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Interview: Alistair Darling

The UK Chancellor has emerged from a year of upheaval with his reputation intact. He tells New State

For a man tackling what he prophetically, if at the time controversially, described last year as the worst economic slump for 60 years, Alistair Darling is in remarkably tranquil mood. Jacketless and sitting back on the sofa in his Treasury office this week, the Chancellor is focused, bullish, sharp – and distinctly unrattled.

Minutes earlier, in the waiting room, Gordon Brown could be seen defending the British eco­nomy on Sky News, as flashing straplines at the bottom of the TV screen were announcing the latest blow: the steel giant Corus is to scrap 2,500 jobs in the UK and close a factory in South Wales.

To walk into the Chancellor's busy Whitehall office, on the day when the global downturn claimed 67,000 jobs, is to enter into the eye of the storm - a place of calm without complacency, amid the chaos of the first major recession to be covered by a 24-hour news media.

How is Darling bearing up personally? "I've always worked better when faced with a challenge, and we certainly have one," he says with characteristic understatement, faced as he is with industrial crises, rising unemployment and an economy that shrank by 1.5 per cent in the ­final three months of 2008 and has just officially been declared in recession. "I've always been resilient," he adds. "Problems don't get any better by shouting at them. You just need to get on with it . . . You're tested in every walk of life, whether you're a politician or whatever. The time you are tested is when you're asked serious questions, and there's no point looking around for someone else to turn up and help you out - they won't."

Election? Frankly, nothing matters more than sorting out today's problems and that is what voters in every town and city would say

Darling could have been forgiven if he had felt a little isolated last August, when a lengthy ­interview with Decca Aitkenhead for the Guardian took off with the declaration that Britain's and the world's economic circumstances were "arguably the worst they've been in 60 years".

At the time, the story added to the sense of ­crisis around an embattled Brown, some of whose more zealous supporters briefed against the Chancellor off the record. Brown had attempted to talk up the economy, saying it would revive within six months. Northern Rock had been ­nationalised in February, after the first run on a UK bank in more than a century. Now, it is clear Darling was right.

"[What] I could see last year was that the problems, which were essentially banking ­problems, were symptomatic of a much wider problem . . . one that banks all around the world were affected by."

Some in Westminster whisper that, in fact, Darling was quicker off the mark in recognising the gravity of the financial crisis that would ­follow than Brown, who admitted last week that he failed to foresee "the possibility of complete market failure". Is it true that much of the state intervention, including the bank bailout plan which did so much to revive Brown's premiership last autumn, were Darling's ideas, but that Brown took the credit? Darling will only smile modestly, and say: "It was a collective effort." was a growing realisation throughout the summer. We had to do what we had to do. It was ­almost like slow motion, you could just see it heading toward the wall. I was pretty clear by the time that happened that we could not carry on dealing with this, bank by bank, when there was a generalised problem.

"And when you're in here every day - throughout that year there wasn't a day in 2008 that a banking issue didn't take up a sizeable chunk of my day - you start to think, well, what do we need to do to deal with the root cause of the problem? It was clear it was going to happen when Lehman Brothers went down [in ­September]. I remember seeing the reports on a ­Sunday afternoon and it was clear that this changed everything."

Is Darling persuaded by those who talked of a "crisis for capitalism" or tempted to join those such as the Archbishop of Canterbury, who implied that Karl Marx was right all along. "No, not really . . . No one has yet come up with a system that operates better than the market economy. That's not an argument for an unfettered free market like in the 1980s . . . I think the market ­system does work, as long as you have the right supervision and the right regulation."

Pragmatism is the theme of his political ­career. Born into a political, middle-class family in 1953, Darling’s was to be a conscious journey into the Labour movement, rather than one ordained by heritage and upbringing. Both his grandfathers had been Liberals, but his great-uncle was a Tory MP in Edinburgh and his civil engineer father voted – as did Tony Blair’s – Conservative. ­Darling was educated at a traditional boarding school outside ­Edinburgh before studying law at Aberdeen. In 1977 he joined the Labour Party, not out of ­tribalism but a growing interest in ­politics and a sense that “the Tories were unfair”. Bearded, with longish hair, and known as ­something of a Trotskyist, he was elected to the Lothian Regional Council in 1982, where he railed against what he saw as the cruel monetarism of Margaret Thatcher that led to three million unemployed.

