PM ally tells Darling to 'sort it out' at Treasury

Jim Cousins, a member of the Commons Treasury select committee and long seen as close to Gordon Brown, suggested that Mr Darling was not in control of his department.

The backbencher said it was crucial that the public had confidence in the Chancellor at a time of global uncertainty and pressure on household incomes. "Frankly, this is a moment when we really need a confident Treasury, held in high esteem by the British people as a whole. Unfortunately, we haven't got it," he told BBC Radio 4's World At One programme.

"The Treasury looks as though it is driven by events. Who's in control? That uncertainty about whose running the show between No10 and the Treasury has given the Bank of England its opportunity to make itself the master of policy. There's a danger that policy about interest rates, policy about tax and policy about pay are all going off in different directions. The show's got to be sorted out."

Mr Cousins's remarks came amid claims from former senior Treasury officials that Mr Darling was suffering from the Prime Minister micro-managing his old department. Insiders suspect that Mr Brown ordered his Chancellor to concoct his non-doms and capital gains tax policies.

Treasury minister Angela Eagle said that Mr Darling's position was " unassailable" but added that it was for Mr Brown to determine who was in his government.

Bank of England governor Mervyn King told MPs today that he would do whatever it took to conquer inflation but would not rush into interest rate rises for fear of making the economic slowdown too severe. He told the Commons Treasury committee: "The economic-slowdown will need to be sufficient-to ensure that inflation does not persist above the target. But at the same time, we need to avoid a slowdown that is so pronounced that it would pull inflation down, not just to the target, but below."

One Tory member of the committee, ex-minister Michael Fallon, said the Bank governor had "lost the plot" on fighting expectations of inflation.

Mr King replied crossly that there could be a "deep recession" if heavyhanded action was taken impetuously.

The Bank's governor said inflation would probably rise above four per cent this year but would be brought under control afterwards.