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.