Professional Standards in the Banking Industry

David Davis Excerpts

Thursday 5th July 2012 Commons Chamber

[Mr David Davis (Haltemprice and Howden) (Con)]

I will start by declaring an interest. When I was the chairman of the Future of Banking Commission it was funded by the Consumer Association, which might have influenced my views on this matter.

May I start by commending the Chairman of the Treasury Committee, my hon. Friend the Member for Chichester (Mr Tyrie), for the tone of his speech? I agree that we should not let the smoke of political battle in this place come between us and rescuing one of the most important industries in the country. Members on both sides of the House should bear that point in mind.

The title of the debate and of both motions refers to the professional conduct of the business of banking. This is not just about LIBOR and the LIBOR scandal. If it stopped there, we could deal with it through two actions: a change to the procedure to make it transaction-based and audited, and the criminal prosecution of everybody involved. That would resolve the issue once and for all, but that is not as far as this goes.

We all know that the practice of banking in this country has become perverted by huge incentives, which have led bankers to behave in ways that do not serve the economic interests of the country or our national interests—indeed, they have had the opposite impact. Although the Chairman of the Select Committee rightly said that the inquiry would need to be tightly drawn, it will nevertheless go pretty far. I am quite certain, for example, that even if it is confined to banking, things such as the derivatives market will undergo a lot of investigation in the course of the Committee’s investigation. We must understand that this issue is much bigger than just LIBOR.

Secondly, we should take on board the fact that we are debating the superstructure of the inquiry when we should perhaps be talking about its engine room. What matters are the inquiry’s powers, whichever we have, and they do not need to be so different for a judicial inquiry and for a Select Committee inquiry. I am afraid that the hon. Member for Eltham (Clive Efford) was just plumb wrong about the status of Select Committees in this House and their powers. I speak as a past Public Accounts Committee Chairman who summoned bankers, rail operators, pharmacy companies and all sorts of companies that did not want to come, to give their documents or to give evidence. We did not take evidence on oath, but they did not want to give evidence to the Committee and were made to do so.

[Bill Esterson]

I want to ask the right hon. Gentleman about the relative skills of a parliamentary inquiry and a judge-led inquiry. Some people in this House have very deep skills, but not everybody does, but a judge-led inquiry would have the necessary skills to carry out the kind of deep inquiry that he rightly says is needed. Will he comment on that?

[Mr Davis]

Absolutely. The Select Committee on Culture, Media and Sport and its inability to reach a unanimous view has been held up as an example. In my entire time as PAC Chairman—and, I think, that of all the subsequent Chairmen—there was never anything other than a unanimous outcome, because of the factual basis of the inquiries. That is what this inquiry must have. It must rest on the facts, which is why the Committee will need forensic accountants, lawyers and investigating teams. It will, I think, need one change in the law. It will need protection for whistleblowers, as we do not have that, but the same would be true of a judge-led inquiry. That would open the inquiry up to its full extent.

Let me make one more point about judge-led inquiries—it goes back to the Leveson inquiry and is slightly embarrassing for those on my side of the House, but I shall make it anyway. Judge-led inquiries cannot work around a criminal investigation without paying attention to it, and that can cramp what they do. If Members did not see it, I recommend that they look back at the evidence given by Andy Coulson and Rebekah Brooks, both of whom were facing potential criminal charges. Those were wholly useless days at the Leveson inquiry because the QC involved had to tiptoe around the issues. That might apply to almost every witness who appears before this inquiry, thanks to the issues facing it, so we must bear it in mind that we cannot solve that with a judge. We will solve it through a different mechanism that either approach would have to use and that, frankly, would be in camera hearings with those witnesses. Although the conclusion will have to be wide, open, wide ranging, honest and transparent, that might not be possible for the evidence-taking.

Although a House inquiry will be faster than a judicial inquiry—there is no doubt about that, for the reasons the Chancellor has given—there is the simple problem that any inquiry will have trouble completing by Christmas.

[Alison McGovern (Wirral South) (Lab)]

Will the right hon. Gentleman give way?

[Mr Davis]

I have taken one intervention and I cannot take any more.

Whatever the inquiry, it will take a long time, because it is a big issue, and it has to be got right. If it is got wrong and the inquiry is handled badly, and it turns out not to be well managed, it will do enormous damage to the City of London and the entire economy. If it is got right and it leaves the City of London with a reputation for clean and honest dealing it could be the single most important thing that happens under this Government.