Interview: Alistair Darling, former chancellor

When Alistair Darling was appointed Chancellor of the Exchequer in June of 2007 it occurred to him that, unusually, he hadn’t been sent to a troubled department in the hope that he’d keep it out of the news. At the time he said: “It’s in good nick, both the department and also the economy.”

But on 7 October 2008, having already weathered the Northern Rock collapse and nationalisation, Mr Darling received one of the most startling phone calls of his life from then-RBS chairman Sir Tom McKillop, who revealed that the bank wouldn’t last the day if the government didn’t step in with a rescue plan.

On a visit to The Scotsman offices, the former chancellor tells me: “It was chilling when he phoned up to say ‘We’re going to run out of money in the early afternoon’.

“You think, they’re one of the biggest banks in the world, they’re the bank that dominates Edinburgh, the one I have grown up with, the one I opened my first account with, in 1971 or whenever it was, the one with the huge HQ out at the airport. And you’re being told within hours it’s going to close its doors.”

The story of the unforeseen meltdown of British banking, and what the government did about it, is the subject of Mr Darling’s memoir, Back from the Brink 1,000 Days at Number 11. He says he wrote it for his children, Calum and Anna, as much as for posterity, “to explain to them where I’ve been for the last three years”. Not to settle scores, I suggest? No, he says, sighing audibly.

“A lot of people still want to know ‘Why did the banks get into this trouble?’ I knew that books would be written about it, and I happened to be there, so I tried to give an accurate account of what happened in those three years.”

To meet his personal standards for fairness and accuracy, he needed to put events in context and that meant describing what went on in the Numbers Ten, Eleven, and Twelve Downing Street, and his uneasy relationship with the PM.

“It’s impossible to tell that story without describing the relationships within government. You couldn’t ignore it. And equally, Gordon Brown and I fell out quite badly in 2009, when he wanted me to move. Versions of that had been out for a while. I thought, well, I’ll tell you exactly what happened. It was difficult at times. The two of us went back a long way. I’m afraid we had a very public falling out both on the analysis of what happened, and what we ought to do to recover the situation, and the deficit and all that.”

Very few people saw the manuscript – certainly not the Browns – but Mr Darling’s wife, Margaret Vaughan, is a respected journalist, and was one of his early readers.

“She was very helpful. Being a tabloid journalist, she’d say, ‘What’s liquidity? Is that water coming through the roof?’”

His book is a gripping read, even if you’re not a keen follower of business or politics. I was struck, for instance, by a visit Sir Fred Goodwin paid to Mr Darling’s Morningside home in December 2007, arriving on the doorstep bearing a panettone and a very uneasy expression. Shouldn’t that meeting have promoted him to launch an inquiry and notify the authorities?

“No, because what he was worried about then was what other bank CEOs had said to me, and that is that they didn’t believe the Bank of England was putting enough money into the system. The capital problem really only began to develop particularly after the American bank Bear Stearns collapsed. But I did say to him ‘Why is everybody worried about you?’”

Sir Fred answered that the markets didn’t feel RBS had sufficient capital. He disagreed, and continued to insist that liquidity, not capital, was their problem.

“When Sir Fred turned up in December 2007, nothing he said to me would have made me say the bank’s going to collapse next week. It was during the summer, when it desperately tried to raise money, that it got into trouble.”

Mr Darling has a reputation for a Zen-like calm, but how did he keep his breakfast down during the worst of it?

“It turned out Northern Rock was a well-disguised blessing. If we hadn’t had that experience – and in retrospect, we let that situation go on for far longer than we should have, although if we’d nationalised it at the start, I think people would’ve been terrified. We knew [with RBS] that unless we said we will do whatever it takes – and we will not let any of our banks collapse – it would have been a catastrophe.”

He emphasises that for all the criticisms, his book is also full of compliments for Gordon Brown, and the RBS crisis is a case in point.

“When it came to RBS, there wasn’t anything between us. The PM was effectively agreeing to betting the country on the banking system. He deserves immense credit for that.”

Indeed, but Mr Darling records that Mr Brown appointed him as a stop-gap measure, and almost instantly began eyeing him with suspicion – not that he trusted anyone much. Mr Brown’s technique was to hold individual rather than group meetings, and to swither endlessly before making any decision. He resisted hearing anything he didn’t agree with.

