29/06/2012 Daily Politics


29/06/2012

Andrew Neil with the latest political news, interviews and debate.


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Morning, folks, welcome to the Daily Politics on Friday. It looks

:00:45.:00:48.

like it could be another bad day for British banks. They are under

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fire again, this time for failings in the way they sold a complex

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financial product to small businesses. Bank of England

:00:56.:01:00.

governor Mervyn King says change is needed in the culture of the

:01:00.:01:04.

banking industry. I think we worked that out ourselves. Meanwhile,

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Barclays' chief executive Bob Diamond has said he will not resign

:01:08.:01:12.

despite criticism of his bank for rigging a key international

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interest rate. We sent Adam out with the mood box to see whether

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anyone still trusts the banks. A European leaders agreed new

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measures in another attempt to restore financial stability to the

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Eurozone. They have also approved a 120 billion euro plan to boost

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economic growth. And we take a look back at an

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eventful week in the Westminster village.

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With me today, Camilla Cavendish from the Times and Rafael Behr from

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the New Statesman. First, let's turn our eyes to Europe, because

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after emergency overnight talks, Eurozone leaders have agreed new

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measures to bolster ailing banks and over indebted governments.

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Asian and European stock markets have risen sharply on the news. But

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how they perform later today is another matter. The European

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Council President, Herman van Rompuy, described the measures as a

:02:14.:02:17.

breakthrough. The agreement is aimed particularly at rescuing

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Spain's troubled banks and reducing borrowing costs of southern

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European countries. This is what the Prime Minister, who was not

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part of this agreement, had to say this morning. The countries of the

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Eurozone did take important steps forward last night. For a long time,

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we have said more action needs to be taken for short-term financial

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stability. More to recapitalise banks, to use firewalls, to drive

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down interest rates and create greater stability. They took

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important steps forward last night. There is still work to do.

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With us now, Sharon Bowles, a Liberal Democrat MEP, and also

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chair of the European Parliament's economic and monetary affairs

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committee. And the Conservative MP John Barron is with us, too. Sharon

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Bowles, let me come to you first. Does this represent a step-change

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in the Eurozone's efforts to sort itself out, or is it just a bigger

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sticking plaster? It is a bit of sticking plaster, and one move

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towards this Aof greater integration. The cars we will have

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a banking union? Well, it is part of the banking union proposals. The

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supervision by the ECB is the right way for it to go. There was a fight

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as to whether it should be the ECB or the European Banking Authority.

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The ECB fits much better and also works better for the UK. This means

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the European bail-out funds, the temporary one and then the

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permanent one, will, in return for buying Spanish bank bonds, they

:04:11.:04:15.

will have to take on to their balance sheet for billions of

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euros' worth of dodgy Spanish bank shares, correct? Yes. That is

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really encouraging if you are a German taxpayer. The problem is

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that neutralising the sovereign debt was difficult. But they have

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not done that. Neutralising bank debt is even bigger, so they still

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need to find some way to bring down the cost of sovereign debt without

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resorting to the bail-out mechanisms. But there is a step

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towards a banking union, which will be run by the Germans, no doubt.

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They are already in control of the committee to set it up. The bail-

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out mechanisms will be able to put money directly onto the dodgy

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banks' balance sheets rather than through the Government's, so it

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doesn't amount to sovereign debt. But there will also be able to buy

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a sovereign debt as well, not the ECB, but the bail-out mechanisms

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will be able to buy dodgy sovereign debt to add to that dodgy bank

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shares. It sounds dodgy to me. The problem is that there is an

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enormous amount of debt in the system, and no amount of moving the

:05:27.:05:32.

debt between government and banks or vice versa can conceal or erode

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its scale. Until you address that, everything else is sticking

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plasters. This must be the 20th summit we have had. It has done

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more than usual. A bit more, but it has not solved the problem in the

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sense that we still have enormous debt. If you really want a

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sustainable long-term solution, you have to narrow the gap between what

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governments earn and spend, make economies more competitive. Where

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are the sweeping supply-side reforms needed to encourage greater

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growth? Mrs Merkel, in some ways, retreated from the position she had

