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Transcript of Alistair Darling interview

THE ANDREW MARR SHOW, ALISTAIR DARLING, MP, FORMER CHANCELLOR OF THE EXCHEQUER

SEPTEMBER 4th 2011

ANDREW MARR:

Now the latest piece in the jigsaw of Labour memoirs arrives this weekend with the publication in the Sunday Times of the first official extract of Alistair Darling's account of his time as Chancellor of the Exchequer. He'd been a cabinet minister from the beginning, 1997, but his thousand days (near enough) as Chancellor were to prove unimaginably testing as he fought the fires of the banking crisis and the recession. And then of course there was Gordon Brown as well, with whom his relationship became so fraught and difficult that it eventually led, in his own words, to "dysfunction" at the top of the government. Strong stuff and its author, Alistair Darling, joins me now. Welcome. Before we talk about the book, if I may directly, the other Libyan related story in the papers today are allegations that the Labour government, of which you were part of course at the time, was doing some kind of secret deal with Gaddafi to free the Lockerbie bomber, al-Megrahi, and that's caused an enormous international storm, as you know. The documents that we've seen so far show that the government must have been worried about Gaddafi's reaction if he wasn't freed, though we haven't yet got the absolute clear evidence that anything particularly happened afterwards. What's your view of this? What do you remember?

ALISTAIR DARLING:

I think there's no doubt that from the British government's point of view, our point of view, we wanted to bring Gaddafi in from the cold because at that time it was thought that that was going to be possible, and there was no doubt that Gaddafi wanted al-Megrahi out. However all this hangs on the willingness of the British Labour government doing a deal with a Scottish Nationalist government, and anyone who knows anything about Scottish politics will know there is such a visceral dislike between the two. The idea that there was some sort of collaboration between the two just seems to be nonsense. I think it's true to say that the British government wanted Megrahi out. It's probably true to say that Alex Salmond fancied a wander into the international stage. Now the whole thing ended in tears, as we know, and you know, Megrahi's still with us; he wasn't at death's door. But you know there's no doubt at the time … I can understand why there was no other way to get … to try and bring Gaddafi under control. They were trying to, you know, bring him in from the cold. It didn't work and you know he now looks pretty nigh finished.

ANDREW MARR:

Talking about warm relationships between Scottish politicians takes us onto your own book. The picture you portray of the relationship with Gordon Brown, between yourself and Gordon Brown - you'd known him for a very long time, but it started in a chilly way and got dramatically worse very fast; to the point where I think in your 2009 budget, you say just days before you were due to stand up in the House of Commons, you didn't have a budget.

ALISTAIR DARLING:

Yuh. Look, first of all this book is essentially about the banking crisis, which then led to an economic crisis, and I wanted to describe how we dealt with that. But of course there is the political overlay because the relations between myself and Gordon got progressively more difficult. We had a fundamental disagreement in 2008 as to how bad this was going to be, and then during 2009 we had this whole argument about what you do about the deficit and there's no doubt about that. But I couldn't tell the story without having to explain …

ANDREW MARR:

Of course.

ALISTAIR DARLING:

… why these things were. But, you know, the object lesson here is… for any government to operate effectively, there has to be complete unity at the top - especially between the Chancellor and the Prime Minister. This isn't the first such relationship that went wrong. Margaret Thatcher/Nigel Lawson - you know, these things have happened before.

ANDREW MARR:

And this was crucial because you and he had a fundamental disagreement about the seriousness of the economic situation. You talked about, famously in an interview, the worst recession for sixty years. He was livid about that. But that was not just a trivial disagreement because it was going to affect everything in terms of your future planning on tax and spending and the rest of it.

ALISTAIR DARLING:

Yeah, what it boils down to is this. My frustration is that, you know, we could have got through this, we could have charted a political way through it. Actually we did get some, you know, kudos from the fact that we managed to stop the banking system from collapsing. We could have dealt with the recession. But the end point was you then had to say, having done all this, you had to get your borrowing back down. I think, you know, ignoring the problem frankly is as bad as the present government's policy, which seems to be to squeeze the life out of the economy. We could have come through this. We didn't.

