Lord Darling of Roulanish, Gordon Brown’s Chancellor through the financial crisis who led the Scots ‘No’ campaign – obituary (2024)

Lord Darling of Roulanish, who has died of cancer aged 70, endured an uncomfortable three years as Gordon Brown’s Chancellor, having taken over from him in 2007 just before the global banking crisis threw Britain’s economy into recession.

Alistair Darling suffered further heading the campaign for a “No” vote in Scotland’s 2014 independence referendum, as a comfortable lead eroded. Two years later, he found himself on the losing side in the Brexit referendum after sharing a platform with George Osborne to warn that leaving the EU would bring economic disaster.

During the financial crisis, Darling’s measured Edinburgh lawyer’s manner, light grey hair and fiercely black eyebrows featured nightly on television as he and Brown worked desperately to avert a total collapse.

Having stabilised the UK economy at the price of an annual deficit approaching £175 billion, he was undermined by Brown’s refusal to contemplate spending cuts until after the 2010 election, which Labour lost.

Brown, his long-time friend and ally, had in 10 years as Chancellor claimed to have ended “boom and bust” and created a prosperous economy driven by a financial services sector subject to world-class regulation.

On Darling’s watch it became evident that British banks had a major exposure to “toxic” loans on the American property market, and that neither the Treasury, the Bank of England nor the Financial Services Agency created by Brown had any real awareness of this.

The result was disastrous. A run on the former building society Northern Rock in September 2007 forced Darling to give £20 billion in guarantees to give it liquidity; when this failed, he nationalised it.

The collapse of Lehman Brothers a year later brought to a head fears over banks’ ability to meet their commitments. The supply of credit dried up, with dire consequences for the property market and for business.

Darling, who had initially urged bankers to “get back to good old-fashioned banking”, found himself forced – in concert with Washington and the EU – to inject billions into the system in an attempt to put a floor under the banks’ losses and get credit flowing again.

He hoped an infusion of £37 billion into the banks as equity, and the takeover of Halifax/Bank of Scotland by Lloyds TSB, would steady the ship. But lack of confidence within the sector as further massive bad debts came to light – culminating in Royal Bank of Scotland reporting a £7 billion annual loss – forced him to put in £50 billion more in January 2009.

Most banks apart from Barclays and HSBC were by then under majority government ownership. Yet bank shares remained weak, amid global concerns over the impact of such massive intervention on sterling, which lost one-third of its value in a year.

Darling had become Chancellor with a record of financial prudence. As Chief Secretary to the Treasury he held down departmental budgets to levels set by the Conservatives, in preparation for a later increase in spending that was supposed to be measured, but led to Brown borrowing even in the good times.

As Secretary for Work and Pensions he held the line on spending, and as Transport Secretary he cancelled schemes he considered extravagant. (In the Lords, he would conduct a rearguard action against the construction of HS2). He was as careful with public money as Trade and Industry Secretary, before returning to the Treasury when Brown succeeded Tony Blair.

Economic conditions forcing him to borrow on a heroic scale with the coffers already empty were not Darling’s only inheritance. Brown had announced a cut in the standard rate of income tax from 2008 to 20p in the £, funded in part by abolishing the 10p starting rate. Darling in his first Budget confirmed the change, then was engulfed in fury as Labour MPs realised it would penalise the lowest-paid. He hurriedly found £2.7 billion for a range of offsetting allowances.

Other controversies were of his own creation. Darling announced a review of the rule under which non-domiciled foreigners lived tax-free in Britain because of their contribution to the economy. Some of the wealthiest threatened to leave, and Darling’s compromise – under which “non-doms” paid a lump sum of £30,000 – left few satisfied.

He upset small businesses with a simplification of Capital Gains Tax which lowered it from 40p in the £ to 18p but ended a raft of exemptions. One enabled owners to sell their companies at a CGT rate of 10 per cent to finance their pensions; their fury won some concessions.

Colleagues rated Darling highly astute, a safe pair of hands – and if anything too cautious. As Chancellor he was as good as the advice he was given, and in happier times could have made a success of the job. Blair had found him reliable in his previous posts; he was, with Brown and Jack Straw, the last survivor of the Cabinet of 1997.

