:00:14. > :00:20.Tonight, our banking model is broken, so how do we fix it? We're
:00:20. > :00:23.above London's financial district to take a panoramic view, with the
:00:23. > :00:27.Treasury Minister, Mark Hoban, an expert panel, and an audience of
:00:27. > :00:36.City insiders. After the LIBOR crisis, is this the moment the
:00:36. > :00:40.system is finally changed? It might be you need some sort of state-
:00:40. > :00:43.backed institution to lend to longer term project that is are
:00:43. > :00:47.difficult for private entrepeneurs to discount the returns on. I think
:00:47. > :00:50.there is a case for all of those in a modern society. We will be
:00:50. > :00:54.discussing what's wrong with the banks and trying to work out
:00:54. > :00:57.whether there's an alternative to the way we do things now.
:00:57. > :01:01.Also tonight, after a massive rebellion by Tory MPs on Lords
:01:01. > :01:06.reform, it looks like the coalition's not responding. Or at
:01:06. > :01:10.least not as it should. Does it need to shut down or be rebooted,
:01:10. > :01:13.for trust to be re-established. coalition Government is moving
:01:13. > :01:17.beyond, outside the original coalition agreement I think really
:01:17. > :01:21.for party unity, and also in the national interest, it is important,
:01:21. > :01:25.as with many other countries, that the agreement is reviewed mid-term.
:01:25. > :01:28.The British company that made a fortune round the world selling
:01:28. > :01:38.bomb detectors that didn't work. A Newsnight exclusive report. Now the
:01:38. > :01:42.
:01:42. > :01:46.police bring charges. Good evening. A cesspit, that's how
:01:46. > :01:51.one Bank of England boss described the LIBOR scandal this week, and
:01:51. > :01:56.it's not over. Bob Diamond, the former Barclays boss, hit back at
:01:56. > :02:00.MPs today, saying claims he misled them were unfounded and "terribly
:02:00. > :02:05.unfair". But it's now likely Mr Diamond will have to testify on
:02:05. > :02:07.Capitol Hill, and meanwhile here, on this hill, this ancient,
:02:07. > :02:14.venerable city behind me, there is pressure for faster and bigger
:02:14. > :02:17.reform of the banks. But what kind of change? How will it come? In a
:02:17. > :02:21.moment we will discuss things, where they go next, with a minister,
:02:21. > :02:25.our panel of experts, and a small audience of people with, as they
:02:25. > :02:30.say here in the City, skin in the game.
:02:30. > :02:39.First, to the people at the cold face, starting with one banker, all
:02:39. > :02:44.too notorious, in the business. Just like the bar it is set in, the
:02:44. > :02:48.Alex cartoon, currently in the Telegraph, is a City institution.
:02:48. > :02:53.But for the sharp-shouldered finance types, real and fictional,
:02:53. > :02:57.the world is changing. I think the LIBOR scandal may be the last straw.
:02:57. > :03:01.I think it has proved the straw that broke the camel's back. This
:03:01. > :03:05.man, who writes the Alex cartoons, is all too aware of the impact of
:03:05. > :03:08.the latest LIBOR scandal. Suddenly, there's all this focus on the City,
:03:08. > :03:15.they are in the public eye, and Alex used to like that, he used to
:03:15. > :03:19.like common people looking at his Porsche, and his suit and being
:03:19. > :03:22.impressed by it. Now he doesn't like the scrutiny any more.
:03:22. > :03:26.doesn't want to be scrutinised at all? Not the way he's being
:03:26. > :03:34.scrutinised right now. And the change is not just coming from
:03:34. > :03:38.regulators any more. Since the LIBOR scandal started two things
:03:39. > :03:43.have changed, politicians have had it up to here with the banks, and
:03:43. > :03:46.to regulation and rhetoric the gloves are off. And secondly,
:03:46. > :03:49.ordinary savers have started to vote with their feet. Since January
:03:49. > :03:55.half a million people have moved their money out of the five big
:03:55. > :04:04.banks and into ethical, mutual, or local banks. In the past two weeks,
:04:04. > :04:09.the Coe op has seen a 25% in-- Oc- Op has seen 25% increase. Ethical
:04:09. > :04:12.banks are report ago 200% increase. LIBOR, it seems, has brought City
:04:12. > :04:15.dodginess into the lives of millions.
:04:15. > :04:18.People are obviously very upset about bonuses, they are concerned
:04:18. > :04:21.about SME lending, they are concerned about stability and the
:04:21. > :04:24.integrity of the financial system. What LIBOR has done is it has made
:04:25. > :04:29.them start to question whether they are paying a fair price for the
:04:29. > :04:34.products and services which they rely on, their mortgages, their
:04:34. > :04:37.loans, their childrens' student loans and pension pots. They can
:04:37. > :04:43.see their personal decision to bank with bank that is a mainstream
:04:43. > :04:46.provider is starting to impact on the macro level concern. But could
:04:46. > :04:51.Britain really switch to an alternative type of banking,
:04:51. > :04:56.focused on people and businesses with non-astro no mamic bonuses, on
:04:56. > :05:00.a human scale? Anne Paul's house was damp and cold, she needed a
:05:00. > :05:04.loan to renovate it, she worked for a bank, but no bank would lend her
:05:04. > :05:10.the money at affordable rates, despite her being a homeowner.
:05:10. > :05:16.the winter, my son would see things, look mum, that wall isn't very good.
:05:16. > :05:22.I would say we would try to put something in front of it and do the
:05:22. > :05:26.best you can. Now she has the money from something called the London
:05:26. > :05:29.Rebuilding Society a community- funded finance scheme. They have
:05:29. > :05:34.changed their approach as seeing the customer as an individual, not
:05:34. > :05:39.one of their customers just. It was this disconnect between Britain's
:05:39. > :05:44.massive banks and the needs of people, that the Vickers report was
:05:44. > :05:49.supposed to address. Only ring- fenced banks would supply the core
:05:49. > :05:53.domestic retail banking services, taking deposits from individuals
:05:53. > :05:57.and small businesses and extending overdrafts to them. Vickers
:05:57. > :06:02.mandated Lloyd's to sell 650 branchs to encourage competition,
:06:02. > :06:05.and he made one big proposal about the structure of our banks. The
:06:05. > :06:09.Vickers' proposals would split the banks internally, but some
:06:09. > :06:12.politicians want to go further, and separate retail and investment
:06:12. > :06:18.banking completely. And, you have to whisper it in place like this,
:06:18. > :06:21.there is even a proposal to abolish leverage, completely.
:06:21. > :06:25.Leverage means a bank borrowing money against the cash it holds,
:06:25. > :06:30.lots of it. And the problem is, it can go wrong for boring banks as
:06:30. > :06:37.well as risky ones. The problem is the good bank is going to be invest
:06:37. > :06:43.anything good assets, which can go bad. Which can become bad assets,
:06:43. > :06:48.just like Italian bonds used to be very safe assets, and Lehman
:06:48. > :06:53.Brothers' bonds were safe assets, now they are bad assets. The more
:06:53. > :06:58.radical solution is known as "limited purpose banking", it was
:06:58. > :07:02.considered as a blue skies option under Vickers, and then discarded.
