Monday 16 July 2012

2320 Politicians and the Barclay Scandal

I previously congratulated Ed Miliband, the Leader of the official Opposition for  the stand he took challenging the power and influence of Rupert Murdoch with the demand for an Judicial Inquiry into the activities of the News of the World and print media generally over the past twenty years but as I wrote earlier in the week, while he forced the Prime Minister and Chancellor to agree to a two part Inquiry with the help of the Liberal Democrat Members of the Coalition, it is now evident that whatever the Inquiry now recommends, implementation may be held up until  after the next General Election as traditional and right wing forces within the Tory party attempt to force the end of the Coalition.

I believe the growing problems of Cameron and Osborne with their own Party as well as the Coalition over Europe and the Reform of the House of Lords had also affected the response to the Barclay Scandal.

I also accept that with his position secure as Leader of the Labour Party and a ten point gap opening between the Opposition and the Coalition in the opinion polls, plus the possibility of yet another historic split in the Tory Party, this time over Europe and the Reform of the House of Lords, Ed Miliband is having to view new political developments with one eye to aiding the split and coalition break up as well as attempting to take the initiative such as on the Banking Scandal. The scandal also provided the opportunity for him to distance his leadership from the inherited shortcomings of the Blair and Brown Administrations.

He also has to balance his attacks with the  possibility of needing to form a centre left coalition with the Lib Dems if the electorate so determines in 2015 or indeed if the Tories decide to end the alliance before then and attempt to function as  a minority government. Sir Mingus Campbell as did Vince Cable on the Andrew Marr Show on successive Sundays have confirmed that the Lib Dems continue to regard themselves as a centre left party and that it is sensible to begin to hold discussions now with Labour over the possibility of a Coalition, if the electorates creates the situation. This is showing an encouraging fresh political maturity which many of the diehards within all three major parties will find it difficult to accept.

It is difficult to see how Cameron and Osborne can survive to fight an Election in 2015 without major concessions to the Right. Any hope of a second Coalition agreement to cover the next two and half year has been dashed and the fine words today mean nothing. It is over Europe and the creation of a single economic, financial and banking structure leading to an eventual political union through a Federal Government on similar lines to the USA that the main battlefield has been settled and therefore while House of Lord Reforms may become the catalyst for Cameron being forced to attempt a minority government until 2015, it is on the issue of the Barclays Banking Scandal and those to emerge in other banks that Cameron and Miliband have started the political war because  the issues are intrinsic to Britain’s future role in Europe.

It is evident that Cameron and Osborne decided in advance of the negotiated settlement between Barclays Bank and the Regulatory authorities on both sides of the Atlantic be made public that they would adopt an aggressive approach and blame Labour for the new crisis. They had considerable success and justification when they were able to blame Labour for the extent of the misery being inflicted upon the British people for at least a decade because of the near collapse of the banking system following the USA decision to let Lehman brothers fail, and where as mentioned in the first piece Barclays were able to acquire the assets to their advantage. However there is a significant difference between Labour‘s responsibility for the Economy before they came to office and how the situation has been managed since. They have failed deliver and the situation has become increasingly worse and instead of recognising that we needed to become closer involved with Europe we have become increasingly on our own.

Cameron and Osborne focussed their attention on the present Shadow Chancellor for several reasons. As a political bruiser Ed Balls was important in stopping the continuing Premiership of Tony Blair before he could  determine the best point to stand down in the interests of  securing for Labour a fourth political term and as a consequence Ed Balls is disliked by supporters of Blair and is something of an Achilles heel for the  Opposition Leader

Cameron and Osborne also dislike Ed Balls personally because of the contempt he shows for them when sitting across the chamber on the Opposition front bench. They also misguidedly thought they could demonstrate that Ed Balls had somehow been involved in the LIBOR banking Scandal in such a way to swing sections of the population away from their new found support for Ed Miliband. In this respect they have been proved embarrassingly wrong with one Conservative Party back bencher and one former Tory Chancellor of the Exchequer telling the leadership they were wrong and ought to apologise for what was said. What their immediate and longer term objective has been in this disloyalty by the two Conservatives involved suggests that more and more within Westminster and the Tory Party believe the leadership has to change or be changed

The claim of Osborne’s people that his article was misrepresented holds no water as the spate of writings from these two in the printed media with Cameron writing in three of the centre right newspapers over recent weekend suggests they have both reached a political crisis point of desperation recognising they have to give in to their right wing, step down or manage to halt the Labour advance in the opinion polls and in front bench exchanges.

