PM says inquiry will report back by Christmas so that its proposals can form part of the financial services bill
David Cameron has announced that a joint committee of MPs and peers will investigate the banking industry by the end of the year, in the wake of growing political anger at recent scandals.
Its remit will be to examine issues of “transparency, conflicts of interest and the culture and professional standards of the financial services industry including the interaction with the criminal law”.
The inquiry, which will be chaired by Andrew Tyrie, the chairman of the Commons Treasury select committee, will be set up within days and will have the support of Treasury officials.
The prime minister said it would have the power to examine witnesses under oath as well as gain access to all relevant papers. It will have most of its hearings in public and, Cameron pointedly said, former ministers and advisers will be called – a reference to Ed Balls, a former economic secretary to the Treasury, and Ed Miliband, a former Treasury special adviser. “No one would like to see the shadow chancellor in the dock of a courtroom more than me,” Cameron said.
The inquiry will report back by Christmas so that its proposals can form part of the financial services bill, which will implement the reforms recommended by the Vickers inquiry.
Following Cameron’s announcement, Miliband said he did not think a parliamentary inquiry would be enough.
But Cameron said the Labour leader’s remarks were demeaning to the Commons and Lords, adding there was “no reason that parliament cannot get to the bottom of this. He said few people were as qualified to undertake the inquiry as Tyrie”.
The inquiry would be swift and strong enough to get to the answers, he added.
Former chancellor Alistair Darling likened the proposed inquiry to be a truth and reconciliation inquiry, and pointed out that it had been the Conservatives who had pressed the last Labour government to do very little on regulation.
Labour did not say immediately if it would co-operate with the inquiry, insisting it would not play student politics on the issue.
Labour said instead it would in the short-term press ahead with a plan to stage a vote in the Lords during the committee stage of the financial services bill calling for a public inquiry into banking.
That call is unlikely to be supported, leaving Labour with the option of co-operating with the inquiry, or running a boycott that might be misunderstood outside Westminster.
Setting out Labour’s broad position an official said: “We do not think the great and the good of Westminster should investigate the great and the good of the City of London.”
The danger with a parliamentary inquiry including even one with a large number of experienced peers is that it descends into party politics, rather than becoming a serious evidence-gathering process.
But the government is genuinely concerned that a judicial inquiry will simply take too long, and miss the chance to inform the legislation implementing Vickers commission recommendations, as well as financial regulation legislation.
Key questions for Barclays bank CEO Bob Diamond as he faces MPs at the Treasury select committee on Wednesday
On Wednesday Bob Diamond will be hauled before Andrew Tyrie MP and the rest of the Treasury select committee to explain his role in the Libor scandal. Here are a few of the questions he will have to answer.
1. When did you know about the attempts to manipulate the Libor rate at Barclays?
2. What did you do about it when you found out?
3. Have you considered resigning?
4. How many people have you fired over the scandal? Are any of the people who were involved in the interest rate rigging still working at the bank?
5. Are you going to give back the money you have earned since 2006 (the date of the now infamous emails between traders)?
6. Do you stand by your statement to the Commons Treasury select committee in January 2011 that the “period of remorse and apology for banks … needs to be over”?
7. Do you regret the hypocrisy of the BBC Today programme lecture last November when you urged bankers to be “good citizens”?
Bob Diamond says Treasury move inflicted ‘unnecessary damage’ on the bank’s reputation
Bob Diamond, chief executive of Barclays, has complained to MPs about the “unnecessary damage” inflicted on the bank’s reputation after the move by the government in February to close two “aggressive” tax avoidance schemes.
In a letter to Andrew Tyrie, the Conservative MP who chairs the Commons Treasury select committee, Diamond claims that the reputation of the UK as a business centre will also be threatened if the government breaches confidential agreements, as he implies was the case with Barclays’ tax affairs.
“The way in which this situation was handled seems to us to have been completely unwarranted,” he said. “Unnecessary damage was placed on Barclays’ reputation just at a time when the focus should be on rebuilding confidence and accelerating growth, not undermining it.”
Exchequer secretary David Gauke took quick action in February to close two tax avoidance schemes that Barclays had disclosed to HM Revenue & Customs and took the highly unusual step of changing the law retrospectively. While Gauke did not name the bank, Barclays’ name emerged.
Tyrie published the letter from Diamond less than a week after the bank held its “citizenship day” to set out commitments on matters such as tax and the letter made reference to this. “Especially in the context of our focus on citizenship, Barclays takes its responsibilities with respect to its tax affairs very seriously,” Diamond said. His personal tax affairs have been highlighted since the action in February as the bank paid £5.7m to the exchequer to avoid him paying a tax bill twice when he relocated back from New York to London to become chief executive at the start of last year. Telling Tyrie that he was grateful for the opportunity to discuss the matter, Diamond said: “I should hasten to add that we have taken away from then lessons and are … carefully reviewing the nature of our business activities here, at the minimum to ensure that we take steps to prevent such an event from occurring again.”