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before. That is the position of the New Statesman, which described Mrs

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Merkel as the most dangerous German leader since Hitler. I did not

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realise the New Statesman was a tabloid. You must be happy. Those

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are not my words, it is a view. We are an ecumenical publication. This

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has been a defeat for Angela Merkel to an extent. The big picture with

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this crisis has always been that at some stage, if they want to save

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the Eurozone, Germany has to put its economy up as collateral for

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the debts of the southern European states. The German economy is not

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big enough. They need to demonstrate to the markets to give

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them the confidence that institutionally, there will be

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integration at a scale that will tell everyone they are committed to

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the project. As you say, German taxpayers are not keen on that.

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Berry's a lot of trust -- they need a lot of trust in the southern

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European states that they would behave in a way that would make

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this work. But yesterday, we saw a softening of the German position.

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They were saying, OK, you need the money. The Italians and Spanish

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were saying, trust us, we will do the fiscal discipline. The banking

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union will be supervised by the Germans, and the Germans will be in

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direct control of the behaviour of every systemic Club Med bank. For

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Britain, as the capital of European finance, is it a danger or an

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opportunity that the Eurozone is going to a banking union? It is

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both. Clearly, the City is concerned. Since 2007, the EU has

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started to swing away from creating a level playing field, which

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benefited the city enormously, towards endless levels of medalling,

:08:05.:08:15.
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which the City does not like. There will be some business lost. But on

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the other hand, it is firstly vital that we get the Eurozone sorted out.

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Nobody will benefit if these countries collapse. Secondly, the

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City is the gateway to the world, not just Europe. We have the second

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biggest insurance industry in the world. And we set LIBOR. Which we

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will come on to. If what do you think? Is a banking union an

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opportunity for Britain, or a disadvantage? I agree that it is a

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bit of both. It is better than try to have supervision that covers us

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as well by the European Banking Authority, which would not have had

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the adequate powers to supervise a large systemic bank. So it is

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better than the alternative. If you have the ECB playing a role for the

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Eurozone, a consequence of that is that a parallel role has to be

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recognised for the Bank of England. This argument about maximum

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harmonisation of capital has to be eroded, because they are saying you

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have to take account of monetary policy in supervision. What is

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sauce for the goose is sauce for the gander. That applies to the UK

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as well. That helps resolve the tension. We still do not know the

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shape of it, though. The City of London seems to have prospered well

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in the shadow of a bigger monetary union known as the United States.

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Are you any closer on your petition numbers? IUD gathering names among

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Tories or the public in general? This is simply Conservative

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backbenchers. About 100. The referendum will take place in the

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next Parliament, but they will be put on the statute book in this

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Parliament, making the case for a referendum. The wording will be

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decided once we have had an informed debate. That debate has

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:10:34.:10:39.

yet to be had. So you are asking people to sign a petition with no

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idea what the referendum will be about? Well, yes, because at the

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end of the day, we need a debate as to what should be on the referendum.

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But it is about our future relationship with the EU, because

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they can be no doubt, particularly after the Eurozone crisis, that the

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EU is fundamentally changing. And people want a say as to our future

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relationship. Will the Europeans be happy that you have been chair of

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this committee? This is something I face almost day in, day out. There

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is a fair degree of respect that how I have handled matters. The

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parliament in general is united in that we do not divide. We are a

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parliament for the EU. I would not take the pessimistic view you have

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about the Eurozone. If the euro wants to be a reserve currency, it

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can't do that. The US doesn't do that for the dollar. And I think

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the UK is right. It is against the single market. We have to leave it

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there. No doubt there will be lots more discussion about where this

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leaves the City of London. Speaking of the City of London, who

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would think the London interbank offered rate, or LIBOR, would kick

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up such a financial and political storm? Assets but 99% of you didn't

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even know what LIBOR was until this boat. Some of you may still not.

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Well, it would be a storm if a bank was found trying to rid it for

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financial gain. That is what bhajis was found try to do, and they have

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had to pay a hefty price for it. But not the resignation of their

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chief executive, Bob Diamond, or even the chairman has not been put

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up for ritual sacrifice yeah, but they paid �290 million in fines.

