'World just hours from collapse' says Darling

Shadow chancellor Alistair Darling told an audience at the Edinburgh Book Festival last night that the world economy was just "hours away" from collapse at the height of the financial crisis.

He also claimed it was only action by Labour that helped avert the crisis, but admitted that his party failed to convince the public that it could be trusted on the economy.

The Scotsman revealed yesterday that Mr Darling was preparing to launch a thinly-veiled attack on former prime minister Gordon Brown, saying Labour lost the General Election because it ignored the deficit.

In a lecture at the Edinburgh Book Festival - sponsored by the Royal Bank of Scotland - he set out a staunch defence of his handling of the economy and made several swipes at the culture of risk among banks.

He said: "I remain confident that considered history will show that we handled the financial crisis of the past few years with competence, integrity and above all an absolute determination not to put short-term political advantage before the interests of the country.

"But while I believe we won the war, we lost the peace.

"Won because the decisions we made did, I believe, avert economic catastrophe - and we were just hours away from that happening. Lost because we failed to persuade the country that we had a plan for the future."

In a swipe at the banks, he said: "The words of one leading banker to me at the height of the crisis illustrate how widespread the ignorance had become.

"He took me aside at the end of one of many meetings and told me, with pride, that his board had decided just the day before that in future the bank would only take on risk that they understood.

"I was not sure whether or not this was meant to reassure me.

"Either way, we - and here I mean you - soon ended up owning most of his bank."