When Nick Clegg announced he was giving up the struggle on House of Lords reform, he named a number of policy areas that could fill the huge legislative void left by the collapse of the plans to overhaul the upper chamber. One of them was banking, and the Deputy Prime Minister told journalists it might be worth examining whether it was possible to go further than the Vickers proposals on this area.
Today’s Financial Times fleshes out what going further might entail. Vickers had originally proposed banning the retail operation of a bank from selling interest rate and currency swaps, but this was dropped in the white paper on banking reform. Now Clegg and the Business Secretary Vince Cable want to re-open talks on this issue. Sources close to the Lib Dem leader say this decision comes in the wake of the latest banking scandals to engulf the sector, but those in Clegg’s party have always felt Vickers was not the last word on bringing the banks to heel. While they are wary of too much banker bashing, the Lib Dems are confident that (unlike trying to reform the House of Lords) this is an issue they will take the public with them on. It would be a useful policy for Clegg to wave at his conference in the autumn.
The problem is, as the FT points out, George Osborne could be quite peeved that June’s white paper is now under attack when he had managed to create some consensus on it. Clegg has identified this as something to keep the government busy now Lords reform is off the table, rather than as something to appease his party’s rage. But it could open up another squabble between the two parties. Having a nice new row will keep the two parties busy, but it will damage the coalition’s health when it is already wheezing a little.Tags: Banks, Coalition, Nick Clegg, UK politics, Vince Cable