Norman Stewart Hughson Lamont, Baron Lamont of Lerwick (born 8 May 1942) is a British politician and former Conservative MP for Kingston-upon-Thames. He served as Chancellor of the Exchequer from 1990 until 1993. He was created a life peer in 1998. Lamont was a supporter of the Eurosceptic organisation Leave Means Leave.
Early life Norman Stewart Hughson Lamont was born in Lerwick, in the Shetland Islands, on 8 May 1942, where his father Daniel Lamont OBE was the islands' surgeon. In 1953,Grimsby Evening Telegraph, 25 May 1976. he moved south with his parents to Grimsby, Lincolnshire, after his father took up a position at Scartho Road Infirmary. He was privately educated at Loretto School, Musselburgh, Scotland, and read economics at Fitzwilliam College, Cambridge, where he was Chairman of the Cambridge University Conservative Association and President of the Cambridge Union Society in 1964.
Corporate career Before entering Parliament, Lamont worked for N M Rothschild & Sons, the investment bank, and became director of Rothschild Asset Management.
In addition to his role as a working peer, Lamont is currently a director of and a consultant to various companies in the financial sector. He is a director of the hedge fund company RAB Capital, Balli Group plc (commodities trading house), and he is an advisor to Rotch Property Group. He is also a director of a number of investment funds. In December 2008 he joined the board of Phorm, an online behavioural advertising company, and he is a non-executive director of Balli Group PLC and the Honorary President of the British Romanian Chamber of Commerce, and Chairman of the British Iranian Chamber of Commerce.
Early political career Member of Parliament Lamont stood as a candidate for Member of Parliament in the June 1970 general election for Kingston upon Hull East. He was defeated by John Prescott, who went on to become Tony Blair's Deputy Prime Minister. Two years later, on 4 May 1972, Lamont won a by-election to become MP for Kingston-upon-Thames.
Junior minister Lamont served in successive governments under Margaret Thatcher and John Major for a total of 14 years, in the Departments of Energy, Industry, Defence and the Treasury. In 1986, he moved to the Treasury, first as Financial Secretary to the Treasury, then Chief Secretary to the Treasury (succeeding John Major in the latter job on Major's promotion to Foreign Secretary in July 1989) under Chancellor Nigel Lawson, whom he tried unsuccessfully to persuade not to resign from the government on the morning of 26 October 1989 – Lawson resigned that evening. Lamont remained as Chief Secretary to the Treasury under Major's chancellorship. In this position, he acquiesced in Major's decision to join the European Exchange Rate Mechanism (ERM) at a central parity of 2.95 Deutschmarks to the Pound, although neither he nor any other Cabinet ministers were involved or informed about the decision before it had been made.Edmund Dell, The Chancellors, HarperCollins (1996), p. 545, states that the Cabinet was not informed, Sir Geoffrey Howe, the Deputy Prime Minister only learning of the decision to join from the Queen.
The decision to join the ERM was announced on Friday 5 October 1990, the last trading day before the week of the Conservative party conference. Shortly afterwards he successfully managed Major's election campaign to succeed Margaret Thatcher as party leader and Prime Minister. In her memoirs, Thatcher listed Lamont along with six other Cabinet ministers as a potential successor to her.Margaret Thatcher, The Downing Street Years, HarperCollins (1993), p. 755. During the leadership election, Lamont clashed angrily in private with Lawson who preferred Michael Heseltine as Thatcher's successor, phoning Lawson up to remind him of his caustic remarks made about Heseltine's economic policies. Lamont eventually slammed the phone down on Lawson in temper, though he later wrote to Lawson to offer an apology.Norman Lamont, In Office, Little, Brown and Company (1999), p. 26.
On 16 May 1991, Lamont stated in parliament that "Rising unemployment and the recession have been the price that we have had to pay to get inflation down. That price is well worth paying." The remark is regularly, but not always approvingly, recalled by commentators and other politicians. Seven months before Lamont made the statement, inflation (as measured by the annual change in the Retail Price Index) reached 10.9%. In May 1991, inflation fell to 6.4%. A year after the Major government was reelected in the 1992 general election, winning the most votes of any political party in British electoral history, inflation fell to 4.3%, falling to 1.3% a year later.ONS, All items retail prices index (seasonally adjusted), CHAW retrieved on 13 April 2012. However the economy continued to contract until the third quarter of 1991. After economic growth resumed, the economy grew rapidly and by the third quarter of 1993, GDP was greater than the pre-recession peak in the second quarter of 1990.ONS, Gross Domestic Product: chained volume measures: Seasonally adjusted, ABMI retrieved on 13 April 2012.
Chancellor of the Exchequer Lamont replaced Major as Chancellor in Major's new Cabinet, thereby inheriting Major's exchange rate policy. In his memoirs, Lamont recalls a senior Treasury civil servant answering his question on why Britain had joined the ERM by replying, "It's politics," to which Lamont replied, "I don't think I would have given up the flexibility of the exchange rate."Norman Lamont, In Office, Little, Brown and Company (1999), p. 8. In public, Lamont justified the decision to join the ERM in terms of the government's counter-inflation strategy. In the House of Commons debate shortly after the pound joined the ERM, he argued that under a regime of floating exchange rates, the consequences of depreciating the currency had been short-lived in terms of output and competitiveness, "but have been lasting in terms of inflation. That is one of the reasons why the Government concluded that it would be right to join the ERM."Hansard, House of Commons debates, 23 October 1990, col 278.
