Andrew Grice: The Week in Politics

A different Chancellor, but the same mantra
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The Independent Online

"How bad is it today?," Alistair Darling got used to asking his officials at his first meeting of the morning at the Treasury. "Bad," was the answer that often came back.

This routine happened regularly before Christmas, after the Chancellor's first big setpiece, his pre-Budget report, had unravelled and Northern Rock was a big black cloud hanging over him.

The mood at the Treasury has brightened a little since. But the clouds haven't gone away. When he delivers his first Budget on Wednesday, Mr Darling has somehow got to try to disperse them, and it won't be easy.

Chancellors can produce magic rabbits out of hats on Budget Day that can make clouds go away – or at least divert attention from them. If Mr Darling tried that, it's a fair bet that the trick would backfire and certainly wouldn't win any media plaudits. He starts this Budget from a low point. So all he can do is play it straight and try to start recovering his previous reputation for competence and for his having the Government's safest pair of hands.

To describe his first eight months at the Treasury as a baptism of fire is an understatement. It was never going to be easy to take over from Gordon Brown. But neither man could have predicted just how "bad" it would get.

Mr Darling is not the author of his own misfortune. He can't say this, of course, but Mr Brown is. The Chancellor opposed an autumn election. But the Prime Minister was flirting with one when his successor drew up his pre-Budget report. So capital gains tax (CGT) reforms to target private equity bosses, and inheritance tax cuts financed by a levy on non-domicile foreign residents were cobbled together as man-for-man marking against Tory policy announcements. The cobbler-in-chief was Mr Brown, not Mr Darling.

The Chancellor made a U-turn over CGT to ease the pain on small businesses. He denies a handbrake turn over "non-doms". He never intended the taxman to know the details of their foreign assets, as would have been allowed by the original draft legislation which provoked the "non-doms" into threatening to leave the country (again). So he was happy to "clarify" the position.

His changes will not satisfy business, which has finally fallen out of love with Labour and is courting the Tories. He will reject their plea for a one-year delay before the CGT and "non-doms" reforms go ahead.

Not that the measures will give the Chancellor a pot of gold with which to satisfy demands from Labour MPs to tackle child poverty. The revenue is needed to spike Tory guns. The other reason why Mr Darling can't produce a firework display is that there is no money in the pot. I am sure Mr Brown will demand a few sparklers, but Mr Darling will have to raise the pennies from somewhere else.

Whitehall whispers suggest some key Budget decisions remain to be taken over this weekend. That is code for saying they will be discussed by Mr Brown and Mr Darling. It must be a strange experience for Mr Brown, who was accused of keeping Tony Blair in the dark about his Budgets. He is now gamekeeper turned poacher. He is keener than Mr Darling on imposing a windfall tax on the energy companies to tap their vast profits, preferring to push them into a voluntary scheme to alleviate fuel poverty.

On Wednesday, the Chancellor will repeatedly recite his boss's favourite mantra – "stability". Indeed, one ally described his Budget strategy as "stability, stability, stability". He will argue that Britain is better placed than most to survive the global slowdown and that his steady-as-she-goes approach will enable the country to tackle the challenges it will face over the next 20 to 30 years.

After being accused of a borrowing binge, Mr Darling is expected to signal some fiscal tightening further down the line. But for this year, the Bank of England should take the strain and get the balance right so we avoid both inflation and recession.

It's not an easy backcloth. According to Ipsos MORI, public concern about the economy is at its highest level for almost 10 years.

Yet reports of Mr Darling's demise have been exaggerated. The Northern Rock cloud hovered ominously for a long time but, when he finally opted for nationalisation, it moved on quickly. He insists he had to leave no stone unturned before deciding. He believes taxpayers will get their money back, and they wouldn't have done if Virgin had bought it.

The Brown-Darling relationship seems to remain strong, despite the pressures on both men. The Prime Minister can hardly blame his Chancellor for decisions in which he played an integral part. Mr Brown does not regret appointing him: if he had sent David Miliband or Ed Balls to the Treasury, he would have been criticised in the light of events for sending a boy to do a man's job.

For all the criticism, Mr Darling might yet prove the right man to play the role of Mr Stability in uncertain economic times. But he cannot afford a repeat of his pre-Budget report if he is to recover his authority, and it will be a long road back.

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