Callaghan, the Treasury and the ERM: Behind Closed Doors

Abstract

The summary contained in Chapter 3 is a reminder of the conventional wisdom that Prime Minister Callaghan decided not to take the UK into the ERM in 1978 because of the domestic political conditions he faced. Specifically, the common argument is that he saw non-participation as the best way to manage the strong and vocal anti-Europeanism in his party as it approached a general election. He was aware of the economic and political implications of joining the ERM but, it is widely suggested, he ultimately succumbed to pressure from his parliamentary party. This would suggest a policy-making process that diverged significantly from the traditional and theoretical policy-making process outlined in Chapter 2.