The government is to set up a wider inquiry into banking to report by the end of the year.
It will not be a full Leveson-style public inquiry. However, it will be separate from, and much wider than, the inquiry already announced into the abuses of LIBOR – inter-bank lending rate – at Barclays and other banks.
Nick Clegg has ramped up the pressure on Bob Diamond by indicating he believed the Barclays chief executive should follow the lead of the bank’s chairman, Marcus Agius.
The Deputy Prime Minister said he had “no problem with more inquires” into what went wrong with the industry after Labour called for a Leveson-style investigation.
Writing in the Financial Times this week, Nick Clegg warned:
In the debate on banking union we back greater co-operation on various aspects of an integrated financial system: common rules on the restructuring of failed banks, shared principles on how to protect depositors, high minimum standards for the capital EU banks should hold and a strong European Banking Authority.
The Government was under growing pressure last night to call a public inquiry into the behaviour of Britain’s bankers as the Business Secretary, Vince Cable, admitted the sector was a “massive cesspit” that needed cleaning up.
Every week Liberal Democrat Secretary of State for Scotland writes a column for local newspapers in his Borders constituency. Here is this week’s edition.
Queen’s Speech
Last week, we saw the State Opening of Parliament by the Queen. Her Majesty set out the legislation planned for the second session of Parliament following the formation of the Coalition. The legislation outlined in the speech supports our efforts to reduce the deficit, rebalance the economy and put the country on the path to sustainable growth. It also sets out our commitment to provide families, businesses and communities across the country with the support they …
We covered earlier Nick Clegg’s reaction to today’s shock news that the UK is back in recession — here’s an excerpt from his speech today to the Institute of Directors where he urges the banks t play their part, and start lending to businesses:
Just before conference I caught some largely unreported news on a Private Member’s Bill, put to the Commons by Steve Baker MP, founder of the Cobden Centre, and one of the Conservative 2010 intake.
My usual response to scant coverage of a Conservative backbencher’s bills would be thankful, but in this case, the bill highlights something that has received astonishingly little attention: reforming the personal liability of directors. We’ve rested on the important points of how to discharge shares in effectively state-owned institutions, and how to increase lending to struggling businesses. On these issues Stephen Williams …
Here’s Lib Dem chief secretary to the treasury Danny Alexander interviewed on Sunday lunchtime, defending the Coalition’s decision not to demand RBS chief executive Stephen Hester return his controversial bonus — a few hours before Mr Hester voluntarily forfeited it to defuse the row:
For seven days before Christmas it has been an incredibly busy day for the financial services sector. The Parliamentary Joint Committee on the Draft Financial Services Bill has produced its wide-ranging report into regulatory reform; the FSA has published its Mortgage Market Review consultation; and, last but not least, the Treasury has published the Government’s response to the Independent Commission on Banking.
At least the latter was well leaked – what isn’t these days? – and gave me time to think about the ICB.
The ICB is actually something quite amazing, not to mention something entirely Lib Dem.
Last week many of us may have witnessed the sickening spectacle of watching a city trader declaring that Goldman Sachs rules the world… among other insights, such as how he lays awake at night fantasising about another economic depression.
If money rules the world, then surely whoever rules the world controls the money supply?
Many of us would, therefore, assume that the Bank of England creates money and regulates its supply to the economy, thereby controlling inflation and interest rates. However, whenever we look to finance a house, car, business project, etc, we invariably turn to the banks (in the …
By Dick Newby
| Mon 12th September 2011 - 10:41 pm
As I write this, the top headline on the BBC online news reads Acclaim for Bank Shake-up Plan. The report states that there is broad support for the Vickers’ report’s proposals to separate domestic retail banking and global wholesale and investment banking operations. This support extends to the Chancellor and the Prime Minister.
What the BBC doesn’t point out is that this a complete victory for the Liberal Democrats – particularly Vince Cable. When the banking crisis broke , we quickly decided that we had to ensure that the state couldn’t be put in the position again where it …
A quirk of the political calendar means Monday sees both politicians and bankers learn of their possible future fate. For English MPs it is when they get embargoed copies of the Parliamentary Boundary Commission’s draft proposals, which get published on Tuesday. Monday is also the day when the Vickers Commission publishes its banking reform recommendations.
There is a widespread expectation in Whitehall that the Vickers Commission will recommend isolating retail banking from other banking activities, but without demanding that companies be split up. Internal firewalls and the like will be demanded instead.
It is also widely expected that the Vickers Commission will …
Nick Clegg’s very public call for the British public to be given shares in the bailed-out banks — creating 46 million shareholders and allowing collective ownership of banks — has garnered acres of coverage the past couple of days.
It’s three months since Lib Dem MP Stephen Williams first proposed the privatisation of its 83% stake in RBS and 41% in Lloyds by distributing shares to the public. Here’s what my co-editor Mark Pack said about the idea at the time:
Nick Clegg’s innovative proposal to give the public shares in Lloyds and RBS is enthusiastically welcomed by Liberal Youth: but we believe that these reforms can go even further. Young people are bearing the brunt of the recession caused by the banks both in a lack of jobs and lost funding for education, and because it is the next generation that will be paying off the government’s debt for years to come. It is only right the government should give something back to them.
While Nick’s proposal represents exactly the kind of fairness that Liberal Democrats seek to bring to …
Over on the BBC News site, BBC political correspondent Norman Smith has written a piece looking at how the Liberal Democrats will continue to exert their influence in a more public way within the coalition after the combined effect of the AV referendum, the local election results and the success of the party’s push to re-think the NHS reforms.
As Norman says:
From the top to the bottom of the party, there is a hankering for clear yellow lines running through government policy.
However, where those lines should be drawn to best reassert the Lib Dems’ independence, is much harder to agree.
From among the blizzard of economic forecast, commentary and political point scoring which presently dominates the airwaves, there is very little consensus but the need to get the banks to lend more is something which brings all sides of the debate together.
The dividing line appears to be on how best to achieve this.
Those who subscribe broadly to the neo-classical or neo-liberal economic world view believe that banks will start wanting to lend as the economy recovers and businesses become more viable. This ‘leave it to the market’ approach is something which Lib Dems should (and do) reject, not just on …
Naomi Smith and Prateek Buch of the Social Liberal Forum write about the Vickers Commission on Banking…
At Lib Dem Spring conference in Sheffield last month, delegates overwhelmingly supported the Social Liberal Forum (SLF) motion Tougher Action on Banks and Bonuses. The interim report published recently by the Vickers Commission on Banking went some way to addressing the problems within the industry , but as we predicted in our speeches to the SLF motion, falls far short of Liberal Democrat policy which calls for:
A break up of banks deemed ‘too big to fail’ into smaller, safer
The big banks will claim that putting their retail banks into subsidiaries would impose significant extra costs on them – because it would force them to raise and retain more capital (which is expensive), and it
A special report from Reuters, not normally exactly a hotbed of anti-capitalism propoganda, brings some provocative research findings about Britain’s financial sector:
Research by Reuters shows … the impact of any big bank departures on the economy, government finances and the City of London’s pre-eminence as a financial centre would be extremely limited…
In terms of taxes alone, Commercial Secretary to the Treasury and former banker James Sassoon told members of the House of Lords in February that large banking groups were expected to contribute around 20 billion pounds ($30 billion) in tax for the 2010-11 tax year.
Nick Clegg has called for widespread reform of Britain’s banking sector in the hope that the country becomes less reliant on what he called “overwhelmingly important” companies.
An interim report on the subject from the Banking Commission is due out next month and Clegg has pre-empted its release with calls for the influence of the banks to be reduced in the interest of the wider economy…
The banking commission will deliver initial findings on April 11th, with a final report due by the end of September.
In an interview with Reuters this month, Lib Dem business minister Vince
Sunday morning’s emergency motion debate was on banking, moved by sometime Lib Dem Voice contributor Prateek Buch. The motion called for “banks supported by the taxpayer to be broken up into smaller, safer entities” alongside criticising banker remuneration and the Merlin project which is called “weak” and “insufficient”. Investment and retail banking should also be separated according to the motion.
The motion also called for Liberal Democrats to “ensure that the recommendations of the Vickers Commission are carried out in full”. As the commission has yet to report, that is a rather risky proposition – but with the general …
Portman Capital, an independent corporate advisory firm, has been asked to comment upon the technical issues raised by Mark Pack’s column on Stephen Williams’ proposal to privatise RBS and Lloyds by distributing the shares to the public. Portman Capital is not politically aligned and its comments are intended to explain the technical feasibility of the proposal rather than its political aspects.
The proposal to distribute the shares to the UK people is innovative, and as the British people will participate without having to provide cash up front, it has fairness at its core. Over time, the scheme is likely to …
This morning saw the launch of a plan for giving away bank shares from Liberal Democrat MP Stephen Williams. Laid out in a pamphlet published by CentreForum, Stephen Williams’s plan is to give shares owned by the government in the banks to everyone on the electoral register. A floor would be set so the shares could not be sold until they had passed the price paid by the government and individuals would only keep any gains made above that floor price. In other words, as the shares rise in price and get sold the government gets back the funds it put into the banks and, if the banks do well, the public gets to profit from that.
It’s a neat idea, and one of the first substantive plans for what the government could do with its 83% of RBS and 41% of Lloyds. As is to be expected with any plan for such a controversial area, it raises a number of questions.
First, the government only gets back the money put into the banks if people sell their shares. If people hold on to them, those funds do not come back to government – and in particular that means a large source of possible government funds ends up being highly dependent on what can be very volatile stock markets. Such uncertainty would apply to other policies too – including direct government selling of shares on the stock market – but it is still an issue.