Darling as Chancellor grew frustrated at economic initiatives from Number 10, the tension coming to a head in 2009. Brown was only prevented from sacking his old friend and replacing him with his confidant Ed Balls because a series of Blairite resignations from the Cabinet put his own survival in question; Darling refused to budge. That December, Brown blocked him from cutting the deficit.

Brown again refused to countenance talk of cuts when Darling presented his final Budget weeks before the 2010 election. The size of the deficit became a central issue in the campaign, and in defeat Darling pinned the blame on Brown.

Darling had come to Westminster with a reputation as a firebrand. At Aberdeen University he joined the International Marxist Group, and as a Lothian regional councillor he urged confronting Margaret Thatcher by refusing to set a rate.

In the Commons Darling – who shaved off his beard on Brown’s orders just before Labour came to power – proved more moderate, and a sceptic about Scottish devolution. He was skilful in the House and had an eye for detail, and his work in opposition ensured him a place in a New Labour Cabinet.

Alistair Maclean Darling was born in London on November 28 1953, the son of Thomas Darling, a civil engineer, and the former Anna Maclean. His great-uncle was Sir William Darling, a Conservative MP for Edinburgh South.

When he was 12 his parents returned to Scotland and he was sent to Loretto, of which he would say: “I would not inflict on my own son what was inflicted on me.” The future Conservative transport minister Robert Key taught him Classics.

Darling took an LLB at Aberdeen, becoming convenor of the Students’ Union. He qualified as a solicitor in 1978, then decided to become an advocate, being admitted to the Faculty in 1984. He resigned from it in 2010.

He joined the Labour Party at 23, and in 1982 was elected to Lothian council. When the council’s stand-off with Mrs Thatcher’s government was at its height, Neil Kinnock paid a visit to calm the situation. He left observing: “I never want to see that bearded Trot becoming an MP.”

Darling did just that in 1987, capturing Edinburgh Central – which included Holyroodhouse and Murrayfield – from the Conservative Scottish Office minister Sir Alex Fletcher. Despite his reputation he was drafted into Labour’s policy review team, then snatched up by Roy Hattersley as a home affairs spokesman.

He persuaded Hattersley to drop his opposition to a Bill of Rights, did effective work on the Broadcasting Bill and the future of Hong Kong residents after the handover to China, and dismissed the idea that identity cards would curb rising crime.

In 1988 Darling was one of 10 Labour MPs who won “substantial” libel damages from the News of the World for erroneously claiming they had missed a debate on the NHS because they were drinking.

When John Smith became leader after the 1992 election, he made Darling the City spokesman in Brown’s shadow Treasury team. He decided against resuming Smith’s “prawn co*cktail offensive” to woo the financial sector, saying: “I have received more invitations from the City than I could ever cope with.”

Darling attacked the Bank of England’s handling of the collapsed Bank of Credit & Commerce International, asking prophetically: “When is this going to happen again?” And when Barings was laid low by the rogue trader Nick Leeson, he commented: “If the Bank of England, an arm of the Government, is involved in trying to rescue a major bank, then we are entitled to expect the Chancellor [Kenneth Clarke] to tell the House about it.”

After the collapse of the Maxwell brothers’ trial, Darling called on ministers to review the work of the Serious Fraud Office. He pressed for an investigation into claims of insider dealing by Lord Archer in the shares of Anglia Television, of which Archer’s wife was a director, and after Asil Nadir fled the country while facing fraud charges, told the House: “We are entitled to know how Nadir got so many high-powered Tories to speak for him.”

When Blair surged past Brown for the leadership following Smith’s sudden death, Darling stayed put, leading the charge when widespread pension mis-selling came to light.

In 1996 Blair promoted him to Shadow Chief Secretary and Brown’s deputy, with the remit of keeping Labour’s spending promises to a minimum – a foretaste of Brown’s “Iron Chancellor” period. He policed colleagues’ speeches for unauthorised commitments, and initiated a “spending round” with spokesmen shadowing the big spending departments.

