How Partygate could do for Johnson as Black Wednesday did for Major
Memories came flooding back as George Soros lambasted Vladimir Putin and Xi Jinping in Davos last week, although 30 years ago it was sterling rather than authoritarian leaders that the arch speculator had in his sights.
As 1992 wore on, pressure on the pound intensified until on 16 September it was blown out of Europe’s exchange rate mechanism (ERM). John Major’s government never recovered from what was quickly dubbed Black Wednesday, so complete was the humiliation and loss of public trust.
The question now is whether Partygate will do for Boris Johnson what Black Wednesday did for Major. Has the Conservative party’s reputation been so shredded by the scandal that, no matter what happens between now and election day, defeat is inevitable?
In some ways the outlook for Johnson is grimmer than it was for Major. Black Wednesday forced the then government to abandon a policy it had hitherto said was non-negotiable – membership of the ERM. That policy, under which the pound was only allowed to trade in a tight range against the German mark, had required interest rates to be kept higher than they otherwise would have been, prolonging the recession of the early 1990s.
Leaving the ERM was good for the economy. Interest rates came down sharply and the pound fell in value. Fears that inflation would surge proved groundless because the recession had left so much slack in the economy. Higher taxes in the budgets that followed Black Wednesday were unpopular but ensured that lower interest rates helped producers rather than encouraging consumer spending.
Once the course had been set, nothing was done to change it. By the time of the 1997 election, unemployment was down, growth was robust and the big balance of payments deficit built up in
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