STILL, Mr Darling says he accepted the appointment without rancour, despite knowing how close Mr Brown was to Ed Balls.

“My reaction from the very start, was ‘Why not Ed?’ The two of them didn’t move an inch without being in touch with each other.

“But he said, ‘No, Ed wants to get some experience outside the Treasury.’ I never said in the book that Ed was running a parallel operation, but naturally Gordon relied on him, because you just don’t give up all that.

“The problem really was as the views began to diverge, it would have been much better if we’d all sat around the table [to discuss things].”

Mr Darling writes that the deteriorating relationship between Tony Blair and Mr Brown poisoned the government and the Labour party. If he felt that way, why didn’t he resign, for the good of country and party?

He says: “The lowest period was the summer of 2009. I was reading every day that I was going to be moved because I was not up to it. Part of me wanted to go. We went upstairs for what I call ‘the last supper’, and I remember saying to Margaret ‘At least we’ll be out of it now. We can do our own thing.’ But the other half of me thought ‘No, I’m damned if I’m going like this, because the job’s not finished. If I go now, then people will say you tried and you failed.’ I still thought we could get our way through this, and at least to some extent we did. So I didn’t want to resign.

“The other thing was, there’s no doubt, as all governments have found, if the Chancellor of the Exchequer resigns in the middle of a crisis it will have unfortunate consequences not just on the party but on the market reaction to it.”

Throughout three years of almost non-stop firefighting, Mr Darling’s best ally was in the flat above Number 11, his wife Margaret. They’d had a mostly long-distance marriage – partly because Margaret’s job was based in Scotland, and partly because they were adamant about wanting their children educated here.

BUT with Calum at university and Anna on her gap year, Margaret went to London in 2007.

“To have her upstairs, was tremendously helpful. If you wanted to escape for ten minutes even, you could do it,” Mr Darling says. I wonder, did it change their marriage?

“Actually, we enjoyed it, so much so that Margaret comes down to London a lot more than she would have done in years gone past. I would have found it very, very difficult to have dealt with everything if I hadn’t had a friendly face upstairs. Also, as chancellor, you have to do a certain amount of entertaining, and so on, and it’s very helpful if there are two of you rather than one of you. The flat is a temporary home for whoever is in it, and you forget that at your peril! But it does help if it is your home.”

Mr Darling remains the Member of Parliament for Edinburgh South West. Though born in London, he was raised in Scotland and attended Loretto School before going to Aberdeen University. Life as a back bencher these past 16 months has given him an opportunity to spend more time in Edinburgh, and I wonder what he thinks of the Scottish political scene? He’s made it clear he’s not interested in serving at Holyrood, nor in leading Scottish Labour, though with the departure of Iain Gray that position is vacant. Should it be filled by an MP or an MSP?

“By the next Scottish election I’ll be 63,” he says, sounding unsure. He makes a quick calculation. “Yes, I was born in 1953. So this is an election that’s going to be held in five years time and I challenge anybody to say what they’re going to be doing in five years’ time. We need somebody who is going to become leader and fight every day between now and that next election. We’ve only got 36 MSPs now, and I feel that unless we have a leader who is sufficiently attractive and compelling, I’m afraid in today’s world you can have brilliant ideas, but if you’re not able to communicate them… given the bad result that Labour has had, I think we owe it to ourselves to get the best possible person, so I would like a larger field from which to pick.”

At no point does he write about talking to Alex Salmond about the imminent failure of HBOS or RBS. An eyebrow rises. “None of that came within his responsibility. All the action that was taken was taken by the Treasury, and he has no Treasury responsibilities. As it happens, I did talk to him about Dunfermline Building Society, when they got in trouble, because an awful lot of Scottish housing was tied up in and financed by Dunfermline. That was his responsibility and he knew what we were doing.

“But as far as RBS and HBOS were concerned, Gordon and I really decided this ourselves. There wasn’t a cabinet discussion about it. There couldn’t be. Not just because of the timing, but every day new banks came onto the radar screen. Someone asked today, should they name all banks they’re worried about, and I said if you do, then you’ll have a very good reason to worry about them in a couple of hours’ time! Can you imagine if I’d said in July, ‘I’m a bit worried about RBS?’ They would have shut that afternoon. A thing like this is so sensitive.”