ANDREW MARR:

Why not?

ALISTAIR DARLING:

Because there was a disagreement at the very top. I mean I … as you know, what I… I was in no doubt and I was absolutely at one with Gordon on this - we had to stop the banking system from collapsing; we had to put money into the economy to stop a recession becoming a depression, as indeed other countries. The result of course is that, like every other economy, there's high levels of borrowing. The disagreement was what did you do to get it back down. I thought we could halve it over a four year period, but I also thought you'd have to say to people look these are the areas where we're going to be doing less or we won't be doing it at all. That's where the disagreement was and everybody knew …

ANDREW MARR:

(over) He unleashed what you described as "the forces of hell" on you.

ALISTAIR DARLING:

Well that was after my interview with the Guardian, you know, three years ago this month actually.

ANDREW MARR:

Making it clear that there was this disagreement. How unpleasant was that?

ALISTAIR DARLING:

It was deeply unpleasant. I mean I really don't mind - and relish - you know, attacking Tories and them attacking me. You know, that's the stuff of politics. What is so debilitating is when your own lot are doing it to you. You know again it's not exactly new in politics, but it sort of left a mark on me that you really can't erase.

ANDREW MARR:

And Gordon Brown wouldn't actually have the argument with you face to face, would he?

ALISTAIR DARLING:

Oh we had lots of arguments, you know very healthy arguments. That's fine, I don't mind having face to face arguments. What I do mind very much is when you've got people, you know, briefing, you know, all over the place that, you know, you've made a fool of yourself, your days are numbered, you've got the judgment wrong - you know, all that sort of stuff.

ANDREW MARR:

So describe the decision making system or lack of system when you were trying to get agreement on what you both thought about the economy and where you were going.

ALISTAIR DARLING:

Well, as I say in the book, throughout 2008 our views departed. Everything I saw in 2008 pointed towards us heading for an absolute meltdown. The banking system was freezing up. If that happens, it's just a matter of time before the economy starts to go as well. It was happening in all countries across the world. It was affecting us. Now he took the view that I was, you know, being too cautious. Now I'm naturally cautious and, you know, of course the treasury is always cautious. Every treasury in the world is cautious.

ANDREW MARR:

He thought it would be over in six months, the recession.

ALISTAIR DARLING:

Well he took the view that, you know, I was exaggerating it, I'd been misled by the advice I'd received. My view - and actually ironically the Guardian interview was one of three I gave that summer where I always said the same thing but it got picked up big style - and, you know, there was a disagreement then. Equally as we came into, you know, the banking crisis, we were actually pretty much at one on that. But you know in 2009 …

ANDREW MARR:

So actually what happened? In practical terms, what happened because you would expect that if there is a disagreement between the Chancellor of the Exchequer and the Prime Minister about something like that, then Cabinet would sit down, would thrash through these things and you would come as a collective parliamentary cabinet government to a decision, but it wasn't like that?

ALISTAIR DARLING:

No. And you know again there's some history here.

ANDREW MARR:

Just talk us through what happened.

ALISTAIR DARLING:

Well there is history here. When Tony Blair became the leader in the 1990s - and the Labour Party had been out of power for a long, long time - we actually badly needed some strong government, you know, almost dictatorship, and that's precisely what we got: Gordon and Tony together, you know, reformed the Labour Party. But unfortunately, as the government went on, that decision making process changed. You know, as I say in the book, there's a number of issues - you know, whether it was on tuition fees, you know conflicts and so on - where a cabinet discussion would have benefited it. You know, if you ask … This book actually, you know, is full of mea culpas. One big one is perhaps we should have or I should have forced this issue at least onto the cabinet table, if not into the party itself.

ANDREW MARR:

Because this was all done by sort of early morning and late evening ad hoc meetings which never came to a decision …

ALISTAIR DARLING:

That's right.

