week in

Mr Major's political career, and the struggle for the soul of the Tory party

LIKE MANY who profess affection for the works of Anthony Trollope, the Prime Minister is not thought to have strayed far beyond the welt-known favourites. He is probably not familiar with a lesser work that accurately reflected his state of mind until the markets trussed him up last week — He Knew He Was Right. In this tale the hero, one Louis Trevelyan, is driven mad because of his stubborn refusal to believe his wife is not committing adultery. The end is especially sad:

He [the doctor] admitted that his patient's thoughts had been forced to dwell on one subject till they had become distorted, untrue, jaundiced, and perhaps mono-mania- cal ... it was very doubtful whether he would not sink altogether before he could be made to begin to rise. But one thing was clear. He should be contradicted in nothing. If he chose to say that the moon was made of green cheese, let it be conceded to him that the moon was made of green cheese. Should he make any other assertion equally removed from the truth, let it not be contradicted.

Until last week no one would have con- tradicted Mr Major in his assertion that the pound sterling was worth at least 2.7780 marks. No one (except those who risked withering accusations of bad judgment) dared to disbelieve his protests that the pound would never be devalued. After all, he knew he was right.

`What you really ought to look at,' one stunned Cabinet minister said to me just after the debacle, 'is why he behaved as he did. He's never stood up for anything in his life. Now, suddenly, he not only stands up for something, but for something so palpa- bly unworkable that he must surely have seen it would self-destruct.'

Another minister, however, supplied part of the answer to this question. 'The policy simply wasn't discussed at Cabinet. We all assumed Major was discussing it, but with the inner circle — Hurd, Clarke, Hesel- tine, Sarah Hogg.'

`Lamont?' I asked, feeling there had been an obvious omission from that list. `Who knows?' my interlocutor replied. In the days immediately after the most blatant Tory U-turn since 1972 the party

was apparently without leadership. A gov- ernment had not looked so disorganised or factional for years. The shock to many min- isters, not least Mr Major himself, had been profound. Confusion and indecision held sway. Mr Major had stuck to the poli- cy because, since his days as Chancellor, he had been persuaded by the Foreign Office — in the person of Mr Hurd — that in order for Britain to be taken seriously as a

player in the European game, it had to join the ERM and take the Bundesbank's eco- nomic lead. Now a new means of inspiring international confidence had to be found. Mr Major was being told by the whips that any attempt to revert to a European means of doing this would stoke up a revolt in his party to a point where he might not be able to survive.