:07:02. > :07:08.Its designer thinks it is the only way forward. There is 10,000
:07:08. > :07:11.separate mutual funds in the US. The ones 100% equifinanced had no
:07:11. > :07:15.trouble in the crisis. If you don't borrow any money you can't go broke.
:07:15. > :07:21.If you have a financial system consisting of a lot of little
:07:21. > :07:26.mutual funds, none of which are leveraged or borrowed, none of them
:07:26. > :07:29.can fail. The plan says simply, all regulated banks, investment furnds,
:07:29. > :07:32.hedge funds et cetera, become mutually owned. So your savings
:07:32. > :07:36.account becomes like an investment, and it can be lent out to
:07:36. > :07:41.businesses. But the bank itself can't go to the markets and borrow
:07:41. > :07:48.money. To the extent that households and firms need to borrow,
:07:48. > :07:54.to buy homes, or to invest in new products, that's where the real
:07:54. > :07:58.advantage of leverage comes from in economics. It is not to have the
:07:58. > :08:04.financial intermediaries to borrow and gamble. We don't need the
:08:04. > :08:08.intermediaries to be leveraged. This week has not been happy for
:08:08. > :08:12.the image of the City. Here is how the man who regulates it described
:08:12. > :08:20.the LIBOR market. We can't be confident in anything after
:08:20. > :08:27.learning about this. This cesspit. How did that go down? Jim O'Neil
:08:27. > :08:30.manages �780 -- $780 billion of others money e manages the part of
:08:30. > :08:35.Goldman Sachs that manages people's savings and pension funds. Do you
:08:35. > :08:39.do people feel about this rush of negativity going on? Understandably
:08:39. > :08:45.and justifiably some of the emotional language being used,
:08:45. > :08:50.there is quite a bit of annoyance. The City ranges from people that
:08:50. > :08:56.are doing jobs probably that most normal people don't get bonuses or
:08:56. > :09:01.get paid that much, to those that are victimised in the populist
:09:01. > :09:05.current mood. You have British institutions, whose prime purpose
:09:05. > :09:09.is to support Britain's economy and Britain's role in the world. And
:09:09. > :09:14.then you have a much larger number of institutions which includes
:09:15. > :09:19.parts of those British institutions, whose purpose is primarily because
:09:19. > :09:25.of the time zone, the English language, and serving the world's
:09:25. > :09:31.needs. And they don't have to be in London. Despite that threat, he's
:09:31. > :09:34.simple theyic to a bigger division of labour -- sympathetic to a
:09:34. > :09:38.bigger division of labour in banking, and would go further on
:09:38. > :09:42.one issue. With the most basic of lending to individuals and
:09:42. > :09:47.companies, you need utility-type banks, and it looks like Vickers
:09:47. > :09:51.has recognised that. We certainly need, despite the mood, investment
:09:51. > :09:55.banks, now being divided as casino banks. You need those that can take
:09:55. > :09:58.risks and risky things, you just don't need them to be big enough to
:09:58. > :10:05.cause enormous problems. And it might well be that you need some
:10:05. > :10:09.sort of state-backed institution, particularly to lend to longer term
:10:09. > :10:13.projects, which are difficult for private entrepeneurs to discount
:10:13. > :10:18.the returns on. Hold on a minute, we have the boss of Goldman Sachs,
:10:18. > :10:23.saying it might be a good idea, if the state owned a bank? Well, I
:10:23. > :10:29.think if you look around the world, some of the countries that have
:10:29. > :10:34.with stood the crisis the best, happen to have those.
:10:35. > :10:39.He has impuned my integrity. bankers, the politicians, and the
:10:39. > :10:44.regulators have a massive image problem, formerly a cosy elite,
:10:44. > :10:50.they are now finger-pointing like crazy as the anger mouoints. How is
:10:50. > :10:54.this going down with the City's most iconic banker. Is he worried?
:10:54. > :10:59.I think he has an escape plan somewhere. Where will he go? They
:10:59. > :11:04.are all buying defensible land, they think there will be civil
:11:04. > :11:08.unrest, they are buying private islands where they can have a
:11:08. > :11:18.primary army on them. What is for sure, is that this particular
:11:18. > :11:19.
:11:19. > :11:23.island no longer feels the same about the money men. Joining me
:11:23. > :11:27.here, with the City behind us, is Mark Hoban, secretary to the
:11:27. > :11:30.Treasury. People are moving their money out of the high street banks,
:11:30. > :11:35.and you heard there, a lot of people in the City behind us, most
:11:35. > :11:38.of whom are honest people, furious with some of the emotive language
:11:38. > :11:42.coming out of parliament about this industry. You are the Financial
:11:42. > :11:47.Secretary, what are you doing about it? We are doing a range of things,
:11:47. > :11:52.we are implementing the proposals of the Vickers Commission, to ring-
:11:52. > :11:56.fence retail banks. Eventually? line with the timetable Vickers
:11:56. > :12:00.announced. We are organise ago major overhaul of the financial
:12:00. > :12:03.system in the City, we are promoting competition in the
:12:03. > :12:11.banking sector to encourage more people to shop around. And they
:12:11. > :12:15.are? And last Friday, we pubished a paper in the society sector toe
:12:15. > :12:22.make them more attractive. And Lloyds Bank is negotiating the sale
:12:22. > :12:25.of 650 branches to the Co-Op. many branches will that leave for
:12:25. > :12:30.the big five remaining banks? will still have significant market
:12:30. > :12:33.share, the key thing is to ensure there are new challenges in the
:12:33. > :12:38.market. We sold Northern Rock to Virgin Money, we need to make it
:12:38. > :12:40.easier for people to move their bank accounts. And the Independent
:12:40. > :12:44.Commission on Banking made proposal about doing that. And people can
:12:44. > :12:48.shift their money easier, and we can see a flourishing competitive
:12:48. > :12:51.landscape. That will keep bankers' on their toes. It hasn't so far,
:12:51. > :12:54.they are not on their toes? That is why we are starting the process. We
:12:54. > :12:58.are also looking at the regulation of the City. We are giving the
:12:58. > :13:01.financial conduct authority, the conduct regulator, much bigger
:13:01. > :13:08.powers, more teeth, more intrusiveness. We saw some of that
:13:08. > :13:11.the week before last, when it introduced measures to compensate
:13:11. > :13:17.businesses who had been mis-sold complex interest rate ops. The this
:13:17. > :13:21.year, in April, we had Barclays and the FSA in a bit of a conversation.
