Political Commentary: Nimble Norman's fancy footwork

NORMAN Lamont's revelation that he has been 'singing in the bath' will surely find its place in political quotation books alongside Harold Wilson's 'pound in your pocket' and James Callaghan's somewhat misquoted 'crisis, what crisis?'. But, in Mr Lamont's case, the quotation may signify not a political nemesis but one of the most remarkable renaissances of the post-war era.

Mr Lamont has just presided over the most humiliating defeat in economic policy in more than 13 years of Tory government. How, then, has he defied the rules of political gravity to make himself appear stronger than he was before Black Wednesday?

The most common answer is that he was not a supporter of the Exchange Rate Mechanism in the first place. So he is now a new man, operating the policy he does believe in. Evidence supports that argument; at least two colleagues who were close to Mr Lamont when he was Chief Secretary confirmed last week that he was not in favour of the decision by John Major, who was then Chancellor, to enter the ERM. This remains an odd alibi, tantamount to saying that many of Mr Lamont's statements as Chancellor - most notably a speech on 10 July saying that withdrawal from the ERM would stoke up inflation and put interest rates up - can be ignored because he did not believe them.

Perhaps it is more to the point that Mr Lamont has played a blinder over the past 10 days. His cheery demeanour in Washington; his Bundesbank-bashing; his success in 'bouncing' the Cabinet into indefinite postponement of ERM re-entry by creatively re-interpreting its decision that Britain should rejoin; his 1 per cent reduction of interest rates; and his fighting speech in the Commons on Thursday night - all have helped to shore up his position, especially on the right of the party. All had populist appeal for the still swelling ranks of anti-ERM backbenchers. 'Norman is very good on the dance floor,' said a pro-European Cabinet colleague last week. 'It was a question of sauve qui peut. But the danger is that he will become a prisoner of the mutineers.' Exactly. As one delighted anti-ERM minister put it: 'Norman is one of us now. We're pushing him strongly.' And all this about someone who had been, by all accounts arguing for early return to ERM on Black Wednesday.

But there is a further explanation for Mr Lamont's astounding clamber back up the bank of the political Styx. Who was the obvious alternative? Not Michael Heseltine, who has frequently said in private that he does not see himself at the Treasury. The fear among the anti-Europeans was that it might be Kenneth Clarke.

It was Mr Clarke who skilfully parried David Dimbleby's ferocious questioning on Panorama on Monday night. In the long term Mr Clarke, who is a pro-European advocate of exchange rate stability, enhanced his own standing. In the short term he began to look to some on the right wing like a threat - even though he had protectively promised to resign if Mr Lamont did.

Those on the right who had most reason to castigate Lamont Mark One for presiding over two years of the dreaded ERM began to turn with enthusiasm towards the reconditioned Lamont Mark Two as their saviour. The Chancellor had secured his constituency; and, on Friday, he used his new-found power to tell a backbench meeting that it was the duty of Tory MPs to support the Prime Minister.

Which brings us to John Major. Ten days ago, it would have been inconceivable that Mr Lamont should be riding to the Prime Minister's rescue. Indeed, the boot was entirely on the other foot.

In the minds of many MPs and Cabinet colleagues, there has always been an ambiguity in Mr Major's stance on Europe. It was there last week when both sides in the Tory Euro-debate interpreted his speech as encouragement for them. It was there, too, in the Cabinet discussions preceding Maastricht. Though Chris Patten said that the Prime Minister should be trusted with a free hand in the negotiations, Mr Major himself favoured a successful proposal from the Euro-dissident Peter Lilley, that the Cabinet should give him a detailed mandate. Several weeks of intense Cabinet committee discussions followed, resulting in a red book, much-brandished by Tristan Garel-Jones at the time, which contained the detailed concessions and 'fall back' positions which Mr Major could adopt, along with those he could not. It was during these discussions that Michael Howard, then Secretary of State for Employment, (and since unjustly described as a Johnny-come-lately in the Euro-sceptic stakes) fought, again successfully, for uncompromising resistance to what became the social chapter. The point of all this is that Mr Major was on the side of those who wanted the Cabinet to agree the negotiating strategy, rather than give him a free hand.

Mr Major's wish to have his hands tied is reckoned by some Europhobe ministers to show that he is really on their side (it is one of Mr Major's subtleties that Tories of opposing views frequently do think he is on their side). But the anti-European wing is almost certainly wrong. The point was to 'lock in' the whole Cabinet. Mr Major adopted the same strategy on Black Wednesday by involving not only Douglas Hurd, but Mr Clarke and Mr Heseltine, the ministers most likely to object, in the decision to leave the ERM.

All this is politically deft. But reality is catching up with Mr Major. The prospect of rejoining the ERM becomes ever more distant, with goodness knows what long-term consequences for economic policy. According to one Cabinet colleague, Mr Lamont has now slipped into the clothes of 1983-5 Nigel Lawson, when the pound still floated. Never mind that, by 1985, a sterling crisis required interest rates of 14 per cent and convinced Mr Lawson that the ERM offered the only lasting chance of a counter-inflation policy. Never mind that Mr Lamont will have to find the sort of successful monetary policy which eluded such heavyweights as Margaret Thatcher, Mr Lawson and Sir Geoffrey Howe.

The damage that the past 10 days have done to Mr Major's reputation as a conviction politician should not be underestimated. The comparison with Harold Wilson is inescapable. But, on one point, the Prime Minister remains firm. Nobody left Thursday's Cabinet meeting other than convinced about Mr Major's commitment to Maastricht - he believes that as a matter of honour he cannot abandon a treaty which he has signed. The most convincing passage of his speech on Thursday was when he said he had never seen Britain's future 'as being a sour isolated country off the mainland of continental Europe'. True, the future of the treaty outside Britain is obscure, but, provided the Danes can be accommodated, the Maastricht Bill will come back.

And here lies the next test for Mr Major. At the very best, the snapshot of current opinion suggests that the Tories will have to depend on the support of John Smith and the Labour mainstream. As one minister puts it, the government business managers will 'kill' in order to whittle the dissidents down once the Prime Minister says that he is ready for the Bill to go through its committee stage. Mr Major may have been forced to abandon one conviction; but the whips will know that his national and international reputation, perhaps even his survival, depend on his not abandoning another.