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This is what the Governor of the Bank of England Mervyn King had to

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say about the affair a few minutes ago. There must be many people who

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work in the banking industry today who know that they are honest,

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hard-working and feel they have been let down by some of their

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colleagues and leaders. I hoped everyone now understands that

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something went very wrong with the UK banding -- banking industry, and

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we need to put it right. That goes both to the question of culture in

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the banking industry and to the structure of the banking industry,

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from excessive levels of compensation to shoddy treatment of

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customers, to a deceitful manipulation of one of the most

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important interest rates, and now this morning to news of yet another

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misselling scandal. We can see that we need a real change in the

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culture of the industry. That was the Governor of the Bank of England.

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We are joined now by our political correspondent, who also doubles up

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adds the BBC's Mary Poppins, as you can see. The chief executive of

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Barclays, Bob Diamond, sent this letter to Andrew Tyrie, chair of

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the select committee. He will have to appear before them. It was quite

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a defiant letter. How has it gone down? I do not think MPs will be

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impressed with the tone of this letter, because Bob Diamond says he

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is happy to come to the committee to talk about what has gone on at

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Barclays, but there is no hint of any kind of apology. He admits that

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there was inappropriate behaviour, but he says this was limited to a

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small number of individuals and there is no suggestion that it went

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to the top of the bank. That kind of response will not satisfy

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politicians across all parties, who feel that the way this rate was

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manipulated, and you heard from Mervyn King talking about cynical

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manipulation of a rate which affected the mortgages of ordinary

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people, and politicians from all parties are questioning how the

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bank is possibly going to manage to rebuild trust with the public while

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Bob Diamond remains in charge. For some strange reason, we thought

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that feeling on the banks on the high streets could be running high.

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They may like them, they may not. There have been loads of stories

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about banks mucking up. When we asked people do you still have

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faith in the banking system, where will they make their deposit, yes

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or no? Reluctantly, I will say yes. Why is that? It needs regulating,

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obviously. At the moment I know things look bad, but I think it's

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probably not the the banking system we shouldn't have faith in but more

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the bankers themselves. No. Why is that? Because sometimes they will

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take my money out of my account but I don't know why. From what I have

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been reading lately it's quite bad, I don't trust it myself. But you

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still use a bank? I have to, I get paid into a bank. It's the only way.

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Why have you said no? I don't really know why, because it's a

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business, and it's about profit. It's not about people who have a

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bank account. I don't think I have ever had faith in the banks. It's

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going to be a no. I hate credit cards and things, I try not to have

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an overdraft or anything. Yeah, it's all gone up the creek.

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vote with your pennies and pounds? I have a big penny jar at home that

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needs counting. Do you trust the system? Have you come to

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investigate Barclays? Well, there are absolutely loads of

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banks on this street, so let's go and head to another one.

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You said no, why? Well, it's just what's in the press at the moment.

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You I think it's probably a reflection of dodgy dealings going

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on there. Would you like to give us your

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views on the banks while you are waiting for the bus? I trust them,

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even though I work for them. are in the belly of the beast?

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but I trust them. It's not the problem. What is the problem?

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Government. You work in a bank, are you a trustworthy person? Very.

:17:08.:17:12.

They get the blame for things that weren't their fault, so I am not

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sure who to vote for. In the middle? Try to balance it. You are

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like a hedge fund. People have been so keen to vote and voted for one

:17:26.:17:29.

option overwhelmingly, it looks like the banking system is

:17:29.:17:33.

seriously overdrawn. You don't keep your money under the mattress?

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Might get robbed. I got to have enough for my funeral, you know,

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because I won't be here too long. She won't need that money for a

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long, long time. We did ask the Treasury if a Minister was

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available and to our shock, horror and surprise, none was. No idea why.

:17:53.:18:00.

But there you go. It's Friday. With us however is the shadow

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Treasury Minister, Chris Leslie. Why did you allow this to happen

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under Labour? Well, I mean, hindsight is a wonderful thing.

:18:08.:18:13.

