Darling Vows to Toughen U.K. Regulation, Backs Brown

By Gonzalo Vina

Sept. 22 (Bloomberg) -- Chancellor of the Exchequer Alistair Darling vowed to tackle the financial crisis by tightening regulation and cracking down on bankers' bonuses, as the government tries to improve its standing with voters.

The government will introduce a bill in Parliament within two weeks to redraw U.K. banking rules, and probe a bonus culture that spurred excessive risk-taking, Darling told the ruling Labour Party's annual conference in Manchester.

``We are putting in place both here in the U.K. and internationally the tougher financial regulation no one can doubt we need,'' he said. ``I will continue to do whatever it takes to maintain financial stability and I remain confident we will do so.''

Darling and Prime Minister Gordon Brown are counting on their handling of the credit crisis to turn around Labour's political fortunes as polls point to a landslide victory for the opposition Conservative Party at the next general election.

Darling said a ``culture of huge bonuses'' had distorted financial decisions, although he dismissed calls from unions and some Labour lawmakers for legislation to limit the payouts to bankers.

The government will introduce the banking reform bill when Parliament returns from its summer break early next month.

The legislation, promised by Brown in May, was prompted by the collapse of Northern Rock Plc a year ago. Depositors besieged Northern Rock branches for days after the credit crunch cut off the mortgage lender from its main source of funds.


Banking Bill

The bill aims to make it easier for U.K. authorities to intervene when a bank gets into difficulties and increase the safety of customer deposits by expanding compensation arrangements.

Brown is staking his own survival on convincing voters that his command of crisis -- he last week helped to secure the takeover of HBOS Plc after shares in the mortgage lender collapsed -- proves he is the best person for the job.

A revolt against Brown's leadership erupted this month as about a dozen Labour lawmakers called for a contest to replace him, although no one has joined in recent days after Cabinet ministers rallied behind him and demanded an end to the squabbling.

Darling began his speech today with an explicit endorsement of Brown.

Endorsement of Brown

``These are very uncertain times. But one thing I am certain about is that we have the right prime minister, the right team and the right policies to help the country through them,'' he said. ``A prime minister with experience and judgment who has helped deliver a decade of rising living standards. These qualities are going to be needed here and across the world.''

Brown began to lose support in October, three months after he took over from Tony Blair, after he allowed speculation about an early election to build, only to back away when a Conservative tax-cutting pledge proved popular with voters.

His woes deepened as the housing slump worsened and soaring food and fuel prices ate into household incomes. With Britain on the brink of a recession, popular support for Conservatives is at its highest since Margaret Thatcher was prime minister 20 years ago, an Ipsos-Mori Ltd. poll published last week showed.

The slump has damaged Brown's reputation, built during a decade as finance minister, as a competent manager of the economy who presided over the longest expansion in 200 years.

Responsibility

Darling today again insisted that Britain is a victim of global events, and the economy is well placed to deal with the fallout with relatively low inflation and high employment.

Critics say Brown stood by while households amassed record debts, much of it tied to a housing boom that burst, and bankers earned billions for bets that led to the credit crunch.

Brown has also left little room to offer a U.S.-style fiscal stimulus after he borrowed heavily to pay for investment in schools and hospitals, the Conservatives say. Debt has climbed to 38.3 percent of gross domestic product from 30 percent in six years.

To contact the reporter on this story: Gonzalo Vina in London at gvina@bloomberg.net