The Chancellor of the Exchequer, the Governor of the Bank of England and the chief executive of the Fin-ancial Services Authority faced a barrage of hostile questioning from MPs yesterday.
Alistair Darling, Mervyn King and Adair Turner were forced to answer criticism of their performance sent to the House of Commons Treasury Select Committee by members of the public, some 5,000 in all.
As the Government announced a new vehicle to manage its stakes in some of Britain's leading banks, UK Financial Investments Limited or UKFI, Mr Darling was pressed on executive bonuses and said: "We don't actually expect many bonuses to be paid at all in the banking sector next year".
Mr Darling and Mr King rebutted allegations that the taxpayer had been taken for a "mug" or a "monkey" over the £500bn in various forms of state support for the banks. Mr King said that he expected the Government to receive "money down the road which will more than justify the initial sums put up." However, he warned the banks again that they "will need to regenerate new sources of funding. The level of savings will be there. Indeed, one would expect that, in the next year or two, the domestic economy will be saving more as a fraction of GDP than it has in recent years. So I've no doubt that the savings pool is there."
Mr Darling told MPs that the UKFI would be required to ensure that "these companies are managed in a commercial way and at arms length from the Government". Its overarching objective will be to "protect and create value" for the taxpayer. A senior Treasury official, John Kingman, will be chief executive, while Sir Philip Hampton, the chairman of J Sainsbury and a former finance director of Lloyds TSB, will chair the UKFI. Sir Philip's appointment will end speculation that he is set to become chairman of Royal Bank of Scotland. The UKFI will oversee the state's interests in Royal Bank of Scotland, HBOS Lloyds TSB, Northern Rock and Bradford & Bingley.
Responding to a large volume of queries about the fate of savers with Icelandic bank accounts held on the Isle of Man, Mr Darling said that he would have to "think long and hard" before offering them compensation, and that it was "something that we would not do lightly". He said he would look again at the tax-free and regulatory status of the Isle of Man, given the evident confusion about whether it is covered by the UK Financial Services Compensation Scheme.
Lord Turner also promised to examine the apparent leaks of information to the BBC's Business Editor, Robert Peston, during the credit crisis. Some MPs raised the way that Mr Peston was ahead of the official release of news with "inside information from the top". Lord Turner said "we are concerned" but that there was no sign of market abuse, though there had been an "imperfect broadcast" of information.
He said the leaks were "very serious", but that no leaks were being investigated by the FSA, given that there was no offence against law or regulation. However, he promised one MP that he was "troubled" by Mr Peston's status, though it was not an offence, and that he would "take what you've said and look at it further, but I think we have to stick to what is an offence under market rules – we are not a policeperson of leaks in general".
MPs' worries over the way the crisis has been handled were echoed in the House of Lords, where the Treasury minister Lord Myners agreed that there was a need for a public inquiry into the behaviour of banks.
The shadow Chancellor, George Osborne, said: "As Alistair Darling has been forced to admit, ministers must bear responsibility for the failures in the system of banking regulation. We need a public inquiry that covers the behaviour of everyone responsible: the bankers, the regulators and, of course, the ministers, past and present.
"Because so much public money has been spent rescuing the banks, any inquiry must interview witnesses in public and one of the central witnesses must be the man who was Chancellor of the Exchequer for 10 years and presided over the age of irresponsibility: Gordon Brown."
John Kingman Head of UKFI
Described as affable and highly intelligent, John Kingman was promoted to be the number two civil servant at the Treasury last October, at the age of 38. A rapid rise to theposition of Second Permanent Secretary and Managing Director, Public Services & Growth, HM Treasury, sounds impressive enough.
More importantly, he obviously has the confidence of the Prime Minister, earned during exposure to Mr Brown during the latter's decade as Chancellor and Mr Kingman's stint as his press officer, among other postings. Mr Kingman was placed in charge of the Treasury team dealing with Northern Rock, and was involved in the recent negotiations with the banks now being part-nationalised, so his new job is a natural, if giddying, progression.
He has had a little exposure to the fringes of the "real world", having been a journalist with the 'Financial Times' and worked in the chief executive's office at BP, but has never been involved in banking or fund management. Able as he is, though, the obvious query is how a figure who has enjoyed such closeness to ministers can fulfil the requirement that the Government's relationship with UKFI be truly "arm's length".