The case for a Leveson-style inquiry into banking

Summary

Thoughts on why I think we should have a full judicial inquiry along the lines stated in Ann Pettifor’s epetition.

Or put simply:

If you’re not convinced, feel free to read further…

I’ve lost count the number of times people have called for full public inquiries into things. ‘Bad stuff has happened, let’s have a public inquiry to get to the truth.’ Such inquiries are neither cheap nor quick. Nor should they be given the magnitude of what they are investigating happens to be. There are reasons why we should be careful about calling for them. One of the longest running inquiries in UK history – the Saville Inquiry into the Bloody Sunday killings in Northern Ireland cost around £200million. Hence criticism that it’s only the lawyers that benefit. If we are going to spend a huge amount of money on an inquiry, have some very good reasons to do so. The Saville Inquiry was justified in going ahead because so many people lost their lives on that dark day, and the flaws in the original Widgery Tribunal that led to Tony Blair’s administration launching Saville’s follow-up. (I.e. the issues being both deaths of civilians and possible miscarriages of justice). One could also say that Saville was essential for the Northern Ireland Peace Process too.

Criteria for a public inquiry.

Why should one issue or incident get a public inquiry and another one not? In the interests of fairness and due process there needs to be an agreed set of criteria that each case can be judged against. This forces the hand of both ministers and officials to assess the evidence on its merits rather than being influenced by people or organisations with vested interests or their own personal interests and possible prejudices. In each case, a minister will have to make the judgement call on each case as to whether it meets the criteria for a public inquiry or not – with the arguments for and against being set out clearly. As a process, it should be pretty straight forward.

As for what those criteria should be, the website PublicInquiries.org has a very detailed set of material that indicates the considerations the Prime Minister and The Chancellor of the Exchequer will need to make in order to decide whether to hold a Leveson-style inquiry. The considerations are summarised as:

  • Determining the need to hold an inquiry – how bad is this bad stuff?
  • Is there a legal obligation to hold an inquiry?
  • What would the inquiry achieve?
  • Public concern
  • Alternatives

Just how bad is the case with banking?

Very. There are a number of recent industry-wide cases that indicate problems are systemic. These include:

Those are the ones that have hit the headlines. The ones that have floated under the radar are all here.

In all of the above-four bullet points:

  • we’re not talking about petty cash
  • we’re not talking about a small number of individuals badly affected
  • we’re not talking about a few rogue people in a small number of firms
  • we’re not talking a one-off error of judgement

Is there a legal obligation?

I’m not a lawyer so I’ll pass that one over to legal watchers of this blog and of Puffles to comment on that one. (Please do – I genuinely do not know if something on the scale of all of these compels/compelled a public inquiry, or whether there is ‘reasonable expectation’ that there should be one).

What would an inquiry achieve?

PublicInquiries.org comes into its own on this one. Their bullet points are as follows:

  • establishing the facts
  • learning from events
  • catharsis or therapeutic exposure
  • reassurance
  • accountability blame and retribution
  • political considerations

Do we know the facts?

In terms of the headline ones, probably. But as we found out from Leveson, it’s the emails, the text messages and the cross-examination where different witnesses contradict each other that more than speak volumes. In terms of the details that created this toxic culture, we don’t know the facts. We don’t know about the lobbying of ministers, MPs, politicians and regulators. We don’t know what the politicians were thinking during what Chancellor George Osborne now calls “the age of irresponsibility” – an age that he is trying to pin down on Labour. I won’t go into the politics in detail. I can understand why Osborne has done this but this problem – as with the media and MPs’ expenses goes far beyond political point-scoring.

Can we learn from events?

Well…we can. Whether we will is a different matter. The evidence-giving process in itself will allow people to think for themselves what improved regulation and/or enforcement is needed.

Catharsis or therapeutic exposure

From Puffles’ Twitter feed I’ve seen there are more than a few people who want to see some chaps called Giles, Harlequin and Aurelien get an absolute roasting in front of the legal and judicial equivalent of the Jeremy Kyle Show. Ditto with the house masters of top public schools, oxbridge professors and even ‘nanny’ – for failing to instill sound morals into their charges during the latter’s early years.

While I don’t thing getting Jezza to shout at them will do much good, at least it would put some faces to the otherwise ‘faceless bankers and traders’ who otherwise have little public profile when compared to their remuneration. It’s not just bureaucrats that can be faceless – and I’ve called on previous occasions for more senior civil servants to have higher public profiles given their responsibilities and remuneration. Let’s make the same true for banking and finance. Let’s shine the light on the faces of those who make up ‘the markets’.

Reassurance

I’d like to think that we the general public want and need to know that the chances of these scandals happening again have been minimised as much as reasonably possible. It doesn’t help businesses small or large if they have no confidence in the banking and finance system. It speaks volumes of the finance system that payday loan companies now feel confident enough to enter the market charging extortionate rates.

Accountability, blame and political considerations

I’m not talking ‘hang ‘em and flog ‘em’ blame here. There’s just as much saying ‘these people were responsible for this, and as a consequence they will be banned from X, Y and Z – e.g. working for a finance company, holding a directorship etc. There’s also the issue of the ill-gotten gains – the bonuses and the assets and status symbols acquired as a result. You never know, the forced sale of all of those houses and apartments may help release some of the pressure on the housing market in London and the South East.