Darling entered parliament at the time of Thatcher's third election victory, and quickly rose up the Labour ranks as the left emerged from crisis and began the long march back to electability. In the final year of opposition, Darling, as shadow chief secretary to the Treasury, helped Brown mastermind the bond of trust on the economy that new Labour would develop with the electorate. When Labour came to office, he kept the chief secretary post until 1998 when he moved to pensions and social security; in 2002, he became Transport Secretary with a £13bn budget to get Britain moving again. At the time of the leadership transition in June 2007, Darling - a perceived Brown ally as well as the ultimate "safe pair of hands" - was the obvious choice to replace the incoming Prime Minister as Chancellor.

Darling has had a turbulent time at the Treasury helm, dragged down with Brown during his annus horribilis last year, but emerging to defy political gravity at the start of 2009 with a reputation for integrity and sound management .

Today, he finds himself leading the Treasury at a time when unemployment is reaching two million but he believes that those who lose their job in Labour's recession will have a brighter ­future. His generation of politicians, he says, "grew up when, even in areas that are relatively prosperous, a generation of people lost their jobs and an awful lot of them never went back to work. Now that's an appalling loss for them, for their families, and an appalling loss to the country actually."

He believes the policy imperative is therefore to help people prepare for new work. "I mean that is absolutely essential."

What of growth? In the pre-Budget report (PBR) last November, the government forecast that growth would continue to decline in the first two quarters of 2009, but would pick up thereafter. This is widely disputed, indeed by some inside the Treasury. Darling concedes that "unseen" circumstances have changed: notably "the problem now with credit and indeed the problem of trying to get credit up again".

Despite his resistance to classifying the PBR as a lurch to the left - and his dismissal as "nonsense" subsequent declarations in the Murdoch and right-wing press of the death of new Labour - Darling believes that the battle lines at the ­election will be clear: a simple choice between Labour investment versus Tory cuts.

"The Tories seem to be going back to where they were in the early 1980s - saying the government's role is pretty limited. They have set themselves significant cuts in public spending. I think that's incredibly short-sighted."

Darling believes the economic crisis has raised awareness of the need for government intervention. He believes that by the next election people will realise that government has to have a clear role. But, he says: "As we get through this, it is important to know that from here, in early January, we are ­going to see a lot of downsides."

Shouldn't the government ignore the right-wing media and build on its bold move of raising income tax to 45 per cent for those earning £150,000? Darling says the decision was practical, not political: "My starting point with tax is that nobody actually wants to pay tax - people want as much money as they want - but they recognise that taxation has a purpose, and that purpose includes helping them: paying for their education, university education, building railways, roads, whatever. What people want, given that people know they have to pay tax, they want them to be fair. Redistribution is not an end to itself. It's about fairness.

"Fairness means that if you've got broader shoulders, then it's fairer that you share a greater share of the burden than if you don't. And that's what my PBR proposed and that's what we're about. There were two parts to the PBR - one was the £20bn fiscal stimulus, the other was to pay for it. You know, we were one of the few countries in the world who said explicitly that it needs to be paid for. I don't think we'll be the only country saying that over the next few months and years."

Darling believes that the attempts by George Osborne, the shadow chancellor, and David Cameron, the Tory leader, to talk down the economy are irrespon­sible. But he appears unwilling to be too ­criticial of Ken Clarke. Asked whether the re-emergence of the new shadow business secretary has rattled Labour, Darling simply says: “The return of Ken Clarke has emphasised the weakness of the Cameron and Osborne approach.” Clarke, after all, said only this month that any party heading into the next election -calling for tax cuts, as Cameron and Osborne are, would be “asking for trouble”.

"I think Ken demonstrated what an old head will tell you. Of course Cameron has got to try and get himself on to the news, but I do think he has to be careful with what he is saying.

"What people want, at a time like this, is for elected politicians to level with them. Yes, it is difficult. Yes, we are having to do things that we would not normally do. In less difficult times, you would not want to do that. Yes, we face a situation which no one would want to face in terms of the international banking crisis like this. We will get through it."

And he believes that Labour can continue to be progressive. "Look at our commitment to halving child poverty. And our commitment to ensure that the markets work for the benefit of the people. Fairness. Opportunity - there is as much to do today as there was 20 years ago."

But with no immediate sign of improvement in either the economy or Labour's fortunes, surely an election this year can be ruled out?

Darling immediately responds that this is "for Gordon to decide". Nonetheless, he implies the idea of going to the polls now would be inappropriate. "Frankly, nothing matters more than trying to sort out today's problems, and I suspect that if you spoke to those people in any town or city in this country, they would want to know that we were working flat out, night and day, trying to sort these problems out."

