Alistair Darling: He's back... but did he ever go away?

Retirement from frontline politics didn't really suit Alistair Darling. While Chancellor of the Exchequer at the height of the financial crisis, he spoke wistfully of how he missed eating out in restaurants, going to gigs and being at home in Edinburgh. But, after leaving the Labour front bench after the last election and writing a book on bearing the brunt of the economic tsunami and the "forces of hell" of the No 10 briefing operation against him, he found himself at a loose end.

So the prospect of his beloved Scotland being divorced from the rest of the UK persuaded him to return to the fray, and front the Better Together campaign opposing independence.

Alex Salmond, the charismatic, bumptious leader of the Scottish Nationalists, had been "getting away with murder": vague boasts and assumptions went unchallenged, with the establishment in Westminster taking the view that "if you ignored it would go away".

Darling admits that there was a point where Scotland breaking away seemed almost an inevitability: "It was one of the things that drove me into taking part, because I thought that unless there was a clear voice for those of us who believe in the United Kingdom, and that Scotland is better off in the United Kingdom, then we would lose it by default."

This autumn will be "quite pivotal" because the date and the question "will to a great extent condition the type of campaign that's fought. "There's a long way to go, but I think we can win the argument." So in addition to his role as economic sage, quietly and politely needling George Osborne over his double-dip recession, Darling is now faced with trying to preserve the 305-year union between the English and the Scots.

The SNP's victory in last year's Holyrood elections was a "rude shock to the system", Darling now admits. People were "squeamish" about standing up to Salmond because he "plays the man, not the ball" and "denounces anyone who is an MP as 'London-based'".

But Darling senses Salmond is losing some of his edge, with a weak spot being his closeness to the media mogul Rupert Murdoch. "When everyone else was running a mile from Murdoch, he was still having him round for tea."

The Westminster government is said to be ready to concede the timing of the vote in 2014, and allowing 16- and 17-year-olds to vote, provided there is just a single question on whether Scotland should become an independent state. Darling says: "I've no doubt the reason Salmond isn't having it sooner is he doesn't think he can win it. He is playing for time."

For unionists, 2012 got off to a shaky start. David Cameron demanded a referendum "sooner rather than later", giving Salmond the chance to accuse the Prime Minister of "interfering" in Scottish matters. "We are in a much better place than we were at the start of the year," Darling says diplomatically. He knows the risks of Tory unpopularity in Scotland. "I just do think the election is going to be fought and won north of the border. In the same way, I am sceptical that [the SNP's] bringing into Scotland an American-based actor [Alan Cumming] is going to impress people in Scotland. Equally, I think there is probably a restricted role that the Conservatives from the Home Counties can play."

What Cameron's intervention did achieve was that it forced Salmond to start explaining what going it alone would really mean in practice. "This isn't like voting for a government for five years. Once you make this change ... it is irrevocable. By having the strength of the UK, we were able to help when the Scottish banks got into deep trouble. Anyone who has any experience of how the EU works – and I have a fair amount – [knows] that big countries have more clout than small countries. We are the second biggest donor in aid, at the top table at the UN."

Salmond and his supporters are rattled, he believes. "They are giving the distinct impression that they are running away from this." Darling is a master of understatement. As he neatly sidesteps a tricky question, you can almost hear his eye twinkling. Does he like Salmond? "I can get on with him. We're certainly not close. He is an accomplished politician, and you can take that any way you want." Twinkle.

Does he trust him? "It's not a question of not trusting him..." Twinkle, twinkle. "But until I see it written down and all done and sorted, no, I wouldn't [trust him], because he is an expert in that if you give him an inch he'll take a mile."

One of the great survivors of New Labour, Darling was one of just three men to sit in Cabinet for its entire 13 years in power. Four years ago this week, Darling gave an interview that attracted the opprobrium of No 10 "insiders". He warned, grimly, that the economic times faced by Britain and the rest of the world were "arguably the worst they've been in 60 years. And I think it's going to be more profound and long-lasting than people thought."