Tyrie has asked the chancellor, George Osborne, for his version of events. “I have forwarded Mr Diamond’s letter to the chancellor. It is important that we find out what happened here,” said Tyrie.
Diamond stressed that Barclays had “voluntarily and proactively disclosed to HRMC” the scheme it had used when buying back its debt in “a tax efficient matter”. The process had been used by other banks but Barclays said that it was “the first and only taxpayer to make a disclosure”. He added: “We were therefore surprised to be singled out in the way that occurred, not only through a retroactive change of law but the effective naming of Barclays by the exchequer secretary in his statement to parliament, accusing the bank of entering into a ‘highly abusive’ scheme.
“We believe that the confidentiality of taxpayers’ affairs is an important principle of UK tax law that has stood for many years … We feel that it is important to the UK’s reputation as a business centre that this principle is not seen to be compromised or watered down simply because the tax authorities do not agree with the material that it disclosed to them.”
He said the bank had had strong legal guidance about the way it was buying back its debt – on the schemes closed by the Treasury – on which it made a profit of £1.1bn in 2011.
David Cameron reveals his love of Cornish pasties, saying he last ate one at Leeds railway station ‘and very good it was too’
David Cameron has presented himself as a man of the people by revealing he likes Cornish pasties, and last ate a large one at Leeds railway station from the West Cornwall Pasty Company – which is seen as being at the Boden end of the pasty market.
The revelation about Cameron’s dietary habits came a day after the chancellor, George Osborne, was cross-examined by a Labour MP at the Treasury select committee over when he last ate a pasty.
Osborne revealed he could not recall, leading to tabloid accusations that he was not aware of the impact of the budget plan to impose VAT on hot takeaway pasties.
Greggs, the bakers, has been to the Treasury to protest at the way the tax was being applied to its pies.
The move will add 20% to the cost of hot pies and pasties, prompting fears there will be panic buying before the VAT rise takes effect.
Cameron said the move would protect small businesses and takeaways from competition in supermarkets.
The prime minister said he eats pasties regularly when he goes to west Cornwall and the one he ate at Leeds station had been large, adding: “And very good it was too.”
The Greggs chief executive, Ken McMeikan, said on BBC Newsnight on Tuesday night that ministers had “lost touch” and did not appreciate the impact the changes to VAT rules would have on ordinary people.
The high street chain saw millions wiped off its shares after the budget closed a loophole that has meant some hot takeaway foods, such as sausage rolls and pasties, escaped the duty.
The move sparked outrage, with critics contrasting it with the cut in the 50p top tax rate.
But speaking at a 10 Downing Street press conference, Cameron said that Osborne was trying to bring shops into line with the VAT charged for more than two decades on takeaway burger bars, fried chicken restaurants and fish and chip shops.
The prime minister said: “It was Nigel Lawson who over 20 years ago put VAT on hot takeaway food, and many pasties and other items of hot takeaway food have had VAT on them since that time.
“What we have seen since then is a number of businesses trying to find ways around that rule, fighting court cases and the rest of it.
“Many, many small businesses in this country, whether selling fried chicken or fish and chips or hot takeaway pies, are already paying VAT.
“What the government has to try to do is make sure the VAT rules are fairly applied.
“I don’t think it is fair that the small businessman running a fried chicken takeaway is having to charge his customers VAT but the big supermarket isn’t having to pay VAT on fresh hot chicken.
“It’s about trying to have a sensible VAT arrangement where the boundaries are sensible.”
The move was ridiculed by Labour MP John Mann during Osborne’s appearance before the Commons Treasury committee on Tuesday.
“With the weather as it is today, a lukewarm pasty from Greggs is not VAT-able because the ambient temperature outside is the reference point, whereas if it is the middle of winter and freezing cold it is VAT-able,” Mann said.
“It is an extraordinarily complex situation when you are having to check with the Meteorological Office on whether or not to add VAT on pasties in Greggs, which is what your consultation paper does.”
Osborne was accused by the Sun of behaving like Marie Antoinette telling the public to eat cake.
The Labour leader, Ed Miliband, talking to the press outside a Greggs outlet in Redditch, where he and Ed Balls ate sausage rolls, said: “There is a serious point here which is that the government is hitting people’s living standards in every way they can.
“Not just fuel duty going up, child benefit taken away, tax credits being cut, now even putting 20% on the cost of pasties, sausage rolls – and the chancellor’s excuse? Well, he says you can buy them cold and you can avoid the tax.”
He said he would vote against the rise and is trying to form an alliance with angry Liberal Democrat West Country MPs.