Speakers:

DM: Dermot Murnaghan

AD: Alistair Darling

DM: Well I’m joined now from Edinburgh by the former Chancellor of the Exchequer, Alistair Darling. Very good morning to you Mr Darling. Well, let’s start with that, I know you would go along with that wouldn’t you that Scotland, if independent the SNP say could keep the pound?

AD: When you think about it, the economy is going to be absolutely central to this debate about independence and central to the economy is the currency we use. Now, in the space of about 12 months the Nationalists have gone from adopting the euro which is about as popular in Scotland as it is anywhere else in the UK to simply using the pound like Panama uses the US dollar and that would be disastrous in that you wouldn’t be able to control your supply of money, it would be disastrous for the financial services industry. So they are now saying that they want a currency union but they don’t seem to understand that if you have a currency union, a Eurozone currency union, there are terms and conditions about your taxation, about your borrowing, about your spending, and whatever else that is, it is not independence. There is a further point too of course, unless they are prepared to say now, they will sign up to whatever constraints, whatever strait-jacket this currency union imposes, they cannot guarantee to keep the pound and they are driven back to what a number of them are now increasingly talking about and that is having a separate Scottish currency.

DM: Okay, so a rare element of agreement there with the current Chancellor, George Osborne on that, but what about the direction of the economy, a triple dip recession looming, perhaps, another triple A rating gone from another ratings agency and warnings about changing direction from the IMF. Do you think the Chancellor will ever listen?

AD: Well, I think there were 3 significant events last week, you know the downgrade by the latest ratings agency was pretty predictable, it is politically embarrassing, but I don’t think there is any more significance than that. I think the 2 other things that were more significant, is firstly, the IMF, which George Osborne has relied upon very heavily in supporting his proposition said last week that he was playing with fire, to use their words. And of course the Treasury Select Committee which is dominated by the Tories, as you would expect, they said that his flagship policy of helping homeowners was more likely to create a housing bubble to recreate the very problems that the US sub-prime mortgage crisis that caused so much difficulties. And instead of that, perhaps we ought to be looking at something like building more houses in order to deal with our housing problem, which of course in turn will create jobs. So I think what you saw last week were more and more people saying this policy isn’t working and I’ve been saying that for the last 3 years and it was pretty unfashionable to do so. But what you are now seeing are respected figures inside and outside the UK calling into question the strategy, the big question is how long does the present government simply lumber on hoping that something will turn up?

DM: And how long does Labour ignore the opportunity at this point to tell us what it would do when it comes to spending? We are going to hear from the Chancellor in June the spending plans for 2015 / 2016, that would be a change of government if there is to be one. Labour has to tell us doesn’t it if it would match those spending plans or outspend them?

AD: Well firstly, I don’t think my colleagues responsible for Labour Party policy need to take a position until they actually see what the present government is proposing, because we don’t actually know what they are doing. What is abundantly obvious at the moment though is that things are so uncertain, so unpredictable and especially the longer the government pursues its present policy, the greater the risk that our borrowing is going up, our debt levels are going up, it is very difficult to plan ahead in any sensible sort of way. I think what we are better doing at the moment is concentrating our fire on the government, which frankly despite all the promises it has been making for the last 3 years when they said they knew how to sort this out we would be back into surplus by the end of this parliament, we would be having debt on a downward track, all of these things have been blown completely off course because the government is following a policy that was always going to be fraught with difficulties and it is manifestly obvious it is simply not working. Whatever George Osborne comes up with this summer in relation to his spending, and remember, some of it because he is ring-fencing so much of the health service and various other budgets, there is going to be quite draconian reductions, cuts in expenditure. I think we would be very wise to just wait and see what he actually comes up with because at the moment nothing he says has got much credibility.

DM: Alistair Darling, thank you very much indeed. Former Chancellor there in Edinburgh.

AD: Thank you very much.

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