THE BRITISH banking industry will face an upgraded House of Commons investigation following Labour’s decision to take part in the process. The move follows highly personal clashes between the chancellor of the exchequer and senior Labour figures.
Following two defeats in Commons votes over its demand for a judge-led inquiry, Labour agreed to take part in one involving MPs only, though it is expected to argue that the committee should not have a government majority.
Ruling out a judicial inquiry, the chancellor, George Osborne, said it would take until the autumn to begin and make it impossible for the British government to pass legislation on the back of recommendations made during the lifetime of the current parliament.
A House of Commons inquiry, he said, will be able to start more quickly and will have powers to call people to give evidence under oath. He pledged to give the body all the resources and access to files that it needs to do its work.
However, relations between Mr Osborne and Labour’s former treasury minister, Ed Balls, are poisonous following Mr Osborne’s allegation that he and other senior Labour figures tried to manipulate the Libor inter-bank rate during their years in office. During sharp exchanges in the Commons, Mr Balls told Mr Osborne: “The cheap and partisan and desperate way in which you and your aides have conducted yourselves in recent days does you no good; it demeans the office you hold.”
Replying, Mr Osborne said: “The idea that Im going to take lessons in integrity from the man who smeared his way through 13 years of Labour government, how half the people who every served with him think he was a disgrace in his post, is another thing.”
Labour’s decision, however unwillingly, to back down from its declared opposition to taking part in the treasury select committee’s investigation under Conservative MP, Andy Tyrie, is crucial, since he had refused to lead an inquiry not supported by all sides of the Commons.
“The Government has won its vote. [Mr Tyrie] will now chair a narrow inquiry . . . On this side we respect [him] and we will work with him,” said Mr Balls, though he said Labour had “real concerns” about the committee’s membership. The parliamentary inquiry route brings with it its own risks, since, by common consent, the select committee failed to make much headway against former Barclays Bank chief executive Bob Diamond when they questioned him on Wednesday.
The political dangers for Mr Osborne on this point were driven home last night by Mr Balls, who said the British public will want to know why an independent public inquiry is not being held “if future scandals emerge”. The danger of the Libor scandal for Barclays is illustrated by the decision of the Standard Poors rating agency to downgrade the stock, though other banks could face similar woes when their role is revealed by regulators.
Concerned about the effects on London’s reputation as a global financial centre, Conservative mayor of London Boris Johnson urged politicians to stop inflicting unnecessary wounds on the industry, lest it provoke companies to flee to New York or elsewhere. “We mustn’t now go around like priests of Baal, cutting ourselves and immolating ourselves in the whole agony of this Libor business, behaving like priests of the Shrine of Sain or Kabul bonking ourselves repeatedly over the head with wooden blocks until we bleed,” he said.
The London-based Bureau of Investigations has shown that contributions from the financial services industry to Conservatives have risen sharply since prime minister David Cameron took over as Conservative Party leader in 2005.
In that year, the industry contributed £2.7 million (€3.4 million) of the party’s £11.1 million (€13.9 million) crop of donations. By 2010, the year of the general election, the sum had grown to £11.4 million – just over half the contributions from donors.
