Clash over inquiry as flawed Diamond departs

The Leader of the Commons Sir George Young said last night that there would be a debate tomorrow on whether a judge should investigate, or whether it should be dealt with by a committee of MPs and peers.

A Labour attempt to force an independent inquiry was defeated yesterday in the House of Lords.

Peers voted by 251 votes to 197 against an amendment to the Financial Services Bill, which would have established an inquiry independent of parliament.

Such an inquiry could still go ahead, however, if MPs vote for it tomorrow.

Prime Minister David Cameron announced on Monday that the Government intended to set up a joint, cross-party committee of the Commons and Lords to carry out an inquiry into rate-rigging by the banks.

His plan was immediately criticised by Labour who insisted only a judicial inquiry – along the lines of the Leveson Inquiry into media ethics – could get to the bottom of the problem.

The man chosen by the Government to chair a joint committee – the chairman of the Commons Treasury Committee, Tory MP Andrew Tyrie – then said he was not prepared to go ahead unless there was a cross-party consensus and other MPs on the Treasury Committee were said to be unhappy a joint committee inquiry would cut across its inquiry into bank governance, which is already under way.

Ministers have argued that a tightly focused parliamentary investigation would be the most effective way to get to the bottom of what happened without undue delay.

But Mr Miliband warned yesterday the public was in no mood for an establishment cover-up, following the resignation of Barclays chief executive Bob Diamond.

“I have to say to David Cameron that if he doesn’t order a judge-led inquiry, I think he will be failing to understand the gravity and scale of this crisis,” Mr Miliband said.

“We’ve had missed opportunities before, we’ve got to seize this moment.

“The last thing the public want is a sense that the establishment is trying to cover this up and sweep it under the carpet.”

Chancellor George Osborne insisted the Government was not dodging a full public inquiry because it was afraid where it might lead.

He said leading Labour figures – such as Shadow Chancellor Ed Balls who was City minister during part of the relevant period – had more to fear.

“I think the people who would be most afraid of where any inquiry goes will be the people who were in charge at the time. No-one more than me would like to see Ed Balls in the dock,” he said.

The Chancellor said a parliamentary review would look at “transparency, conflicts of interest, culture and the professional standards” in the banking industry.

Labour put its demands for a judge-led inquiry to a vote in the House of Lords which was defeated last night amid Labour anger at Lib Dem peers.

Earlier Mr Osborne said Mr Diamond’s resignation had been the “right decision” for both the bank and for the country.

He added: “I think he has clearly taken the view that Barclays has a better future without him than with him.”

Despite mounting calls for his departure, Mr Diamond’s exit came as a shock as he had showed no signs of leaving his position after pledging to see an internal review through to the end.

IG Index market analyst Chris Beauchamp said Mr Diamond’s appearance before MPs later today could contain “interesting revelations”, while the head of equities at Hargreaves Lansdown Stockbrokers Richard Hunter said it would throw light on “internal turmoil at the bank”.

Earlier, Barclays said Mr Diamond’s severance pay package was “still under discussion”.

The bank’s most recent remuneration report, for 2011, said executive directors are entitled to a notice period of 12 months and payment in lieu of notice in instalments.

This means Mr Diamond could be entitled to a full year’s salary, which in 2011 was worth £1.4m.