And is he confident Labour will win, whenever that election comes? "Yes, I think we can. You know, I said last summer actually that provided you can show a sense of purpose and a clear sense of direction, and you can convince people that there is a reason to support you and that it is in their interests, then you can win."

Darling also said last summer that the Labour government had a year to turn itself around. "We demonstrated that we had a sense of purpose and I think that was reflected in the rise in support. We need to continue to do that. This January was always going to be difficult."

Darling does not go along with those - including the Labour chair of the Treasury select committee, John McFall - who are calling for full ­nationalisation of the banks. He and Brown are at one on this, believing that "banks are best run ­commercially because at the end of the day banking is about assessing risks and putting a price on them".

But he does wants tougher regulation and ­rigorous scrutiny of the boardrooms.

Brown has said the government will do "whatever it takes" to save the economy. Does that "whatever" include the beleaguered car industry? Speaking before the announcement on Tuesday of the £2.3bn rescue plan, including £35m for retraining workers, Darling will only say: "Peter Mandelson is in very close touch with the car ­industry."

The mention demands the question: How is Mandelson doing? Darling – a long-time Brownite – says immediately: “Very well. I speak to him regularly. It’s good to get someone to come back in who has good strategic sense.”

The famously calm Chancellor has emerged as something of an unlikely hero of the whirlwind of economic events of the past year. Is his own position secure? What of the talks of fresh splits? Despite a Guardian poll suggesting that Cameron and Osborne appear more trusted on the economy than Brown and Darling, the Chancellor is undoubtedly respected in the country as well as in the City, where many ­believe that to move him before the election would be a grave mistake.

But is there any substance to the the rumours that Ed Balls, the ambitious Education Secretary, is lobbying his mentor, the Prime Minister, for Darling's job? The Chancellor is unfazed. "Look, it's one of these things . . . it's just not something that is in my mind at the moment."

He remains resilient: "We're facing extra­ordinary times and that is what we're totally ­focused on. Nothing else matters, actually. Nothing at all."

ALISTAIR DARLING: THE CV

  • Born: November 28, 1953, in London. The son of an engineer, and the great-nephew of Sir William Darling, Conservative MP for Edinburgh South (1945-1957).
  • Married to a former journalist Margaret Vaughan, he has two children, Calum and Anna
  • Educated at Loretto School, Musselburgh (Scotland's oldest boarding school) and Aberdeen University, where he studied law
  • Called to the Scottish Bar, 1984
  • MP for Edinburgh Central, June 1987 -2005 (when boundaries changed). Since then he has held Edinburgh South West
  • Shadow Chief Secretary to the Treasury, July 1996; became Chief Secretary to the Treasury after Labour's 1997 election victory
  • Secretary of State for Social Security, 1998-2001
  • Secretary of State for Transport, 2002-06
  • Secretary of State for Scotland, 2003-06
  • Chancellor of the Exchequer from June 2007

“YOU COULD SEE IT HEADING TOWARD THE WALL”:
A TIMELINE OF DARLING’S YEAR

October 2007
Computer discs containing personal and confidential details of more than 25 million British citizens go missing from HMRC

November 2007
Darling announces the scrapping of the 10p tax band

December 2007
Makes a surprise announcement of new taxes for non-doms

February 2008
Northern Rock is nationalised following the first run on a British bank for over a century

February 2008
A U-turn on proposals to tax non-doms is announced

March 2008
On Wall Street, Bear Stearns collapses. Darling continues to assert that the British economy will grow in 2008 and 2009

May 2008
Confronted by a Labour rebellion over the 10p tax band abolition, Darling raises personal allowances to compensate

June 2008
A cover-up row erupts, as Whitehall emails reveal that a senior civil servant - not a junior member of administrative staff - was involved in the blunders that led to the lost HMRC data

August 2008
Tells the Guardian that "the economic times we are facing . . . are arguably the worst they've been in 60 years", as the pound crashes to new low against the euro

September 2008
Bradford & Bingley is nationalised; the government takes on its £41bn mortgage book

October 2008
A £500bn rescue package is announced in an attempt to save the banks

November 2008
In his pre-Budget report, Darling announces £20bn in tax cuts - including a cut in VAT to 15 per cent - and increased spending. He also admits that economy will shrink during 2009

January 2009
Britain is deemed to be officially in recession. Darling admits that a second rescue package will be necessary
David Patrikarakos

James Macintyre is political correspondent for the New Statesman.

This article first appeared in the 02 February 2009 issue of the New Statesman, Interview: Alistair Darling