Friday, 29 June 2012

Morning briefing..


The  “firestorm” of the Barclay’s scandal, as the FT splash phrases it, covers the front pages since - as we’ve put it -  “More banks are drawn in”. RBS and Lloyds are now in the frame. The Prime Minister and the Chancellor have already waded in, giving the Indy its headline “You’ll pay for this, PM tells Barclays” . The fury palpable, the Sun’s  “Sign on you crazy Diamond” - one for the Pink Floyd fans, that - adds some light relief. This morning’s breaking news on how small firms have been crippled by bank hedges add to the gloom.

Mark Hoban has been on Radio 5 to say laws will be put in place to make sure the setting of Libor is regulated and that criminal sanctions can be imposed in future. He said:

“What we’ve done is look at the regulation of Libor. The regulatory regime we inherited from the previous government doesn’t cover Libor and nor are there any criminal sanctions in place for the manipulation of Libor.”

The Mail’s leader column calls for an inquiry into banks, while the FT  says it may “be necessary to retire this generation of flawed leaders.” The Indy says it’s  “A sick banking culture that cannot be tolerated”.

Our leader column urges caution in the face of this anger, saying:  “there is a danger that in our haste to shove Bob Diamond and others into the tumbril, we will not only fail to remedy the situation, but will create more problems than we solve.”

In his column,  Jeremy Warner reinforces that view:  “Finance’s golden age may be drawing to a close; with no new industry or manufacturing renaissance coming up in the wings, it is not entirely clear what’s going to take its place as a source of British wealth, jobs and tax revenues. It is not just finance for which hard times lie ahead.”

Unbelievably, Bob Diamond has no intention of quitting - or saying sorry. In a letter to Andrew Tyrie, the Chairman of the Treasury Select Committee  -  published in full here  - falls short of an apology. The closest he gets is: “As well as accepting the authorities’ penalties and apologising, it is important that Barclays takes further action.” Read the last three paragraphs to appreciate the miss.  

David Cameron will consider a number of variables. In political terms, he will be relieved to see the media spotlight focusing elsewhere - at a fractious time for the Coalition, he will benefit from being out of the firing line for a period. But he will be anxious about any evidence that connects the Tories to bankers (there are hints of it today, with claims that Conservative donors are implicated in the scandal).

No wonder George Osborne is keen to make sure that the role of Labour and Ed Balls in regulating (or not regulating) the banks is appreciated by everyone. Ed Balls was City minister when it happened, which the Treasury says raised questions about his credibility as shadow Chancellor. But in economic terms, Mr Cameron will worry that the scandal will do yet more damage to the international reputation of the City and the economy. This will be his greater preoccupation: how a scandal of greed will prove to be a major setback to the prospects for growth.


Italian victories over Germany is not limited to the football today. Italy, with backing from the Spain, refused to back the EU summit’s  growth and jobs package yesterday, unless Germany supported short-term debt crisis measures.

In the early hours this morning, Angela Merkel caved in. The Spanish banks will be recapitalised directly by allowing a €100 billion EU bailout to transferred off Spain’s balance sheet at the end of the year. The move is based on putting the ECB at the centre of a “effective single supervisory mechanism” for banks after an EU summit in December.

Mario Monti could not resist mentioning the football, saying “It is a double satisfaction for Italy.” Ouch. You can read more in our report here.


There’s also another Coalition to dig out amidst all this chaos. In a letter to the Telegraph , Michelle Mitchell, director general of Age UK, and Dr Peter Carter, chief executive of the RCN, accuse the Government of failing to “measure up” on pledges in the Coalition Agreement to find a sustainable solution to elderly care.

They claim that months of delays in announcing a white paper to overhaul the care system threaten to land the NHS with a “colossal” and unnecessary bill.

The Coalition agreement recognised the “urgency” of reforming the care system. How will they respond?


Fraser Nelson  has a revealing column in today’s Telegraph. He says there’s a brain drain going on in Downing Street, because the recent U-turns have led to the sense of mission drift. At least half a dozen people have left and have not been replaced. He says this has emboldened the Tory backbenchers, and that the rebels are growing in number. He claims the Treasury dropped the fuel tax because they thought they’d the lose the vote.

He is on to something. Today we read that 100 Tory backbenchers  have signed a letter to the Prime Minister telling him he must put a EU referendum on the statute book before the next election, making a commitment to hold a referendum during the next Parliament. 

The letter, organised by Tory backbencher John Baron, says  “The heart and soul of the Conservative Party believes it is now time to consult the British people about this.”

Dave tried to shore things up in Brussels yesterday, underlining his eurosceptic credentials by reminding other leaders of his promise to defend Britain’s £3 billion annual rebate from the EU budget. He also said he “understood and shared” his MPs’ concerns, but offered no public support for the prospect of a popular vote on the EU relationship. You can read more in our report  here.

The numbers will worry Mr Cameron: 100 MPs - the same amount willing to rebel on the Lords Bill - is almost a third of his parliamentary party. He’ll be hoping this third doesn’t start to see themselves as an alliance and coordinate their attack against No 10 - it could be the makings of a threat to his leadership.

Ian Birrell in the Guardian is slightly more optimistic for Dave, saying that the “naked politics” at work in his welfare cuts speech on Monday, could help him accidentally rediscover “his narrative of compassionate conservatism”.  


And finally, the Sun  reports that Grant Shapps has announced that families of fallen soldiers will be rushed to the front of the social housing queue. Dave will be pleased. It might help relieve some of the problems Rachel Sylvester revealed he’s got with the MoD.


Good to see Labour MP Jamie Reed is keeping things decent online:

“‏@jreedmp: Germany v. Italy. Can we leave our WW2 jokes outside please? You know the ones. Thank you.”


Latest YouGov/The Sun results: Conservatives 32%, Labour 43%, Lib Dems 10%, UKIP 7%

Overall government approval rating: -38


In The Telegraph

Fraser Nelson:  U-turns make even David Cameron wonder what this Government is for

Sue Cameron:  PFI is the boondoggle to end them all

Jeremy Warner:  After Barclays, the golden age of finance is dead

Leader:  Crippling the banks will only make things worse

Best of the rest

Owen Jones in the Independent: If rigging rates isn't anti-social behaviour, what is, dude?

Ian Birrell in the Guardian: David Cameron's inner Maoist

Gillian Tett in the Financial Times: Libor affair shows banking’s big conceit

Nigel Lawson in the Times: After this scam, banks must be split apart


Today:  David Cameron attends the European Council

10.30am: The Bank of England publishes its Financial Stability Report. Followed by a televised press conference with governor Sir Mervyn King. The report is expected to relax rules requiring banks to hold large amounts of cash as a buffer.