With the Chancellor away in Washington at the IMF, Treasury mandarins sought as

best they could to start to construct a non- ERM economic policy. Initially, they set- tled on a return to monetarism, with the M4 (broad money) measure of the money supply being resurrected as their guide. Senior ministers were starting to fight among each other openly, a sure sign of a failure by Mr Major to impose his will on the party. But from not being contradicted, Mr Major had now — at least for a time — become simply bypassed. Those who had seen him spoke of him being deeplY wounded behind his public veneer of calm, unapologetic purposefulness. Like his hero Neville Chamberlain, he had (as he saw it) been let down by the German Chancellor, and the experience had unseated him. I-!e, must now be wondering whether he will recover from the blow any better than Chamberlain did. Not that that was the only reason for his debility. He was aware his advisers had let him down. Having deferred to them — especially to his policy unit chief, Mrs Dou- glas Hogg — to a remarkable degree throughout his premiership, Mr Major now sees how they — and he — were wrong. More pragmatic colleagues have been urg- ing him to put the past behind him swiftly, and to make the best of the opportunities that the floating pound now allows him. But, in the aftermath of last week, such res- olution is not easy to summon up. He has made his first great political mis- take. He cannot enjoy being prime minister at the moment; and with the prospect growing of his having to make a series of anti-federalist gestures to his European friends in the months ahead, friends say his morale is low. Over the last few days the rest of the Tory party has been in shock, too, induced not just by the events 01 `Black Wednesday' but by the way the party's leaders have behaved since then. Reflecting the chaos at the top, back- benchers on both sides have been spouting silly things about the struggle they fear, or hope, is to come. The party is having to adjust itself to being led by men whose credibility is now in tatters. Mr Major has been damaged, exposed as a man who (like any sensible politician) has put survival before principle. Not for him the approach of the Calvinist Prime Minister of Sweden who, even though his country was not in the ERM, put up interest rates briefly to 1,000 per cent to hold the crown against the mark. One under-secretary, who had loyally sup- ported Mr Major since he became Prime Minister, told me over the weekend that he had been 'deeply disappointed' by the `complacent and unrealistic' way that Mr Major had conducted himself since what, after all, had been the greatest humiliation for a British government in the economic sphere since 1976. Among those who were not in any case Mr Major's admirers, feel- ings verge on the hysterical. Mr Major's opponents were appalled by the dishonest tone of the damage-limita- tion exercise the Government tried to con- duct last Thursday, after the emergency Cabinet meeting that followed the U-turn. keep hearing fantasies,' one of Mr Major's strongest critics told me. 'First, that we haven't had a devaluation. Second, that there hasn't been a change of policy. And third, that it's business as usual. We're not sharing the same planet.' But, again, the corruptingly pally way in which the Cabinet is run had contributed to this unreal climate. Despite the reserva- tions privately held by some ministers, no one around the table seemed to want to dissent when Mr Major asked for a show of support for the Chancellor. To protect himself, Mr Major shrewdly won agree- ment for the line that they were all in this together. Unanimity did not last long when it came to discussing the future, however. Mr Kenneth Clarke, the Home Secretary, Mr David Hunt, the Welsh Secretary, and Mr John Gummer, the Agriculture Minis- ter, all argued for Britain to re-enter the ERM as soon as possible in order to prove our commitment to stay 'at the heart of Europe' (wherever that is). This had a cool reception from some of their colleagues, notably Mr Michael Howard, the Environ- ment Secretary, who is seeking to re-build some bridges with the right. By that evening the more realistic wing of the Cab- inet was briefing that ERM re-entry was not on the agenda. Mr Lamont's announce- ment in Washington on Sunday that it would not be contemplated until there was convergence of the British and German economy was interpreted as amounting to the same thing. No end of a lesson had been learned. But many MPs, on returning to their constituencies last weekend, found percep- tionsof the party leadership had changed drastically. Hostility among Tories to Euro- pean integration, which has always been far greater at the grass roots than in Parlia- ment, was at unprecedented levels. There was dismay at the Prime Minister's attitude to his mistakes, not least because natural most severe have been among those most severely hit by the failed policy. There was a feeling that someone ought to be made to pay for the misjudgment. Several of Mr Lamont's Cabinet colleagues let it be known, privately, that had they made such a mess, they would have not have waited to be asked to resign — particularly if they knew another great office of state would be cleared for them.

Ominously, the whips started to take soundings again about the future of David Mellor, the beleaguered National Heritage Secretary, and found that support for him was waning. The prospect of Mr Mellor resigning was raised again; those advocat- ing this move said it would be good for Mr Mellor to go while attention was distracted from him by the economic crisis. It would also allow a little flexibility for Mr Major to reconstruct the Cabinet. The irony is that if Mr Lamont satisfies honour by moving to another post, his replacement is likely to be someone of far less sensible instincts. No one expects either of the Cabinet's two most convinced monetarists, Peter Lilley or Michael Portillo, to be offered the job, mainly because it would like like an admis- sion of guilt by Mr Major. However, many backbenchers were so horrified by Mr Clarke's professed passion for re-entry into the ERM that Mr Major may be advised by the whips to leave him at the Home Office.