There’s also accountability of current and former ministers. It’s one of the reasons why Ed Miliband needs to consider how he and Ed Balls would respond given that they were special advisers in The Treasury and/or ministers responsible or in Cabinet when much of this was going on. It would also force Gordon Brown – and possibly Tony Blair to properly account for their actions throughout the 2000s, allowing their critics to put their points to them in a way they may have felt did not get publicity at the time or have not ever been properly responded to.

Public Concern

This stems from Amnesty International and is cited on PublicInqiries.org.

The public concern here is that public trust in a key pillar of the economy has been significantly undermined. They relate to a defined series of events serious enough that only a judge-led public inquiry could get to the bottom of it and restore public trust. That’s my interpretation of the public concern in this case.

Are there alternatives?

Absolutely. Bob Diamond will be appearing before the Treasury Select Committee on Wednesday. Cynics might say that he’s going to apologise for the fact that events turned out badly and that naughty boys did inappropriate things that inconvenienced quite a few people. I couldn’t possibly comment either way. Parliamentary inquiries are one route. Ministerial or ministerially-appointed reviews can take place – with various levels of timeframes and resources and varying levels of power.

The differences with a judge-led inquiry as highlighted in the epetition include:

  • The ability to send for persons, papers and electronic communications – i.e. once requested they must be retrieved and sent (with various stern penalties for obstructing said inquiry by destroying such material)
  • The ability to compel witnesses to give evidence on oath – lying on oath carrying the offence of perjury and a lengthy spell in jail
  • Cross-examination by expert QC. Robert Jay QC has provided excellent examples of how useful this can be compared say to select committee evidence sessions. Jay was so good at it that in the case of Adam Smith I almost felt sorry for the latter.

Conclusion?

A judge-led public inquiry is justified by:

  1. The need to restore trust in an essential component of the economy
  2. The number of people and firms involved in activities ranging from bad practice to flagrant law-breaking
  3. The number of people and firms negatively affected by 2)
  4. The amount of money involved relative to national income
  5. The impact that these scandals have had on UK Plc, and the consequences for the country’s trading relations abroad
  6. The need to put right the wrongs to minimise the chances of them happening again
  7. To hold those to account those that have broken the law
This entry was posted in Business economics and finance, Campaigning, protesting and demonstrating, Law and legal issues, Party politics, Public administration & policy. Bookmark the permalink.

4 Responses to The case for a Leveson-style inquiry into banking

  1. I had already signed the petition, Puffles – was one of the first 3,000.

    However, I would prefer the investigation to be international. Finance is an international industry. It is not possible for the UK to put its house in order on its own.

    • Sal says:

      I thought so, too, but then I had a change of heart. Two main reasons: 1) like Leveson, an enquiry in the UK can go wherever it needs to go, turning over whatever stones it chooses and ignoring whatever pleas it chooses, 2) other countries may choose to follow suit individually, creating a much more hostile environment for dodgy banking institutions than just one, international enquiry, which they can fix, accommodate or get round.

  2. Adam says:

    Sorry, not at all convinced that an inquiry will achieve anything. I’m sure that it’s just a ploy that politicians use for kicking things into the long grass so that they don’t actually have to *do* anything.

    Let’s face it, we already know that some bad stuff happened, don’t we? So why not just prosecute those involved? That would also mean that the facts would come out in open court, and would actually achieve something, mainly sending a message that people who scam the rest of us out of billions are not untouchable.

    The only problem is, it won’t happen, because in reality, they are untouchable.

    I blogged my thoughts on it here:

    http://learn.open.ac.uk/mod/oublog/viewpost.php?post=116208

  3. Sadly it is a fact that the majority of SMEs affected by the conduct of bankers cannot afford redress in the Civil Courts. Banks have deep pockets (some funded by the tax payer) and a mindset that allows them to put aside morality, integrity or decency in the name of ‘brand protection.’ Many small business owners report serious irregularities or even criminal acts by bankers to the FOS, FSA or even the police and it gets them nowhere – although I can confirm that if you are prepared to dedicate years of your life to the fight you might get somewhere.

    I don’t suggest any inquiry can look into the hundreds (if not thousands) of bank scams/frauds/scandals but at least a fully independent inquiry will not end up as a game of political mud slinging that excludes public input.

    Politicians simply have no idea of the true extent of malpractice in our banks. None at all and I believe some MPs would be truly shocked at the depths some banks have stooped to. I hope, in the very near future, one bank will be fully exposed in the criminal Courts (not Barclays) but even so, I believe the bank in question has used all its political influence to avoid this situation. Hopefully, in this instance, ‘soft power’ will not work but it has done in the past and it has to stop.

    The more David Cameron insists we should not have a public inquiry, the more it convinces me we need one. His determination to avoid this is becoming disturbing and is possibly pushing many Tory or Coalition voters directly towards Labour – who caused so much of this mess in the first place.

    This is the time to expose all the rot – to miss this opportunity risks a continuation of the same and, lets face it, the Country has no money left for more bailouts. It will be Monetecarlo or bust. the public will only get the bust. Very bust.

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