:13:21. > :13:25.The FSA told Barclays they were aggressively, they had an
:13:25. > :13:29.aggressive pattern of effectively pushing the rules beyond acceptable
:13:29. > :13:34.limits. This was done, presumably, in private, I'm presuming, did you
:13:34. > :13:37.know about that? The regulator is independent. They don't come to the
:13:37. > :13:41.regulators and say one of the British banks is pushing the rules
:13:41. > :13:44.here? We have an independent regulator, we make sure they have
:13:44. > :13:46.the powers they need to take action. That is why one of the regulations
:13:46. > :13:49.going through parliament at the moment, we are giving the Bank of
:13:49. > :13:53.England and the financial conduct authority much more powers to take
:13:53. > :13:57.action to tackle some of these practices. Hold a minute, we see,
:13:57. > :14:01.now, thanks to the freedom of information requests, the way that
:14:01. > :14:04.e-mails fly around on an hourly basis between Whitehall and the FSA
:14:04. > :14:06.and the Bank of England and these banks. Are you seriously telling me
:14:07. > :14:11.that the Government had no idea there was something wrong at
:14:11. > :14:14.Barclays, which the FSA had actually identified? Look, you know,
:14:15. > :14:19.the FSA is responsible for regulating financial services.
:14:19. > :14:23.say they had no idea? We know what they are responsible? I don't think
:14:23. > :14:26.you would like it Paul if Government ministers interfered in
:14:26. > :14:29.the financial regulation of independent businesses t has to be
:14:29. > :14:32.done independently at arm's length. We have to make sure they have the
:14:32. > :14:36.powers they need to tackle wrongdoing in the City, we are
:14:36. > :14:39.doing that. The point seems to be to outside observers, that the
:14:39. > :14:44.Government is consistently behind the curve on these things, were you
:14:44. > :14:48.shocked when you suddenly found out that LIBOR had been manipulated by
:14:48. > :14:50.this major British bank, were you shocked? The reality is this
:14:50. > :14:54.Government is taking action to reform depings service, and
:14:54. > :14:57.Meredith Vickers said we are leading the world in attempts to
:14:57. > :15:01.reform -- John Vickers said we are leading the world in attempts to
:15:01. > :15:07.reform the banking system. That is why when we found out what was
:15:07. > :15:10.going on in Barclays and LIBOR, we got the report done, how to
:15:10. > :15:13.regulate LIBOR in the future, and how to ensure there are criminal
:15:13. > :15:17.sanctions in place to prevent it happening to LIBOR again. We are
:15:17. > :15:25.taking action to sort out this mess and make sure we have a City people
:15:25. > :15:28.can be proud of. And one place that employees, it employs two million
:15:28. > :15:33.people across the country, to make sure it thrives and service the
:15:33. > :15:36.economy. We know it is an important employer, and we know that the
:15:36. > :15:40.Vickers proposals may not have stopped what was going on in
:15:40. > :15:44.Barclays. That the structure wasn't going to be stopped by creating a
:15:44. > :15:47.ring-fence inside it, it was failure of regulation and
:15:47. > :15:52.management. What more can you do, than what Vickers, what you have
:15:52. > :15:56.accepted from Vickers, what more can you do to assure the British
:15:56. > :16:02.public that there won't be mother banks like this, after, eventually
:16:02. > :16:04.in 2019, Vickers is implemented? Vickers is range of things we are
:16:05. > :16:08.doing to sort out the financial sector. It won't be enough in
:16:08. > :16:11.itself to solve the problems, that is why we are radically reforming
:16:11. > :16:15.financial regulation and giving the Bank of England more powers T will
:16:15. > :16:18.take over the division of banks t will use its jupltd to intervene
:16:18. > :16:24.and act. That is what people - judgment to intervene and act. That
:16:24. > :16:29.is what people want to see. We have set up parliamentary inquiry on so.
:16:29. > :16:33.Brorder issues flowing from the LIBOR-fixing scandal, -- broader
:16:33. > :16:40.issues flowing from the LIBOR- fixing scandal. Something Vickers
:16:40. > :16:46.has drawn back you will accept? What the parliamentary ip inquiry
:16:46. > :16:50.is looking at is the ethic -- parliamentary inquiry is looking at
:16:50. > :16:55.is the ethics in the banking system. There is a range of steps taking,
:16:55. > :16:57.to change the banking structure and regulatory system, we have
:16:57. > :17:02.identified problems that need to be tackled. You have given more power
:17:02. > :17:05.to the Bank of England, your own colleague, Mr Andrew Tyrie, said to
:17:05. > :17:10.the deputy Governor of the Bank of England, this week, this does not
:17:10. > :17:15.look good, they have missed the Barclays LIBOR manipulation,
:17:15. > :17:18.despite discussion it at committee in 2007. Do you think it looks good
:17:18. > :17:22.the way the Government has handled the LIBOR communication? We need to
:17:22. > :17:25.learn the lessons that are going on, that is why we need to act. People
:17:25. > :17:30.want to see the action and see the mess sorted out. Thank you. Stick
:17:30. > :17:35.around for main. We are going to talk to our panel of experts. I'm
:17:35. > :17:37.joined by our panel to discuss their thoughts on how to fix our
:17:37. > :17:43.broken banks. Martin Wolf, the Financial Times journalist, who sat
:17:43. > :17:48.on the Vickers' commission. We have a specialist in industrial policy,
:17:48. > :17:52.and from the industry body City UK, Chris Cummings.
:17:52. > :17:57.Chris Cummings, the reputation of this industry is in shreds, despite,
:17:57. > :18:01.as I say, the vast majority of the people working in it being honest,
:18:01. > :18:06.hard working, talented people. What are you do about it? I think there
:18:06. > :18:09.are a range of things we can do. Let me first of all say the fact
:18:09. > :18:14.that some people tried to rig LIBOR is completely unacceptable.
:18:14. > :18:18.Wrongdoing has happened, it has been traced by the regulator, and
:18:18. > :18:21.the banks involved have co-operated. I come back to the point that you
:18:21. > :18:24.made, this industry is a national employer, two million people work
:18:24. > :18:28.in financial services, two-thirds of those outside London. This is
:18:28. > :18:32.actually a national industry. Something that we want our public
:18:32. > :18:36.to be proud of tkpwhin. We want our employees to be -- again. We want
:18:36. > :18:39.employees to be proud of. Yes we want to work with the regulator and
:18:39. > :18:45.the Government, in order to address these problems. But actually, what
:18:45. > :18:50.we need to be inculcating is a reputation where it is not enough
:18:50. > :18:54.to obey the rules, we have to do the right thing, that is more
:18:54. > :18:58.important. Presumably you will stop quibbling about Vickers, and
:18:58. > :19:02.spending money on lobbyists to tweak the edges of the Vickers'
:19:02. > :19:06.proposals to become more acceptable to members S that a promise?
:19:06. > :19:09.industry is working very closely with Vickers. We know, and the
:19:09. > :19:12.result is it is watered down? is a range of views out there.