Fiscal policy By the time Lamont was appointed Chancellor, the Conservative government's principal economic objective was to regain control of inflation. The Thatcher government had been elected in 1979 on a manifesto that had listed restoration of sound money as its first priority. Having peaked at 21.9% in 1980, inflation (as measured by the 12-month increase in the Retail Prices Index) fell to 3.3% at the beginning of 1988. However, controlling inflation through the targeting of the growth of the domestic money supply, as proposed in that manifesto, turned out to be more problematic than its authors had envisaged and during his time as Chancellor, Lawson had increasingly been drawn instead to targeting the exchange rate to provide an external monetary anchor.Nigel Lawson, The View from No. 11, Bantam Press (1992), pp. 418–420. From its low point in February 1988, inflation rose with apparent inexorability: of the 31 months until it peaked at 10.9% in October 1990, there were only four months when inflation fell. In response, interest rates were progressively increased, doubling from 7.4% in June 1988 to 15% in October 1988, being cut by one point to 14% when the pound entered the ERM, the level of interest rates Lamont inherited as chancellor. As a result, the economy began to slow, contracting by 1.1% in the third quarter of 1990 and shrinking a further 0.7% in the final quarter of the year.Office for National Statistics, YBEZ Gross domestic product index: CVM: Seasonally adjusted, Constant 2003 prices, Updated on 25 February 2009. Thus Lamont's period as Chancellor started with inflation at its highest level since 1982 and the economy in recession.
Asked at his first appearance as chancellor at the Treasury Select Committee whether he agreed with his predecessor's view on the depth and duration of the recession and not wishing to contradict Major, Lamont replied that "there are reasons why one could believe that it will be relatively short-lived and relatively shallow."Norman Lamont, In Office, Little, Brown and Company (1999), p. 37. In October 1991, based on CBI and Institute of Directors business surveys, he said "what we are seeing is the return of that vital ingredient – confidence. The green shoots of economic spring are appearing once again."Norman Lamont, In Office, Little, Brown and Company (1999), pp. 140–141. The comment was widely criticised as premature. However, Gavyn Davies, then chief economist at Goldman Sachs, wrote in a newspaper article at the time of Lamont's removal from the Treasury that the "green shoots" speech had turned out to be "remarkably prescient. From that moment onwards, output stopped declining, and within a few months, it started to rise".The Independent, 28 May 1993. Estimates of gross domestic product show the trough of the recession occurring in the fourth quarter of 1991, with sustained growth resuming in the third quarter of 1992, when GDP grew 0.4% compared to the second quarter.Office for National Statistics, YBEZ Gross domestic product index: CVM: Seasonally adjusted, Constant 2003 prices, Updated on 25 February 2009; http://www.statistics.gov.uk/downloads/theme_economy/RP04.pdfInsert
Negotiating the Maastricht Treaty On succeeding Thatcher, the Major government had to decide its position on the negotiations on European economic and monetary union (EMU); this would lead to the Maastricht Treaty. It had been Thatcher's opposition to EMU which triggered the end of her premiership. Like Thatcher, Lamont was a long-standing opponent of EMU and the European single currency. In his memoirs, Lamont wrote that he was "horrified" when Ted Heath in 1972 announced Britain that it was accepting the Werner Plan for monetary union.Norman Lamont, In Office, Little, Brown and Company (1999), p. 112. Newly appointed as Chancellor, Lamont therefore supported Major's idea of Britain negotiating an opt-out from the single currency. Negotiations on the economic aspects of the proposed treaty began in earnest at the end of 1990 with monthly meetings of European finance ministers. At an Intergovernmental Conference held in Rome on 15 December 1990, Lamont declared, "I remain unconvinced that the potential benefits of a single currency are as great as its supporters allege."Norman Lamont, In Office, Little, Brown and Company (1999), p. 116.
In a minute to the Cabinet's Defence and Overseas Policy committee the following month, Lamont set out his three objectives for the negotiations: first, to ensure that Britain did not have to join the single currency; second, to ensure the opt-out was legally water-tight; and third, to ensure that during the period in the run-up to the single currency, there should be no binding obligations on Britain. In meeting the third of these, Lamont had to overcome the resistance of the prime minister and the foreign secretary, Douglas Hurd, who told Lamont: "I can't see what you are so worked up about. We are in the ERM. What difference does it make if it is in the Treaty?"Norman Lamont, In Office, Little, Brown and Company (1999), p. 127. Lamont decided to ignore their objections. At the next negotiating meeting on the treaty, he told his fellow European finance ministers that Britain would not accept membership of the ERM as a treaty obligation. As a result, the meeting agreed to remove it.