Cable prepares to relaunch his career with new war on bankers

Nick Clegg and Vince Cable will demand major reforms of the banks as the Liberal Democrats flex their muscles and adopt a more "arms length" policy from the Conservatives.

After tensions between Liberal Democrat and Tory ministers over the proposed NHS reorganisation and next month's referendum on the voting system, the structure of the banks could be the next battleground between the Coalition Government partners.

Mr Clegg and Mr Cable, the Business Secretary, will press David Cameron to implement in full proposals to restructure the banks to be published on Monday in the interim report of the Independent Commission on Banking chaired by Sir John Vickers, former head of the Office of Fair Trading.

Although the commission may stop short of recommending the full separation of the banks' high street and investment arms, Whitehall officials believe it is likely to propose putting the two functions into different subsidiaries within each bank. The aim of such ring-fencing would be to ensure that taxpayers never have to bail out so-called "casino banking" again.

Such a division could win the support of Mervyn King, Governor of the Bank of England, but Treasury officials are worried that some banks could move abroad if they judge the costs of the restructuring to be excessive. Imposing a costly shake-up on the banks, some Tory ministers believe, could also hinder the Government's efforts to persuade them to lend more to small businesses – dealing another blow to the fragile economic recovery.

Ministers admit that George Osborne, the Chancellor, could face a big dilemma over the report. There have been tensions between them in the past over Mr Cable's determination to rein in the banks.

Senior Liberal Democrats were disappointed that the Chancellor did not take a tougher stance on bank bonuses and say they will not accept any dilution of the Vickers proposals. They say the Government's response must be decided by the full Cabinet and not the Chancellor. But such demands will not please some Tory MPs, who are already accusing the Liberal Democrats of "overplaying their hand" in the run-up to the 5 May elections in English councils, the Scottish Parliament and Welsh Assembly. "They need to remember they have 57 MPs and we have 306," one Tory backbench leader said.

Lord Oakeshott of Seagrove Bay, who resigned as a Liberal Democrat Treasury spokesman after accusing the Government of going soft on bonuses, said yesterday: "Unless we implement Vickers fast and in full, the question will be 'who runs Britain, the Government or the banks?' When you see the banks' power network operating at the heart of Government, you understand why Labour bottled out of radical action to reform our broken banking system, but we must do it."

Lord Oakeshott said that unlike the NHS reorganisation, banking reform would be popular and fair: "We will never get our banks doing their essential job of lending to small business to create jobs, and to homebuyers without a 20 or 30 per cent deposit, until we split off their gambling arms and limit British taxpayers' guarantees."

The commission's final report is not due until September, but Whitehall insiders expect Monday's proposals to be very detailed. They will also include plans to promote greater competition in retail and investment banking.

Ed Miliband said the Government must be "bold" in implementing the commission's report. The Labour leader told the British Chambers of Commerce conference in London that the banks were going back to "business as usual" before the financial crisis.

"We need to restore the primary role of banks as intermediaries between savers and productive investment in the economy, rather than as institutions that derive massive profits from speculation."

Start your day with The Independent, sign up for daily news emails
sportWWE latest including Sting vs Triple H, Brock Lesnar vs Roman Reigns and The Undertaker vs Bray Wyatt
Arts and Entertainment
Louis Theroux: By Reason of Insanity takes him behind the bars again
tvBy Reason of Insanity, TV review
Arts and Entertainment
Cassetteboy's latest video is called Emperor's New Clothes rap
videoThe political parody genius duo strike again with new video
Arts and Entertainment
tvPoldark, TV review
Have you tried new the Independent Digital Edition apps?
ebooksA special investigation by Andy McSmith
  • Get to the point
2015 General Election

Poll of Polls

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

iJobs Job Widget
iJobs General

Recruitment Genius: Junior Web Designer - Client Liaison

£6 per hour: Recruitment Genius: This is an exciting opportunity to join a gro...

Recruitment Genius: Service Delivery Manager

Negotiable: Recruitment Genius: A Service Delivery Manager is required to join...

Recruitment Genius: Massage Therapist / Sports Therapist

£12000 - £24000 per annum: Recruitment Genius: A opportunity has arisen for a ...

Ashdown Group: Practice Accountant - Bournemouth - £38,000

£32000 - £38000 per annum: Ashdown Group: A successful accountancy practice in...

Day In a Page

Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat
Saudi Arabia's airstrikes in Yemen are fuelling the Gulf's fire

Saudi airstrikes are fuelling the Gulf's fire

Arab intervention in Yemen risks entrenching Sunni-Shia divide and handing a victory to Isis, says Patrick Cockburn
Zayn Malik's departure from One Direction shows the perils of fame in the age of social media

The only direction Zayn could go

We wince at the anguish of One Direction's fans, but Malik's departure shows the perils of fame in the age of social media
Young Magician of the Year 2015: Meet the schoolgirl from Newcastle who has her heart set on being the competition's first female winner

Spells like teen spirit

A 16-year-old from Newcastle has set her heart on being the first female to win Young Magician of the Year. Jonathan Owen meets her
Jonathan Anderson: If fashion is a cycle, this young man knows just how to ride it

If fashion is a cycle, this young man knows just how to ride it

British designer Jonathan Anderson is putting his stamp on venerable house Loewe
Number plates scheme could provide a licence to offend in the land of the free

Licence to offend in the land of the free

Cash-strapped states have hit on a way of making money out of drivers that may be in collision with the First Amendment, says Rupert Cornwell
From farm to fork: Meet the Cornish fishermen, vegetable-growers and butchers causing a stir in London's top restaurants

From farm to fork in Cornwall

One man is bringing together Cornwall's most accomplished growers, fishermen and butchers with London's best chefs to put the finest, freshest produce on the plates of some of the country’s best restaurants
Robert Parker interview: The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes

Robert Parker interview

The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes
Don't believe the stereotype - or should you?

Don't believe the stereotype - or should you?

We exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor
How to make your own Easter egg: Willie Harcourt-Cooze shares his chocolate recipes

How to make your own Easter egg

Willie Harcourt-Cooze talks about his love affair with 'cacao' - and creates an Easter egg especially for The Independent on Sunday
Bill Granger recipes: Our chef declares barbecue season open with his twist on a tradtional Easter Sunday lamb lunch

Bill Granger's twist on Easter Sunday lunch

Next weekend, our chef plans to return to his Aussie roots by firing up the barbecue
Joe Marler: 'It's the way I think the game should be played'

Joe Marler: 'It's the way I think the game should be played'

The England prop relives the highs and lows of last Saturday's remarkable afternoon of Six Nations rugby
Cricket World Cup 2015: Has the success of the tournament spelt the end for Test matches?

Cricket World Cup 2015

Has the success of the tournament spelt the end for Test matches?
The Last Word: Justin Gatlin knows the price of everything, the value of nothing

Michael Calvin's Last Word

Justin Gatlin knows the price of everything, the value of nothing