Could a no-deal Brexit destroy the Tory party’s reputation for competence and lead to a crushing electoral defeat in the same way as Britain’s withdrawal from the Exchange Rate Mechanism did in 1992? That is certainly the view of some seasoned commentators, such as Jeremy Warner in yesterday’s Daily Telegraph, and the parallels to an acrimonious Brexit seem obvious. But in reality, the comparison is actually misleading, as it misrepresents the political history of the ERM exit and fails to understand how Britain has changed as a result of the Brexit referendum.
First, it’s worth remembering that what really hurt the Conservatives after ‘Black Wednesday’ was not that government policy had been defeated by economic logic. Instead, the damage was done by the realisation that the initial Tory policy of ERM membership had inflicted a severe recession, a housing-market slump and a fiscal disaster – and very nearly a banking crisis – on the country. The consequences of Britain’s withdrawal from ERM, which restored freedom to reduce interest rates, eventually banished recession. It also made it possible to undertake a fiscal squeeze without crushing the economy. But that squeeze, however necessary, was extremely unpopular – not least because it involved a sharp rise in VAT. The overall effect of the ERM experience was to make people ask why it had happened at all. The answer? The economic incompetence had been in entering the infernal mechanism in the first place.
Similarly, it was a massive failure of political competence ever to take Britain into what became the EU. But this time, electoral vengeance will be sought not against a specific party but against the political class – or at least that part of it that seeks to overturn the referendum result, the Conservative and Labour Party 2017 manifestos, the Article 50 notification and the passage of the EU Withdrawal Act.