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National politics

My Black Wednesday

Some people can tell you where they were when John Lennon was shot or Elvis Preseley died. I can tell you where I was at 11am on Black Wednesday. 20 years ago exactly I was sitting in the office of the treasurer of the Co-op Bank in Cornhill in the City waiting to meet him. The treasurer’s PA very politely told us that there was a flap on and that he couldn’t see us – it was the 2% rise in interest rates from 10% to 12% announced by the Bank of England in an attempt to stave off the currency crisis that was smashing the ERM to bits.

For fifteen years after Black Wednesday the UK enjoyed steady, low inflation growth under both Conservative and Labour administrations. This benign period in our economic history was only bought to an end by the global liquidity crisis that hit the UK in waves from 2007 onwards although many people didn’t notice for a couple of years. Since then we have had five years of hard times. The financial crisis and the consequent loss of confidence quickly turned into a fiscal one as markets realised that the UK had been living beyond its means even in the good times thanks to Gordon Brown’s 11 year experiment in systematically adding to Labour’s payroll vote of state workers and benefit recipients. Labour was bequeathed the best modern inheritance of any government. The Coalition was bequeathed the worst. As John Major was saying on the Andrew Marr Show this morning we may be at another turning point right now. Let’s hope so.