Also over the weekend the whips started another trawl round, this time by tele- phone, to ask normally loyal MPs how they saw things. They found little belief in the credibility of Mr Lamont, and heard threats of non-co-operation from usually docile members. One clear point was made to them: that if Mr Major tried to take Britain back into the ERM under any cir- cumstances, or tried to reintroduce the Maastricht Bill, there would be trouble on a scale the whips would not be able to con- trol. The result of the French referendum meant that the second of those potential problems will now have to be faced. How- ever, Mr Major now felt it expedient to retreat from his earlier rhetoric about mov- ing ahead to ratify. He, his Chancellor and Foreign Secretary made co-ordinated state- ments soon after the result was known, to the effect that Britain would now be tread- ing more cautiously and waiting on the Danes. The Danes then announced that they would hold a second referendum next year, provided there was a new basis for them to hold it upon. This means they want renegotiation, something Mr Major is not prepared to accept. But then what he says should not be taken too seriously, as the value of the pound sterling proves.

The anti-Maastricht lobby interprets this new caution on Maastricht as a victory. It 'Well, first of all, you're very gullible.' was also a victory of sorts for Mr Lamont, who has, according to friends, finally had enough of following a policy in which he has not wholly believed, and is determined to follow an economic policy that is as wholly British as the last one to which he was committed was wholly German. `I'd like to know why he didn't do that before he got in the departure lounge,' remarked one of his colleagues, savagely.

It was clear that in the event of a narrow `yes' vote in France, Mr Major's troubles would be intensified. Everything he says to placate his party inflames his former friends on the continent, bruised as they already are by his repudiation of the ERM. Yet for Mr Major domestic considerations are, for the moment, all that matter. This week's recall of Parliament was a harrow- ing enough prospect, but at least there the Labour party was in no position to cry `I told you so'. The Tory party conference will be full of people, from Lady Thatcher downwards, waiting to raise that cry.

There is also the question of Mr Lamont. `I feel very sorry for him. He never believed in it,' says one of his Cabinet friends, reflecting what has become a prospering school of historical revisionism. `But if he goes, that would leave Major vulnerable.' None the less, Mr Lamont is the incarna- tion of the failed policy, even if that policy was Mr Major's. Whatever the no-change, business-as-usual pretence, his back- benchers and the party in the country do not appear to be swallowing it. `By far the best thing to do with Norman would be to make him Foreign Secretary,' said one of his supporters. 'After all, Douglas is in this up to his neck. It was he who leant on Major to persuade Margaret to enter the ERM in the first place. I think he could quite profitably clear off and write some books.

`And,' the minister continued, `since our foreign policy is now going to consist of telling our European partners why we find it impossible to be especially European, there is no better man left to give it to them straight than Norman.'

In the current mood what the Tory party does not want is more important than what it does want. The urgent priority for the anti-Maastricht tendency is to ensure that the things that have now been forced off the agenda stay off the agenda. Mr Major, egged on by the born-again monetarist Mr Lamont, realises the benefits of espousing this attitude, at least while economic policy is being remade. But Mr Major is taking the risk of alienating the vocal minority of federalist sympathisers in his Cabinet. The 'Perhaps you should wait for the wind to die down before spreading the rest of his ashes.' two most prominent — Messrs Clarke and Heseltine — are the two most likely to fight out the succession if Mr Major's cred- ibility cannot recover. For now, the thing the party needs most urgently is the assertion of strong leader- ship. If he is to do this Mr Major will have to upset one or other wing of his party, possibly risking ministerial resignations, or what one anti-Maastricht backbencher, James Cran, called `trench warfare'. Com- mon sense would seem to dictate that it Is now the federalists' turn to feel aggrieved, for they can be hurt — it seems — without threatening Mr Major's leadership. If the party is to change direction, it will require some changes of personnel at the top. Mr Major will be reluctant to do all these things, even if they are in the interests of saving his own skin. But if the last few weeks have taught him anything, it must be that stubbornness built on a platform of misjudgment is no way to run a country.