(1) “Didn’t Britain lose £30bn of reserves during the ERM crisis?”
No. There were many exaggerated estimates put around at the time. When foreign exchange reserves are used to support a currency, the money is not “lost”, it is swapped for another currency. Britain spent almost all its reserves as did countries like Italy, Ireland, Portugal, Finland, Sweden, Spain and France during the crisis. The correct measure of the loss is the amount of foreign exchange reserves spent, divided by the percentage fall in the currency. In Britain’s case this came to about £3bn. The reserves are not money that could have been spent on roads and hospitals, they are specifically for foreign exchange transactions. The “loss” on the reserves was made up in a few years as Sterling recovered its strength against other currencies.
(2) “A break up of the ERM was always inevitable”
Fixed exchange rate systems do not always break up. The ERM had existed since the early 1970s as a fixed but adjustable system of exchange rates. There had been no crises throughout the 70s and 80s. What broke the system was German reunification which created a boom and raised interest rates throughout the ERM countries. What is often forgotten, is that public support for joining the ERM in 1990 was widespread in the press and business.
(3) “Britain was ejected from the ERM”