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By Paul Goodman
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One of politicians' most primal instincts is to avoid blame – and dump it elsewhere.  Yesterday's manoevres by George Osborne and Ed Balls to hold each other's parties responsible for the banking collapse in general, and the Libor scandal in particular, was therefore unremarkable.  In a fair world, as Bruce Anderson suggests today, most of the blame would attach itself irremovably to the Shadow Chancellor himself, who is deeply implicated in Gordon Brown's idiot tripartite regulation of the City (though if banks are determined to lie about their borrowing costs, even the best regulation in the world may not find out – swiftly, at any rate).

But the world remains resolutely unfair, and Mr Balls's chutzpah may thus pay off.  It is the Conservative Party, not the billionaire-friendly party that Tony Blair turned Labour into, that is associated with country suppers, rising horses, wearing tails at weddings, the Bullingdon Club – all the David Cameron-related trivia about which Downing Street has understandably proved so sensitive – and capitalism itself.  No wonder Messrs Cameron and Osborne have scrabbled about agonising over Stephen Hester's bonus, removing Fred Goodwin's knighthood (in effect) and pronouncing, in Mr Cameron's case, on Jimmy Carr's tax affairs.  They are seeking to avoid blame.


These are thus punishing times for those seeking to make the case for free enterprise.  It is correct to argue that banking went wrong not because we've had too much real capitalism, but too little – because politicians and bureaucrats kept interest rates too low (take a bow, Alan Greenspan – and Mr Brown too, while we're on the subject) and because the international banking model that Mr Balls helped to oversee isn't really capitalist at all (take a bow, Bill Clinton, the Democrat President who helped to shape sub-prime lending – and Mr Balls too, while this subject remains unchanged).

The mortal peril under which continental banks labour at present can't reasonably be blamed on the wicked Anglo-Saxon capitalist model either.  But to say all this is to spit in the wind.  Ed Miliband is pushing at an open door when he seeks to make the interesting distinction between good and bad businesses.  For these reasons, it is understandable for conservatives to feel that the best course in relation to the Libor horror – of which there is much, much more to come: Barclays were not alone – is to generally keep their heads down while the regulators and lawyers do their stuff.

After all, some will argue, banking is already being reformed: we have had the Vickers report and the legislation that flows from it.  And the measures that are being put in place risk the return of our old friend, the law of unintended consequences: is not one of the reasons that small business find it so hard to obtain loans the requirement on banks to build up their balance sheets?  Best, therefore, to leave well alone.  This way of thinking may be intellectually sound but it is emotionally extraordinarily unintelligent.  The victims of lending rates built on lies are not the elites but the masses – ordinary savers and borrowers: watch for group legal actions.

Thoughtful MPs such as David Ruffley and commentators such as Iain Martin have proposed a public inquiry.  We have enquiries, the latter wrote yesterday, "when a hospital trust lets down its patients, or when a transport company kills its passengers, or when a massive intelligence failure leads to war" – so why not for the banking collapse, too?  The aim would be less to produce recommendations than to purge the stables: to bring the truth to light, to name and shame the guilty, to create a ventilation system for public anger, and to allow catharsis to follow nemesis as it properly should.  We've had the vanities.  Now should come the public bonfire.

There is a case for a judge-led inquiry.  But the Leveson one is proof that though judges may be highly intelligent and counsel may ask searching questions, the latter cost a lot of money and the former, to put it politely, aren't always better informed than politicians.  (Or, to put it more directly, it is evident that the distinguished judge simply doesn't understand how the media works.)  Talking of politicians, events since the fall of Michael Martin and the explosion of the expenses scandal have shown the legislature, however imperfectly, seeking to wrest power back from the executive.

There is now a back-bench business committee, elected Select Committee Chairmen and members, a Speaker who (however unappetising) at least stands up to Ministers.  This is the moment for it to act.  We need that major inquiry into banking – and the Treasury Select Committee, however excellent its dry-as-dust Chairman, Andrew Tyrie, may be isn't quite major enough.  David Davis, who has already helped to oversee an enquiry into banking, is a big enough figure to chair it.  A less pugilistic though no less senior candidate (more so, on reflection) would be that former Cabinet member of deadly intelligence, Peter Lilley.

Fearless backbencers such as Douglas Carswell, Lord Martin's assassin, and my Wycombe successor Steve Baker would have a place.  Commons committees aren't famous for the forensic quality of their questioning, but these are serious people with an interest in the subject.  A Gisela Stuart or a Kate Hoey on the Labour side might provide the necessary balance.  David Cameron should announce an inquiry.  And if he doesn't, the legislature itself should step in where the executive fears to tread.  It would not be hard as a first step for a backbencher to argue to the backbench business committee that a debate on setting up such an inquiry would be in order.  It is time for MPs to scrag the bankers.

1.30 pm Update I see that Ed Balls is now calling for a judge-led inquiry (and therefore for an inquiry partly into himself, but let's not get too technical).  I'm not sure that Cameron and Osborne will be able to resist such calls indefinitely as the Libor scandal deepens.  Were I a Conservative backbencher, I would therefore be in no a rush – especially after the fuel duty, pasty tax, charity cap, church buildings and caravans U-turns – to sign off the standard PRU letter saying that such an inquiry isn't necessary.  With less a month to go until the summer recess, will the Commons insist that it should have charge of an inquiry – not another Lord Leveson?

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