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DERMOT MURNAGHAN: Now then, 2012 has started much in the same way as last year ended – unemployment remains high and growing, retailers are facing tough times as consumer confidence falls and the European debt crisis rumbles on so is Britain inevitably facing a double dip recession? In a moment I’ll speak to the former Chancellor, Alistair Darling, but just let me tell you about our Twitter experts watching the discussion first, they are Vincent Moss, political editor at the Sunday Mirror, Kevin Schofield, the Sun’s political correspondent and editor of City AM, Allister Heath. They provide their reactions via Twitter which you can read on the side panels and you can follow on our website, skynews.com/politics and join in of course using the hashtag #murnaghan. Well a very good morning to Alistair Darling who joins me from Edinburgh, Mr Darling first of all your broad economic view of course in power in 2008 when the banking crisis really hit, how high do you assess the risks and chances of another one happening in 2012?

ALISTAIR DARLING: Well I think the best we can expect this year is simply to bump along the bottom however there’s no doubt that if the eurozone crisis is not resolved, the chances are you will get recession in Europe and if Europe goes into recession then we will follow, because it is such a big market. I think the imperative at the moment is for the eurozone leaders to finally face up to the fact that they have to sort out this imbalance between the richer more powerful countries and the poorer countries on the periphery of Europe. If they don’t do that I can see nothing but unmitigated disaster.

DERMOT MURNAGHAN: Unmitigated disaster, that’s quite a phrase from a former Chancellor. Is that because the credit crunch, which of course started in 2007, seems to be unaddressed? Banks of course across the continent, and beyond, in terrible difficulties and of course the difference from 2008, we have sovereign debt crises as well.

ALISTAIR DARLING: Well that’s right. In 2008 you were dealing with a banking crisis, which although difficult to deal with, you can and indeed we did deal with it and of course our economy started to grow up until the end of 2010. What you’ve now got is doubts over the solvency of countries, is much more widespread and it’s interesting that at the end of last year the ECB rightly put billions of pounds into the eurozone system to try and avoid another credit crunch, what’s happened now is it appears the banks have lodged that money back with the European Central Bank rather than lending it to each other, which illustrates to me that people are desperately worried about the solvency not just of individual banks but of countries themselves, which is why – and the reason I use the term unmitigated disaster is it doesn’t have to be like this. If countries would act together in the same spirit that they acted together in 2009, then in Europe we could – and it would be painful, it would be slow but at least we could begin to turn the corner and then get the economies growing again and of course if you don’t get growth, you never do get your borrowing and your debt down. That’s why I think the summit just before Christmas was a complete disaster because they came up with a solution if you like, which may have been appropriate a few years ago but it is actually locking them into a suicide pact where the poorer countries will keep having to cut and cut again, they will deflate, they will find it more and difficult to grow – Greece is perhaps the most obvious illustration of that – so you had a complete wasted opportunity back in December. I would like to think that the eurozone leaders spent Christmas working on a plan that we will see shortly but a plan we do need, if Europe is going to turn the corner, and it is terribly important that we’re engaged in that process.

DERMOT MURNAGHAN: You talk about addressing some of the mistakes of the past as well, and one of them that is still with us it seems is excess in our boardrooms in terms of pay and bonuses. Do you think the Prime Minister is on to something when he talks about plans to allow shareholders in particular to have more power when it comes to rewarding executives and of course when they fail?

ALISTAIR DARLING: Of course and the break between what someone actually does and what they get paid was graphically illustrated during the banking crisis. Now if the government is going to come up with new plans for shareholders, that’s all very well but a word of caution here – you can give shareholders that right but who in practice are the shareholders? Well they tend to be the institutional investors, the pension funds and so on – will they actually say hold on, this pay rise is too much or these bonuses can’t be justified? You can take a horse to the water but you can’t make it drink so let’s wait and see what actually happens. One of the difficult things of course is it is very difficult to legislate for common sense and it is an absence of common sense in some boardrooms, and in particular some banks, that has caused so much difficulty.

DERMOT MURNAGHAN: You talk about getting the shareholders to do that, of course I suppose you were one of the main shareholders, we were one of the main shareholders in RBS when Fred Goodwin departed from that company on your watch in power with a huge pension pot. Is it a matter of regret to you that you didn’t do something about that?

ALISTAIR DARLING: Well we looked very carefully at doing something about it, the problem was that Fred Goodwin had a legally binding entitlement which was agreed by the board long before the government had to take a shareholding in it. Believe me, if we could have done something about it, as it was it was a struggle to persuade him to take a reduced sum which still on any view is a very substantial amount. No, I think what is necessary, yes perhaps we do need to tighten up the legislation, there are other proposals in relation to transparency, to more accountability, that my own colleagues, Ed Miliband and others have been putting forward which I do think need to be looked at and considered but at the end of the day what it really needs is shareholders to insist on sensible awards. I think what’s gone wrong is that the whole concept of a bonus has been distorted. A bonus surely is something special, something unusual, something you give in return for a bit extra or something especially good, not a matter of routine and entitlement and I think that is what has gone wrong. So the legislation, let’s see what it has to say but at the end of the day, as I say, it is very difficult to legislate for common sense. Common sense, one would hope, is something that would come naturally to people but so far we haven’t perhaps seen as much evidence of that as we might like.