It is widely reported, no doubt coming from the Tory Right  that Cameron  lost his temper and went facially red when failing to convince Jesse Norman a leader in the anti Reform of the House Lords Bill majority of back benchers  his position. This Member has also been a ruthless inquisitor on the Treasury back bench committee.

It is alleged that Cameron was just short of poking Norman physically with an aggressive finger such was his frustration on realising that he could not command his Party to vote for the Time Table Motion which would could have seen the present House of Lord Reform Bill pass through the Commons albeit in a modified form with a number of concessions, and then to use the Parliament Act to get the measure through the House of Lords who are to be expected to oppose their abolition as appointed peers for Life in the Second Chamber. The failure to put the Time Table Motion knowing that Labour would abstain and his backbenchers would vote against in a substantial number heralds the premature end of the Coalition.

Cameron has apparently told the Backbenchers that he will attempt to broker a compromise over the summer to get the legislation through but this is doomed because first his backbenchers having achieved this blow are now plotting to attack his jugular and Labour understandably will not be in any mood to give him succour.

The Lib Dems are in a difficult position. It is evident that their leader having failed to win the referendum on the proposed revised voting system made the reform of the House Lords his badge of honour and something he can put before the next General Election as a Lib Dem inspired success given that three out of  four voters agree that the present House of Lords is an anti democratic anachronism although they do not regard the matter as sufficiently important to take up the greater part of this session and provoke a constitutional crisis

Clegg in terms of his personal standing and The Lib Dems know that another failure to win a flagship policy change will have damaging electoral consequences and blaming Labour rather than the Tory back benchers will not work or threaten to undermine the grounds for a future Coalition. In any event the failure to get the measure through Parliament could pave the way for Vince Cable to become Lib Dem Leader although I would hope that if there is a Coalition he would not just become Deputy Prime Minister but also Chancellor of the Exchequer with Ed Balls at the Home Office or sorting out the Doctors at Health. The way things are going I can foresee the Labour Party winning outright control and the Lib Dems being decimated while UKIP will advance if Murdoch throws in the support of the Sun and the Times, and the Conservatives Party remains divided on the issue as it is.

The right wing had hoped that the Euro would fail or at least several of the weaker nations such as Greece and some of the more recent entrants would be forced back to their original currencies. Michael Portillo has been an advocate if the departure of Greece as a test move which would lead others to follow and this would severely put back or end the move for an economic, financial and banking unification prior to a Federal state and a political union.

He and others on the right recognised that in fairness Cameron and Osborne who understand the importance of Britain’s involvement within Europe are playing a double game while on one hand standing outside the present developments are arguing for a return of domestic powers, they have been urging the rest of Europe to move ahead with the Economic Federalism. Once this becomes a Fait Accompli they hope to negotiate granting back of domestic powers but once the Euro is sorted and a centralised banking, finance and trading system has been established then the UK remaining outside will be dangerous. I believe they recognise that the UK especially with an increasingly devolved Scotland and potentially a united economic Ireland with common banking and financial structures could not function on its own especially if the USA supported the new European development and the majority of Commonwealth nations recognised their need to develop even closer   trading relations with Europe and the new power blocks of Asia and North, Central and Southern Americas. With Africa increasingly aligned with China I suspect the UK will find it increasingly difficult albeit not impossible but at a high a price to go it alone. Central to such a situation the UK and London in particular would need to remain one of the importance centres in the world for Corporate Finance, Investment Banking, Insurance and other financial services.

It was therefore not unexpected that whatever their underlying motivations it was Cameron and Osborn who rounded on Barclays and ignited the Tory press and public opinion against Barclays and in particular against the Group Chief Executive who I affectionately call Casino Bob given his liking to call people he has just met even in the circumstances of a Parliamentary inquisition by their Christian names.

