Alistair Darling guaranteed all Northern Rock deposits after coming under intense pressure over the Government’s handling of the banking crisis.

The Chancellor began the day acknowledging that his reputation was on the line and admitting that lengthening queues of depositors wanting to withdraw their money had put paid to all prospects of a snap poll.

With the Government’s reputation for economic competence at stake, the Chancellor toured broadcasting studios in an attempt to calm fears.

But David Cameron heaped on the pressure at midday by demanding that Mr Darling make a full statement and accusing Gordon Brown of building the economy on a “mountain of debt”.

BACKGROUND

• Goldman Sachs steps into Northern Rock crisis

• ‘We did not let down our investors’ says chairman

• Northern is not just a bank, it’s our bank

• Northern Rock still lending ‘recklessly’

• Star investor stays bullish on banks

Man who stepped into limelight on a dark day

Alistair Darling, the Cabinet stalwart who shunned headlines, has become the Chancellor facing down a grave economic crisis

• Narrow Squeak

Brown points way to election fight

In an exclusive interview, the PM explains why ‘intensifying’ health service reforms will be the cornerstone of his appeal

• The most damaging run has been on our trust in you, prime minister

• Full transcript: Gordon Brown interview

• The Trivial Pursuit question Gordon is wary of asking voters

Related Internet Links

• Northern Rock company information

• Northern Rock share price charts

• Northern Rock company forecasts

Related Links

• Government's £28bn cheque to stop bank run

• Savers drain Northern Rock cash

• Panic infects other mortgage lenders

The Tory leader said that questions about regulation and transparency needed to be answered, particularly about the framework established by Gordon Brown that was supposed to prevent a banking crisis.

“This is the first time that a system based on the split roles of the FSA and the Bank of England has been seriously tested and we must ensure that we learn whatever lessons emerge,” he said in a speech at the London headquarters of KPMG.

Mr Cameron said that the economy had been left more exposed to shocks by a failure of the Government to curb personal and state borrowing.

He accused Mr Brown and Mr Darling of “a decade of virtual silence” on the issue of debt.

“Under Labour our economic growth has been built on a mountain of debt,” he said, adding that “higher debt makes us more vulnerable to the unexpected”.

The Tory leader denied that he was scaremongering and told Northern Rock savers to “listen carefully” to what the Bank of England and the FSA were saying about the institution.

Mr Cameron called for a statement from Mr Darling but stopped short of calling for a recall of Parliament, which he said would add to the “sense of alarm”.

Downing Street went out of its way to rebut the claims, however. Officials said that household wealth was seven times greater than household debt and that net wealth had gone up by 72 per cent in real terms since 1997. Because of low inflation and low interest rates people had been better able to service debt. Household interest payments now accounted for 9.6 per cent of disposable income compared with 15 per cent ten years ago.

Mr Brown’s spokesman added that the fundamentals of the economy were sound and “we are well placed to withstand the kind of global uncertainty we have seen in recent weeks and months, and we have a well-established framework to maintain financial and fiscal stability”.

He added: “We have been through periods over the past decade where we have faced significant global economic shocks of this kind. The British economy has been able to withstand those shocks.”

Early yesterday Mr Darling was asked on GMTV if his reputation was on the line. He replied: “It is, I’m afraid, yes.”

The Chancellor also appeared to rule out an autumn election: “I don’t get any sense that people inside Government or outside Government are anxious for a dash to the polls.”

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