While Gordon Brown is eating fish and chips in Southwold, Alistair Darling
will be reading the Prime Minister’s red boxes in No 10. He won’t have his
finger on the nuclear trigger. “Knowing Gordon as I do, I dare say he will
still find time to pick up the newspapers and listen to the radio,” he said.
In the Chancellor’s view there is, however, more likely to be economic
meltdown than an atomic Armageddon. Last year his Spanish holiday was ruined
by Northern Rock – “after three days I picked up a copy of the FT
in the supermarket and thought, that’s it then.”
This year he won’t leave Britain all summer. “We are going through a very,
very difficult time,” he said. “You have the twin effect of the credit
crunch and very high oil prices. That means the economic news is going to be
difficult for quite some time.”
The self-confessed puritan is an appropriate Chancellor for these austere
days. He has a picture called Death’s Head on his office wall
and his musical hero is the notoriously depressing Leonard Cohen. “I’m going
to a concert he’s giving,” he said. “After a day at the Treasury I’m going
there to be cheered up.”
As we spoke for nearly an hour in his office, Mr Darling was frank about the
scale of the problem facing the economy. He confirmed that he was
considering revising the Government’s fiscal rules, although he would not be
drawn on any detail. “This is routine work that has been going on at the
Treasury for several months,” is all he would say.
It is clear though that the downturn will last far longer and go much deeper
than he had expected. “At Christmas most people remained hopeful there would
be an improvement by the autumn. Most people would now say it’s far more
profound. It’s affecting every economy and everybody. Whether it’s a shop in
Shanghai or Sheffield, prices are going up. I can’t say how long it will
last.”
The gloomy days could, he believes, continue for years rather than months.
When we asked whether Labour could win an election in such difficult
economic circumstances, he admitted that the downturn could still be a
factor when the country next went to the polls, probably in 2010. “Politics
and economics are inextricably linked but it will be a choice of who can get
us out of this,” he said.
Although he has already down-graded his growth forecasts twice, the Chancellor
said that the true picture was “at the bottom end of my range” set out in
the last Budget. He insisted that the country was not in recession but he
said that oil prices would “stay high” and there was “bound to be more
downward pressure” on the housing market in coming months.
He also expressed his concerns about the banking system: “The real problem we
are facing today is a consequence of the fact that too many banks at a very
senior level didn’t understand the extent of the risk to which they had
become exposed.”
Mr Darling is tightening his own belt. “I am trying to cut back across the
board. I haven’t purchased a tie for ages,” he said. “When it costs £30 more
to fill up your car, and you go into Tesco and look at the prices of bread,
you can see that everything is going up.” At the last Cabinet meeting he
told ministers that the spending spree was over in Whitehall too. “I’ve been
very clear with my colleagues that there is no point them writing in saying,
‘Can we have some more money?’ because the reply is already on its way and
it’s a very short reply. I told them at the last meeting of Cabinet they’ve
got to manage within the money they’ve got. I told them they would have to
make the tough choices.”
There will be difficult decisions for the Treasury too in the next few months.
The money coming in through tax receipts is going down but the bills are
still there to be paid. Mr Darling clearly believes that it would be better
to increase borrowing, even if that means rewriting the fiscal rules, than
to raise tax.
“People will pay their fair share but you can’t push that,” he said. “My
judgment at the moment is that there are a lot of people in this country who
feel they work hard, they make their contribution and they’re feeling
squeezed. People will accept that they have got to pay for the schools for
their children and for the hospitals in case they get ill, but they want to
make sure the Government is fair about taxation. Every Chancellor has to be
very conscious that there is a balance to be struck between how much you can
spend and how much people will say, ‘OK if you’ ve got another pound to
spend remember me as well’.”
Mr Darling has already borrowed £2.7 billion to pay for the package that
defused the row over the abolition of the 10p starting rate for income tax.
He admits that the Government did not act quickly enough to compensate the
losers.
“It was a mistake on our part. We should have dealt with it better, we should
have done something sooner, but I take entire responsibility.”
This week, he announced that the 2p increase in fuel duty would also be
postponed. It is clear that he is considering scrapping the fuel escalator
altogether. “We have frozen it from time to time and I will come back to it
in the Budget. It is not the same as the 1990s,” he said.
There are also growing signs that the Government may scrap the increase in
vehicle excise duty. “It is very important that there is a clear
environmental signal,” he said, “but we also have to be mindful that we are
all taxpayers, we are all motorists.”
Many taxpayers do not understand why they should be bailing out a bank such as
Northern Rock but Mr Darling insists that he had no choice. “The wellbeing
of every man, woman and child in this country depends on the security of the
financial system,” he said. “If you had a company making metal boxes and
that went under it would be a tragedy for that company and everybody who
worked for it but the economy would carry on.”
The people with savings in Equitable Life may not be so lucky. This week the
Parliamentary Ombudsman, Ann Abraham, concluded that the investors should be
compensated and ministers should apologise for the regulatory failures. Mr
Darling said that he would consider her findings but he would also take into
account the conclusions of Lord Penrose’s independent review. “He said that
[Equitable Life] was to a substantial extent the author of its own
misfortunes.” On compensation he said: “There are issues of principle in
relation to the precedent it sets. Wherever you put your money there is
always a risk that something will go wrong.”
That should, he insisted, apply to City bonuses too. “People find it very
difficult to understand that if you fail you appear to walk off with more.
The Government can’t pass laws about that any more than it can legislate
about how much a professional footballer gets, but boards need to be far
more responsible. Incentives are good but they’ve got to drive someone in
the right direction.”
Mr Darling must feel that he inherited a poisoned chalice from his old friend
Mr Brown, but he is not bitter. “You deal with whatever you have to deal
with,” he said. “I’ve had to deal with the problems of financial stability
on a very regular basis. Chancellors have not always had to do that.”
There have been reports of tension between the Chancellor and Mr Brown in
recent months. Some in Downing Street have started to suggest that it might
be time for Mr Darling to move on. When we asked whether he thought that he
was being set up as the fall guy for the downturn, he replied with only the
slightest flick of an eyebrow that it had “never entered my mind”. He has
not asked Mr Brown for an assurance that he would keep his job. “We haven’t
discussed these things.”
It is, however, clear that there have been rows. “Of course I can stand up to
Gordon,” he said. “With any group of ministers you will have arguments
about what you ought to do or what your priorities ought to be. You’ll have
to wait for the memoirs to find out what they were about.”
A Labour ‘technocrat’
Name: Alistair Maclean Darling
Age 54
Education Loretto (private boarding school) followed by Aberdeen
University
Family Married for 20 years to Margaret, a former journalist. They have
two children, Calum (born 1988) and Anna (1990). His great uncle was a
Conservative MP
Career Solicitor in Edinburgh before becoming an advocate at the
Scottish Bar. Labour councillor, then an MP for Edinburgh since 1987.
Cabinet jobs have included Work and Pensions, Social Security, Trade and
Industry and Transport. He has been Chancellor since Gordon Brown became
Prime Minister last year
Personal He lives in the Morningside area of Edinburgh, in the same
street as J. K. Rowling. While he is in London his wife and children stay at
home in Scotland. He has asked to be remembered as “the minister who began
to eradicate poverty”, but is more often described as a “managerial
technocrat”
Away from the office
Coldplay or the Killers? I like both of them. If I had to choose, the
Killers
Ian Rankin or Alexander McCall Smith? Ian Rankin
Roundhead or cavalier? Roundhead
Kilt or black tie? If pressed, black tie
Black pudding or risotto? Black pudding
Sun or shade? Shade
