Alistair Darling urges George Osborne to 'act now' on economy

Alistair Darling and George Osborne Mr Darling said Mr Osborne and the Bank of England had "given up" on growth

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Chancellor George Osborne must change course on the economy now or cause "immeasurable damage", his predecessor Alistair Darling has warned.

In an open letter, published in the Sunday People, the Labour MP claims both Mr Osborne and the Bank of England have "given up on any plan for growth".

He suggests more spending on homes, the railways and a third Heathrow runway.

The government says that Mr Darling presided over the UK's biggest post-war deficit as chancellor.

It also says he failed to regulate the banks effectively.

Mr Darling's open letter to his Tory successor calls for "urgent action to promote growth".

Start Quote

Most parts of the country are short of homes so we could do with tens of thousands more”

End Quote Alistair Darling

"Your policies since 2010 simply haven't worked, you need another plan - call it plan B, call it whatever you like," he adds.

"But unless you do something now it will be years before we recover."

Mr Darling says low interest rates mean it is "just the time to kick-start some major spending projects".

These should include replacing ageing power stations, investment in rail and Heathrow's third runway.

"And George, you must build more houses - it helped get Britain out of depression in the 1930s," he adds.

"Most parts of the country are short of homes so we could do with tens of thousands more."

And he says the Bank of England should halt its programme of quantitative easing - the process by which more money is pumped into the economy - until it is clear that banks are passing more cash on to businesses through increased lending.

"This money is simply not finding its way out of the bank vaults. So the Bank of England should use its powers to make it less attractive for banks to sit on money," he says.

Unhelpful timing

Mr Darling ends the letter by quoting advice from economist Maynard Keynes that "when the facts change, you change your mind".

"The facts have changed, George. And you must change your mind," Mr Darling adds.

BBC political correspondent Iain Watson said Mr Darling's tone was less partisan than that of shadow chancellor Ed Balls.

For example, Mr Darling says he is sure "Labour is keen to work with you on social care issues and welfare reform".

But with Mr Osborne under pressure from some of his own backbenchers, the timing of the intervention was not helpful, our correspondent added.


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  • rate this

    Comment number 423.

    @395 John from Hendon and 393 Javaman.

    The current economic crisis was not caused by de-regulation, but by a credit boom i.e. the government borrowed money it did not have to blow the public sector up to a size the economy could not support, and citizens borrowed way too much. Now it has to be paid back, which is inevitably depressing the economy. The govt and BOE irresponsibly let this happen.

  • rate this

    Comment number 422.

    I also predicted that QE would have no significant effect. Ministers cannot solve the problem until they have the facts about its cause.

  • rate this

    Comment number 421.

    I am so sick of party politics.

    This issue is just too important for cheap shots based on which party someone represents instead of whether they make sense or not.

    I would like to each party grow up a little, nominate people with experience in economic management and free them from the worry of toeing the party line so they can work together to formulate a decent cross-party plan.

  • rate this

    Comment number 420.

    The Euro crisis mus be resolved first. The UK does 40% of its international trade with the Eurozone. It's a good idea to reduce this, but that won't happen overnight - we have to persuade them to buy from us. Larger UK companies are sitting on the money to get us out of recession - they want to invest it, but are frightened to, because the Euro could come crashing down at an minute

  • rate this

    Comment number 419.

    410. billbedo "right to buy"

    Fine have the house for 3 times your wage


    Accept that if you subsequently sell the house for more that you give all profit back to the state.

    see 411 below.

  • rate this

    Comment number 418.

    386. Duncan “George Osborne is about as much use as an appendix.”

    My appendix nearly killed me! Osborne and his policies are doing the same to the country.

  • rate this

    Comment number 417.

    To all those mad men who still think Labours past policies are to blame for the current problems just remember that they only did it by "stealing your clothes".

  • rate this

    Comment number 416.

