Parties fail to agree on the nature and breadth of inquiry as chairman warns it cannot proceed without cross-party support
David Cameron and Ed Miliband were locked in a trial of strength on Tuesday night over the status and breadth of an inquiry into British banking, amid signs that a political deadlock between the two parties could yet lead to no inquiry being set up at all.
In the Lords, the government defeated a Labour attempt to set up a judicial inquiry into banking by 251 to 197. But in an attempt to force the issue further, Cameron announced that MPs will be asked to vote on Thursday on either setting up a judicial inquiry, or a joint parliamentary inquiry of peers and MPs, as proposed by the government.
Although the Tories, with Liberal Democrat support, are certain to win Thursday’s vote, it is still possible that Labour could boycott the joint parliamentary inquiry.
The Treasury select committee chairman Andrew Tyrie, chosen by the government to chair the joint committee inquiry, has said it cannot proceed without cross-party support.
Cameron was being pressed to hold further private talks with Miliband about the composition, terms of reference, powers and resources to be given to the joint committee. The former head of the civil service Lord O’Donnell suggested the government press ahead with the parliamentary inquiry, but keep open the option of a further, fuller inquiry if it is needed.
Labour claimed, despite government denials, that the terms of reference of the parliamentary inquiry are too narrowly trained on the issue of Libor price setting as opposed to the wider banking issues.
Miliband said: “If [Cameron] doesn’t order that judge-led inquiry, he will be failing to understand both the gravity and scale of the crisis … We’ve got to seize the moment. The last thing the public want is a sense that the establishment is trying to cover it up and sweep it under the carpet.”
Labour also claimed that a politician-led inquiry was likely to descend into political point-scoring over whether the previous Labour government had presided over a system of light-touch regulation that had allowed the Libor scandal at Barclays to go ahead undetected.
The prime minister’s spokesman hinted at some flexibility over the terms of reference: “Parliamentary committees can make judgments about the precise issues they look at.”
The chancellor, George Osborne, urged Labour “to see sense”, arguing that a judge-led inquiry would take too long. He also said that, as Labour had been in power when the interest rate-fixing had gone on, its former ministers would be “the most afraid”, adding: “No one more than me would like to see [shadow chancellor] Ed Balls in the dock.”
In the upper house, Lord Sassoon, the Treasury minister, accused Labour of a misguided attempt to slow down an urgent need for an inquiry that on any construction had very wide terms of reference.
Labour countered that a parliamentary inquiry required to report by the end of the year, as the government proposed, would in practice, due to summer holidays and party conferences, effectively have only two months to take evidence and reach conclusions.
The deadlock was made more complex by a meeting of the Treasury select committee that saw both Tory and Labour MPs questioning why the committee was being sidelined.
The committee is due to take evidence from the former Barclays chief executive Bob Diamond on Wednesday, and has plans to call other witnesses. It has already taken extensive evidence on financial regulation.
Privately, some Tory sources admitted that Osborne’s nakedly party political stance on Monday in the Commons had made it more difficult to create cross-party consensus.