David and George knew only too well the growing anger and frustration among the rest of the British population that despite getting us into the mess, lowering living standards and taking vast amounts of state funds bankers continue to pay themselves unacceptable salaries, bonuses and benefits and were creating more and not less problems for small and medium sized business with a number of casino requirements which left good firms and good people going to the wall. The failures of the computer system also added to public anger as had Labour’s exploitation that in the budget the Coalition had rounded on the elderly to give the wealthiest a significant cash boost by reducing the 50 pence personal taxation rate to 45 for those who have not taken the available professional and legal advice  on how to pay significantly less. This decision is doing for the Conservatives what abolition of the 10 pence income tax rate did for Gordon Brown and the call to abolish universal free TV licences for the over 75, free bus travel and the Winter fuel allowance by some on the right plus to start means testing the state pension will only dig a deeper hole for the present Tory leadership. As someone said on Newsnight there will be 11 million elder voters involved in 2015.

I believe Cameron and Osborne launched their attack on Barclays Bank because they knew in advance that Casino Bob had no  intention of resigning and while it was agreed that Marcus Agius was likely to do the honourable thing and resign he remained a well respected figure who had become chairman of the powerful British Bankers Association with its 250 members and 150 influential committees influencing all aspects of government economic and financial policy and having  what they would have regarded as a cosy relationship with the 3000 staff of the Financial Services Authority and the Bank of England. It is noteworthy that the BBA cancelled its annual summer bash at which Ministers and would be Ministers and anyone who would be anyone in the world of  high finance because of the political and public reaction to the scandal, in the same way that  no politician will now chose to be seen in public with the Murdoch’s.

As I shall explain in greater detail in the next writing Casino Bob had built a strong body of support among staff and shareholders for keeping the bank out of nationalisation by getting the Qatari’s to invest billions and well as getting hold of several billion US bail out funds which did not have the Government involvement as in the UK.  In addition to Marcus being Chair of the BBA, Casino Bob along with the other big bank chiefs executives served on the executive committee. It is not surprising that Ed Miliband seized on the opportunity to exorcise his own Party’s involvement along with that of the Tories through a Leveson style part one inquiry.

There was no way that Cameron and Osborne would agree to such an Inquiry in their present circumstances under pressure from their own Cabinet and backbenchers.  I was not convinced by the Cameron and Osborne argument that the reason for not holding a such an Inquiry was because they needed quick advice on changes to be made to the Banking and financial services legislation before Parliament and which will seek to divide the Capital Investment and International Corporate Financings wings of the Banks from the High Street Retail and  smaller business services but do so in terms of separate managements and accountings while enabling continuing the transfer of profits to  balance shortfalls in retailing , but not  jeopardising the retailing side if the investment trading functions failed,  at least this is my present understanding

Not that Miliband and his colleagues were opposed to the ongoing work of the Treasury Committee or to the recently agreed joint Committee of the Houses of Commons and the Lords but they believed only a Leveson Inquiry would achieve the desired objectives although in the event the Treasury Committee is putting on trial all those involved in a way that even Leveson was unable to do because of due process.

The best immediate effect is that the aggressive approach of the Treasury Committee has led to the evidence of Casino Bob and Chairman Marcus stretching the credulity of anyone who has watched their performances including the FSA and as we can expect to learn tomorrow, the Bank of England.  Bob has done for himself for good from which there is no return. I remain opened minded about Chairman Marcus whose answers before the Committee were clearly coded and where there is scope for his resurrection should he chose.

Just as The FSA and the Bank of England were made aware of serious question being asked about LIBOR back in 2008 but the FSA did not commence its major investigation till 2010 I believe the Coalition were quickly made aware of the nature and extent of the LIBOR scandal at Barclays and in other Banks and the failure of the Regulators as soon as they reached their desks in Whitehall. I suspect knowing the likely damage which would result from the inquiries help to determine their approach to the national debt and the need to keep the USA Treasury, the World Bank and the other International Financial Institution onside if they were to weather the inevitable storm.

I also suspect this also led them to appreciate that their previous stance of self regulation and opposition even to the light tough approach of Labour had been mistaken and that as with the newsprint industry relationships between the industry and the regulators had become incestuous and relationships between the bankers and Whitehall too cosy. This was the tenor of much of the questioning of he FSA on Monday evening as the politicians wanted o know why it was the USA regulator had taken the initiative and why despite four years they were just getting around to taking  direct action. They were wrong that they did not have the power to initiate criminal proceedings and they confirmed that only now was the Serious Fraud Squad under its new leadership commencinga formal investigation despite two years of sharing information and discussing the subject.

