Darling lifts lid on power struggle at Labour’s heart as UK crashed

A NEW book by Alistair Darling has reportedly described Gordon Brown’s mood as he sought to tackle the financial crisis in 2008 as “brutal and volcanic”.

The former chancellor, whose account of the tumultuous events around the credit crunch is published next week, is also said to use the book to attack Mr Brown’s trusted advisers Ed Balls and Shriti Vadhera, claiming the latter was “only happy if there was blood on the floor – preferably of her colleagues”.

In comments sure to embarrass the governor of the Bank of England, Sir Mervyn King, Mr Darling is quoted as describing him as “amazingly stubborn and exasperating”.

The quotes from the book, posted by a Labour-supporting blog yesterday, look set to offer a fresh insight into the personal warfare inside the Labour government in the autumn of 2008, as ministers and central bankers sought to tackle the full force of the credit crunch and save the UK economy from collapse.

As the crisis mounted, sources say Mr Darling was fighting off attempts to depose him at the Treasury by Mr Brown’s allies – later described by the former chancellor as “the forces of hell”.

The book, Back from the Brink: 1,000 days at Number 11, is published next week, but the Labour Uncut blog claims it had seen extracts from the text, which is to be serialised this weekend.

Mr Darling’s description of Mr Brown will further expose the rift which developed between the two men after they took over at the helm in the summer of 2007, when the former replaced the latter at the Treasury.

The book is understood to reveal how Mr Brown sought to run what Mr Darling describes as a shadow Treasury within No 10, undermining the real Treasury next door. It is said Mr Brown even tried to put his own aides in the Treasury to report back to him on what the chancellor was doing.

Mr Darling is understood to have refused to have the newly ennobled Baroness Vadhera in his team, and when Brown ally Yvette Cooper was appointed chief secretary to the treasury in January 2008, he concluded she was there to “keep an eye” on him.

It is believed the book confirms Mr Brown sought to reshuffle his then chancellor, replacing him with Ed Balls – and that this was thwarted only when Mr Darling said he would walk out of government if he went ahead. Faced with such a threat by a man who had won credit for his handling of the financial crisis, Mr Brown was forced to back off.

Details of such a plot will be deeply damaging for Mr Balls, who has long denied there was any attempt to put him in the Treasury at Mr Darling’s expense – although senior Labour sources last night said the plot had indeed been hatched and was only called off at the 11th hour.

While much of the detail on the relationship with Mr Brown will confirm existing assumptions, Mr Darling’s criticism of Sir Mervyn will come as a surprise.

The book is understood to reveal the Labour government came close to letting him go after just one term – which would have made him the first one-term governor for 50 years. Only when a suitable alternative could not be found was he re-appointed.

Mr Darling’s book is said to reveal the “prickly and strained” relations between Sir Mervyn and Lord Adair Turner, the then chair of the Financial Services Authority. He is believed to place some of the blame on these poor relations for the regulators’ failure to spot the crash coming.

The Edinburgh MP’s book is expected to give a detailed account of the attempt by the Labour government to prevent economic meltdown in the wake of the Lehman Brothers’ bankruptcy. Mr Darling pushed forward a £500 billion bail-out for Britain’s banks, as the full scale of the global credit crunch hit home. His measures saw both Royal Bank of Scotland and Lloyds Banking Group becoming majority owned by the taxpayer.

Mr Darling was appointed by Mr Brown in July 2007, as one of his most trusted allies. However, the relationship is said to have soured from August 2008, when Mr Darling warned that the economic times the country was facing were “arguably the worst they’ve been in 60 years”.

The chancellor subsequently openly accused Mr Brown’s team of trying to bring him down. “I’d done this interview and the forces of hell were unleashed,” he said.

Tensions between the pair also flared prior to last year’s General Election when Mr Darling urged Mr Brown to talk up the party’s deficit reduction strategy, to show that Labour had got a grip on spending.

After Labour lost the election, he claimed Mr Brown’s campaign had failed to “talk openly about the deficit” and had got sidetracked instead by attempting to beat the Conservatives on a pledge of “investment versus cuts”.

Sources close to Mr Darling said in the early stages of his time as chancellor, Mr Brown’s allies were “actively seeking” to replace him at the Treasury – and that they then used his outspoken warning about the economy to bolster their case. They said concerted efforts had begun after Mr Darling’s warnings about the state of the economy in the summer of 2008.

One senior Labour source said: “This all sounds very accurate. And it was not Alistair who was to blame for this. Alistair is not a precious type. He is a big grown-up and he knows politics is a rough game. If he was complaining it was too rough, then it was too rough.”

The source went on: “There were briefings ongoing that he was going to be removed from the Treasury and that Ed Balls would take over. It was common knowledge.”

However, other Labour figures sought to play down any talk of a rift between the pair.

One said: “There may have been personal disagreements, but the truth is that Alistair and Gordon got the big calls right. They stopped the banking crisis from tipping the country over the edge and acted quickly, all the while being opposed by the Tories.”

A spokesman for Atlantic Books, which is publishing Mr Darling’s account of the crisis, said they had no comment ahead of publication next week.

But Conservative Party chairman Sayeeda Warsi seized on the claims as proof that key Labour figures had put party infighting above the nation’s interests.