ANDREW MARR:

… and ended quickly.

ALISTAIR DARLING:

It did. But, you know, none of that should, you know, … And, you know, I'm not interested in, you know, the sort of kiss and tell political story. You have to…It's incidental to my story. The far bigger picture here is - and the one where I think any political party needs to draw a lesson - you need to be united at the top, but you also need a credible economic policy. If you don't have a credible economic policy, you are simply not at the races. And our problem was it was so blindingly obvious to the outside world that the two of us, Gordon and myself, were at odds, that it really hampered us when it came to the election in 2010.

ANDREW MARR:

I have to say collectively out of this account, you weren't fit to govern.

ALISTAIR DARLING:

Well I think that we could have done a better job than that than we did. You know I think …

ANDREW MARR:

Can I just pick up on the 'we' there because I mean everybody has had a go at Gordon Brown and everybody is telling the same story of volcanic eruptions and tempers and briefings and all of that sort of stuff, and yet the rest of you were kind of grown up, adult, powerful, political players. Why did you not go in - not necessarily get rid of him, but say to him you've got to change, you can't carry on like this? Was it simply frightening or …?

ALISTAIR DARLING:

No, there were lots of discussions like that and, you know, it's like …

ANDREW MARR:

With him?

ALISTAIR DARLING:

Yes. You know what it's like - you have a discussion with someone in a tempestuous relationship and they say, "Yeah, we can't go on like this. We'll change" and then, you know, two minutes later we're back where we were. You know, if you want to criticise us collectively, you know perhaps we should have done something. But you know, as I say in the book, why did I not do it? Well I'm afraid for me despite everything - and, you know, if Gordon's listening to this, he may find it difficult to believe - I had a residual loyalty, which I found very difficult to overcome. We go back a long, long way. This whole thing was very, you know, unpleasant, but, you know, it had to be dealt … But, as I say, frankly for the wider audience - and I hope the people who …

ANDREW MARR:

(over) I want to come onto …

ALISTAIR DARLING:

… I hope people will look at some of the bigger issues in here, which are still with us today.

ANDREW MARR:

Well I want to come onto one of the bigger issues that's still with us today, which is the Governor of the Bank of England, Mervyn King. You at one point considered not reappointing him as governor and you felt that his relationship, his understanding of what was going on in some of the big banks was poor.

ALISTAIR DARLING:

Well, my… this is back in 2007 when Northern Rock hit us. I think there were two problems at the Bank of England. One is that I don't think that the bank had an adequate or anywhere near adequate understanding of what was going on in the banking system despite the fact it had responsibility for the financial stability of the system and had done since 1997. All the action was on the interest rate, the monetary policy side if you like. I think the second thing is that the governor and I disagreed with each other as to what ought to be done. I thought it was essential to get money into the system to stop the system from freezing. He was more concerned about the solvency of banks. Now of course the two are related, but, you know, throughout the autumn of 2007 we did not deal with this as effectively as we could because of this disagreement.

ANDREW MARR:

Had there been a better candidate available, you wouldn't have reappointed Mervyn King, would you?

ALISTAIR DARLING:

Well it was…it was difficult, but you have to think long and hard about not reappointing a governor.

ANDREW MARR:

Then later on clearly you had disagreements about macro policy and you felt that he had come pretty close to crossing the line and coming out on the Conservative side of the argument about tax and spend.

ALISTAIR DARLING:

Well I think my bigger complaint, if you like, was more about what he was saying about the regulation of banks, which was the Conservative Party's policy, not the government's policy. Now I do think governors of banks need to be terribly careful before they openly cross the sitting government of the day. The problem was he could see that we were going and he felt emboldened, I think, to say what he wanted, and I just disagreed with his analysis to do with the Conservatives about what actually went wrong with the banking system.

ANDREW MARR:

Well this is obviously, as you know, a very live topic right at the moment where there seems to be a big argument going on inside the coalition about whether or not to enforce the break-up of the banks into retail banks and investment banks. What do you think should be happening now?

