Major welcomes ERM papers release

What information to release has led to rows in the Treasury

John Major has welcomed the release of Treasury papers which he says puts the cost of Black Wednesday in 1992 at £3.3bn, much less than often estimated.

Mr Major was prime minister when the UK quit the Exchange Rate Mechanism.

The papers were published after a Treasury document outlining why some of the papers should be held back was inadvertently e-mailed to the BBC.

The Treasury said it regretted the BBC had published details of papers which it thought should not be made public.

Mr Major meanwhile has said he considered quitting over the crisis, actually going as far as writing a letter to the Queen, but he was dissuaded by "trenchant" arguments from cabinet colleagues.

READ THE DOCUMENTS Treasury document accidentally sent to BBC Download the reader here

"It was a very unpleasant, very difficult, very painful day," he told Channel 4 News.

Black Wednesday, 16 September 1992, was the day Britain exited from the ERM - a system for tying the pound and other currencies' values to that of the German mark, and which was a precursor to the single European currency.

Dirt digging?

Mr Major and his chancellor, Norman Lamont, raised interest rates during the day from 10% to 12% to 15% and authorised the spending of billions of pounds in a doomed effort to keep the pound within the range allowed by ERM.

In the end, the UK's two-year membership of ERM was suspended and the second interest rate rise reversed. The UK never rejoined the ERM.

But both Mr Major and Lord Lamont said papers disclosed under the Freedom of Information Act showed estimates of the cost of Black Wednesday had been "wildly wrong".

It came as Labour and the Tories accused each other of using the new laws to dig dirt ahead of an expected general election.

Welcome release

Documents sent to the BBC in an e-mail, apparently by mistake, revealed internal Treasury debate over what information to make public about "Black Wednesday".

The Financial Times had requested the Treasury assessment of what went wrong.

These papers will correct the many misconceptions which surround this particular event, not least the wildly overstated costs of our exit to the taxpayer John Major Q&A: Black Wednesday What Treasury papers say 1992: UK crashes out of ERM

Mr Major stressed that he had "made no request whatsoever for any papers to be withheld".

"Indeed, I welcome the release of these papers in so far as they will correct the many misconceptions which surround this particular event, not least the wildly overstated costs of our exit to the taxpayer," he said.

Lord Lamont said the £3.3bn was the cost to reserves of devaluing sterling - a move the ERM's rules made compulsory.

But he said the cash could not have been used for schools and hospitals and the reserves had been restored in a few years.

The "significant" costs had been dwarfed by the gain of low inflation and he argued Labour had advocated Britain's membership of the ERM.

The Labour Party is in no position to make political capital out of the ERM, a policy they advocated and supported strongly Lord Lamont Analysis: Andrew Marr's view

Papers sent to the BBC suggested that 13-year-old financial assessments were among the information officials want to remain private.

There were also concerns in the Treasury that the papers could reveal economic spying on France and divisions within the then Tory Cabinet, the documents suggest.

A guide to exemptions in the released Treasury papers expressed regret "that the inadvertent e-mail to the BBC revealed some of the earlier, and in some cases out of date internal discussions among officials about how to implement the FoI Act.

"The BBC release contains some information that the Treasury does not believe should have been put in the public domain," it said.