Darling heralds banking shake-up

Pledging to be a cautious chancellor who is prepared to take unpopular decisions, Alistair Darling has admitted that dealing with the Northern Rock crisis was "difficult".

In his first Labour conference speech since moving into Number 11, he promised to shake up Britain's system of protecting savings held in banks and building societies.

And he heralded moves to ensure that City firms account for more of their investments on their balance sheets.

Darling said the past week had been a "challenge".

"But we will come through this because we have built a strong and stable economy," he said.

"We deal with these challenges from a position of strength, and we do so by taking the right decisions for the long term interests of our country.

"And that is exactly how we will continue, with confidence built on competence."

Labour had delivered 10 years of continuous economic growth, he told the Bournemouth audience, a record "not achieved by any other major economy".

"But last week was difficult, it was difficult for Northern Rock savers, it was difficult for us all," Darling added.

"There are lessons to be learned and I will make sure that we make the changes we need to ensure stability."

He said that the government would not bail out business leaders who make bad decisions.

"My job is to protect ordinary savers, so we need to strengthen protection for ordinary savers, to give them confidence, ensuring their savings in a bank or building society are guaranteed.

"We need to be able to separate out ordinary savers' money, paying it out quickly.

"And we need effective regulation in the international markets too. Far greater openness to prevent risky investments being hidden off balance sheet.

"We need effective supervision for banks not just here but across the world."

He added: "It is only possible to keep on helping improve people's lives because of the strong economic foundations we've created.

"As chancellor, everything I do will be to maintain that strength and stability.

"I will continue the discipline essential to underpin it even when those decisions might be unpopular.

"Chancellors are not in politics to find a fan club. I am cautious and I will always be cautious with other people's hard earned savings and with our hard won, stable economy."