Leading Article: We're not all doomed, Mr Darling

Related Topics

We think that we know what Alistair Darling, the Chancellor, thought he was saying. The way that he said it, however, has undermined economic confidence and further weakened the Prime Minister. In his newspaper interview yesterday, and even in his attempt to clarify it on television later, Mr Darling sounded more apocalyptic than he intended.

He told The Guardian that we are facing economic times that "are arguably the worst they've been in 60 years". This was a remarkable assessment, not least because, on the face of it, it was untrue. Was he saying that current forecasts are for conditions worse than the three-day week in 1974, the high inflation of 1974-80, or the mass unemployment of the early 1980s? Even the most pessimistic member of the Bank of England's committee, David Blanchflower, who last week predicted 330,000 job losses by Christmas, does not seem to be suggesting anything of that order.

As Sean O'Grady, economics editor of The Independent, explains on page 6, the Chancellor may have had a specific aspect of the economic situation in mind. The drying-up of credit in the global banking system is something that has not happened on such a scale since it became possible, after the Second World War, to speak of an international capital market. It is much bigger than the secondary banking crisis that hit the City of London in 1973-4 and, although its effects on the "real" economy have so far been limited, it does have the potential to cause a global slump that really would be serious.

So far, however, even Professor Blanchflower is predicting "only" a recession. That may mean hardship for many, but it was hubris for this Government to have proclaimed the end to boom and bust. There will always be economic cycles, and in many ways it is healthy for the over-borrowing of the past decade to unwind a little.

Even in his clarification, Mr Darling failed to make the distinction clear between a "profound downturn" and a "credit crunch the like of which we haven't seen for generations". The trouble is that, as he should know, "credit crunch" has become lazy shorthand for "a period of economic stringency". In fact, it means that banks find it difficult to borrow from each other. It may contribute to recession, but the extent to which it does depends crucially on confidence. Which is why his words were so damaging.

Unless he makes clear that his "worst in 60 years" comment applied to the state of the banking system, rather than directly to living standards, people will wonder if he knows something that they do not. Most people are realistic enough to accept that a period of slow or negative growth may be a price to be paid for the good years of 1993-2007. But they are not expecting a return to the three-day week.

In many respects, as Mr Darling tried to "clarify", the fundamentals of the British and world economy are sound. US growth has bounced back; China and India continue to lift the rest of the world; the oil price has subsided. Mr Darling may have thought that he was engaged in expectations management. And it is true that Gordon Brown's upbeat assessments of Britain's economic prospect had started to ring false. But there is a happy medium between optimistic bluster and proclaiming, like Private Fraser, that "we're all doomed".

A Chancellor of the Exchequer needs to be sensitive to the effects of his or her every word on economic confidence. It is surprising that Mr Darling should have resorted to playing political games with such important matters. As we report today, it appears that he had not told Mr Brown about the interview. It looks like an attempt to prepare the public for bad economic news, to secure his own position and to distance himself from the Prime Minister. Probably unintentionally, he allowed some of his frustration to show at having to take the sharp end of Mr Brown's mistakes, from the 10p tax fiasco to the summer briefing about a stamp duty holiday.

In that respect, the interview was a significant manifestation of a Government core close to meltdown. The relationship between Nos 10 and 11 is plainly dysfunctional already. It took years for that to happen in the case of Margaret Thatcher and Nigel Lawson, and even Tony Blair and Mr Brown managed to keep it together, just about, until the final two years. Another sign of turmoil at the heart of Government, as we also report, is the imminent departure of Stephen Carter, who has luxuriated in the grand title of Chief of Strategy and Principal Adviser to the Prime Minister for less than a year. The auguries for the efficient despatch of the nation's business are not good.

React Now

Latest stories from i100
iJobs Job Widget
iJobs General

Recruitment Genius: Bookkeeper

£23000 - £26000 per annum: Recruitment Genius: This small, friendly, proactive...

Recruitment Genius: Photographic Event Crew

£14500 - £22800 per annum: Recruitment Genius: This is a fantastic opportunity...

Recruitment Genius: Software Developers - .NET / ASP.NET / WebAPI / JavaScript

Negotiable: Recruitment Genius: A Software Developer is required to join a lea...

Austen Lloyd: Corporate Tax Solicitor - City

Excellent Salary: Austen Lloyd: A first rate opportunity to join a top ranking...

Day In a Page

Read Next

After Savile, we must devote our energies to stopping the child abuse taking place now

Mary Dejevsky
A ‘hugely irritated’ Sir Malcolm Rifkind on his way home from Parliament on Monday  

Before rushing to criticise Malcolm Rifkind, do you know how much being an MP can cost?

Isabel Hardman
HIV pill: Scientists hail discovery of 'game-changer' that cuts the risk of infection among gay men by 86%

Scientists hail daily pill that protects against HIV infection

Breakthrough in battle against global scourge – but will the NHS pay for it?
How we must adjust our lifestyles to nature: Welcome to the 'Anthropocene', the human epoch

Time to play God

Welcome to the 'Anthropocene', the human epoch where we may need to redefine nature itself
MacGyver returns, but with a difference: Handyman hero of classic 1980s TV series to be recast as a woman

MacGyver returns, but with a difference

Handyman hero of classic 1980s TV series to be recast as a woman
Tunnel renaissance: Why cities are hiding roads down in the ground

Tunnel renaissance

Why cities are hiding roads underground
'Backstreet Boys - Show 'Em What You're Made Of': An affectionate look at five middle-aged men

Boys to men

The Backstreet Boys might be middle-aged, married and have dodgy knees, but a heartfelt documentary reveals they’re not going gently into pop’s good night
Crufts 2015: Should foreign dogs be allowed to compete?

Crufts 2015

Should foreign dogs be allowed to compete?
10 best projectors

How to make your home cinema more cinematic: 10 best projectors

Want to recreate the big-screen experience in your sitting room? IndyBest sizes up gadgets to form your film-watching
Manchester City 1 Barcelona 2 player ratings: Luis Suarez? Lionel Messi? Joe Hart? Who was the star man?

Manchester City vs Barcelona player ratings

Luis Suarez? Lionel Messi? Joe Hart? Who was the star man at the Etihad?
Arsenal vs Monaco: Monaco - the making of Gunners' manager Arsene Wenger

Monaco: the making of Wenger

Jack Pitt-Brooke speaks to former players and learns the Frenchman’s man-management has always been one of his best skills
Cricket World Cup 2015: Chris Gayle - the West Indies' enigma lives up to his reputation

Chris Gayle: The West Indies' enigma

Some said the game's eternal rebel was washed up. As ever, he proved he writes the scripts by producing a blistering World Cup innings
In Ukraine a dark world of hybrid warfare and murky loyalties prevails

In Ukraine a dark world of hybrid warfare

This war in the shadows has been going on since the fall of Mr Yanukovych
'Birdman' and 'Bullets Over Broadway': Homage or plagiarism?

Homage or plagiarism?

'Birdman' shares much DNA with Woody Allen's 'Bullets Over Broadway'
Broadchurch ends as damp squib not even David Tennant can revive

A damp squib not even David Tennant can revive

Broadchurch, Series 2 finale, review
A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower: inside the mansion of Germany's 'Bishop of Bling'

Inside the mansion of Germany's 'Bishop of Bling'

A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower