UK was 'two hours from the cashpoints running dry', says Alistair Darling
People were were only two hours away from being unable to withdraw money from British banks during the financial crisis, the former Chancellor Alistair Darling will reveal in a new book.
In the first insider's account of the crisis, Mr Darling will disclose how the near-collapse of the Royal Bank of Scotland in October 2008 would have spread quickly to other UK banks if the Government had not rushed out a £50bn emergency rescue package.
"We were at the stage where in a very short period of time, one of the world's biggest banks would have to shut the door and switch off the electricity," he told the London Independent in an interview ahead of next week's Budget. "It would not have stopped there, because you can just imagine people going from bank to bank."
His "first hand account" of the crisis will be published by Atlantic Books in September. "It is really harrowing. You just write it down. You don't need to spice it up."
In the interview, Mr Darling:
- Claimed Meryvn King, the Bank of England Governor, is uncomfortable about being used by Tory ministers to defend their cuts strategy
- Warned that George Osborne could "crash the economy" by cutting too far, too fast;
- Claimed the Treasury has secret economic Plan B;
- Warned Labour that must spell out a positive vision to regain power
Mr Darling, who stood down from the Shadow Cabinet last October, has completed about a third of his 100,000-word book. Asked whether he would detail his strained relationship with his long-time ally Gordon Brown when he succeeded him at the Treasury, he said: "Most Chancellors and Prime Ministers fall out from time to time. What I want to do is to give a credible account of what happened. I have never been interested in the gratuitous kiss and tell stuff."
Asked whether Mr Brown was a good prime minister, he said: "As Chancellor he achieved a great deal... I think he is entitled to be judged in the round on all of the things he did rather than just over a short period."
The "Darling plan" to halve the public deficit over four years has entered the political lexicon. Mr Darling is convinced that the Coalition is cutting too far, too fast and could choke off the fragile recovery.
"The big question is where is the growth going to come from?" he said. "What I am worried about is that these people will end up crashing the economy."
Despite Mr Osborne's denials, he is convinced that the Treasury has a Plan B. "You have got to have a plan for growth. That is absent at the moment," he said. "There is a Plan B there and he [Mr Osborne] will be looking for cover and ways of introducing bits of it without people noticing too much."
The former Chancellor expressed concern that Mr King had been drawn into party politics by endorsing Mr Osborne's Plan A. He said: "The Governor has to accept that he cannot put himself in a position where people can say, 'He is on our side.' Tories are saying that. That is something I know he is very mindful of because no Governor wants to be put in that position. The authority of the Bank of England should be formidable. Part of that authority stems from the fact that it should be fearlessly independent, not on one side nor the other but doing its job.
"I think Cameron quite deliberately set out to exaggerate the problems because he wanted cover for what he would have done anyway. He has got the added bonus of the Liberal Democrats being willing to front up what he is doing – rather like the court fools."
He backed Ed Balls, the shadow Chancellor, who suggested the cuts should be implemented more slowly at the start of the four-year period than Mr Darling envisaged because the outlook was now so gloomy. Mr Darling has known Labour's "two Eds" since the early 1990s when they worked as aides to Mr Brown.
"Becoming Leader of the Opposition just after you have lost an election is pretty tough...after any defeat, especially after a long period in office, it takes time to recover.
"I know Ed [Miliband] understands what needs to be done. I am confident that he will be able to develop a vision and mission people will take to.
"The key for us is that it is not enough to say this Government is not doing well and say it is damaging important things in this country. We have to show we have a vision of what Britain can be that is better."
The economy, as ever, will be crucial. "If we don't establish in the public mind we are more competent than the Tories, then we won't make any headway," he said.
After a marathon 22 years on Labour's front bench, Mr Darling is enjoying the freedom of the backbenches. But, he said: "I miss being in government because you can do things."
And the 57-year-old MP for Edinburgh South West does not rule out a return to the front line.
"I am still young, " he said. "I will be required to work for some considerable time yet under plans to delay state pension age. Many politicians enter their prime in their sixties."
In quotes: Darling on...
... the banking crisis of 2008
"We were at the stage where – in a very short period of time – one of the world's biggest banks would have to shut the door and switch off the electricity. It would not have stopped there, because you can just imagine people going from bank to bank."
... David Cameron and George Osborne
"What I am worried about is that these people will end up crashing the economy... My guess is that the Treasury is working on a plan for growth despite what [George] Osborne has been saying for several months. There is a Plan B there and he will be looking for cover and ways of introducing bits of it without people noticing too much."
... the Coalition's cuts
"The Tories are doing things they could only have dreamt of in opposition. If they had a majority of 10 or 20 they would not have been able to do half of this...The Lib Dems are completely lashed to the mast."
"It is not enough to say this Government is not doing well and say it is damaging important things in this country. We have to show we have a vision of what Britain can be that is better. If we don't establish in the public mind we are more competent [on the economy] than the Tories, then we won't make any headway."
... Mervyn King
"The Governor [of the Bank of England] has to accept that he cannot put himself in a position where people can say 'he is on our side.' Tories are saying that. That is something I know he is very mindful of because no Governor wants to be put in that position."
... his future
"I am still young... I will be required to work for a considerable time under plans to delay the pension age... Many politicians enter their prime in their sixties."