:19:12. > :19:15.There are certain things we want to see s and working with the
:19:15. > :19:19.timetable laid out. I think it is for the industry to prove good
:19:19. > :19:24.faith, that is really what we have been doing. You will accept it, in
:19:24. > :19:30.full, you will stop the rear guard action, you will accept the
:19:30. > :19:34.implications, your members will, of a fairly hard, eventual 2019, break
:19:34. > :19:39.within these banks. They won't be gaining that? We need proposals
:19:39. > :19:42.that work in practice what can look like rear guard action, is actually
:19:42. > :19:46.significant discussions on the detail to make sure we have a
:19:46. > :19:48.banking system that is as robust that everybody wants to see, but
:19:48. > :19:52.which still enables small businesses to get the loans they
:19:52. > :19:56.want to see, individuals to get the banking services they want. That is
:19:56. > :20:03.the heart of the industry's discussion with regulators and
:20:03. > :20:06.Government, on highly complex and technical matters. The senior bosss
:20:06. > :20:12.in your industry spend considerable time in dinners together, they have
:20:12. > :20:15.time and privacy. When they do this, do they discuss the culture at all.
:20:15. > :20:20.If so, why are they constantly shocked when it is revealed that a
:20:20. > :20:23.whole desk worth of people n this bank or other, is fiddling the
:20:23. > :20:26.system. Do they ever do anything about the culture. Do they even
:20:26. > :20:30.recognise it? Talk to any chief executive, in the City or across
:20:30. > :20:34.the country today, whether that's in banking, insurance, whether in
:20:34. > :20:37.Asset Management, in pensions. The one thing that everybody is
:20:38. > :20:41.concerned about these days is delivering a better culture. One
:20:41. > :20:45.that focuses on helping people get the loans they need, the savings
:20:45. > :20:48.that they want, and small businesses. So it really is at the
:20:48. > :20:53.heart of matters today. We will come back to you.
:20:53. > :20:57.You sat on this Vickers' commission, could it have stopped what happened
:20:57. > :21:01.at Barclays? No, they weren't designed to. They were asked to
:21:01. > :21:05.look at the structure of the banking system to make it more
:21:05. > :21:09.resilient, and to improve competition. I think we have given
:21:09. > :21:13.sensible recommendations on that. There are many matters of the
:21:13. > :21:16.conduct of financial institutions, which is essentially what this is
:21:16. > :21:20.about, which clearly didn't fall been that view. There were
:21:20. > :21:24.important issues that were affected by global and European regulation,
:21:24. > :21:28.which we obviously couldn't do anything about, so we focused very
:21:28. > :21:32.clearly on what we were asked to look at, and this sort of behaviour
:21:32. > :21:37.would not have been eliminated by that. That's for somebody else to
:21:37. > :21:42.look after, as you said, that is a profound cultural issue, we weren't
:21:43. > :21:46.asked to sort out the culture of banks. We have a regulatory
:21:46. > :21:51.structure where the Bank of England sits on top of it, you saw Paul
:21:51. > :21:57.Tucker at the committee, it didn't look very good, Andrew Tyrie, the
:21:57. > :22:04.chair of it. The regulatory system, do we have the new one up to
:22:04. > :22:08.scratch to learn about further malfesiants? It is absolutely clear
:22:08. > :22:13.that the ball slipped between all these hands. Now it is absolutely
:22:13. > :22:18.clear who is responsible, pretty well, it is the bank. The bank,
:22:18. > :22:20.before the crisis, basically wanted to get rid of regulation, they
:22:20. > :22:24.weren'ted interested. Now they surely are interested. I don't
:22:24. > :22:27.think look -- they weren't interested, now they surely are
:22:27. > :22:31.interested, I don't think looking at the past will tell us what to do.
:22:31. > :22:36.I would expect regulation for the next ten or 15 years to be really
:22:36. > :22:41.fierce, everybody knows how stupid they look as a result of these
:22:41. > :22:44.series of catastrophys. The horse has bolted. You heard Jim O'Neil of
:22:44. > :22:47.Goldman Sachs, surprisingly to me, suggest a state investment bank,
:22:47. > :22:52.this is something you and the people you work with in your
:22:52. > :22:55.research proposed. What would it do and add to the mix. We have heard
:22:55. > :23:01.people leaving mainstream banks, why do you need a state one?
:23:01. > :23:04.two different reasons. One is the one we have been hearing there, a
:23:04. > :23:07.counter cyclical lender, because private banks and businesses lend
:23:07. > :23:13.or spend too much during the booms and too little during the bust. You
:23:13. > :23:17.need the counter cyclical state policy in terms of bank lending.
:23:17. > :23:23.What is not said is you also need a state investment bank, we are
:23:23. > :23:26.seeing that in China and Brazil, to provide courageous capital in high-
:23:26. > :23:32.risk areas. What is interesting, is these investment bankers, as well
:23:32. > :23:34.as venture capitalists, talk about themselves as loving risks, they
:23:35. > :23:39.are entreprenurial, they are out there to look at the great types of
:23:40. > :23:44.investment that is might actually be nurturing long-term growth. If
:23:44. > :23:48.you look at where they have been investing, it is not in areas that
:23:48. > :23:51.created Silicone Valley. What would you do on the wider issue. You are
:23:51. > :23:55.somebody who is listened to people on both sides of parliament, for
:23:55. > :23:59.the wider issue of the industry, what is the number one thing would
:23:59. > :24:03.have to happen now? We have open up the debate about a state investment
:24:03. > :24:07.bank. We have the RBS, which is the skeleton there that we could
:24:07. > :24:10.transform very quickly. The point is not again just to talk about an
:24:10. > :24:14.institution and say where weather it is good ored bad, it is about
:24:14. > :24:17.the ecology of what type of banking system we need, to provide the
:24:18. > :24:21.patient and committed finance. That, by the way. If we look at the
:24:21. > :24:24.eurozone, why is Germany so competitive? Why is it a surplus
:24:25. > :24:30.country, where as Portugal, Italy and Greece are in this terrible
:24:30. > :24:35.situation? They have a state investment bank as well as these
:24:35. > :24:39.regional banks that have been lending, not only counter
:24:39. > :24:45.cyclically, but also better companies.
:24:45. > :24:48.You think it is a rubbish idea, what do you think? I think some of
:24:48. > :24:52.those banks are the worst in the world. I started my life in
:24:52. > :24:55.development, I recognise the good cases, there have been some very
:24:55. > :25:00.good state investment banks, and there have been a lot of
:25:00. > :25:06.unbelievably bad ones. If you promise me it will be a very good
:25:06. > :25:11.bank in the UK, state investment, I wouldn't buy it, I wouldn't be
:25:11. > :25:16.easily convinced of it. A couple of members of the audience. Gemma, you
:25:16. > :25:19.work for a wealth manager, Brooks McDonald, how does this feel to you,
:25:19. > :25:24.your colleagues out there watching this tonight and crying into their
:25:24. > :25:30.champagne, what does it feel like? Banks need to earn back our respect,
:25:30. > :25:35.but we can't use a sledgehammer to correct a house of cards. The
:25:35. > :25:38.challenge is that low level regulation hasn't worked, but
:25:38. > :25:44.heavy-handed regulation could be as damaging, and hit the man on the
:25:44. > :25:46.street hardest, in terms of higher borrowing costs, reduced credit
:25:46. > :25:50.availability, and potential job losses as well. You are
:25:50. > :25:53.representing Move Your Money, people winding up this getting your
:25:53. > :25:59.money out of Barclays, et cetera. What would you say to the
:25:59. > :26:03.Government right now? I would say to listen to customers, half a
:26:03. > :26:07.million people have moved their money this year already, out of the
:26:07. > :26:12.big high street banks, and into alternatives, like mutuals, local
:26:12. > :26:20.Credit Unions, and ethical banks. I would ask the Government to carry
:26:20. > :26:23.on making it easier for people to move their money, and to release
:26:23. > :26:27.regulations that make it hard for these banks. They work for local
:26:27. > :26:31.communities, and for the UK economy, to make it easier for them to grow.