On Labour’s landslide victory in May 1997, Darling joined the Cabinet as Chief Secretary and a Privy Counsellor. He worked hard to hold the line as the Labour grassroots pressed Blair and Brown to loosen the purse-strings for the NHS.

After a year he became Social Security Secretary when Blair sacked Harriet Harman, who was deadlocked on welfare reform with her deputy, Frank Field. His fiefdom was restructured after the 2001 election as the Department for Work and Pensions, gaining Employment from the Department of Education.

The consequences of devolution confronted him when Henry McLeish, Scotland’s Labour First Minister, moved to introduce free personal care for the elderly, with implications for the UK benefits system that Darling would not accept. After weeks of tetchy discussion McLeish went ahead, but on Darling’s terms.

Darling’s next move, in May 2002, was to Transport when Stephen Byers resigned. Blair instructed him to take the privatised railways out of the headlines following the collapse of Railtrack and several high-profile accidents.

He succeeded, presiding over the formation of Network Rail and pleasing the Treasury by abolishing John Prescott’s free-standing Strategic Rail Authority, putting his own civil servants in charge. This cut costs, at the price of suffocating micro-management.

His other priority was tighter security in the wake of the 9/11 attacks on America, especially at airports. He also produced a White Paper on airports policy which considered, then rejected, a range of highly unpopular schemes including a new international airport near Rugby. It paved the way for the promotion of a third runway at Heathrow, a major headache for successive governments.

After Labour won the 2003 Holyrood election, Blair decided Scotland no longer needed a full-time secretary of state, and Darling took over the office from Helen Liddell while remaining Transport Secretary. (The SNP’s capture of power in 2007 would lead to the stand-alone post being re-created.)

The reduction in the number of Scottish MPs at the 2005 election led to Darling fighting the new, supposedly marginal seat of Edinburgh South West; he won it comfortably.

A year later, he moved to the DTI. Here he gave the go-ahead for a new generation of nuclear power plants (it would be nine years more before the first was finally approved), and came under pressure as rising world energy prices began to affect the economy.

It had long been assumed that when eventually Blair gave way to Brown, Darling would become Chancellor. He duly moved into 11 Downing Street on June 28 2007 – taking over its living accommodation from the Blairs, as Brown had occupied the smaller “Flat” in Number 10.

Within weeks, the extent of “sub-prime” lending to the US property market began to emerge and the banking system went into a tailspin. The deteriorating economy stifled Labour misgivings over Brown’s leadership, but Darling was on a hiding to nothing, not least because the credit for any rescue would go to Brown.

Each successive forecast from Darling was seen by the markets as unrealistically rosy. But in August 2008 he told the Guardian from his boat in the Hebrides: “The economic times we’re facing are arguably the worst in 60 years. And it’s going to be more profound and long-lasting than people thought.”

Brown was furious, Darling later disclosing that “forces of hell” had been unleashed on him – but he turned out to be right.

When the independence referendum came, Darling – by then an opposition backbencher – bested Alex Salmond in a televised debate by stressing that an independent Scotland could not automatically keep the pound, but lost a second as Salmond claimed that maintaining the Union would leave Scotland’s NHS – in fact fully devolved – under threat from the Tories.

Ten days out from polling, a YouGov poll put the “No” camp in the lead by just 52 per cent to 48. Panic ensued at Westminster over the implications of separation, all three party leaders headed north to campaign and a barnstorming Brown turned the tide, pledging further powers for Holyrood. On September 18 2014, Scotland rejected independence by 55.3 to 44.7 per cent.

Darling left the Commons at the 2015 election, and his seat – like all but one of Labour’s in Scotland – was lost to the SNP. He received a life peerage in the dissolution honours, and became a director of Morgan Stanley. He retired from the Lords in 2020.

Alistair Darling was twice married. His second wife was the journalist Maggie McQueen, whom he married in 1986. They had a son and a daughter.

Lord Darling of Roulanish, born November 28 1953, died November 30 2023