Second, even leaving aside the uncertainty, would this route raise more or less money for the government than a straight-forward sell off of shares? Stephen Williams and colleagues think so, as their Q&A explains,
The absolute and relative size of the Government’s shareholdings in Lloyds Group, and RBS make it conventional exit through share sales impossible at a reasonable price. In other words, shares would have to be sold at a substantial discount over many transactions over a number of years. This increases the risk that the public would never get its money back – as has happened in the US, where the Obama Administration has lost at least $10bn in selling a tranche of its GM shares.
Third, the degree to which shareholders have failed to hold boards of directors to account has been bad enough even with big institutional shareholders, let alone with mass small-scale shareholdings. But given how poor institutional shareholders have been, would this situation really be that much worse?
Fourth, by giving the same amount of shares to everyone, there is a neat piece of simplicity combined with fairness. Because the sale of shares would be subject to capital gains tax, the initial allocation of shares would have the virtue of simplicity whilst subsequent capital gains tax revenues would mean that the richest end up paying more of what they have been given back in tax.
Fifth, although I said “simplicity”, relying on the electoral registers raises issues of principle and practicality. The principle is about whether the electoral register should be used solely for electoral purposes. The practicality is about the accuracy of the electoral register. The offer of money in return for being on the register would most likely be an extra incentive for people to register, but what about then deliberate fraudulent register entries? Having a system that is resistant to fraud makes the idea not quite as simple as it looks at first.
(Strictly speaking, it’s not just the electoral register the proposal uses. As the Q&A explains, shares would go to “those on the electoral roll for UK elections who are resident in the UK for tax purposes. In addition, non-UK nationals serving in HM Forces and their dependents should be eligible on the same basis”.)
In other words, there are plenty of questions that the scheme raises, but as this is a proposal designed to help set the political agenda rather than a finely worked out imminent piece of legislation, that is as much a compliment as anything else. It’s a good contribution to the debate.
Matthew Oakeshott’s departure as a Liberal Democrat spokesman for criticising the ‘Project Merlin’ deal with the banks over bonuses and the like may have got the headlines, but the real story is revealed by Anthony Hilton in the Evening Standard – all the members of the Commission threatened to resign in protest at government interference with their work.
The Government offered to emasculate the Independent Commission on Banking as it tried to strike a deal on bank bonuses a few weeks ago. I am told it backed off only when Sir John Vickers, chairman of the inquiry, and his entire committee, Clare
As bankers continue to scandalise the country with the scale of their pay and bonuses while the real economy struggles and youth unemployment soars, we should take a long hard look at the role of banking in the wider economy.
For years the received wisdom has been that they make huge profits so they must be simply wonderful, Masters of the Universe, the jewel in the crown of the British economy and so unlike the broken-backed manufacturing sector. But how do they do it? I can see why top footballers are paid a fortune and why Apple’s brilliant …
This morning the government’s plan to phase in a permanent banking levy were altered to bring in the levy in full straight away. It will bring in an extra £800 million as a one-off and, in the words of the Today program is, “Maybe not of a kick, more of a shove perhaps”.
Although attempts to encourage an increase in bank lending are by no means over, the combination of those slow talks and the paying out of large bank bonuses, has not exactly been winning the banking sector friends in government, even amongst Conservative ministers let alone amongst Liberal Democrats.
Barclays was tonight accused of making a mockery of attempts to call a truce with the government over “banker bashing” amid fresh expectations that its chief executive Bob Diamond would be awarded a bonus of at least £8m.
After months of talking with the banks, the coalition is yet to announce a deal, codenamed Merlin, under which the industry would to agree lending targets of up to £190bn and show restraint on bonuses in return for less criticism from the government.
The talks with the banks have been led by Diamond’s predecessor John Varley and tonight Lord Oakeshott, a Liberal
December 2010 is the first month in – probably – history where the UK’s manufacturing sector had more money on deposit than it borrowed from the banks. Or, to put it another way, industry is lending money to the banks, rather than the other way around. Bizarre.
David Evans This strikes me as a proposal for a very complex system that needs to be thoroughly thought out before it gets anywhere near becoming party policy. As a party ...
Paul Holmes Rif - "..taking on both Conservatives and Labour and challenging the Establishment." Yes I identify with those sentiments, which is why I joined the SDP in 1983...
Peter Davies @Peter Wrigley: The key word is option. The landlord has the option to let it fall down or bet it on a Lib Dem win in Makerfield. In either case, he will end up...
cim This is where Coalition comes in. Sure, you didn't make a lot of centre-left voters very happy by backing the Conservatives, but more importantly you went into ...
FS People Expats
If we are being “fair to the police” we need full facts:
A neighbour called 999 saying someone had been stabbed,
The brothers call contains signif...
Nick Clegg has ramped up the pressure on Bob Diamond by indicating he believed the Barclays chief executive should follow the lead of the bank’s chairman, Marcus Agius.
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The shame of Liverpool Labour councillors taking their allowances but not turning up to do the work
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