Get it right at the Mansion House or move over, Darling

The Mansion House debut speech on Wednesday will be a test for Alistair Darling to show his mettle as Chancellor, but the whispering campaign against him is growing. Today's inflation figures are expected to lead to the Governor of the Bank of England, Mervyn King, having to write to the Chancellor for only the second time since Labour took power.

King is blaming international conditions beyond his control - rising oil and commodity prices - for inflation heading towards four per cent. And he has signalled that it is unlikely that inflation will fall below the target of two per cent for the rest of the year, which means that he will have to engage in a regular correspondence with Darling.

Worse, the rise in inflation could lead the Monetary Policy Committee at the Bank of England to raise interest rates, threatening 'stagflation' - growing inflation coupled with low economic growth.

This is the time for a big Chancellor to show he is up to the job. The problem with Darling is he is like a ghost of Gordon Brown, a fellow Scot and his closest friend in politics. He has spent his entire Westminster career in Brown's shadow, depending on Brown for promotion, and has no inclination to stand up for himself. He will certainly never rock the boat with the Prime Minister. One senior member of his Treasury team said: "Alistair can't do that. He's so close to Gordon."

Since being given the job by Brown last year, Darling has hardly covered himself with laurels. His mishandling of the Northern Rock crisis landed the taxpayer with a multi-billion pound bill for nationalising the bank, long after it was recommended by shrewder birds like Lib Dem treasury spokesman Vince Cable.

Darling has done nothing to order greater vigilance by the Financial Services Agency - the watchdog that was fast asleep while the NR scandal was going on. Now the whispering is starting behind Darling's back. "He has risen without a trace," said one former Blairite minister. "He's never had an original thought in his head. We need an outstanding Chancellor - but Brown will never sack Darling."

The upside is that there are none of the tensions that existed between past Chancellors and Prime Ministers - Lawson and Thatcher, Lamont and Major, Brown and Blair. But Darling's debut at the Mansion House tomorrow, when the Chancellor sets out to convince the City that he has a clear vision for the direction ahead, is his last chance to show that the grey shadow is at least alive and kicking.

THE MOLE: INFLATION

FIRST POSTED JUNE 17, 2008