When Labour came in it had a whole series of unregulated self-

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regulated financial services. We created a Financial Services

:18:16.:18:19.

Authority and gave it some regulatory powers. Of course, we

:18:19.:18:24.

then had this global credit crunch, regulators, governments around the

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world didn't spot the absolute appalling risk-taking going on. The

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question now is today with a contemporary legislation before

:18:32.:18:37.

parliament what are the judgments that need to be made? I think there

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are serious doubts about whether the Government are going far enough

:18:39.:18:44.

today. Maybe, but your only financial services and markets Act

:18:44.:18:48.

failed to regulate LIBOR, didn't mention LIBOR. You left it to the

:18:48.:18:52.

banks to fix LIBOR themselves. Why did you do that? Well, and LIBOR

:18:52.:18:58.

has been unregulated since it began. Interestingly over the past year

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several of my Labour colleagues, including myself on the 6th March,

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raised this question about surely LIBOR should now begin to come

:19:06.:19:11.

under the regulator - I put this... Shouldn't you be asking Ed Balls,

:19:11.:19:14.

Ed Miliband and Alistair Darling, they were the people who who didn't

:19:14.:19:17.

do it. We have known there has been some sort of investigation for the

:19:18.:19:22.

past year into LIBOR. I put to the Minister on 6th March do you have a

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view about whether this should be regulated. His answer to me in a

:19:25.:19:28.

single word, no. No view at all. That's the astonishing thing. Of

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course they've been forced to U- turn yesterday when this blew up. I

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think now we need to recognise that this isn't just a question of

:19:38.:19:42.

regulatory fail failures with one individual and one bank, this could

:19:42.:19:44.

be across the whole system. We are starting to head to a situation

:19:44.:19:48.

where we really need to take a systemic view about whether bigger

:19:48.:19:51.

reforms are necessary. It's interesting almost everything you

:19:51.:19:56.

did has fallen apart, hasn't it? You put in a tri-partite regulatory

:19:56.:19:59.

system, that didn't survive the crash. No longer exists. No more

:19:59.:20:05.

boom and bust. We have had the biggest bust since the 1930s. You

:20:05.:20:09.

imposed PFI on the NHS, they're now going - hospitals are going bust,

:20:09.:20:13.

as well. You dined out out on a light touch regulation which was

:20:13.:20:16.

really another word for the wild west. I am not going to claim

:20:16.:20:23.

everything... Not a great record. Not everything being rosy. It's all

:20:23.:20:27.

all withered on the vine. There were some steps taken to improve

:20:27.:20:29.

regulation, not enough. But the idea that the Chancellor or the

:20:29.:20:32.

Conservatives have some sort of insight here that the previous

:20:32.:20:35.

Government didn't, they were not saying regulate more heavily,

:20:35.:20:44.

Andrew. Excuse me, as you know,... They criticised us for regulating.

:20:44.:20:48.

Could you show me where you urged Labour to do more and answer comes

:20:48.:20:53.

there none. Why are you not calling for Bob Diamond's resignation?

:20:53.:20:57.

suspect because this is more than just one chief executive of one

:20:57.:21:02.

bank. We are talking about multiple executives. Why shouldn't we have a

:21:02.:21:05.

huge clearout of this generation of bankers that's brought us to our

:21:05.:21:08.

knees and start again? I suspect that's probably going to be on the

:21:08.:21:13.

cards. I really do think that we are talking about a much more

:21:13.:21:20.

systemic inquiry. There are plenty of banks - but why not... Why are

:21:20.:21:24.

you not calling for Bob Diamond's resignation? There could be a move

:21:24.:21:27.

between regulators slapping people on the wrist and finding them and

:21:27.:21:31.

into criminal investigations. There was some doubt yesterday about do

:21:31.:21:35.

the regulators have the criminal powers. It's clear now that the

:21:35.:21:38.

Serious Fraud Office, the City of London Police do have the criminal

:21:38.:21:41.

capability to pursue conspiracy to defraud and so forth. That's why we

:21:41.:21:47.

have to be a little bit circumspect about the criminal implications.