:26:31. > :26:37.We will come back to you Mark Hoban in a moment. I wonder if anybody
:26:37. > :26:40.else on the panel, there is an he can sis tension problem here, we
:26:40. > :26:43.all -- existential problem here, we know these guys are struggling to
:26:43. > :26:47.try to defend the industry, which is a strategic industry for this
:26:47. > :26:50.country, like it or not. Not doing a great job of it, let's put it
:26:50. > :26:53.that way. What would you do, what is the number one thing you would
:26:53. > :26:57.do to bring the situation to a head? I think that we should
:26:57. > :27:00.implement our proposals in full. And there are some important areas
:27:00. > :27:04.where they weren't being implemented in full. One of the
:27:04. > :27:08.most important, which directly relates to a scandal, you mentioned,
:27:08. > :27:13.is we felt retail banks, should not be selling derivatives to people
:27:13. > :27:18.who don't understand them. That is exactly what has happened in this
:27:18. > :27:21.very important case, and the Government has, unfortunately,
:27:21. > :27:24.ignored that recommendation F we implement the proposals in full, it
:27:24. > :27:33.will make a difference in the determine to how the banks operate.
:27:33. > :27:39.There is a danger if we accept rate -- separate commercial and
:27:39. > :27:43.investment banking, we are assuming small businesses will use the small
:27:43. > :27:50.banks, we need investment. We need to ask what sort of companies we
:27:50. > :27:52.want in the country, innovative companies that are producing jobs.
:27:52. > :27:56.Most SMEs don't create net employment, there is a small
:27:56. > :27:59.percentage of them, these high- growth, innovative companies, they
:27:59. > :28:03.need proper investment banking, they are not going to be satisfied
:28:03. > :28:06.by low-scale commercial banks. are out of time. Quickly to throw
:28:06. > :28:10.this to Mark Hoban. You do recognise this is a turning point,
:28:10. > :28:13.it has been a torrid couple of weeks for the place behind me and
:28:13. > :28:18.people who keep their money in banks? It has been a difficult few
:28:18. > :28:22.weeks. The important thing is tone sure we take the action needed, --
:28:22. > :28:26.to ensure we take the action needed so the banks with underpin the
:28:26. > :28:29.economy, they can lend money to businesses, take long-term
:28:30. > :28:33.decisions to promote growth, to offer good deals to consumers. We
:28:33. > :28:36.want to see people shop around, so there is more competition on the
:28:36. > :28:40.high street and businesses. Let's get a better outcome for the city,
:28:40. > :28:44.and the two million people across the UK who work in financial
:28:44. > :28:47.services. We all live in hope for all of that. That is all from us
:28:47. > :28:53.here in the Financial Times building in central London. Thanks
:28:53. > :28:56.to all my guest, back to you in the studio.
:28:57. > :29:00.Maybe it is that tetchy, end of term feeling, at the close of a
:29:00. > :29:03.parliamentary session. As MPs prepare to leave for their holidays,
:29:03. > :29:07.their grumpiness over Lords reform turned to questions about the very
:29:07. > :29:11.future of the coalition Government itself. The Prime Minister told his
:29:11. > :29:15.MPs today that he make one more attempt to win them over on Lords
:29:15. > :29:19.reform in the autumn, and then draw a line and move on. Liberal
:29:19. > :29:22.Democrats do have the nuclear option of bringing down the whole
:29:22. > :29:25.coalition, with potentially dire consequences for their party in any
:29:25. > :29:31.general election. What happens now? Our political editor, Allegra
:29:31. > :29:35.Stratton is here. Are they all could have chillaxing this summer?
:29:35. > :29:40.What I find interesting is the Olympics and Jubilee, were always,
:29:40. > :29:45.the people like me were told, is the rebooting moment for the
:29:46. > :29:48.coalition and a feeling of happy Britain, Richard Curtis-esque, and
:29:48. > :29:51.the Prime Minister would preside over it, it would be great moment
:29:51. > :29:55.for the coalition and trying to achieve majorities in the future
:29:55. > :29:58.for the Prime Minister. And what will happen with the Olympics is
:29:58. > :30:02.you and I will be watching it, but the machinery of the Conservatives
:30:02. > :30:06.will have to press very hard on the Tory rebels that rebelled in such
:30:06. > :30:08.large numbers last night, to get them on to side. We got a sense of
:30:08. > :30:11.it in our discussion last night with David Laws and others, that
:30:11. > :30:14.they weren't going to leave this, they were going to come back. You
:30:14. > :30:19.have had, this evening, the Prime Minister say, we are going to have
:30:19. > :30:23.one last try. Somebody described it to me, when you are trying to
:30:23. > :30:27.figure out what the grounds for consensus will be, it is incredibly
:30:27. > :30:30.difficult, they say a 3-D chess board being shaken, there is so
:30:30. > :30:33.many different interests and grounds for consensus that may or
:30:33. > :30:36.may not be possible. That is what the Prime Minister and his team
:30:36. > :30:39.will be trying to figure out over the summer. I don't suppose anybody
:30:39. > :30:44.seriously thinks the Government will end, or the coalition will end.
:30:44. > :30:49.But there is a risk of tit for tat meanness, point scoring on both
:30:49. > :30:53.sides? I think that the Liberal Democrats believe if they don't get
:30:53. > :30:57.Lords reform there won't be boundaries. This brings us back to
:30:57. > :31:01.the idea of how the Tories think they will get their majority in the
:31:01. > :31:04.future. Boundary review is very important for them, they think it
:31:04. > :31:08.delivers them anything between 15- 20 MPs t makes it more difficult
:31:08. > :31:13.for Labour to win majorities in the future. The Liberal Democrats are
:31:13. > :31:22.saying we will simply block that. They don't mind if the public think
:31:22. > :31:30.that is at this timeor at that time, that could also be -- think that
:31:30. > :31:33.could be tit for tat, they think that could be construed as strength.
:31:33. > :31:36.What about Ed Miliband? principle he's in favour, he's
:31:36. > :31:41.having a good summer, but he's blocking it because of the
:31:41. > :31:45.practicalities of this. For some that is not edifying politics.