    Building houses is pointless if the only people who can afford them have enough cash to put down a 20% deposit to be offered a mortgage. A third runway at Heathrow what cost of borrowing would this be Alistair? The Conservatives have made some very tough but very neccessary calls and have been praised by the IMF for doing so, I only hope people do not forget so easily that Labour were the cause

  • rate this

    Comment number 415.

    For Labour to win the next election , they need to dump Miliband , Balls , Harman et al and bring back David Miliband and Alistair Darling to form a new Government .

  • rate this

    Comment number 414.

    Alistair Darling - nice man - very charming - but as a politician and Chancellor - what a waste of time and space. Time to wake up and get real you Labour supporters.

    It is happening all over the world, Not just here, what a shame you cannot see past the English Channel or are you all blind, or just politically ignorant of world economies. WE may be an island but in world terms we are zero.

  • rate this

    Comment number 413.

    If your faith is wavering with the way that George chancellor of the exchequer REALLY! Is handling the economy (when he's not watching jolly hockeysticks with Kate) You can always draw faith from the supreme expertise and wise guidence of Sir Mervyn King??????

  • rate this

    Comment number 412.

    347 stevo

    Your post comes across as arrogant & simple but I'll give the benefit of the doubt as character limits restrict us.

    Cut income tax - we need low paid workers to have and spend more money. Public/private contracts to be cost effective, rather than looking like corrupt scams, among other things. I think that the public's also sick of tax avoiders & government reluctance to tackle them.

  • rate this

    Comment number 411.

    387.Le P "A stamp duty holiday on low value houses."

    Do you work for a bank?

    Our house prices are far far higher than our competitors (3 or 4 TIMES HIGHER in London).

    We have to be price competitive across the board from assets through productivity and wages and the we will be able to make the best use of our (sleeping) native genius.

    The last thing we need is higher house prices.

  • rate this

    Comment number 410.

    Why dont all persons in housing association be given the right to buy their flats at a reduced rate. I live in a granger HA flat for 18 years, it used to be church commission. I would like to put in a new kitchen etc but the flat is not mind. Grainger charges all new tenants near double as to what I pay, grainger is making lots of money. I need a new kitchen and bathroom. Give me right to buy

  • rate this

    Comment number 409.

    In any economy, if producers pay workers just enough to buy what's produced the system's sustainable (ignore pensions for simplicty). If that equation is not maintained then we have boom and bust. The idea that growth somehow solves this is false, growth's a boom leading to the bust. How many times does it take to learn that lesson?

  • rate this

    Comment number 408.

    I dont think we need worry. If Labour gets back in in two years time they will be spending all the savings that the coalition have made and then some. If Darling is right then the UK will take off like a rocket. Of course if he is wrong your taxes will be permanently going up 25% for no good reason and long term decline will continue.

  • rate this

    Comment number 407.

    Without "growth" the old banking model cannot work.

    Without "growth" the new "too big to fail" model works if you can accept fascism and impoverishment for all but the wealthy.

  • rate this

    Comment number 406.

    I predicted economic problems in the west 20 years ago, due to the (ongoing) anti-science policies of government (esp. UK). About a year ago I predicted zero growth today, when experts predicted small growth. I am not a better economist than the experts, but I do have some understanding of the plight of the People. Ministers are not stupid, they are simply misinformed, ignorant of the problem.

  • rate this

    Comment number 405.

    We want the banks to lend, but we also want them to hold more capital in case the EU explodes.

    We want people to borrow but they have no confidence or job security.

    We want businesses to borrow but they won't take the risk with all this uncertainty.

    We want to export but we can't because who we export to are also broke.

    It's still a world problem it needs a world wide solution.

  • rate this

    Comment number 404.

    When you reach a point where it's almost 10% of the population on the edge of going bust you are certainly in deep kack! Many are saying that is about where we are now, so it's time for a complete change to basic structure in the way you operate or you quite simply die! The last to see that will be those who have the most by the time they realise this it'll be too late & then they die too! Simples


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