:21:47.:21:50.

The Serious Fraud Office doesn't do financial regulation, it implements

:21:50.:21:56.

the criminal law. That's a different matter. Let me come to

:21:56.:22:01.

our journalists here. Shouldn't we now have a Leveson-style inquiry

:22:01.:22:08.

into the banks? I wouldn't wish a Leveson Inquiry on anybody. A judge

:22:08.:22:12.

who knows something about banking to do it as opposed to the current

:22:12.:22:16.

one on journalism. I think we have had a huge problem in this country

:22:16.:22:20.

because we haven't prosecuted. In the US they've taken a lot of

:22:20.:22:25.

people to court, pursued inquiries. A lot of people have gone to jail.

:22:25.:22:28.

They've had a sort of truth and reconciliation in a sense. One

:22:28.:22:32.

thing we all need in this country is to get over this issue, restore

:22:32.:22:36.

banks, we also need to have faith in our banks again. I agree we need

:22:36.:22:39.

to do something to punch that but I don't want a two-year inquiry. I

:22:40.:22:44.

think this is quite simple. Either you find a way to prosecute which

:22:44.:22:47.

does not - you are saying there is a way, maybe there is or the very

:22:47.:22:51.

least you have to name the 14 traders in Barclays whose e-mails -

:22:51.:22:56.

that would be a factor. Who is this? You have to have heads to

:22:56.:22:59.

roll. There is no other answer. They don't seem to learn. We now

:22:59.:23:04.

have this FSA findings on the swap, mis-selling, rather complicated.

:23:04.:23:09.

The RBS statement, and it's my bank, it beggars belief. They say in the

:23:09.:23:17.

case of a small number of less sophisticated systems who entered

:23:17.:23:23.

into more complex swap products we have agreed to move directly to - I

:23:23.:23:28.

mean... This is the essential point and why people are angry at a much

:23:28.:23:33.

bigger level than thinking some of it is dodgy and that feels rum,

:23:33.:23:38.

because going back over the period at the peak of the financial crisis

:23:38.:23:42.

2007-8, there is now a feeling that the people who arguably were the

:23:42.:23:45.

most responsible for this are the people who have been given immunity

:23:45.:23:48.

from the economic consequences of it. So the whole bail out process

:23:48.:23:52.

of the whole banking sector and then the subsequent recession and

:23:52.:23:55.

you can argue about the causes of that as much as you like, but it

:23:55.:23:58.

feels to a lot of people like a transfer of wealth from people at

:23:58.:24:02.

the bottom to people at the top. People who caused it in the first

:24:02.:24:06.

place. When you hear attitudes like that and see Bob Diamond and the

:24:06.:24:09.

way he behaves the impunity that they seem to have at a sort of

:24:09.:24:13.

level of justice when they might or might not have been committing acts

:24:13.:24:16.

of fraud, sort of reflects the impunity they have, the immunity

:24:16.:24:23.

they have. I didn't see Marie And toeupbet runs the RBS. If there was

:24:23.:24:26.

one thing you could do if you were in power to help get the show back

:24:26.:24:32.

on the road, what would that be? Looking at whether the regulatory,

:24:32.:24:36.

needs to extend to areas like the LIBOR, but on the swap mis-selling

:24:36.:24:41.

they have this this independent commission, they said

:24:41.:24:44.

derequiretives - the Chancellor is still saying those should be in the

:24:44.:24:49.

retail. I think another U-turn is beckoning. Surely not! I suspect so.

:24:49.:24:53.

I can't believe it. Chris, thank you very much for being with us. So,

:24:53.:24:59.

Germany not knocked out of the Euros, Rafael Nadal not Goked out

:24:59.:25:05.

of women -- got knocked out of Wimbledon. Bob Diamond's still got

:25:05.:25:08.

a job. Let's look at the week in 60 seconds.

:25:09.:25:12.

Three times wasn't enough for the man who used to rule at Number 10.

:25:12.:25:16.

Tony Blair would like to be PM again, but doesn't fancy his

:25:16.:25:19.

chances of a comeback. In Northern Ireland, they were building bridges

:25:19.:25:26.

with a handshake when the the Queen met former IRA commander, now

:25:26.:25:28.

