Alastair Darling's gloomy prognostications have apparently led to 'robust exchanges' between him and his patron Gordon Brown: in other words, there has been an almighty row. The Chancellor's position is said to be in question. The pound slumped against the euro and august bodies like the CBI rushed to say that things were not as bad as the Chancellor claimed while usually they are willing to pile on the gloom as a means of criticising government policy.
What the Chancellor said in an interview with The Guardian is that the present economic times - the combination of the global credit crunch and soaring international commodity prices - were as bad as they had been for more than half a century. Mervyn King said as much earlier in the summer, and it's not quite the same as saying as the economy is on the brink of a major recession.
However, these subtleties have been lost in the media row. It has overshadowed the Government's latest re-launch in terms of a package to help the housing market. These measures are open to criticism from a number of directions. On the one hand, they could be portrayed as insufficient, which is not surprising given the Government's fiscal position. On the other hand, they can be portrayed as using taxpayers' money to subsidise those have been feckless. Rather than tinkering with stamp duty, and then only for a year, there is a case for letting the market correct house prices until they are once again affordable.
Attention has now turned to who might replace the Chancellor and it is clear that, as with the prime minister, there is no leading candidate. Choosing David Miliband would give him a boost, making him look less like a sixth former on work experience and more of a serious candidate for prime minister. His brother, Ed, might actually be a better choice but that would mean too much Miliband at the top of government.
Ed Balls would seem like a case of favouritism. Alan Johnson would be a safe pair of hands, as would Jack Straw. One of the best choices would be John Hutton who is competent and would reassure business and the City whose confidence in Labour has been badly dented.
But then Hutton is against the windfall tax on energy companies which is gaining ground in popularity on the Labour backbenches. No doubt it would also be popular with the electorate, but it would also be a piece of economic illiteracy which shows little understanding of how a market economy works.
The relationship between the prime minister and the chancellor lies at the heart of government, particularly in difficult times. When prime ministers lose or sack their chancellors, it reflects badly on them: recall Harold Macmillan (Selwyn Lloyd) and Margaret Thatcher (Nigel Lawson). Alastair Darling has not been involved in the equivalent of a 1992 crisis and I think that he will survive.