29/06/2012 Daily Politics


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


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


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


financial product to small businesses. Bank of England


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


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


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


despite criticism of his bank for rigging a key international


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


anyone still trusts the banks. A European leaders agreed new


measures in another attempt to restore financial stability to the


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


economic growth. And we take a look back at an


eventful week in the Westminster village.


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


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


after emergency overnight talks, Eurozone leaders have agreed new


measures to bolster ailing banks and over indebted governments.


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


how they perform later today is another matter. The European


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


breakthrough. The agreement is aimed particularly at rescuing


Spain's troubled banks and reducing borrowing costs of southern


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


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


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


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


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


down interest rates and create greater stability. They took


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


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


chair of the European Parliament's economic and monetary affairs


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


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


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


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


towards this Aof greater integration. The cars we will have


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


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


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


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


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


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


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


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


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


that neutralising the sovereign debt was difficult. But they have


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


governments earn and spend, make economies more competitive. Where


are the sweeping supply-side reforms needed to encourage greater


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


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


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


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


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


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


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


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


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


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


them the confidence that institutionally, there will be


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


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


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


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


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


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


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


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


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


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


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


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


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


benefited the city enormously, towards endless levels of medalling,


which the City does not like. There will be some business lost. But on


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


Nobody will benefit if these countries collapse. Secondly, the


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


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


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


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


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


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


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


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


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


recognised for the Bank of England. This argument about maximum


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


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


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


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


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


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


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


Tories or the public in general? This is simply Conservative


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


colleagues and leaders. I hoped everyone now understands that


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


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


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


from excessive levels of compensation to shoddy treatment of


customers, to a deceitful manipulation of one of the most


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


manipulated, and you heard from Mervyn King talking about cynical


manipulation of a rate which affected the mortgages of ordinary


people, and politicians from all parties are questioning how the


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


investigate Barclays? Well, there are absolutely loads of


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


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


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


on there. Would you like to give us your


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


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


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


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


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


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


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


option overwhelmingly, it looks like the banking system is


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


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


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


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


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


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


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


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


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


regulated financial services. We created a Financial Services


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


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


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


question now is today with a contemporary legislation before


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


are serious doubts about whether the Government are going far enough


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


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


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


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


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


raised this question about surely LIBOR should now begin to come


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


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


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


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


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


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


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


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


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


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


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


reforms are necessary. It's interesting almost everything you


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


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


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


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


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


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


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


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


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


Conservatives have some sort of insight here that the previous


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


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


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


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


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


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


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


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


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


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


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


between regulators slapping people on the wrist and finding them and


into criminal investigations. There was some doubt yesterday about do


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


case of a small number of less sophisticated systems who entered


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


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


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


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


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


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


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


of the whole banking sector and then the subsequent recession and


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


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


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


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


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


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


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


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


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


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


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


they have this this independent commission, they said


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


going to put up with some swaggering Senator turning up on


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


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


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


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


that David Cameron has given Nick Clegg all the assurances possible


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


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


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


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


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


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