Darling torpedoes Brown’s failing defences

You could almost hear the sound of the crockery smashing in Downing Street as Prime Minister Gordon Brown read the extraordinary interview given by chancellor Alistair Darling to the Guardian.

As I told London’s Evening Standard last week, cunning politician that he is, the PM would have appreciated immediately the damage the chancellor’s interview has done to his plans for yet another relaunch of his premiership this month.

Darling’s home truths have sunk the much-hyped Brown recovery plan before it even made it down the slipway. Here’s why. First, the chancellor has destroyed Brown’s main line of defence on the economy – the transparently false claim that it is fundamentally strong.

Just recently, we are told, Treasury minister Yvette Cooper emailed Labour spin doctors ordering them to repeat ad nauseam that the economy is not as bad as it was in the 1980s and 1990s.

Now her boss the chancellor tells us this is not so. He says that we face the worst economic crisis for 60 years and it comes not after a period of Conservative rule but after Brown has been running the Treasury for a decade.

What’s more, Darling admits that far from the government being prepared for the economic slowdown, no-one in power saw it coming. Indeed, rather touchingly, he admits that the first he knew there was a serious problem was when he read a newspaper headline in a supermarket in Majorca.

Second, Darling’s interview has torpedoed the PM’s big message planned for the autumn – that a recovery is just around the corner thanks to his clever plans.

Only a fortnight ago, Brown sound-ed like a World War I general, happily telling journalists flying with him to Beijing for the Olympics that things would be better by Christmas.

Now his chancellor has flatly contradicted him. He says the UK’s economic problems are going to be more profound and long-lasting than the public thinks.

Even more significantly, Darling appears to be fighting a fierce battle in Whitehall to stop the PM borrowing billions of pounds of taxpayers’ money to fund his own political survival. The chancellor appears to understand, as I do, how unfair that would be.

Third, Darling’s interview has kyboshed the other part of Brown’s political survival plan, a Cabinet reshuffle.

He says: “Frankly, if you had a reshuffle now, I think the public would say, ‘who are they anyway?'”

Good question. Putting it more bluntly than most politicians would dare, Darling also says that voters are “pissed off” with the government from the top down. At least with that enduring phrase, Darling has probably earn-ed his first entry in the Oxford dict- ionary of quotations. So as we survey the political fallout from the chancellor’s interview, we can see what a divided and dysfunctional Cabinet now governs the UK. At the top we have a PM fighting for his political life, a chancellor openly disagreeing with him on the economy and foreign secretary David Miliband spending more time planning a coup at home than preventing them abroad.

What can be done? The country faces serious economic problems that demand serious answers. The dire state of public finances means the government’s hand is constrained, but there are things that can be done immediately to support families.

To help consumers filling up their cars it should introduce a fair fuel stabiliser. This means that when oil prices go up and North Sea oil tax revenues rise, fuel duty should fall to cushion the blow at the pumps.

To help lower income families with rising utility bills, we need to get them onto the cheaper tariffs enjoyed by those with bank accounts who pay by direct debit. The Conservatives have worked with the industry on a plan to allow consumers to pay their utility bills direct from their Post Office card accounts, which could save them £100 a year.

All these short-term measures will help consumers get through the coming economic storm without adding to the debt we are leaving for the next generation. We will set out more ideas in the weeks ahead.

But the long-term challenge is to fix our public finances and make sure we are better prepared in future for the shocks the global economy will throw at us.

Never again after a period of global economic growth should we end up with the worst budget deficit in the developed world. We must fix the roof when the sun is shining. This means replacing Brown’s broken fiscal rules that failed to guarantee prudence.

We need a system that protects us from the short-term borrowing sprees of politicians out to save their own skins. Gross fiscal irresponsibility is not just economically reckless, it is deeply unfair on future generations.

We also need to reform the banking system so that we don’t rely on taxpayers to bail out the excesses of institutions that borrowed too much. We cannot afford another Northern Rock.

At the moment banking regulations encourage banks to lend more in the good times and cut back sharply in the bad. These regulations exacerbate the boom and bust cycle.

Instead, the rules should dampen the credit cycle and I have spent much of this year discussing how we could reform them at an international level with central bank governors and finance ministers.

Finally, we need to make our economy more competitive in the face of globalisation so that businesses bring jobs and investment to our shores. This means lower and simpler business tax rates, a revolution in education supply and moving to a more balanced economy that isn’t so dependent on housing and finance.

None of these things will be easy to achieve. But you need a united government focussing on the long-term future of the country instead of its own short-term survival to do so. You also need a chancellor who doesn’t just speak the truth but has the support of the PM to act on it.