Darling plays to left with attack on bonuses

Unions welcome an apparent shift away from Conservative thinking. Chancellor calls for tighter regulation to protect banking system
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Indy Politics

The tunes of the past that used to inspire the Labour Party were heard again yesterday as the Chancellor Alistair Darling faced calls for the Government to impose a ceiling on fuel prices, slap a windfall tax on the energy companies, and even to nationalise them.

For the first time in 11 years, the party's annual conference also heard a Chancellor of the Exchequer issue a slap on the wrist to a part of the business community, when he criticised the "bonus culture" that has helped undermine the banking system.

His comments delighted left-wing union leaders and other old Labour stalwarts, who saw it a sign that Gordon Brown's government is being forced by economic circumstances to move to the left, putting more distance between Labour and the Conservatives.

Delivering the main conference speech yesterday, Mr Darling warned that tighter regulation will be needed to prevent a repeat of the current banking crisis – reversing years of talk from new Labour about the importance of keeping government's hands off the operations of the free market.

"It is clearer than ever that markets can't do this on their own," he said. "Nor can individual governments. In the past it was sufficient to ensure effective domestic regulation. That's not enough today. It's not a question of light-touch regulation against heavy-handed regulation. It's about effective regulation.

"We need to look as well at the culture of huge bonuses which have distorted the way decisions are made. It's essential that bonuses don't result in people being encouraged to take on more and more risk without understanding the damage that might be done, not just to their bank, but to the rest of us in the wider economy."

His remarks warmed the hearts of trade union bosses in the audience, who have heard nothing from new Labour leaders for years other than the need to deregulate.

The unions came away believing that they had had a good day in Manchester, after getting several measures onto the agenda for future discussion by Labour's National Policy Forum, including having the Government step in to curb the profits being made by energy companies. They also pushed through a resolution which, if it became government policy, would mean that an EU directive that limits working hours on the continent to 48 hours a week would apply to the UK, for the first time since the former prime minister, John Major, negotiated the right to opt out in 1991.

Derek Simpson, joint leader of Britain's biggest union, Unite, called for punitive taxes for city speculators. "The bonus culture in the City of London is out of control," he said. "It has created an all-powerful mega-rich elite with no connection to ordinary people; an amoral class without a care for how their reckless behaviour is now wrecking lives. If we don't regulate these people into a decent way of conduct, then we should tax them out of existence."

The conference also heard a passionate call from the former environment minister Michael Meacher to attack the profits of the energy companies, or even to nationalise them. "There could not be a stronger case for a 'Robin Hood' tax than now," he claimed. "Are we going to let these companies hold this country to ransom like this? Why do we have a Labour government if it doesn't stand up to the rich and the powerful when they misuse their position? We should be thinking about having a public sector role in our energy sector."

But although proposals for a windfall tax and other measures have been sent to Labour's National Policy Forum, Mr Darling made it clear that they will not become government policy while he is Chancellor. "You need to remain level-headed. You need to do what is right and avoid knee-jerk reactions," he told Radio 4's Today programme. "I don't want to destabilise the tax system."

And the Business Secretary John Hutton told BBC Radio 4's The World at One: "The idea that we can follow some kind of Venezuelan strategy here in the UK, taking these companies into public ownership, I think, is really quite misplaced. Right now we need massive investment, a huge low-carbon revolution."

Dave Prentis, head of the UK's second biggest union, Unison, said: "The Chancellor is making the right noises, but he has not gone far enough. The right thing to do is levy a windfall tax now, and he must curb boardroom pay."

Vince Cable, the Liberal Democrat Treasury spokesman, said: "It isn't clear that the Chancellor has understood the necessity for regulating bank capital to offset the boom-and-bust cycle. Nor is it clear how the Government proposes to use legislation to deal with the problem of the bonus culture, though clearly something drastic needs to be done."

Trial by GMTV How Darling dodged the tax question

Chancellor Alistair Darling was asked five times whether he was going to raise tax during an interview with the GMTV presenter Ben Shephard. Here is an edited transcript of the exchanges:

Ben Shephard: Now what many people already struggling with rising prices want to know, Mr Darling, is whether you're going to have to raise taxes to pay for the mistakes of the banking industry.

Alistair Darling: No, what we're dealing with is a situation where economies are being hit by the credit crunch and the effects of high oil prices. What I'm determined to do is to make sure that we get through this difficult time, despite the fact we are facing very difficult conditions.

BS: Are you going to raise taxes?

AD: What I'm going to be talking about today is the need to ensure that firstly we stabilise the financial system. We've also got to make sure that we support the economy... But what I'm confident about is that we do have a pretty strong economy. So I am confident but what I am saying to people is let's be realistic.

BS: To be honest it doesn't sound like you're saying much at all to me. I asked if you were going to raise taxes – yes or no.

AD: What I've said to you is that at a time when the economy is slowing down...

BS: Yes or no Mr Darling – will you be raising taxes? It's a simple question.

AD: If you stop interrupting I'll try and answer you. What I'm saying to you is that I don't think there's anybody who's saying this is the right time to be starting to take a lot of money out of the economy....

BS: Are you going to raise tax in the future to sort out the problems that you're having to stabilise now?

AD: My immediate priority at the moment is to stabilise the economy.