Darling tries some moral suasion

Darling and Brown appear to be getting seriously worried. Darling was handed an explosive legacy by Brown when he took over the reins of Number 10 last summer and his early months as Chancellor have been dogged by the emerging financial crisis and by mounting media and political pressure over his poor performance at the Treasury. His budget speech was just about the worst I have ever heard in twenty years of listening to them. Darling is reported as saying at a meeting of G7 Finance Ministers that present turbulence was “the biggest economic shock since the Great Depression.” This is pretty strong stuff - and I question the wisdom of coming out with such a loaded sound-bite.

Now he has come out and virtually insisted that the mortgage lenders cut their interest rates in response to the recent base rate reductions announced by the Bank of England? Why should they? It is a competitive mortgage market and many of the lenders have taken the decision to withdraw mortgage products from the market for the time being and raise their lending rates in response to (a) the higher cost of borrowing money from the wholesale markets and (b) the need to raise savings interest rates to attract fresh deposits and rebuild capital bases.

This attempt at moral suasion by the Chancellor is a sign of the weakness of his position. If he had inherited a better fiscal position last year then the government would have had more leeway to use fiscal policy to help stabilise demand during these difficult times.