:31:45. > :31:53.molt we will hear from three politic -- in a moment they will
:31:53. > :31:57.hear from three political insiders. And now an issue rarely centre of
:31:57. > :32:00.how MPs are dealing with it. You might have noticed there have
:32:00. > :32:04.been a few gliches with the coalition recently, little problems
:32:04. > :32:07.with the budget, little disagreements over Europe.
:32:07. > :32:12.Problems with the LIBOR scandal, and last night, of course, that
:32:12. > :32:18.battle over Lords reform. Time, some believe, for something
:32:18. > :32:21.of a coalition reboot. Now is a good time to have a cool,
:32:22. > :32:24.calm reflection, on what remain of the coalition, by taking it and
:32:24. > :32:29.having a review of the Government itself. David Cameron's first
:32:29. > :32:37.problem is many of his backbenchers aren't very happy right now.
:32:37. > :32:41.Last night's vote was a as -- as much a symptom of that over the
:32:41. > :32:46.disquiet over specifics of Lords reform. Not only do they feel
:32:46. > :32:49.valued, but there is no chance of promotion, and they don't get
:32:50. > :32:53.called in for a chat any more. They don't feel under any obligation to
:32:53. > :32:58.support David Cameron when he needs them to. Crunch the numbers and
:32:58. > :33:04.last night's rebellion looks even more spectacular. Out of 171
:33:04. > :33:09.Conservative backbenchers, who voted last night, only 80 voted for
:33:09. > :33:15.the Government. 91 voted against, and a further 19 abstained, some of
:33:15. > :33:20.them may have simply been unable to attend. Many of us fear...Connor
:33:20. > :33:25.Burns was one of ten MPs who had to leave their junior jobs after
:33:25. > :33:28.voting against the Lords Reform Bill. I resigned yesterday, I voted
:33:28. > :33:31.loyally for every vote for this Government and the coalition since
:33:31. > :33:37.I was elected a member of parliament. I'm going away more
:33:37. > :33:42.unhappy than I have been for a very long time. I didn't want to resign,
:33:42. > :33:47.I resigned over something in the last parliament, many members of
:33:47. > :33:51.Government voted for and remained in Government. Do you think
:33:51. > :33:53.backbenchers feel taken for granted? What you see often in
:33:53. > :33:57.television discussions, you will see somebody speaking for the
:33:57. > :34:00.coalition and the Liberal Democrats, and there is a sense that we need
:34:00. > :34:02.sometimes people who are speaking for the Conservative Party. This is
:34:02. > :34:06.a coalition for both the Conservatives and the liberal
:34:06. > :34:11.leadership, but there is also a coalition within each party,
:34:11. > :34:14.between the leadership and the backbenchers. That needs work.
:34:14. > :34:20.Today was the last Prime Minister's Questions of the parliamentary term,
:34:20. > :34:25.and Mr Cameron was rather teased by the Labour leader about what
:34:25. > :34:31.happened last night, particularly over an apparent bust up he had
:34:31. > :34:34.with the unofficial head of the rebels, the Lib Dem MP, Jessie
:34:34. > :34:40.Norman. He lost control of his party, and not for the first time,
:34:40. > :34:45.he lost his temper as well. We understand it was fisty cuffs in
:34:45. > :34:48.the lobby, with the member for Hereford and south Hertfordshire. I
:34:48. > :34:53.notice that the posh boys have ordered him off the estate today,
:34:53. > :34:57.he doesn't seem to be here. Who does the Prime Minister blame
:34:57. > :35:02.most for the disarray in his Government? The Lib Dems or his own
:35:03. > :35:08.backbenchers. If the best he can do today is a
:35:08. > :35:14.bunch of tittle tattle and rumour, how utterly pathetic. In fact, the
:35:14. > :35:17.MP in qi, -- question, Jessie Norman, wasn't in hiding, but
:35:17. > :35:22.meeting the Queen in his constituencies, he declined to
:35:22. > :35:27.discuss his row with the PM. Ask I ask you what Mr Cameron said to you
:35:27. > :35:31.yesterday? No it is a private matter. Apparently he's furious
:35:31. > :35:35.with you? No comment. Meanwhile the Lib Dems feel a bit bounced too, by
:35:35. > :35:39.Conservative MPs, who they say, are ignoring the coalition agreement.
:35:39. > :35:43.deal is a deal, and it is important you stick to that deal and to the
:35:43. > :35:47.contract, if you like, that you have entered into, that is why I
:35:47. > :35:51.think it is important, not least because so far both parties have
:35:51. > :35:54.stuck to that deal very effectively, that we continue to do so. That is
:35:54. > :36:00.why it is important we deliver House of Lords reform, it is a
:36:00. > :36:03.clear commitment in the coalition agreement. By contrast, today, one
:36:03. > :36:06.of Mr Cameron's own backbenchers said what should happen is the
:36:06. > :36:11.coalition agreement should be reviewed. The whole issue around
:36:11. > :36:15.Lords reform is because it was felt that this wasn't clearly defined in
:36:15. > :36:20.the coalition agreement, this agreement is specific, it is 400
:36:20. > :36:25.pages long. And yet this wasn't clearly defined in that it said we
:36:25. > :36:28.should reach consensus, and then bring forward proposals. It didn't
:36:28. > :36:30.talk about legislation and consensus hasn't been reached. It
:36:30. > :36:34.is sometimes felt that the coalition Government is moving
:36:34. > :36:37.beyond, outside the original coalition agreement. For party
:36:37. > :36:40.unity, and also in the national interest, it is important, as with
:36:40. > :36:44.many other countries, that the agreement is reviewed, mid-term.
:36:44. > :36:48.Tonight, at a meeting with his party, Mr Cameron said he was
:36:48. > :36:52.prepared to give Lords reform one more try, but then would draw a
:36:52. > :36:58.line under the matter. However, not many expect the Liberal Democrats
:36:58. > :37:06.to be so willing to drop the issue. With me now to give their own end
:37:06. > :37:11.of term report are three wise heads of Westminster, Danny Finkelstein,
:37:11. > :37:16.Amber Elliott and Steve Richards. First of all, when you talk to Tory
:37:16. > :37:19.MPs, why did so many of them, 91 of them, feel so emboldened or annoyed
:37:19. > :37:23.to rebel? There are two things, they don't like the scheme, they
:37:23. > :37:26.think it will lead to a bad House of Commons, as a Home Office Lords
:37:26. > :37:29.that will challenge the House of Commons, they don't believe in the
:37:29. > :37:33.principle of election, even though they are elected themselves. I
:37:33. > :37:36.suppose the other thing they are not committed theelojically as the
:37:36. > :37:39.Liberal Democrats are to the coalition deal. The Liberal
:37:39. > :37:42.Democrats went to the party and got the whole party committed behind
:37:42. > :37:47.the coalition deal, people felt a sense of investment in it. The
:37:47. > :37:52.Conservatives didn't go through the same process, so their MPs feel
:37:52. > :37:57.more justified in their own lines to rebel. Shouldn't David Cameron
:37:57. > :38:01.have thought of that before? certainly have got to look at your
:38:01. > :38:04.party management when you have lost so many MPs. But, on the other hand,
:38:04. > :38:07.this was always going to be very difficult. It was the reason why it
:38:08. > :38:12.wasn't a priority for the Tories, it splits the Conservative Party.
