James Moore: Why George Osborne must beware of the banking backlash

Outlook The blue touch paper has been lit and it might pay for George Osborne to consider a flak jacket when he delivers his Mansion House speech.

Today's report by Andrew Tyrie's Parliamentary Commission on Banking Standards is a lengthy affair. Yet unlike so many such tomes emanating from various organs of the British state, the language is quite economical. And in some places it cuts like a rapier.

Those cuts will not go unanswered. There is likely to be an enormous blowback from the leaders of the financial community today, because the report takes aim squarely at them. Its chief targets can be identified as the gilded corps of banking industry executives who ducked any and all responsibility for what occurred on their watch... leaving the British taxpayer with a bill estimated at £1trn for propping up the industry during the financial crisis, with confidence in an industry which survives only as a result of it at dangerously low levels. And that was even before the succession of scandals that were uncovered lurking within the wreckage.

If there is any group which exemplifies the "one-way bet" enjoyed by senior business leaders it is they who enjoyed fabulous rewards during the good times, and retired with fabulous pensions when the house of cards, whose foundations they built, fell over.

To ensure no repeat the Commission's report breaks new ground in a number of areas, areas which will prove hugely controversial. For a start it seeks to establish clear lines of accountability so executives can no longer rely on the "didn't know" or "couldn't have predicted" defences, and spreading responsibility around committees. This made it impossible for regulators to realistically launch proceedings against any of them.

It dares to suggest shifting the burden of proof for those faced with regulatory sanction onto the accused, at least in the most serious of cases. Although the libel laws, which demand that the defendant proves they did not defame a plaintiff rather than the other way around, do define something like this principle in English law, the legal profession will be up in arms publicly, and plotting methods of challenge privately.

Then there is the possibility of stripping executives of their "unvested" pensions if banks are bailed out, a response to the outrage over the vast retirement pots accumulated by Fred Goodwin at Royal Bank of Scotland and James Crosby following his term at the head of HBoS. Pensions have tended to be seen as sacrosanct, untouchable even in instances of personal bankruptcy. But not any more.

Senior executives are not accustomed to this type of treatment. In theory they are already held to account by shareholders. In practice the institutions that control companies only react when confronted with such flagrant malpractice that they have little choice. This report is as much a consequence of their failings as it is of the banking industry's.

There are recommendations that will find some favour in the City. The report has no truck, for example, with the EU's blunt instrument of capping bonuses. However, executives will not love the greater powers of deferral and clawback. If they want the money, they'll have to behave.

In general, the problem for the industry, as it girds its loins for the battle to come, is that the public will stand squarely behind Mr Tyrie and his Commission.

Business groups appear to have perceived this. Their public responses have shown a degree of caution despite some of the report's more incendiary recommendations.

In private it will be a different matter.

That said, riding roughshod over public opinion would be a dangerous move for Mr Osborne. The Commission has produced a commendable, courageous, and exhaustive report. Woe betide the politician that seeks, to coin a phrase, to get around or "game" its main thrust.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Claims Administrator

£16000 - £18000 per annum: Recruitment Genius: A position has arisen within th...

Ashdown Group: Development Manager - Rickmansworth - £55k +15% bonus

£50000 - £63000 per annum + excellent benefits : Ashdown Group: IT Manager / D...

Recruitment Genius: Security Officer

£16500 per annum: Recruitment Genius: Applicants must hold a valid SIA Door Su...

Ashdown Group: Business Analyst - City, London

£50000 per annum: Ashdown Group: Business Analyst - Financial Services - The C...

Day In a Page

The saffron censorship that governs India: Why national pride and religious sentiment trump freedom of expression

The saffron censorship that governs India

Zareer Masani reveals why national pride and religious sentiment trump freedom of expression
Prince Charles' 'black spider' letters to be published 'within weeks'

Prince Charles' 'black spider' letters to be published 'within weeks'

Supreme Court rules Dominic Grieve's ministerial veto was invalid
Distressed Zayn Malik fans are cutting themselves - how did fandom get so dark?

How did fandom get so dark?

Grief over Zayn Malik's exit from One Direction seemed amusing until stories of mass 'cutting' emerged. Experts tell Gillian Orr the distress is real, and the girls need support
The galaxy collisions that shed light on unseen parallel Universe

The cosmic collisions that have shed light on unseen parallel Universe

Dark matter study gives scientists insight into mystery of space
The Swedes are adding a gender-neutral pronoun to their dictionary

Swedes introduce gender-neutral pronoun

Why, asks Simon Usborne, must English still struggle awkwardly with the likes of 's/he' and 'they'?
Disney's mega money-making formula: 'Human' remakes of cartoon classics are part of a lucrative, long-term creative plan

Disney's mega money-making formula

'Human' remakes of cartoon classics are part of a lucrative, long-term creative plan
Lobster has gone mainstream with supermarket bargains for £10 or less - but is it any good?

Lobster has gone mainstream

Anthea Gerrie, raised on meaty specimens from the waters around Maine, reveals how to cook up an affordable feast
Easter 2015: 14 best decorations

14 best Easter decorations

Get into the Easter spirit with our pick of accessories, ornaments and tableware
Paul Scholes column: Gareth Bale would be a perfect fit at Manchester United and could turn them into serious title contenders next season

Paul Scholes column

Gareth Bale would be a perfect fit at Manchester United and could turn them into serious title contenders next season
Inside the Kansas greenhouses where Monsanto is 'playing God' with the future of the planet

The future of GM

The greenhouses where Monsanto 'plays God' with the future of the planet
Britain's mild winters could be numbered: why global warming is leaving UK chillier

Britain's mild winters could be numbered

Gulf Stream is slowing down faster than ever, scientists say
Government gives £250,000 to Independent appeal

Government gives £250,000 to Independent appeal

Donation brings total raised by Homeless Veterans campaign to at least £1.25m
Oh dear, the most borrowed book at Bank of England library doesn't inspire confidence

The most borrowed book at Bank of England library? Oh dear

The book's fifth edition is used for Edexcel exams
Cowslips vs honeysuckle: The hunt for the UK’s favourite wildflower

Cowslips vs honeysuckle

It's the hunt for UK’s favourite wildflower
Child abuse scandal: Did a botched blackmail attempt by South African intelligence help Cyril Smith escape justice?

Did a botched blackmail attempt help Cyril Smith escape justice?

A fresh twist reveals the Liberal MP was targeted by the notorious South African intelligence agency Boss