DERMOT MURNAGHAN: We’ve been looking at the economic prospects for 2012, what about the prospects for your own party, Mr Darling? Do you see them as fairly rosy with Ed Miliband in charge?

ALISTAIR DARLING: Yes. We’ve been talking just now about corporate responsibility and there is a lot of debate in the papers today about how we can get more responsibility, well Ed floated that in his conference speech last year so I think it’s simply not true to say he isn’t making the weather. Obviously we’ve got a lot more to do, we’ve got to restore our reputation for economic credibility and I know that Ed Balls said at the end of last year that he recognised the fact that we are going into a world where there is going to be less money around. We’re not going to be able to go into the next election promising to spend money on this, that and the next thing, many of my colleagues – Jim Murphy earlier this week, Douglas Alexander, Liam Byrne – they’re all showing signs, encouraging signs, that we are getting to grips with some of the problems that maybe we have wrestled unsuccessfully with in the past. So we’ve got a long way to go, we need to be further ahead in the polls, we need to restore that credibility but that’s always difficult in opposition.

DERMOT MURNAGHAN: But is part of that lagging in the polls down to the leader, down to Ed Miliband? His own advisors planting the thought in the country’s mind in a memo saying that of course he is not Labour’s Iain Duncan Smith, the failed leader of the Conservative party about a decade ago, the idea that somehow he is not getting his message across.

ALISTAIR DARLING: No, it is difficult. Last night I went to see the film The Iron Lady and you are looking back on Mrs Thatcher’s life. I do remember, because I’m just about old enough to do that, the first year or so of her spell as leader of the opposition, lots of her people were saying, oh well I’m not sure she’s up to it. Whether you agree with her or not, she went on to be a Prime Minister for a long, long time so it is difficult but as I’ve said, what we do need to do is to establish a credible and compelling position on the economy. We need to be clear about our values, what sort of country we want to see, where jobs are going to come from in an increasingly difficult world so yes, this next year is going to be pretty important because we’re just about half way through this parliament and elections are won over years and not over months. So we do have a lot to do but I think some of the criticism pointed in Ed’s way is a bit unfair.

DERMOT MURNAGHAN: Okay, it’s interesting, Mr Darling, in terms of comparisons of Mr Miliband with former Conservative leaders, I mentioned Iain Duncan Smith, you said Lady Thatcher. You really think Ed Miliband could go on to become Lady Thatcher, not in terms of policies but in terms of longevity and how effective he is?

ALISTAIR DARLING: I was simply making the point that if you look at leaders of the opposition, of both political parties, main political parties, very often in the first two or three years people say oh well, I’m not so sure they’re going to be able to hack it and it’s not working out. It is a difficult task, it is one of the most difficult jobs in British politics as people say. Obviously collectively we together have got a lot to do to claw back the ground that we lost at the time of the last election, I think Ed recognises that, his Shadow Chancellor recognises that, his colleagues recognise that but I think some of the criticism is a wee bit unfair and if you look at the big debate this weekend, it just so happens that I think Ed kicked that off last autumn.

DERMOT MURNAGHAN: You say some of the criticism is unfair but of course it is there as we have all been reading. I’ve just been handed these latest odds on the next Labour leader by a bookmaker and the headline is ‘Darling in comeback as Labour leader? Odds halved to 25/1 as an interim leader’, would you volunteer if asked?

ALISTAIR DARLING: No. Look, I’ve made my position clear, I’m a backbench Labour MP, I’m happy to serve there. I hope we’ll win the next election but I’ve made it clear that I’ve stepped back from frontline politics and I’m going to devote all my energy to helping the present front bench, including the present leader, as well as intending to vote some time to make sure I play my part in making sure that Scotland remains in the United Kingdom. So that’s where I’ll be for the next couple of years or so.

DERMOT MURNAGHAN: So that’s that, full stop? The back benches, no comeback onto the front benches, as again we saw with Michael Howard of course and the Conservatives after Iain Duncan Smith?

ALISTAIR DARLING: Well never mind them, I’m very clear where I’m sitting at the moment and I’m remaining there and bookies can sometimes get it wrong.

DERMOT MURNAGHAN: Okay, to the point there. Alistair Darling, thank you very much indeed for your time, the former Chancellor Alistair Darling staying firmly on the backbenches.

ALISTAIR DARLING: Thank you.