:38:12. > :38:15.In terms of where it leaves the coalition, do you think the
:38:15. > :38:18.relations are bound to be pretty tetchy into the summer and autumn?
:38:18. > :38:23.Someone described it to me as we're at the bump in the road, we know
:38:23. > :38:28.the bump is there, we know we have to get over it, we don't quite know
:38:28. > :38:31.how yet. I saw Nick Clegg this evening, he was sort of a lot more
:38:31. > :38:35.downhearted, shall we say, about the future of Lords reform than he
:38:35. > :38:39.was previously. He was saying, look it is up to David Cameron to sort
:38:39. > :38:42.it out over the summer. We are going to go away and come back to
:38:42. > :38:48.it, but I won't agree to it unless we get the programme motion which,
:38:48. > :38:52.is the timetable for Lords reform. How far do you think trust is
:38:52. > :38:58.necessary in this. It is obviouslinessry at the very top
:38:58. > :39:05.between Nick Clegg -- obviously very necessary at the very top
:39:05. > :39:08.between Nick Clegg and Cameron, does it matter elsewhere or does it
:39:08. > :39:12.become tribal? They are two separate parties running in a
:39:12. > :39:16.coalition. When it is said, rightly, that Conservative MPs feel strongly
:39:16. > :39:22.about this as a matter of principle. It is admirable they are sticking
:39:22. > :39:26.up for Nair beliefs and threatening their ministerial careers. -- their
:39:26. > :39:30.beliefs and threatening their ministerial careers. However there
:39:30. > :39:35.was an agreement, and I understand why Nick Clegg is feeling down, he
:39:35. > :39:40.has delivered on many issues that were difficult for the Lib Dems,
:39:40. > :39:43.tuition fees and other things. It is difficult for them to have a
:39:43. > :39:49.profound sympathy for the Conservatives, when they had to
:39:49. > :39:57.jump some of their deeply-held beliefs to back other areas of the
:39:57. > :40:01.coalition. There is another issue as well, that is that with
:40:01. > :40:05.electoral reform, that was a painful moment for Nick Clegg, but
:40:05. > :40:08.Cameron delivered the referendum, he ruthlessly won it, he delivered
:40:08. > :40:14.it, that was the deal. This was delivery on the substance, and he
:40:14. > :40:20.can't do it. I think there are causes for real tension now. Do you
:40:20. > :40:24.think the worry is there will be reprisal, that some Lib Dems will
:40:24. > :40:27.be unwhippable, and party at the top might be irritated? If you part
:40:27. > :40:31.company with the them you are in unchartered territory. If you look
:40:31. > :40:35.at what is in front of the coalition, if you end up not having
:40:35. > :40:39.the Lords, the Lib Dem leaving the Government to vote against the
:40:39. > :40:42.boundary reviews, you are looking at a coalition spliting up over
:40:42. > :40:45.issues that the public don't care about. That is not doable for the
:40:45. > :40:48.Liberal Democrats or the Conservatives. You need a
:40:48. > :40:51.compromise, either they drop both those things, or David Cameron is
:40:51. > :40:54.going to be able to come back to Conservative MPs with something on
:40:54. > :41:00.the Lords they will accept, and that Nick Clegg will accept too.
:41:00. > :41:03.There must be a range of such compromises, because Nick Clegg
:41:03. > :41:06.cannot possibly and David Cameron cannot possibly allow the
:41:07. > :41:10.Government to fall on such an issue. Do you broadly agree with that,
:41:10. > :41:13.that the Government will not fall on this issue, but some how they
:41:13. > :41:16.have to stagger on for the next two years? I can't see them falling
:41:16. > :41:18.over this issue. For the last two years we have had the Liberal
:41:18. > :41:21.Democrats saying they are in the Government for the greater good, it
:41:21. > :41:26.is because of the public they are doing this. Although they could be
:41:26. > :41:30.in a burning building with no exits, Danny was suggesting that today?
:41:30. > :41:34.The problem is they could turn around and say that is enough, you
:41:34. > :41:39.haven't delivered it and we are out of here, it looks like they were in
:41:39. > :41:43.it for self-interest. They are in a difficult place. Nick Clegg is
:41:43. > :41:46.trying to distance himself from Lords reform, saying it is up to
:41:46. > :41:50.David Cameron to sort it out, we have delivered t you co-signed the
:41:50. > :41:53.word in the white paper, you are in it, whether you like it or not.
:41:53. > :41:57.Where does it leave the leader, the Times had a story suggesting that
:41:58. > :42:02.Nick Clegg after the AV referendum failed was offered by David Cameron,
:42:02. > :42:05.something, what do you want. The Tories, apparently, accord together
:42:06. > :42:10.story thought he would say scupper NHS reform, he didn't, he went for
:42:10. > :42:14.this, that could be a big mistake in his own judgment? If you don't
:42:14. > :42:18.get it, having put yourself so closely in line with a particular
:42:18. > :42:21.issue and you don't get it. Obviously it is devastating on many
:42:21. > :42:25.levels, you have to explain it to your party that you failed to do it.
:42:25. > :42:28.He will have an answer, that it is not his party, they are all united
:42:29. > :42:34.behind it. But the others, however, it is still not deliverable for him.
:42:34. > :42:38.And so, it is very difficult for him. As I say, having failed to get
:42:38. > :42:41.electoral reform, to note get this, and meanwhile have to explain why
:42:41. > :42:44.you are endorsing more of the sort of policies associated with the
:42:44. > :42:47.Conservatives, puts him in a very difficult position. What about
:42:47. > :42:51.David Cameron's position on this, does the size of the rebellion, and
:42:52. > :42:59.also the coverage that has suggested there were nods and winks
:42:59. > :43:05.saying we wouldn't be tooishcated - - ircated by this? It isn't the
:43:05. > :43:11.issue for them is the aren't they stkpnt get AV is nobody -- didn't
:43:11. > :43:15.get AV is nobody isn't interested. This isn't the issue that is a
:43:15. > :43:18.problem for them. The problem in Nick Clegg's case is to be seen to
:43:18. > :43:23.be supporting responsibly, as a governing party, that can be
:43:23. > :43:27.trusted in a coalition. The issue for David Cameron is he seen to be
:43:27. > :43:33.in touch and competent, and those are issues about the real economy,
:43:33. > :43:37.and this is just an issue they have got to sort out between the -- them,
:43:37. > :43:41.because the electorate doesn't mind. For Ed Miliband, a few months ago a
:43:41. > :43:45.lot of columnists were writing him off, not now? We have had the
:43:45. > :43:49.situation with Tony Blaired today. I think the problem for Ed Miliband
:43:49. > :43:57.s he has to find way to be constant. He has big highs, like bark close
:43:57. > :44:02.and Levy, and then he has lows. -- Barclays and lefson, and then he
:44:02. > :44:07.has lows. Until he is seen by the public as a trustworthy figure he
:44:07. > :44:11.has problems. He has to say he's a man that is better for you than
:44:11. > :44:13.David Cameron and you can trust me more on situations like the economy.
