Coalition gets its way over bankers inquiry

Ed Balls and George Osborne had their most explosive exchange today.
Ed Balls and George Osborne had their most explosive exchange today.

By Ian Dunt and Alex Stevenson

A parliamentary inquiry into the professional standards of Britain's bankers is set to go ahead, despite an afternoon of acrimony across the despatch boxes.

Chaotic Commons scenes saw George Osborne and Ed Balls take their battle to a new low, as both men accused the other of outright lying in the Commons.

The rowdy exchanges did not prevent a grudging truce breaking out once the coalition's victory was concerned, however.


Labour had called for a judge-led inquiry, but its motion proposing a "forensic" and "independent" probe was defeated by Conservative and Liberal Democrat MPs by 320 votes to 239. The government then won its motion by 330 votes to 226.

Following the result Balls said David Cameron and Osborne had made a "very grave error of judgement" in rejecting the idea of a judicial inquiry.

He pledged that the opposition would work with Treasury select committee chair Andrew Tyrie, however.

"It is our view that the case for a full, open judge-led public inquiry is immeasurably stronger at the end of this afternoon," Balls said.

Osborne welcomed the "agreement in principle", before Tyrie told MPs he would fall in with the wishes of the Commons if the parties can work together.

Their clash over the despatch boxes followed a Spectator interview in which the chancellor accused Balls of being personally involved in alleged attempts from Whitehall to get Barclays to 'lowball' its Libor rating.

"If he has any evidence he must produce it now," Balls shouted across a rowdy Commons chamber at the height of their clashes.

"At no point did I have any communication, directly or indirectly, with Paul Tucker [deputy Bank of England governor]. I had no discussion at any time with anybody about the Libor market or its operation."

He added: "If he has any evidence he should provide it now in this House. I will take an intervention.

"If he will not provide the evidence now he needs to stand at this despatch box now and withdraw this accusation."

At that point Osborne stood up and reminded MPs that former Barclays boss Bob Diamond had said that Tucker mentioned pressure from Treasury ministers when he had his phone call with the bank in October 2008. He did not cite any evidence against Balls directly.

Speaking to the Treasury committee yesterday, Diamond had said 'minsters' had contacted Tucker about Barclays' high Libor rating, before the deputy governor contacted Diamond. He did not mention any specific names.

Diamond also said he did not interpret that call as a demand for the bank's rating to be lowered, but his boss, Jerry del Missier, then called for a reduction in the rating.
"Let him explain what Labour's involvement was, who were the ministers, who had the conversation, who were the senior figures?" Osborne said.

"Let him answer for his time in office."

Deputy Speaker Nigel Evans faced one of his toughest occasions in the Speakers chair as he fought to keep MPs under control during the emotional exchanges. He did not prevent the shadow chancellor from strongly suggesting Osborne had lied – a breach of parliamentary rules.

Balls replied: "The House and the public will judge the integrity of the chancellor who cannot defend here what he whispers to the Spectator magazine.

"What he said is not true and he knew that.

"The sight of a chancellor who says one thing to the press but can't defend himself in parliament is embarrassing."

In one of the worst-tempered debates in recent memory, Balls said Osborne "impugned [his] integrity".

Osborne said the shadow chancellor "smeared his way through 13 years" in power.

At one point Labour MP Dave Watts was forced to withdraw a remark after he accused George Osborne of lying.

Tyrie appeared to directly contradict David Cameron's promises during PMQs that the inquiry would have a broad remit when he insisted he would only chair an inquiry into which changes of Libor regulations could be put in the financial services bill.

Attorney general Dominic Grieve inadvertently made the prospect of a parliamentary inquiry even less likely when he said Labour's preferred option of a public inquiry would be impossible while a criminal investigation was already underway.

Opposition MPs forcefully argued that a politician-led inquiry would be far more susceptible to breaking sub-judice rules than a judge-led inquiry.

The Grieve comment, described by Balls after the vote as a "devastating intervention", raises serious questions about the government's line of argument, which is that a parliamentary inquiry could report back quickly so that laws could be changed early next year.

He added: "It is clear that there are a whole wider set of questions, from mis-selling to small businesses to the wider culture and practice of the banking industry, which are outside the scope of the inquiry set out by the chair of the select committee and cannot be properly addressed by a parliamentary committee."

The parliamentary inquiry proposed by the prime minister at the start of the week will be given extensive powers not usually available to select committees.

It will be able to take evidence under oath and be given access to government papers - including those from during New Labour's period in government. 

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