It is was also nonsense to suggest that new Joint Committee of Parliament will be able to inquire at the depth and width required within a short time scale because of the unfolding nature of the scandal. I suspect the reason why the Regulators Report and fine package on the involvement of the RBS has been held up  because of the outcry and the need to ensure that appropriate action is taken regarding those directly guilty and in relation to management responsibility. The temptation will also have been to hold over until the political recess and perhaps the Olympic games is underway and the British Gold and other medal tally feel good factor is well underway.  There are also the repeated statements that the investigations are continuing regarding the involvement of other banks with the FSA admitting that they were involved in seven and that other Regulators were involved with others in addition. This could take at least a year if not years just as the Police inquiries in relation to phone and computer hacking and bribery and corruption have taken a year and shows no sign of coming to an end.

The outcome of all this is that there is likely to be several years of inquiries with the House of Commons Treasury Committee investigating individual developments, the Joint Committee attempting to produce recommendations which Parliament can act on, Criminal investigations and Prosecutions and a full judicial investigation. There is urgency because of the International ramifications but because of the International aspect getting agreement is likely to take longer.

What I find extraordinary is that the Politicians do not still appear to appreciate the contempt which those in the ownership and management of the international corporations, including banking, have for them and which I did not appreciate until attending the International senior management course at Henley in 1985 although alongside politicians was similar hostility and contempt for the public sector and for the welfare state. The mantra then was to prepare for globalisation by having the flexibility to make alliances and move workforces to where the greatest profits could be made as well the least political interference.

The threat of removing workforces and taxation contributions out of one country to another has been quoted by politicians as the reason for not controlling bankers and punishing them in the same away as everyone else. On Question Time immediately after the scandal became public there was surprising agreement on the panel that if the Bankers wanted to go they should especially as it had become evident that individually and collectively they were expert in paying as little taxation as possible. After all should they go to the USA they will find the authorities more willing to prosecute and send people to prison while in Arabia they are likely to have their greedy mits cut off or while in Russia they are looking to make use of its defunct Gulags or to China where they would be executed on the quiet? While I am not going as far as advocating blood on the British carpet what has happened is unacceptable and we need to see effective justice, especially if the gulf between Parliament and the people is not to widen.

I was also not surprised by the almost universal call that those who had committed acts which would be declared unlawful by your average citizen should have faced criminal prosecution. I understood the reluctance of Cameron and Osborne to make a direct call for Casino Bob to resign given the furore and judicial review following the intervention of the Education Secretary (Ed Balls) over the second Harringey scandal over the baby then known as Baby P. 

I was less convinced by the initial reluctance to call for a criminal investigation although this appeared a policy ploy  to enable the Coalition to point to the fact that the Labour Administration had not taken the opportunity to make unprofessional  or self interested behaviour in relation to the setting of LIBOR a criminal offence in much the same way that The Labour Government had chickened out of giving the information Commissioner the additional sanction  of  binging offenders before the courts with thee threat of imprisonment.

The present banking system in the UK only appears to serve Governments, international corporations, other banks and financial institutions, while destroying the lives of countless electors and their families and has failed pathetically to prevent a second recession although the policies and actions of the Coalition have contributed greatly to the general reduction in living standards, the dismantling of many public services and the threat to the care and provision for the elderly. Only the wealthiest have been protected and given significant tax breaks. The Coalition has taken from the elderly by sleigh of hand to prevent going back on its electoral promise to maintain the raft of successful universal benefits created under the Labour administration. As with House of Commons expenses and the Print Media scandal Labour Ministers deserve some censure for their part and for a number of bad judgements but in relation to Casino wealth creation the Tory party stands alone in its historical protectionism, fraternization and moral corruption. The gall although some would say political panic of Cameron and Osborn to censure one Comedian who got advice on how to use the tax system to personal advantage while Barclays used the same system as other International Banks and Corporations to avoid contributing a fair share to the British tax account was typical of their recent behaviour under pressure from Ed Miliband, from Coalition partners and the gathering right wing forces within their own party.

There will be more involuntary resignations, there will some individuals prosecuted and sent to prison, there will be tougher regulation and endless inquiries but I predict that as with the news paper print industry when push comes to shove the politicians will yield to the collective pressure of vested interests rather than that of the interest of the general public.

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