Deputy First Minister, Martin McGuinness. At Westminster, it was

:25:28.:25:34.

time for another budget U-turn, this time on fuel backs -- tax. Who

:25:34.:25:37.

knew what and when. The Junior Minister left us none the wiser.

:25:37.:25:42.

When were you told? I have been involved in this for sometime and...

:25:42.:25:45.

You didn't take the decision, obviously? The Chancellor and Prime

:25:45.:25:50.

Minister did, when were you told? We had a collective discussion of

:25:50.:25:54.

that... The policy we have all been waiting for has finally been

:25:54.:25:58.

unveiled. Nick Clegg even took to his soap box to make the case for

:25:58.:26:03.

Lords reform. This comes down to a really, really simple idea. It's

:26:03.:26:07.

called democracy. He might have to shout louder to get the Tory

:26:07.:26:15.

backbenches on side. OK, let's pick up on the back of

:26:15.:26:19.

Nick Clegg there, how will Labour play this House of Lords reform?

:26:19.:26:23.

They are in favour of a elected chamber but they're also the

:26:23.:26:28.

opposition. They're divided over this. Ed Miliband's position is you

:26:28.:26:32.

can see some clarity if you look hard enough, which is that they're

:26:32.:26:35.

in favour of the principle of Lords reform so they'll vote at a second

:26:35.:26:39.

reading of the bill, they'll let it go through if it gets that far. But

:26:39.:26:42.

they are not - they want to have plenty of time in parliament to

:26:42.:26:45.

fiddle with it, argue with it, they don't want to see it rushed through

:26:45.:26:48.

quickly. The problem is that at least half of Labour MPs think that

:26:48.:26:56.

this is really an opportunity to ideally cut Nick Clegg's head until

:26:56.:27:03.

all the Lib Dems are curled up in the floor begging for mercy. They

:27:04.:27:08.

should be getting that crowbar in and trying to prise them apart.

:27:08.:27:12.

you add in what he is saying about the Labour attitude to the view on

:27:12.:27:17.

the Tory backbenches where there is a huge rebellion brewing, you have

:27:17.:27:20.

to wonder whether this is ever going to see the light of day.

:27:20.:27:24.

Certainly there's nobody outside of parliament who cares a hoot about

:27:24.:27:27.

this, which is another problem for Liberal Democrats. But they're

:27:27.:27:30.

desperate to cling on to this. It's important. I think this issue is

:27:30.:27:32.

the one that could break the coalition. It's another reason why

:27:32.:27:36.

Labour is so interested in it. The Conservatives are really split.

:27:36.:27:41.

David Cameron knows that he has to back Nick Clegg. The other issue,

:27:41.:27:46.

fundamentally the idea of electing people from party lists on 15-year

:27:46.:27:51.

terms, it's nonsense. That's no accountability. This is a register

:27:51.:27:57.

for ex-politicians to sit around. That's the biggest problem the MPs

:27:57.:28:01.

have, is you work hard as a MP and most do work quite hard and you

:28:01.:28:04.

might get sacked every four or five years by the electorate. Are you

:28:05.:28:08.

going to put up with some swaggering Senator turning up on

:28:08.:28:12.

your patch saying I am here, I have a better democratic mandate for you

:28:12.:28:15.

but I have a job for life as well or 15 years which in political

:28:15.:28:18.

terms is life. The interesting thing that I found talking to

:28:18.:28:22.

people around parliament about this, is that the Lib Dems are persuaded

:28:22.:28:26.

that David Cameron has given Nick Clegg all the assurances possible

:28:26.:28:30.

that he will whip his MPs behind this and they've looked them in the

:28:30.:28:33.

whites of the eyes and the Conservative MPs are saying it's -

:28:33.:28:36.

we can choose whether we like this or not. They say the whips speak to

:28:36.:28:41.

them with fingers crossed. Thank you both for today. I am going to

:28:41.:28:45.

be back on Sunday with the Sunday Politics at midday. I will be

:28:45.:28:51.

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