Still, RBS employs thousands in Scotland and together with HBOS, helped build Edinburgh – he said so himself, earlier. “But I’m a Scottish MP, I represent Scotland. I don’t need to be told by Alex Salmond what’s good for Scotland. What were we going to do, ask him if he thought it was a good idea?”

Where, then, does he stand on independence, which Salmond does appear to think is good for the nation? “I am dead against it. Scotland’s got so many big issues to confront, like how do we ensure that we have high quality education, how do we improve our transport system, how do we get more businesses being set up and developed in Scotland – all these issues are going to be put to one side while we have a long, protracted constitutional debate?

“As I said in May, just after the Scottish elections, if you’re going to have a referendum, let’s have it now and let’s deal with the issues, like what kind of currency are we going to have, how is the debt and the borrowing going to be carved up, because we’re going to get some of it, especially if two of our banks were part of the cause of the problems in the first place. What impact is it going to have when public spending arrangements change? How quickly will they change?

“I’m not afraid of having these discussions and am prepared to play an active role in having them, but simply letting the whole thing smoulder, and thinking, ‘How can I cause another grievance, how can I foment dissent’, that’s when people become very cynical. But, having said all that, I readily accept that Labour lost badly. We didn’t appeal to enough people; people didn’t think that we had anything to say or that what we had to say they didn’t like, so we’ve got a lot of things to put right. But I am actually optimistic about Scotland’s future – within the United Kingdom.”

As a former transport minister, and a local, I wonder if he’s as optimistic about the Edinburgh trams? Rolling his eyes, he says: “I am a tram sceptic. All tram schemes end up costing vastly more than anyone says they will. Last Friday’s decision was amazing. One of the points of devolution was to bring government closer to the people. I do not understand how the Scottish Government, which was given a clean bill of health in 2007 by Audit Scotland, has just stayed aloof from it until last week when it threatened to withhold the money unless the thing went ahead. What you’ve got now is not a tram network it’s a railway line that runs from the airport to St Andrews Square.”

And there’s a perfectly good, inexpensive bus service from Waverley Bridge, I remind him. “Yes. Lothian Buses are actually very, very good. If you attach this millstone around its neck, the inevitable is going to happen. I think it’s sad and [the tram scheme] should have had a proper, independent inquiry into what went wrong. When your tram comes to be known throughout the world for all the wrong reasons, then it’s time to say let’s pause and reflect and see if we can’t get it right.”

Surely we’re beyond getting it right? “They can always salvage something. Look, they’re hawking the tram carriages around Istanbul at the moment – it’s come to that! We need to salvage something, but they need someone competent to run it. Part of the problem is you’ve got a council that’s openly divided, and you’re dealing with a contractor and a contract that seems to have a degree of fluidity that’s alarming, then you’re asking for trouble. That’s my thoughts, anyway.”

Mr Darling professes that he’s content about sitting on the back benches, though he acknowledges that he misses having the day to day knowledge of what’s going on, and the ability to do something about it. “I’ve been in opposition before, and there’s only so many ways you can say, ‘It’s terrible’. What I don’t miss is getting phoned at the weekend, and having a Blackberry that has endless messages coming up.”

SEEING his book in print now, does he have any second thoughts? “No. I never thought I would write a book. It was odd when I got the first copy last week.” He ought to feel some pride, it’s an achievement. “It’s nice, but it’s odd staring at the cover,” he replies. Then, with a small smile, adds: “And the publisher says it’s so much in demand that I can’t get any more copies.”

Time is winding down but one last question. Mr Darling professes a residual loyalty toward Gordon Brown, despite everything. Why? What is it about Brown that inspires this feeling?

“He can be incredibly generous, and I don’t mean gifts, but in spirit. He can be good company, and there were times when he was very supportive to me. It would have taken a helluva lot to get me to join in a coup or revolt.”

With that he asks if he can take a moment to comb his hair before having his picture taken. “If I don’t, my mother will notice.”

l BACK FROM THE BRINK, 1,000 DAYS AT NUMBER 11 by Alistair Darling, published by Atlantic Books, £19.99.