Darling backs Brown to weather economic storm
Combating global economic turmoil will require same cooperation employed to fight terrorism, Alistair Darling says
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Monday, 22, Sep 2008 07:55
Alistair Darling has insisted Gordon Brown has the qualities to guide Britain through the current period of global economic turbulence.
In his speech to the Labour party conference the chancellor said the prime minister had the necessary "experience and judgment".
"These are very uncertain times," he said. "But one thing I am certain about is that we have the right prime minister, the right team and the right policies to help the country through them."
Mr Darling also announced a new banking reform bill, pledging to "strengthen global supervision".
"It's clearer than ever that markets cannot do this on their own," he explained.
"We are putting in place the tougher financial regulation no one can doubt we need.
"It is why I will introduce a new banking reform bill in the Commons in a fortnight... strengthening the supervision of the banking system; making it easier to intervene if a bank gets in trouble and giving new powers to the regulators."
Mr Darling also suggested a wholesale reorganisation of Britain's current economic regulation system may be necessary.
The UK has relied on the 'tripartite' regulatory system of the Bank of England, the Treasury and the Financial Services Authority (FSA), but that system has come under criticism following its failure to predict the Northern Rock collapse and for being sluggish in its response to last week's crisis.
Mr Darling came close to admitting that today.
"I have asked the new chairman of the FSA to review urgently what we need to do to improve the system," he announced.
"I can promise that wherever weaknesses are found in the financial system – whether in the powers of government, the Bank of England or the FSA, I will take steps to deal with it."
The speech confirms a noticeable shift in Labour's attitude to the market, since last week's financial crisis provoked outrage at the mistakes of senior bankers and the actions of speculators.
There were also signs the government was beginning to harden its attitude towards what many see as excessive City bonuses.
"We need to look as well at the culture of huge bonuses which have distorted the way decision are made," he said.
"It's essential that bonuses don't result in people being encouraged top take on more and more risk without understanding the damage that might be done, not just to their bank, but to the rest of us in the wider economy."
It was unclear exactly what action the government could take, however. Critics argue any attempt to control bonuses through legislation would be unthinkable.
Mr Darling ended the speech by referring to the controversy surrounding his interview to the Guardian, in which he claimed – contrary to the message from Downing Street – that the UK was facing its worse economic crisis for sixty years.
"I've made headlines by saying just how tough times are," he said.
"I draw little comfort from the fact that many people now understand what I meant."
In his speech Mr Darling also likened the impact of globalisation to terrorism.
"Just as one government alone cannot combat global terrorism, just as one government alone cannot deal with climate change, one government alone cannot deal with the impact of globalisation," he said.
Mr Darling and Gordon Brown are due to fly out to New York after the conference concludes to push for greater international cooperation on financial regulation.
"In the next few weeks Gordon and I will be in the US and in Europe and speaking to finance ministers around the world to put in place measures to help prevent the mistakes and misjudgements which caused the crisis," the chancellor explained.
The last week has seen shockwaves on world financial markets, with Lehman Brothers collapsing on Wall Street, the nationalisation of insurance giant AIG, Lloyds TSB buying out stricken UK lender HBOS, and the US government pushing to buy out toxic mortgage-backed debt.