Attorney general steps in to caution against speedy banking inquiry

Dominic Grieve says quick inquiry could clash with on-going criminal investigations, putting government plan in doubt
Attorney general Dominic Grieve
Dominic Grieve made a rare personal intervention in Labour’s parliamentary debate on a banking inquiry. Photograph: Paul Ellis/AFP/Getty Images

Britain's most senior law officer has appeared to undermine the government's own argument that any inquiry into the current banking scandal needed to happen as quickly as possible.

The attorney general, Dominic Grieve, made a rare personal intervention in Labour's parliamentary debate calling for a judge-led public inquiry into the wider banking crisis – an idea rejected by the Treasury as being too long to enable MPs to act to legislate before the end of the parliament.

The shadow chancellor, Ed Balls, said the party was prepared to hold a two-part inquiry, with the first part examining specific allegations about manipulation of the inter-bank lending rate, Libor, to report before Christmas, in line with the government's own proposal, and a second part looking at the wider banking culture and regulation, to report next summer.

However Grieve intervened to reject Labour's two-part inquiry, arguing that the first element of the investigation would then clash with on-going criminal investigations, throwing the government's own timetable into doubt.

The apparent discrepancy was leapt on by Labour. "If it's too short for one [inquiry] how come is the right length for the other," said Balls. "And when there's a complex issue like this, the idea judges would make that fine legal judgement worse than a parliamentary committee is nonsense."

The attorney general had been very helpful, Balls said.

In a frequently bad-tempered debate in the Commons, Balls challenged George Osborne over an interview the chancellor published on Thursday morning in the Spectator magazine, in which he claimed his opposite number was "clearly" involved in the Libor fixing in 2005-2009, when Balls was city minister in the previous Labour government.

Balls said the allegations were "utterly untrue" and challenged the chancellor: "If he has any evidence, he should produce it now ... If he will not provide any evidence he needs to step up at the despatch box now and withdraw this utterly false allegation."

Osborne refused several invitations to apologise, instead pointing to the admission by Balls' former colleague at the Treasury, Baroness Vadera, that she had seen a UBS report into the Libor market, and evidence on Wednesday by former Barclay's chief executive Bob Diamond, to the Treasury select committee of MPs, that he was talking about ministers when he said in an email that "senior figures in Whitehall" had told the Bank of England they were worried about Libor being too high.

"Let him [Balls] explain what Labour's involvement was, who were the ministers, who had the conversations, who were the senior figures," added Osborne.

Opening Labour's debate, Balls said the party rejected the government's three reasons for opposing a public inquiry similar to the current Leveson inquiry into press behaviour and standards. The problems with the banking industry were "much, much wider" than the Libor problems and so merited a wider inquiry; a part inquiry would enable MPs to have a report on the Libor fixing scandal by Christmas, before the expected banking bill in January; and a public inquiry would have greater powers to force witnesses to give evidence under oath and request documents, said Balls.

"Only a judge-led inquiry can truely persuade the public that the inquiry is truely independent and objective," added Balls.

Osborne said wider banking issues had been considered by the Vickers commission on banking, which reported in 2011 and is to be the subject of a banking bill early next year, and insisted that the proposed joint committee of MPs and Lords could be given tough powers, using standing orders or legislation if necessary.

The chancellor also challenged Labour to take part in the parliamentary inquiry if MPs voted against the opposition bill and for the government. "If the House [of Commons] votes for a joint public inquiry will the Labour party take part in it?" said Osborne. "If not he'll be cancelling any inquiry into the banking scandal."