Darling of business? Interview with the Chancellor
CHANCELLOR of the Exchequer Alastair Darling admits that times are tough but says that the strength of many businesses – particularly in Yorkshire – will help the British economy through the current uncertainty.
Visting Leeds yesterday, Mr Darling answered questions from a panel of business leaders at an event organised by the Leeds Financial Services Initiative at Eversheds offices at Bridgewater Place.
He said it was important to hear about what was happening in British business “from the horse’s mouth” and said he understood the concern about rising fuel and energy prices, inflation and problems in the construction sector.
Mr Darling called on workers to accept below inflation pay rises rather than see Britain return to the experiences of the 1970s when inflation topped 27%.
Mr Darling, who also visited Leeds University Business School and the Grand Theatre during his trip to the city, said he had heard positive news from manufacturers and retailers and also said the city’s financial sector was strong and growing.
“Over the last year I have made a point of visiting different parts of the country to find out what is happening in different industries and sectors outside London.
“As most of us know, it is not all well. High fuel prices have affected every single part of the country.”
Mr Darling said the message coming from business leaders he spoke to in Leeds had many positive aspects.
“There is no doubt that in some sectors that times are tough, the housing market – that is having an affect on the construction industry. The other thing that they said time and time again is ‘remember the good things’, manufacturing – where there are good order books, particularly for exporters.
“Yes, it is tough at the moment but they were confident that we would get through it. It underlines the confidence in the Leeds economy.
“Sometimes cities struggle to change but Leeds in the last 10 years has changed and I suppose the financial services industry is a classic example of that. It provides a third of the city’s wealth and employs a lot of people here.
“People here are confident that they will get through it because they are offering a pretty good service.
“We along with every other country in the world are being affected by two things that started outside this country – the credit crunch and rising fuel and energy prices.”
The Chancellor said he was in “listening mode” and heard from a panel of business people chaired by Chris Pilling, chief executive of First Direct bank.
He received a clear message from Kevin O’Connor, chairman of Leeds Financial Services Initiative and managing partner of accountants Baker Tilly in Leeds.
“I told him he should bring some stability to the tax system, particularly for entrepreneurial businesses. I told him that the tax changes that had taken place of late like taper relief had just lost him the confidence and trust of the entrepreneurial community.
“Less is more, particularly in terms of taxation. He needs to bring some certainty, bring some stability, bring some trust back.”
Robin Johnson, partner at Eversheds, said of the Chancellor: “He wasn’t as grey as he is portrayed! I think he was trying to deal with issues he can affect, such as training and renewable energy. There are issues no government can control but he said his top aim is to maintain stability in the system.”
John Cleland, banking lawyer at Pinsent Masons, told the Chancellor that the construction industry in Leeds was having real problems, with some firms defaulting on bank loans and work now grinding to a halt. The retail sector, he said, was also feeling the strain.
Mr Darling said: “The problems in the construction industry are largely driven because of the disruption in the financial markets, both the commercial sector and the domestic sector. We are in discussion with the industry at the moment.
“The biggest single step we’ve taken this year is to provide support for the banking sector,” he added.
A representative from Asda warned that consumers were now spending £8 on average less than last year on ‘discretionary’ items – but said that middle-market supermarkets such as his and Morrisons were now winning customers away from high-end names like Sainsbury’s and Waitrose.
Mr Darling defended his actions over collapsed bank Northern Rock saying he acted 
to “protect depositors” by taking it into “common ownership”. He said this prevented similar problems at other banks which would have hit the whole economy.
And he said more recent steps by the Bank of England to pump up to £50bn into the British banking sector to increase liquidity will “take time to work its way through” but had been of massive benefit to the British banking sector.
He said rising oil prices had underlined that Britain must look at other energy sources such as nuclear and renewables and he and the Government were taking steps to address this.
But Mr Darling’s message on keeping wage rises down will not be well received by unions and their members.
“We’re going through a period of uncertainty, times are tough,” said Mr Darling. “But there is an optimism that we can get through this and that the economy will continue to grow.
“If we get ourselves into the situation we’ve got ourselves into in the past, where in the 70s 80s and early 1990s every penny you get by way of an wage increase is eaten up by prices rising faster than that you will lose out.
“If we allow home grown inflation to be entrenched as we did – people will remember prices rising one year in the 1970s by 27% – if we allow that to happen again then everyone will lose out, especially those on the lowest incomes because inflation hits them hardest.
“We’ve got to think long term because we’ve been here before, we’ve made mistakes before, and we can’t afford to repeat them again.”
The Bank of England has announced that inflation has now reached 3.3% overall – and warned that it is likely to get as high as 4% before it goes down, double the target rate of 2%.
Mr Darling accepted people were “anxious” about prices going up, and said that he may well again defer putting a further 2p on fuel duty if oil prices remain high in October.
“Every time people go to the filling station they can see the difference, even a year ago it cost a lot less to fill up your car, that’s why it’s important that we take action both here at home and internationally to reduce these pressures and so avoid the problem where we get prices going up and up and up.”
What do you think about the Chancellor’s comments? Are you as confident about the economic outlook? Add your views below.
