Alistair Darling was the surprise giant of the New Labour era

The former chancellor was the perfect politician to have in the Treasury on the day Lehman Brothers went up in smoke, writes John Rentoul

Being seen as a Brownite took him to the department of work and pensions, which the then-chancellor Gordon Brown saw as part of his empire (AFP)

Alistair Darling was an unexpected giant of the New Labour government. At the start, he was chief secretary to the Treasury, one of the most junior members of the cabinet, thought to have secured the post because he was part of Gordon Brown’s party within a party.

In fact, he had supported Tony Blair for the leadership, in preference to Brown, and it was a tribute to his political skill that he was able to maintain a close relationship with both poles of the twin-axis government.

Being seen as a Brownite took him to the department of work and pensions, which the chancellor saw as part of his empire. Darling secured his reputation for competence and reliability when he was moved to transport, which he stabilised after the disruption of Stephen Byers’s exit – over problems that no one can now remember, and which seem trivial in comparison with the turbulence of the Tory years.

Darling sorted out the railways, creating Network Rail, and he signed off the plans for the new Overground network in London – in the teeth of Treasury scepticism about the cost-benefit analysis – it is now one of the big success stories of recent transport history.

By the time Blair stepped down, however, Darling was fading in the incoming prime minister’s favour. One of the most striking themes in Darling’s memoir, published in 2011, is his account of Brown sulkiness and bad grace. Brown really wanted to appoint Ed Balls as chancellor, but Balls had been an MP for only two years, and Darling had a better claim by dint of eight years’ service in increasingly senior cabinet roles, latterly as business secretary, without making a mess of things.

After trying to fob Darling off with the home office or foreign office, Brown “disappeared”, presumably to consult Balls, before returning to say: “OK, you can do it, but maybe for just a year or so. I may want to make some changes then.”

It could be said that Darling shouldn’t have accepted the chancellorship on those terms – having said that he must have Brown’s complete confidence – but it was probably a good thing for the country that he did.

When the financial crisis struck in 2007, Darling and Brown were a good combination. Darling had nerves of steel that allowed him to stay calm and clear-thinking even when the UK banking system was hours away from collapse, which would have meant cash machines failing to dispense cash. Brown, meanwhile, advised by Balls who was notionally education secretary, had the capacity and political creativity to get the policy right and to coordinate the international response. Between them, who knows how many jobs and livelihoods they saved.

But Darling’s relationship with Brown was a disaster zone for all three years of Brown’s time in No 10. By 2009, Darling assumed that he would be moved from the Treasury, but Brown was so shaken by James Purnell’s resignation from the cabinet that he summoned Darling and said: “OK, you can stay.”

As a Blairite, I regret that Darling didn’t resign, because he could have brought Brown down. Darling dealt with that argument directly in his book: “There will be those who think that if I had said, ‘I’ve had enough, I’m off,’ it would have brought him down. It might have done. But I was not prepared to do that. I had supported his leadership. If I left the government, it would be to sit on the back benches, not to foment his overthrow. Also, I feel deep loyalty to the Labour Party. I did not want to damage it any further. There was already a sense of calamity; we were in no fit shape to fight an election. To walk away would have been to absolve myself of collective responsibility for the government.”

There were those, indeed, who felt that a deeper loyalty to the party would have required a change of leader and that David Miliband, whom Darling went on to support later, should have taken over before the 2010 election. Darling and Peter Mandelson both strengthened Brown when they should have weakened him, but they did so for good reasons – while neither Miliband nor Alan Johnson showed the hunger for power that was required.

Thus Darling survived to the end – along with Brown himself and Jack Straw, the three ministers who served continuously in the New Labour cabinet for the whole 13 years.

His memoir, Back from the Brink: 1,000 Days at Number 11, was one of the best of the New Labour crop, suffused with his dry humour. He wrote about his appointment to the cabinet by Blair in 1997: “​​As I left the cabinet room, I was handed a folder by the cabinet secretary. It was empty. He told me that ministers cannot be seen to leave Downing Street empty-handed. I accepted the prop.”

Thirteen years later, he left office empty-handed, but with a record to be proud of. He had fought Brown to a standstill on the question of how to tackle the deficit, with Brown refusing to accept Treasury forecasts and assuming that they were part of a plot to do him down. In the end, Darling’s plan to reduce the deficit over the next five years was pretty much what happened: George Osborne fought the election on a plan to cut public spending more sharply, but was forced to moderate his policy in the 2012 Budget.

It was at the time of that Budget that Darling came to talk to the students at the New Labour government course that Prof Jon Davis and I then taught at Queen Mary, University of London. He was as modest and straightforward as ever, pointing out one of the “giveaway phrases” in Osborne’s Budget, which he recognised from his time: “No cash losers.” In other words, there will be losers once inflation is taken into account.

He refused to go beyond the criticisms he made of Brown in his book, saying only that Brown always followed Margaret Thatcher’s advice: “Never make up your mind until you absolutely have to.”

The last time I saw him was in Edinburgh a year ago, when Nick Macpherson, who was his permanent secretary at the Treasury and is now a peer and a visiting professor at King’s College London, delivered a waspish lecture aimed at the recently departed Liz Truss and Kwasi Kwarteng, called “Treasury orthodoxy: fact or fiction?” Darling said that he didn’t get to London as often as he wanted to, but I suspect that he didn’t really want to, and was happier in Scotland.

He seemed content with his reputation as one of the greater ministers in a good government – certainly in comparison with what came afterwards. We should be grateful that he was in charge when Lehman Brothers went up in smoke.