Westminster blog

These are dangerous times for the government. Alistair Darling, chancellor, is in serious political trouble and the sound of muttering about his performance can be heard swelling around Whitehall.

Gordon Brown’s spokesman on Tuesday repeated the view that it was "total garbage" that the prime minister had any doubts about the performance of his neighbour.

But there are some senior figures close to Mr Brown who are questioning how Mr Darling managed to spectacularly damage the government’s relations with business with last year’s pre-budget report.

When this sort of criticism seeps into the political gossip machine, it can be unsettling. When it relates to the way in which the Brown camp sees the Chancellor of the Exchequer it threatens to be highly damaging to the government. Ben Brogan in his Daily Mail blog points out what is at stake.

The fact is that Mr Darling’s pre-budget report – with its capital gains tax reforms and plans to hit non-doms with a £30,000 levy – was hastily drawn up with an autumn general election in mind.

It might have played well in a three week election campaign, but it has gone down disastrously with business and the City. This is the very constituency which Mr Brown – through ten years as chancellor – struggled so hard to win over.

But if the detail in the PBR was Mr Darling’s responsibility, the plan to tax rich foreigners and hit private equity bosses through CGT reform was Mr Brown’s. It was the PM who toyed with the early election; it was Mr Brown who told his chancellor to rush out these plans to counter Tory moves in the same area.

They are in this together. My guess is that Mr Brown will not move his chancellor in a summer reshuffle – a move which would smack of sheer panic – and that Mr Darling will continue to play a role as a human shield deflecting criticism from Number 10.

Ed Balls, children’s minister, is talked about as a chancellor-in-waiting. But does Mr Brown really want his closest ally to stand in the line of fire at such a dangerous political and economic moment.

I’ve been tipping Tony Blair to be the first "president of Europe" since 2002 – when the creation of the job was just a twinkle in his eye – so I’m delighted the former PM is taking soundings about whether the post will be worthy of his political talents. No doubting his self-confidence, is there?

Back in 2002 I remember being told that Mr Blair thought the creation of a full-time president of the European Council – the supreme body of the EU – was the most important thing to get written into the new EU constitution, now rebranded the Treaty of Lisbon.

What’s more aides to the PM told me over a coffee in Strasbourg that this was a job in which he had "a keen personal interest". The story I wrote off the back of this briefing spawned a brilliant follow-up by Trevor Kavanagh of The Sun, who wrote Mr Blair would be a Napoleonic figure, living in a huge (yet to be built) presidential palace.

I always had my doubts whether a former British PM would get the job, simply because I couldn’t imagine a French president agreeing to let a Brit stride around the world stage speaking for Europe. But since Nicolas Sarkozy seems to be almost as much in love with TB as he is with Carla Bruni, that no longer seems a problem.

If Silvio Berlusconi (Mr Blair’s old holiday pal) gets back into power in Italy, consider it a done deal – if Mr Blair wants ths job.

He apparently wants to know exactly what it entails. Will it be simply to act as a messenger boy for the EU’s 27 leaders on the off-chance they can agree a common position. Or will he have real clout in areas such as trade and foreign policy?

It seems to me that the first person to hold the job (which could be created in 2009) will define the job. If it’s Tony Blair it will be a big job; if it’s Jean-Claude Juncker, the Luxembourg prime minister, I suspect it will be a smaller one.

Will Gordon Brown accept it? I can’t imagine a British PM blocking a British candidate for such a job and – in any case – I hear suggestions the two old rivals are getting along better these days.

What about Cherie? She would obviously like Tony to rake in a few more millions, but by 2009 he’ll already be well on his way to his first £10m thanks to a book deal and various banking jobs. Being president of Europe is unlikely to lower his future earnings potential.

So go for it Tony. You might finally be able to do what you signally failed to do while in Number 10 – explain to the British public what is the point of our membership of the EU. And I’ll be able to rip out that old story from my 2002 cuttings book and say that I told you so.

Five European leaders are meeting on Tuesday night in Downing St to discuss the world’s economic problems. That’s no bad thing, but how much are Mssrs Brown, Sarkozy, Prodi, Barroso and Ms Merkel really going to achieve in talks lasting no more than a few hours?

Kenneth Clarke, whom one might have expected to be sceptical about the whole thing, told Sky this morning that such events are useful, provided they can be kept informal. The former Chancellor says it is important, in an inter-connected world, to know how your counterparts in Europe are going to react to any given event.

The worst thing that can happen, he says, is for the leaders to get bogged down too much in detailed work on the communique to be presented to journalists afterwards.

Fair point, but isn’t it about time all this talk about reforming the financial system started bearing fruit. After all, Mr Brown and his colleagues have been talking for months about greater transparency, better early warning systems of contagion, clearer roles for credit rating agencies and so on.

Perhaps that will all be nailed down in greater detail at the G7 in Tokyo next month. Let’s hope so.

I suspect Tuesday’s events is more about politics. For Mr Brown it is a chance to make it look like he is engaged in Europe and setting the agenda, rather than the lonely, forlorn figure who turned up late to sign the EU treaty in Lisbon last month.

For Mr Brown, Mr Sarkozy, Ms Merkel and (the soon to be former prime minster) Romano Prodi, it is also a chance to tell domestic audiences that – hey – these economic difficulties at home are actually international in nature. We’re all in this together and we’re doing something about it.

One other thought. How many times do you think we we will be told that the problems in the global financial system started in America?

Oh dear. Just what Gordon Brown didn’t want to hear. Dominique Strauss-Kahn, the new head of the IMF, suggesting that the world needs a big fiscal electric-shock to help it out of its looming economic downturn.

Mr Strauss-Kahn’s view that interest rate cuts alone won’t dig the global economy out of a hole marks a surprise shift in the IMF’s position – normally it is the biggest cheerleader for fiscal consolidation.

But it is awkward for governments like Gordon Brown’s where the room for manouevre in the fiscal area is virtually non-existent. Even in the boom years, Britain’s deficit was topping 2 per cent of GDP – this year it will be nudging up towards the EU’s 3 per cent borrowing limit.

So don’t expect Mr Brown or Alistair Darling, chancellor, to be following Mr Strauss-Kahn’s advice to loosen the pursestrings a bit. They couldn’t, even if they wanted to.

Why is Mr Strauss-Kahn’s intervention bad news politically for Mr Brown? Well, it plays straight into the hands of George Osborne, shadow chancellor, who has been telling anyone who would listen in Davos that Britain is uniquely badly placed to withstand a global downturn.

Britain, he argues, has the biggest deficit of any major European economy. Automatic stabilisers – namely higher government spending in a downturn – cannot be applied. Mr Strauss-Kahn’s advice, whether economically sensible or not, is certain to draw attention to precisely that point.