Darling backs UK economy as stormclouds gather
Alistair Darling speaks out at Mansion House
Thursday, 19, Jun 2008 12:00
Alistair Darling sounded a note of reassurance in his first Mansion House speech as chancellor.
The chancellor said Britain was on firm ground and not in danger of returning to the dark days of the 1970s in yesterday evening's speech.
Foreign influences, rather than domestic pressures, are influencing inflation, he argued.
But opposition parties criticised the speech, with shadow chancellor George Osborne accusing Mr Darling of not being honest enough about the state of the economy.
Mr Darling called on greater wage constraint in the private and public sector to hold back public prices and warned the economy is heading into a difficult period.
"Times are tough. It will take time for these global difficulties to work through. But our economy will continue to grow," he said.
"Independent forecasters expect UK inflation to fall back next year. Employment is at a record high. Many order books are full… our economy is flexible and resilient."
Turning to the credit crunch and international financial instability, Mr Darling promised to look at ways of restoring confidence in the UK mortgage market and financial services.
"Northern Rock tested our own system of financial regulation," he said.
"There were no easy answers to its problems. But we took the necessary steps to protect savers and wider financial stability.
He added: "I believe that our proportionate, principles based approach to regulation – and the single regulator model that has been widely copied since we put it in place a decade ago - remains the right one for our future.
"As I have said before, the answer is not more regulation, but regulation that is more effective."
The Conservatives' Mr Osborne, speaking on BBC2's Newsnight programme, said: "Frankly, Alistair Darling's speech tonight told us nothing – there was no new information and he wasn't, I don't think, upfront about the big challenges facing the British economy.
If he were in government, Mr Osborne said, "the first thing I would do… is be much more honest about the state of the British economy at the moment".
Liberal Democrat economic affairs spokesperson Vince Cable warned the chancellor to avoid putting his own political survival before the state of the economy in the coming months.
"The government's fiscal rules were devised with a purpose and must not be compromised to deal with political problems," Mr Cable commented.
"It is only through a careful and considered approach to public spending that the UK will be able to ride out the economic storm."