Coalition papers over cracks

THE NEW Liberal Conservative coalition government has launched a huge number of commissions and reviews, kicking uncomfortable party differences into the long grass.

Prime Minister David Cameron and his deputy Nick Clegg yesterday launched six commissions and 28 reviews into virtually every area of government policy, from the Human Rights Act to long-term care for the elderly.

George Osborne announced a commission tasked with exploring the break-up of retail and investment banks, an area that the Liberals and Tories have failed to agree on.

The chancellor wants to introduce some kind of ban on “risky” investment banking activities like proprietary trading. But Lib Dem business secretary Vince Cable backs a more radical full separation of retail and investment backs, similar to the now-defunct Glass-Steagall Act.

The commission, which reports its interim findings in a year, allows the coalition to put off a solution without either party losing face.

Meanwhile, the government said it planned to introduce a banking levy and rein in bonuses as it unveiled its weighty, 36-page coalition agreement.

And it will impose a “social responsibility levy” on the entire financial services sector to fund a free national financial advice service.

Meanwhile, the chancellor refused to say whether or not the FSA would survive a massive overhaul of the tripartite regulatory system, although Treasury sources insist it will continue to exist in some form or other.

If the FSA does survive, it will be much diminished. Its responsibility for fighting white collar crime will be handed to a new agency, while a Bank of England committee will oversee micro-prudential regulation.