'Big steps' for extraordinary times

Please note 'The Andrew Marr Show' must be credited if any part of this transcript is used.

The Chancellor says he's ready to give more help to individual banks in trouble.

ANDREW MARR: I'm going to turn to Peter... to Alistair Darling up in Edinburgh, Chancellor of the Exchequer, who's been listening to some of that.

Alistair Darling MP

Can I ask, first of all, Chancellor, whether you currently regard inflation or recession as the greater risk?

ALISTAIR DARLING: Well inflation, it's always important to control that, and indeed one of the things that helped us over the last few years is that inflation has been a lot lower than we've seen in this country for decades.

But I think if you're asking me about the point raised by Vince Cable, look at the remit that I have given the Bank of England, first set out by Gordon Brown nearly eleven years ago, and that is to target inflation because that's very important, but the Bank of England also has a wider duty to support the government's economic objectives.

So I'm not going to change that remit. I think it's very important that if you establish an independent central bank, that it remains independent, free of interference from ministers. That's one of the key ingredients of its success.

But I think if you look at the remit, you'll see that it was designed for good times as well as the more difficult times, so people should be in no doubt that the bank has an obligation to target inflation, but it also has an obligation to look at the wider objectives of government policy.

ANDREW MARR: So you would not write to the Bank of England asking for an interest rate cut even as an emergency or temporary measure?

ALISTAIR DARLING: I'm not going to be writing to the Bank of England to change its remit. I set its remit in March of this year at the Budget, as I do, on an annual basis. The Bank of England has a very clear remit to target inflation - that's absolutely important - and, in support of that, to look at the government's wider economic objectives.

Nothing has changed over the last eleven years. That remit was designed to deal with difficult times as well as the good times, and I think that is very, very important in maintaining the central bank's independence.

ANDREW MARR: There are different aspects to this crisis obviously. It seems that over the past twenty-four hours with the meeting in Paris, a tension is focusing on the plight of business, particularly small business running into liquidity problems, cash problems with their banks.

From your perspective, is that the next big problem hitting the economy?

ALISTAIR DARLING: Well, look, there are two problems at the moment. One is to stabilise the position in the banking sector. That's very, very important. And you can see, whether it's in America, us with Bradford & Bingley last weekend, what's going on in Europe even as we speak, the situation is difficult, conditions are very febrile.

And what was important about yesterday's meeting in Paris is that the leaders of government pledged themselves to do everything possible to stabilise that, but of course it is also necessary to make sure that we remember the wider economy and helping small businesses is very important. One of the reasons that Gordon Brown has established the National Economic Council - bringing together government not just in Whitehall, different departments in Whitehall, but also making sure that we can bring together what government is doing in the regions of the country - is to make sure that we do everything we possibly can to help businesses.

Now given what is happening in the banking industry, we are concerned to ensure that we can reduce the impact of that on individual businesses that need to borrow from banks whether on loans or overdraft facilities. It is very, very important that we do that.

ANDREW MARR: You mentioned the National Economic Council. Some people have said back to the 70s with all of that stuff. Can you explain how it's actually going to work? You're going to meet as a group of ministers regularly in Downing Street to discuss the economic crisis.

Will that replace an economic discussion at the full cabinet and does it mean that in some sense you are sharing responsibility as Chancellor with other ministers, not least Peter Mandelson?

ALISTAIR DARLING: No, of course the cabinet will continue to consider these issues. You know that's, that's what the cabinet is for. It's absolutely central to the government. The object here is to make sure that if you take something like energy, for example, making sure that we have secure supplies of energy, as well as cleaner and greener supplies of energy, is absolutely critical.

Now we have a job of work to do to make sure that as the North Sea begins to decline in terms of the amount of oil and gas coming out, that we can replace energy supplies with nuclear, with renewables and so on.

That takes you into planning issues. So what we're trying to do is to make sure that everything in Whitehall, everything in government is pointing in exactly the same way. Similarly, in relation to...

ANDREW MARR: But sorry, I...

ALISTAIR DARLING: ... food, for example.

ANDREW MARR: I don't want to interrupt you, but I still don't entirely understand. It sounds like another talking shop, another piece of discussion alongside the cabinet...

ALISTAIR DARLING: No, it's not.

ANDREW MARR: ... and, frankly, with an element of PR about it.

ALISTAIR DARLING: No. I was mentioning the question of energy. I know from my own experience in August when I was putting together the package that we announced a few weeks ago to help people with their bills, to help in relation to energy costs, that simply having a mechanism where you could bring together government, ensuring that it works efficiently not just at a national level but also at a regional level as well with regional development agencies and so on, that is very, very important. But the key thing here, structures are a means to an end. The end must be that not only do we stabilise the present situation, which is critically important here and across the world, but that we get through this; that we help businesses large and small; we help people deal with what is undoubtedly one of the biggest shocks we've seen to the system for decades...

ANDREW MARR: Okay.

ALISTAIR DARLING: ... and then, as we come through that, critically we prepare for a different world - one where there are massive opportunities, where Britain can have huge, huge opportunities come into this country provided we prepare for it, provided we plan for it, and we seize these opportunities in the future.

ANDREW MARR: How bad is it going to get?

ALISTAIR DARLING: Look, things are difficult and you know if we'd have been having this conversation a year ago or even six months ago and I told you that America would nationalise two of its biggest mortgage corporations...

ANDREW MARR: Yeah.

ALISTAIR DARLING: ... some household names would go under, that you spent a weekend in Europe with governments anxious to take action to support the system, you'd have said, �Well that seems unlikely.� This is difficult, we will get through it. And can I just, can I just...

ANDREW MARR: Before you...

ALISTAIR DARLING: ... go back to one important point?

