As David Cameron attacks the record of the last Labour Government in Westminster (PMQ’s) and demands an apology for “the mess they made of RBS”, Business for Scotland says there are still questions Darling must answer on the ongoing banking scandal.
Banking bonuses are highly contentious but the press are ignoring the real story
Today Cameron said to Ed Milliband:
“You come here every week to complain about a problem created by the Labour Party. Last week it was betting, this week is was banking. You rise up with all the moral authority of Reverend Flowers – where’s the apology for the mess you [Labour] made of RBS in the first place?”
Commenting on today’s exchanges between UK Labour Party Leader Ed Miliband and his colleague in the No Campaign Prime Minister David Cameron, Business for Scotland, said:
“Once again we see splits in the anti-independence No Campaign on Alistair Darling’s competence.”
“Darling is the last person we should trust on the economics and finances of Scotland’s past or its future after a Yes vote.”
“As his own colleagues in the No Campaign pointed out again today, it was Darling that allowed RBS to keep paying big banker bonuses.“
“The buck of banking regulation stops at the Chancellor and Darling was quite simply asleep at the wheel.”
“Darling invested £45bn of taxpayer cash into RBS under an arrangement by which we are unlikely to ever to see most of it returned. Meanwhile, as his own colleagues in the No Campaign pointed out again today, it was Darling that allowed RBS to keep paying big banker bonuses.”
“Darling really is the No Campaign’s Weapon of Maths Destruction. Scotland needs to put the legacy of a failed Westminster system behind it and move forward with the powers of independence to sustainable economic growth.”
Note: Prime Minister David Cameron’s response to Ed Miliband’s questioning on RBS bonuses at today’s Prime Minister’s Questions was as follows:
PM: “We’ve just had a demonstration of the grasp of maths that was involved at the Treasury [under the previous Labour government]. No wonder we had banks collapsing and all the rest of it.
“You come here every week to complain about a problem created by the Labour Party. Last week it was betting, this week is was banking. You rise up with all the moral authority of Reverend Flowers – where’ the apology for the mess you [Labour] made of RBS in the first place?”
Banking scandal questions Darling must answer
The No Campaign started to stutter when leading Conservatives questioned the competency of Alistair Darling as its leader. They raised fears that Darling has little campaigning experience and his style was ill-suited to the challenge of 2014.
Dysfunctional London economics
It is, however, unsurprising that concerns regarding Darling’s competency are raised. He was, of course, central to the economic calamities of the previous Government. This record included a fixation with financial services and a property boom – which drove growth, but at the expense of manufacturing and production. It included a growing disparity between the North and South within the UK – as the wealth division between the City of London and the rest became a gulf. And it included a record of poor financial oversight and regulation which led to the banking crash and contributed to the deepest recession since the 1930s.
Robert Peston, the Economics Editor for BBC News, was scathing of this record in his books ‘Who Runs Britain?’ and ‘Brown’s Britain’. He highlights the desperation of an economic clique in Whitehall to provide tax support to hedge funds and financial capital above the overall health of the economy. Darling was very much a part of this.
Darling’s response to the banking crisis was an extension of this economic strategy. His account of the time, ‘Back From the Brink’, attempts to deflect criticism onto Gordon Brown as Prime Minister and Mervin King at the Bank of England.
Darling: A Treasury brief from 1992-98 and 2007-10
However, Darling cannot be separated from the decisions that led to the crisis. He was Labour spokesman on Treasury Affairs and then Chief Secretary to the Treasury across the period of 1992-1998. Alongside Gordon Brown, Tony Blair and Ed Balls, he was an architect of – if not at least heavily complicit in – the deregulation and tax cuts which let the financial sector spiral out of control.
By his time as Chancellor this serious error led to crisis. It was compounded by a series of errors and misjudgments – not least Darling setting the course for UK austerity by proclaiming the need for cuts “deeper and tougher” than those of Margaret Thatcher.
Under Darling, capital investment nearly halved when it should have been expanded in the wake of credit crisis to boost growth, jobs and revenue. Most economic commentators on the left and right accept that was a major mistake. Even the Tories reversed it to an extent, albeit indirectly and too little too late.
Criticisms over Lehman Brothers errors
In the documentary films “Inside Job” and “Hank”, Darling’s decision to block US Treasury Secretary Hank Paulson’s rescue plan for the sale of the good part of Lehman Brothers to Barclays is heavily criticised. Darling mis-judged the contagion impact of a Lehman’s collapse, a fact which meant taxpayers had to invest even more money in RBS and other banks than would have been the case.
Yet some of the financial issues are equally concerning.
Questions Darling has to answer
1) Why did he allow such poor regulation by the Financial Services Association which was one of the major contributors to the financial crisis? The FSA was the responsibility of the Treasury and Alistair Darling – both in his earlier and later periods in the department. HMT and its associated regulators were asleep at the wheel leading to a range of scandals including over-leveraging on toxic debt and the Libor rate rigging scandal.
2) Darling was criticised for inaction over the Royal Bank of Scotland “bank robbery” unit which shut down businesses through excessive fees. This was in a drive to return RBS to profitability. Darling signed off on the over-riding strategy in February 2009, one element of which was then implemented by the Global Restructuring Group. Darling was briefed on the activities by Derek Sach in January 2010, but was reported by Ian Fraser of the Sunday Herald to have “failed to ask the right questions“. Does Darling deny this?
3) Alistair Darling, as Chancellor in conjunction with the FSA, signed off the RBS takeover of ABN Amro. This, according to reports, squeezed the bank’s capital buffers and exposed RBS to more troubled loans and toxic debt. Why was Treasury scrutiny of the takeover so poor?
4) While Chief Secretary and Chancellor, Darling’s policies prioritised the interests of a select few financial institutions over the interests of small and medium sized businesses. HMRC, for instance, continued to rigorously enforce tax collection and regulation – unless it related to golden hand shake deals with larger corporations and individuals. Vodaphone and Phillip Green were allowed to walk away from huge tax liabilities, while smaller companies – without the same legal and administrative support- faced the full weight of the regulation and tax code. Why were smaller businesses so unfairly treated on his watch?
5) It’s no surprise with this record that Alistair Darling has sought to re-write the record both of the banking crisis and Scotland’s economic position. His claims that Scotland would not have survived the crisis are morally dubious (given his own contribution to the crisis) and the economic evidence of trans-national finance that disproves his assertion. Does he deny that the US Federal reserved committed more the UK bank bail outs that the UK did and that Scotland would have actually paid no more as an independent country as it did as part of the UK?
Business for Scotland is non-party political and we reserve the right to attack what we see as damaging incompetence on behalf of any politician. We believe that a Government of any colour in an independent Scotland would be better for Scotland than a government of any colour based in Westminster.
However in the course of the referendum debate on Scottish independence there remain serious questions over Alistair Darling’s competency. He was not solely responsible for the systematic and trans-national failures of the financial system. However, he was complicit in the economic policy shift within his party that exacerbated these problems and led to economic catastrophe (not to mention the failure to resolve the many other economic failures of UK plc).
As Alistair Darling in his capacity as head of the No Campaign releases further economic misinformation on Scotland’s economy, the people of Scotland must reflect on his record in government. It wasn’t successful, it wasn’t stable and it certainly wasn’t prosperous. It isn’t a message the people of Scotland can trust.
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