ALISTAIR DARLING:

Well I think the whole basis on which this argument is being conducted is false. The idea that you could let an investment bank collapse and walk away from it in times of crisis is nonsense. That is what the American government did with Lehman Brothers and that precipitated the worst crisis the banking system has ever seen.

ANDREW MARR:

So this is a false argument going on?

ALISTAIR DARLING:

It's a complete …

ANDREW MARR:

So does it follow, therefore, that Vince Cable is wrong to be pushing at all costs now for agreement on the break-up of banks?

ALISTAIR DARLING:

If the argument is about ring-fencing bank activities, that is a very useful tool in managing any collapse. That's all it is. It is not going to stop it happening again. Now if you are going to make those changes in ring-fencing, then frankly you should get on with it and not leave … 2019 in investment bankers' terms is several bonuses away. You know they're way beyond their ken.

ANDREW MARR:

(over) Because the point is if you do this, if you impose it now on banks, then you will so hit bank profits that you endanger whatever kind of stuttering economy … economic recovery you've got.

ALISTAIR DARLING:

Maybe there's three points here. One is this isn't going to sort the problem. It'll be a useful tool, but it's not going to stop it happening again. Secondly, anything you do in reorganising banks at the same time as you're requiring them to hold more capital and so on, it will mean there is less money to go around to lend, and you just need to be aware of that. The third thing - and again I mention this in my book - is that we are the world's largest financial centre. Now that brings huge risks, as we know, but it also brings opportunities. I do think we need to be terribly careful about doing something which doesn't actually solve the problems that we face and then the double whammy is you start losing banks because they won't go tomorrow morning or anything like that, but they start moving away.

ANDREW MARR:

And the Bank of England, you say, is an old-fashioned autocratic institution which badly needs radical reform?

ALISTAIR DARLING:

Yes, the new gov… the present government wants to make the Bank of England not just responsible for interest rates, but also for the supervision of banks where its track record is mixed, and also it's got this overall responsibility for trying to iron out the peaks and troughs of the economic cycle. That is an awful lot of things to invest in one person. Now I think the governance of the Bank of England needs to change. There's legislation coming through the House of Commons this autumn. I think it needs to be reconstructed so the, you know, the governor …

ANDREW MARR:

The governor has less personal power.

ALISTAIR DARLING:

He has to be the first amongst equals. You need to have a board of directors - not an advisory committee, not, you know, people telling him what to …

ANDREW MARR:

A court.

ALISTAIR DARLING:

A court. Well a court, you know, it's an adornment in every sense. You know, I think what you need is a thorough … If you're going to do this reform, then for goodness sake do it properly.

ANDREW MARR:

Now as a well-known non-sunny optimist, what do you think about the current economic outlook? Bad news coming in from America at the moment.

ALISTAIR DARLING:

I'm very pessimistic now. You know, our economy was growing, you know, for several months after we left office. I think the present government's policy of sq… of almost squeezing the life out of the economy is going to be very bad for us, especially when you look at what is happening in Europe where you've exactly the same conservative austerity approach being imposed on Europe. And, as you say, the picture in America is very mixed. We really have to rediscover the spirit of the G20 in 2009 where Gordon deserves a lot of credit for what he did there because countries need to meet together urgently to yes got your deficits down. For goodness sake we need to get growth. Ed Miliband was calling for that. He's absolutely right in that and that's I believe absolutely essential.

ANDREW MARR:

Do you still speak to Gordon Brown very much?

ALISTAIR DARLING:

Yeah of course we can and I hope we'll continue to speak to each other.

ANDREW MARR:

Alright.

ALISTAIR DARLING:

You know I'm not interested in living in the past.

ANDREW MARR:

Indeed. Alistair Darling, thank you very much indeed for joining us.

ALISTAIR DARLING:

Thank you.

INTERVIEW ENDS




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