ANDREW MARR: Okay.

ALISTAIR DARLING: Yes, of course.

ANDREW MARR: Just before you do. Have you got a list? I know you can't give me the names, but have you got a list of British banks that you are still worried about?

ALISTAIR DARLING: Look, we monitor the situation not just in Britain, but in Europe, across the world because banks are now completely global and connected with each other, so we do this all the time. But can I just make one important point? Firstly, it is important that we take action across the piece.

That's why, for example, through the Bank of England we have put billions of pounds into the system to help the whole banking sector. But also you do need to be ready to take specific action, as we did with Bradford & Bingley last weekend...

ANDREW MARR: Is there a...

ALISTAIR DARLING: ... as we did with Northern Rock...

ANDREW MARR: Sorry, can I just...

ALISTAIR DARLING: ... or even in... The point I'm making is it's important that you take generalised action as well as being ready to take particular action if you get a particular problem with an individual bank.

ANDREW MARR: Isn't there a danger that under the way things are operating at the moment, the markets simply crowd in and pick off one bank after another?

ALISTAIR DARLING: Well what you need to do is... as I say you need to help the banking sector as a whole. For example, the Bank of England will be putting �40 billion into the markets this year. They've changed the criteria... This week rather. They've changed the criteria to ensure that it's easier for banks to get access to that money.

So you need to support the system as a whole. We've also been supporting it, as I say, by making sure that where banks have got difficulty being... in lending to each other that we help, and I've authorised over �100 billion to help there.

ANDREW MARR: And you're still prepared to...

ALISTAIR DARLING: And in addition to that, you do need to be ready to deal with individual institutions.

ANDREW MARR: Exactly. So you are prepared to put public money to recapitalise banks in trouble and you've heard...

ALISTAIR DARLING: Look...

ANDREW MARR: ... Conservative support for that?

ALISTAIR DARLING: We are ready to do whatever it takes; and that is we've put money into the system to help banks generally, there are other measures that we will be taking too and I'll announce them when we're ready to do that. But be in no doubt, we will do whatever it takes to ensure that we stabilise the banking system because that is critical to supporting businesses, to helping people, to helping jobs.

It's absolutely critical. And of course I welcome cross party support. That is very, very welcome because I think each and every one of us want to ensure that not only do we stabilise the present position, but we get through it. And, as I say, there are big opportunities when we get through the other side, huge opportunities for this country which I'm determined to take.

ANDREW MARR: Before we get to the other side, you're going to have to raise taxes, aren't you?

ALISTAIR DARLING: I've made it very clear that at this time we need to support the economy. And you know because we reduced the amount of debt that we inherited in the ten years after we were elected, we're now in a better position to allow borrowing to rise as the economy slows down. That's the right thing to do. You support it, you don't start taking money out of it.

ANDREW MARR: E�even if you change the old borrowing rules?

ALISTAIR DARLING: We have manifesto policies, as you know, in relation to tax and we're going to keep to those.

ANDREW MARR: Even if you change the old borrow... You may have to change the original borrowing rules to allow borrowing to rise further?

ALISTAIR DARLING: I'm going to be going into that further in the maze lecture that I deliver on Wednesday evening as to how I believe that governments faced with the global shock of this nature ought to react. I do think though what is important is that governments do have disciplines upon them. That's why we've had the discipline on the amount of debt that the government maintains.

That's why we have the discipline that allows us to borrow to invest, but not to fund current consumption. Now obviously, as I've been saying for weeks now, as the economy slows, as we're being hit by this twin shock of the credit crunch and very, very high oil prices, every country in the world is being affected by this. This is a profound...

ANDREW MARR: Okay.

ALISTAIR DARLING: ... shock to the system. Now we need to deal with it and we need to get through it and we'll do that. And, as I say, later this week I'll be setting out my thoughts on how we ought to be dealing with it - maintaining discipline but also having the flexibility that people would expect to find in a government being ready to help businesses, helping individuals...

ANDREW MARR: Okay.

ALISTAIR DARLING: ... get through what is a difficult time.

ANDREW MARR: Talking of severe shocks to the system, you're now sitting alongside Peter Mandelson in government - not a man the Labour Party has always found it easy to get on with. Can the Labour Party learn to love Peter Mandelson? Can you?

ALISTAIR DARLING: Look, you know people tend to get into a lather on the subject really quite unnecessarily. I worked with Peter when I was Secretary of State for Trade and Industry and he was the Trade Commissioner. We worked very well together. I met him on Friday, the day of his appointment, and the two of us are absolutely clear that especially at this time you need in government the best people for the job. I've brought in Paul Miners, who is a very distinguished member of boards across the city, who's now come into government to help me in relation to the banking system.

There have been other appointments too that I think will significantly strengthen this government and you know Peter will be a valuable part of that, as will everybody else. As I say, the key thing here at these you know exceptional times, that we all work together, that we get through it. If we get cross party support, that's very welcome too. But all of us should be in no doubt, this is the most profound shock that we have seen to the world economic position...

ANDREW MARR: Yeah.

ALISTAIR DARLING: We're being affected by it, so is everybody else, so you need the best people for the job.

ANDREW MARR: Okay.

ALISTAIR DARLING: You need the experience. You need the people who can make the right calls...

ANDREW MARR: Okay.

ALISTAIR DARLING: And you know with Gordon and the rest of us, we'll all try and do that.

ANDREW MARR: Fine.

INTERVIEW ENDS

Please note "The Andrew Marr Show" must be credited if any part of this transcript is used.

NB: This transcript was typed from a recording and not copied from an original script.

Because of the possibility of mis-hearing and the difficulty, in some cases, of identifying individual speakers, the BBC cannot vouch for its accuracy

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