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12 June 2008

Interview: Alistair Darling

Alistair Darling was once the safest pair of hands in the government. A year after

By Martin Bright

Who’d be Alistair Darling? Once viewed as the safest pair of hands in the government, he has presided over a period of crisis in the Treasury not witnessed since the time of Norman Lamont (and a young adviser called David Cameron) more than a decade and a half ago. Most cabinet ministers consider themselves unfortunate in having to deal with a single serious crisis in their time, two at the most. Darling has faced an avalanche: Northern Rock, the loss of computer discs containing details of 25 million people, criticism of his handling of a new tax on “non-doms”, and changes to capital gains tax and corporation tax. He has had to weather the storm over the decision to abolish the 10p rate of income tax inherited from his predecessor, deal with a potentially disastrous downturn in the housing market and the effects of continued hikes in the price of oil.

When we meet on a glorious June day at the Treasury, the Chancellor is in a remarkably sunny frame of mind, all things considered. I wonder if, just sometimes, he felt he was the most unlucky politician alive. “If you’re ever tempted to feel sorry for yourself, then that’s the day you go away,” he replies. “You just have to deal with events.” He raises the example of the child benefit discs, lost in November 2007. “When I was phoned up on a Saturday morning and told by the head of Revenue & Customs that they’d lost these tax discs . . . it was obvious to me within 30 seconds that this was a massive political problem and you just have to deal with it. No one would want to go to the House of Commons and explain it the way I had to, but there’s no way to get away from it.”

Darling is keen to note that he had also foreseen the potential political consequences of the abolition of the 10p tax rate shortly after he took up the Treasury job a year ago. “As you would expect when I became Chancellor, I looked right across the piste to see where we were on a whole lot of things.” He interrupts and even completes my question when I begin to ask whether action should have been taken earlier: “Of course,” he says. But the key question is whether, when he looked at the 2007 Budget, which contained the 10p proposals, he thought it would prove to be a political problem or something that could be dealt with as a piece of financial tinkering? “Well,” he says,”what I noticed was that a lot of people would be paying more tax.”

At no point does Darling show the least sign of disloyalty to Gordon Brown, but he is keen to emphasise that he was well aware of the potentially toxic nature of the 10p tax rate abolition as soon as he took over from his old friend at the Treasury. He made a similar claim to the Observer journalist Andrew Rawnsley during an interview for his recent Channel 4 documentary on Brown; so it would appear that Darling is not prepared to act as the fall guy for the government’s woes over the 10p tax-band fiasco.

It’s the economy, stupid

In the spirit of fair play I ask him to take me through the past year and give me his perspective on the predicament in which the government presently finds itself. “If you ask fundamentally what’s changed . . . self-evidently it’s the credit crunch . . . The IMF has said that it is the biggest shock to the world’s economic systems since the 1930s . . . If you look at the overarching event of the past 12 months, it is a slowdown in the economy, and everything that comes with it, and that hasn’t just affected the economic matters – it’s had a huge bearing on politics, too. It’s the old adage ‘it’s the economy, stupid’, and the economy drives politics.”

Alistair Darling has the disarming habit, for a politician, of admitting when he and the government have got things wrong. For instance, although he believes it was right to simplify capital gains tax and create a single rate of 18 per cent in his pre-Budget report last October, he acknowledges that this hit small businesses too hard, forcing him to back-track three months later.

His ready admission of mistakes makes his defence more credible than it would otherwise be, when he talks about criticism he sees as unfair. On Northern Rock he is unrepentant. “I’m not apologising for one moment for what we did. We set out to prevent Northern Rock’s problems from spreading to the rest of the banking system and we succeeded.” He firmly believes the government did everything it could to find a private-sector buyer for the bank and that nationalisation was the only option.

On legislation to bring in a £30,000 a year tax on wealthy foreigners who have made their home in Britain, Darling points out that he stuck to his guns on the tax, despite talk of a possible climbdown in February during the consultation period. “What I announced last October is what is in force. I’m not saying anyone is happy to pay tax, but I think most people would think it’s not unreasonable. It’s a question of fairness.”

Radical suggestion

Which brings us back to the 10p issue. “It was a costly mistake for us, because after ten years of systematically going through the tax system to help the middle- and lower-income people in this country . . . this appeared to send a different message.”

Darling believes that Labour needs a significant shift in emphasis if it is to woo back the voters necessary to win the next election. “We have in the past ten years helped a lot of people on middle and low incomes,” he says. But he adds: “The political challenge to us now is that there are a lot of people, for example, without children, or whose children have grown up who say, ‘I’m in favour of helping families and in favour of ending child poverty, but I’m also in favour of helping people like me.’ “

Darling, for all his natural caution, makes a radical suggestion for Labour’s strategy for the next election. “We have to go into the next election almost with the mentality of an opposition party and say what it is we want to do at the next stage, what it is we think is wrong that still needs to be put right.”

It is notoriously difficult to get the Chancellor to talk about his personal life. But I was curious to know what stirred his passions. Why, for instance, did this privately educated son of Conservative-voting parents end up as a Labour politician? What attracted him to the cause? “In a nutshell, it was fairness,” he says. “I think it’s unfair that some people, through no fault of their own, are held back and can never do the best they’re capable of.”

I ask if he can remember a particular moment, but he says it was just something that grew on him. He joined in 1977, during one of the previous dark times for the party – two years before a Tory landslide.

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