:44:13. > :44:19.In that sense, since the budget, that may have changed one or two
:44:19. > :44:23.things. I have talked to a few Tory MPs who are a bit irritated
:44:23. > :44:27.defending certain things that were reversed S that all good news for
:44:27. > :44:30.Miliband? -- is that all good news for Miliband? I slightly disagree.
:44:30. > :44:34.On the whole he has been a pretty constant performer, it is
:44:34. > :44:37.interesting that the way he is perceived has changed. Today at
:44:37. > :44:42.Prime Minister's Questions, I noticed a lot of commentators
:44:42. > :44:45.tweeting that it was a brilliant performance from Ed Miliband. It
:44:45. > :44:49.wasn't that much different from performances six months ago, but
:44:49. > :44:53.the context has changed. When you have a Prime Minister who can't
:44:53. > :44:56.deliver his own parliamentary party, and the Deputy Prime Minister
:44:56. > :45:00.feeling betrayed by the Prime Minister for not doing so, as
:45:00. > :45:05.leader of the opposition you were in a stronger position than you
:45:05. > :45:08.were, which has always been pretty good. Is Lords reform dead in the
:45:08. > :45:13.water? I think they could find a compromise. They have either got to
:45:13. > :45:17.do that or drop t they can't possibly break up over it. I think
:45:17. > :45:22.he's looking to have 120 elected peers by 2015, that is what he will
:45:22. > :45:25.push on and Cameron hopes so too. Dead or alive? In the end they will
:45:25. > :45:31.find a compromise that won't really please any of them, but might get
:45:31. > :45:34.them through this particular hurdle. A British businessman is to face
:45:34. > :45:39.criminal charges over a supposed bomb detector he sold to countries
:45:40. > :45:44.around the world, including Iraq, which paid �50 million for the
:45:44. > :45:49.devices. Jim McCormick has been remanded in custody and will appear
:45:49. > :45:53.in a London court tomorrow, charged with multiple counts of fraud. A
:45:53. > :45:59.Newsnight investigation revealed the product made by Mr McCormick
:45:59. > :46:02.didn't work. This is how the called bomb
:46:02. > :46:07.detector was sold, with extraordinary claims about how it
:46:08. > :46:13.can detect explosives, powered only by the use of static electricity.
:46:13. > :46:20.The device didn't come cheap. Iraq, one of Jim McCormick's biggest
:46:20. > :46:23.customers, spent $85 million on t at a cost of around $40,000 each.
:46:23. > :46:28.They are still used at police checkpoints today. Jim McCormick,
:46:28. > :46:33.shown here on a visit to Baghdad, runs a security company, based in
:46:33. > :46:38.Somerset. Filmed by BBC Points West in 2009, Jim McCormick claimed that
:46:38. > :46:42.these cards are the key to how the device work, and they can detect
:46:42. > :46:47.everything from explosives to dollar bills and ivory. Ideal
:46:47. > :46:53.conditions you can be up to one kilometer away. So this card will
:46:53. > :46:59.help this device spot explosive as kilometer away. Under ideal
:46:59. > :47:02.conditions, yes. After a string of deadly bombs in
:47:02. > :47:08.Baghdad, we began investigating the device, which Jim McCormick has
:47:08. > :47:12.said he has sold to some 20 countries around the world. In
:47:12. > :47:15.early 2010, we managed to obtain a set of Mr McCormick's special cards,
:47:15. > :47:19.and brought them to Cambridge University's computer laboratory,
:47:19. > :47:24.to analyse them for us. There is nothing to programme in these cards,
:47:24. > :47:29.there is memory, no microcontroller, these are shop theft prevention
:47:29. > :47:33.cards. It couldn't be programmed then to detect TNT? Absolutely not.
:47:33. > :47:38.We told the Government the results of our investigation, and it
:47:38. > :47:43.immediately banned the export of the ADE-651 and similar device, to
:47:43. > :47:48.both Iraq and Afghanistan. Now, after a long and complex
:47:48. > :47:53.international investigation, Jim McCormick has been charged. He will
:47:53. > :47:58.face six charges under the Fraud Act 2006. Three count of possession
:47:58. > :48:01.or having under his control a device for use in the course of use
:48:01. > :48:04.for fraud. A further three counts of manufacturing or supplying a
:48:04. > :48:07.device, knowing that it was designed to be used in the
:48:07. > :48:12.commission of a fraud. McCormick has been remanded in
:48:12. > :48:22.custody, and due to appear at a court in London tomorrow.
:48:22. > :48:41.
:48:41. > :48:45.That's all tonight, we leave you with news that the man who brought
:48:45. > :48:49.bunga-bunga into the English language, Silvio Berlusconi mayk
:48:49. > :48:54.staging a comeback, despite charges -- bay be staging a comeback,
:48:54. > :49:04.despite charges of having sex with a 17-year-old hanging over them, it
:49:04. > :49:08.
:49:08. > :49:14.is thought he may make a bid for # The Italian
:49:14. > :49:21.# Take a chance # And try to steal a fiery kiss
:49:21. > :49:31.# The Italian # When you hold me
:49:31. > :49:34.
:49:34. > :49:37.# Don't just hold me Hello there. There is a brief
:49:37. > :49:40.window of fine weather for most of us on Thursday, but not everywhere.
:49:41. > :49:44.A little bit of rain across the north-east of Scotland. Rain
:49:44. > :49:48.pushing into the south western parts of England as well. Inbetween
:49:48. > :49:52.a fair amount of dry and at times fairly sunny weather to be enjoyed.
:49:52. > :49:55.That is difficult to find in recent days. Temperature-wise, still
:49:55. > :50:00.fairly disappointing, getting up into the high teens, possibly the
:50:00. > :50:05.low 20s in one or two of the brighter spots. The rain moving in
:50:05. > :50:09.well across south Hampshire, and heavy by then across parts of Devon,
:50:09. > :50:12.Cornwall and Somerset. The rain edging into South Wales, along with
:50:12. > :50:14.a freshening breeze. For North Wales you might well hang on to
:50:14. > :50:18.sunny skies into the afternoon, and across Northern Ireland,
:50:18. > :50:22.essentially, it is a fine day, with spells of sunshine, lingering on.
:50:22. > :50:26.But still disappointing temperatures, 14 or 15 degrees,
:50:27. > :50:31.western Scotland still dry, rain badly needed across the Western
:50:31. > :50:35.Isles, a persistent drought here, 12 degrees in Inverness, very poor
:50:36. > :50:40.here. It doesn't get warmer here as we go into industry as well.
:50:41. > :50:45.Edinburgh struggling 13 degrees, the high with cloud hey skies and a
:50:45. > :50:50.cool breeze to go -- cloudy skies and a cool breeze to go with it. It