Darling Will Say U.K. to Tackle Causes of Crisis

By Gonzalo Vina
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Sept. 22 (Bloomberg) -- U.K. Chancellor of the Exchequer Alistair Darling will today pledge to tackle the failings at the root of the financial storm that swept across global markets last week.

``Wherever weaknesses are found in the financial system, I will take steps to deal with them,'' Darling will tell the ruling Labour Party's annual conference in Manchester, northern England, according to comments released by his office.

He will pledge ``measures to help prevent the mistakes and misjudgments which caused the crisis,'' and say, ``This is a global problem and it will require global solutions.''

Darling and Prime Minister Gordon Brown are seeking to emphasize their handling of the credit crisis as polls point to defeat for Labour at the next general election. Brown last week helped broker a takeover of HBOS Plc to avert its collapse following the bankruptcy-court filing of Lehman Brothers Holdings Inc.

The government's actions may push the government to increase taxes in the future, Darling suggested today in an interview with GMTV. He dismissed the idea that the government would take any action any sooner.

``In the medium term, all governments have got to live within their means,'' Darling said when asked if he would need to increase taxes to pay for any help to the financial system. ``But I don't think this is the right time to be taking money out of the economy.''

`Measured Response'

Darling will tell the annual conference that he and Brown will meet European and U.S. counterparts in coming weeks to seek a response to the financial crisis. He will promise ``not a knee-jerk reaction but a measured response.''

Brown acted to rescue HBOS after the mortgage lender slumped amid concern it may become the next victim of the credit crunch that hobbled Northern Rock Plc a year ago. He then waived competition rules to allow its takeover by Lloyds TSB Group Plc. Darling told Sky News today that the HBOS action was ``dramatic but effective.''

The market regulator, the Financial Services Authority, also put a ban on the short-selling of financial shares for the rest of the year. Brown yesterday promised further regulation, telling BBC television he is ready to do ``whatever it takes'' to shore up the financial system against future crises.

Still, Britain has no plans to mimic the U.S., where Treasury Secretary Henry Paulson is urging Congress to pass a $700 billion proposal to cleanse banks of bad mortgage-related securities. The U.K. currently has no plans to set up such a fund, a Treasury official said yesterday.

Many Voters

Labour lags behind the opposition Conservatives by at least 20 points in opinion polls, with many voters saying Brown lacks leadership skills. About a dozen Labour lawmakers are calling for a contest to replace him, arguing that unless he steps aside the party faces a wipeout at the next election, due by mid 2010.

If an election were held now, David Cameron's Conservatives would win a 146-member majority in the House of Commons and eight Cabinet ministers would lose their seats, a poll of 35,000 voters for PoliticsHome.com published yesterday showed. Labour currently has a majority of 62 in the 646-seat lower chamber.

With unemployment rising and forecasters saying Britain is slipping into a recession, Brown says his decade as finance minister before he took over from Tony Blair in June 2007 makes him the best person to lead Britain through the turmoil.

Darling will today pledge to do more for people struggling with higher fuel and borrowing costs as the slowdown deepens.

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