Speaking on the telephone from Edinburgh, the mention of the infamous interview brings a nervous "oh yeah … ?" down the line. But he adds: "I stand by every word I said. If I went back I would say it's going to be even more profound."

Pointedly, he notes that when he handed the keys to No 11 to George Osborne "the economy was growing". Since then, the "policies that have been pursued have been pushing in the other way". "If you said to me in 2008 would we [now] be the only country in recession in the G20 apart from Italy, I'd have said no, of course we won't."

Osborne, he says, is "sticking doggedly to a course of action … All the evidence is that far from working we are actually going backwards, not forwards". He adds: "An impression is beginning to emerge that both the Chancellor and the Bank of England have given up."

Claims made by the Tories about securing Britain's AAA credit rating "may yet come back to haunt them". "In the language they have used, they have absolutely trashed confidence. If the facts change or it's clear that Plan A isn't working, you've got to leave yourself sufficient room to be able to say to people that because of changed circumstances I'm changing my stance."

As a reshuffle looms, he insists that moving Osborne is not the answer. "It's the policy that's the problem, and Osborne's policy is Cameron's policy, it's Ken Clarke's policy, it's Michael Gove's policy. They collectively are in it together." Even Vince Cable, seen as politically closer to Labour, would be no better.

What is required now is a "good jolt to the system", not "patch and mend" announcements. Housing, energy, transport projects, including a third runway at Heathrow, would provide the shot in the arm the economy needs. While the problems are homemade, he concedes that they are being "exacerbated" by events on the Continent.

So begins another crunch week for the eurozone. "The most likely agreement is to kick the can further down the road." Only another crisis will make the eurozone act. "And the problem with that is when it comes it may be totally unexpected and far worse than they think, and the greater risk still is that it's too big for them to deal with. This has been dragging on now for two and a half years."

He still regrets Labour's election defeat in 2010. "But we lost. I don't have anything to add to what I said in my book." Ah yes, his book, Back from the Brink, which revealed Gordon Brown's "brutal regime".

The only time Darling stumbles in our conversation is when I ask if he has spoken to Brown lately. "You know, we bump into each other. But we haven't seen ... we simply ... It's surprising you can go for weeks on end without seeing anybody." They are both "absolutely in the same place" on Scottish independence.

Ah, and as luck would have it, we are suddenly out of time. "I'm being gesticulated at because apparently I've got to go somewhere, but we are, um ... we are, um ..." Are you and Brown still friends? A pause. "We've always had a good working relationship and that will continue."

And with that he is off, out into Edinburgh's streets, taking in the festival. "One of the nice things about not being on the frontline is you do get more time to do that, although I'm bound to say I haven't listened to Leonard Cohen's latest CD. Anyway, I am being shouted at. I am really overdue."

Curriculum vitae

1953 Born in London to Thomas, a civil engineer, and his wife Anna.

1977 Despite parents voting Tory, he joins the Labour Party, aged 23. Becomes a solicitor a year later.

1982 Elected as a councillor to the Lothian Regional Council.

1986 Marries former journalist Margaret McQueen Vaughan.

1987 Becomes MP for Edinburgh Central. Beats Tory MP Sir Alexander Fletcher by 2,262 votes.

1988 Son Calum is born. Two years later, daughter Anna.

1997 Enters Cabinet as Chief Secretary to the Treasury in first Blair government.

1998 Becomes Social Security Secretary.

2001 Department of Social Security dissolved. He fronts the new Department for Work and Pensions.

2002 Becomes Transport Secretary. A year later adds Secretary of State for Scotland to his list of responsibilities.

2007 Appointed as Chancellor of the Exchequer by new PM Gordon Brown, initially for a year or two, with Ed Balls expected to replace him. But disaster strikes as the global economy goes into meltdown. He authorises the Bank of England to lend Northern Rock up to £20bn to stop the run on the bank.

2008 Upsets party by warning of difficult economic times ahead in a press interview.

2010 Retires from front bench politics after Labour's election defeat.

2011 Publishes Back From the Brink, which lifts the lid on the "brutal" Brown regime.

2012 Fronts campaign against Scottish independence.