Sir Cover-Up under fire over his emails on Libor scandal
Project Fear undermined trust in Whitehall, say MPs
BRITAIN’S top civil servant was last night facing questions over a stream of emails about Libor he sent to a top Bank of England official at the height of the financial crisis.
In the messages, Sir Jeremy Heywood repeatedly questioned Bank official Sir Paul Tucker about why Libor interest rates were still so high despite efforts to prop up the banks.
He singled out Barclays, arguing there had been a ‘lot of speculation in the market over what they are up to’.
Cabinet Secretary Sir Jeremy, who was Downing Street’s chief of staff at the time, did not instruct Sir Paul to lean on banks to manipulate Libor rates – the rate at which banks lend to each other. But he did appear to lobby for action to push rates downwards, saying: ‘I am an advocate of speeding it up.’
The emails were sent just three days before Sir Paul was accused of instructing Barclays’ disgraced former boss Bob Diamond to lower Libor interest rates – an allegation which both have categorically denied.
Last night Lib Dem leader Tim Farron said the emails showed the Libor scandal ‘reached the very heart of Downing Street’ and should be reviewed as part of a fresh investigation.
The emails were first published by John Mann, a Labour MP on the Treasury committee, in July 2012 – shortly after Barclays became the first bank to be fined for rigging Libor. But the emails came under fresh scrutiny yesterday after the BBC’s Panorama made new claims on Monday about the alleged involvement of senior officials in the row.
It revealed a phone call from Barclays senior manager Mark Dearlove to Libor submitter Peter Johnson in which he appeared to instruct Mr Johnson to lower his rates, saying that Barclays has come under some ‘very serious pressure from the UK government ... about pushing our Libors lower’. This raised questions about the role of allies of ex prime minister Gordon Brown.
In his emails to Sir Paul between October 13 and October 26, 2008, Sir Jeremy expressed alarm that – despite efforts by the Treasury and the Bank to shore up the banking system – Libor rates remained stubbornly high.
He also raised concerns about Barclays submitting high Libor rates. In one, he said: ‘Sterling 3m [three month] Libor is high because Barclays are bidding it. They are bidding 2bps (0.02pc) ABOVE Libor. This has been going on for three weeks ... A lot of speculation in the market over what they are up to.’ A few
days later Sir Jeremy suggests Barclays is submitting high rates because it would be cheaper to borrow money at that level than pay for emergency loans under the government’s Credit Guarantee Scheme (CGS). He then suggests the fee for accessing CGS funds could be reduced. ‘Libor’s decline is in train but it will be gradual,’ he said. ‘I am an advocate for speeding it up.’ Yesterday Mr Farron said: ‘It’s clear that Sir Jeremy should be questioned about the emails as part of a full investigation.
‘What did he do ... did the government connive in any way in this rate fixing scandal?’
The Cabinet Office said: ‘It is a matter of public record that the Government ... followed what was happening to market interest rates during the financial crisis and was keen to see the cost of lending fall after the Bank of England cut interest rates.
almost ‘These five emails, years first ago, made reflect public the Government’s position. There is nothing in these documents suggesting or relating in any way to the alleged manipulation of Libor by banks. Those allegations have been investigated by the Serious Fraud Office who have already made clear that the Cabinet Office provided access to all relevant documents.’
‘Reached heart of Downing Street’
DAVID Cameron and George Osborne damaged the civil service’s reputation for impartiality by dragging officials into the Brexit referendum campaign, MPs have said.
A scathing report has criticised their ‘inappropriate’ and ‘counterproductive’ decision to spend £9.3million of taxpayers’ money on a leaflet sent to all households setting out the arguments for Remain.
The Commons public administration and constitutional affairs committee also said the civil service under Cabinet Secretary Sir Jeremy Heywood had failed to prepare for the possibility of Brexit.
It accused ministers – including the then chancellor – of ‘misrepresenting’ a series of reports drawn up by the Treasury warning about Brexit.
In a report on what lessons should be learned from the EU referendum, it said the Remain campaign, which was
‘Very obviously partisan’
dubbed ‘ Project Fear’, had unfairly presented the Treasury’s analysis.
The committee gave the example of a report on the short-term impacts of Brexit, which was published just a month before the June 23 vote on the front page of the Treasury website with the banner headline: ‘UK economy would fall into recession if Britain leaves the EU.’
‘ This both misrepresented the analysis and was very obviously partisan in the context of the campaign,’ the MPs said.
They added: ‘ The Government was legally obliged to publish reports on aspects of the UK’s membership of the EU.
‘However, the presentation of these reports, particularly those from the Treasury, and the decision to spend £9.3million on sending a leaflet, advocating a Remain vote, to all UK households, were inappropriate and counterproductive for the Government.
‘These incidents strengthen the case for the purdah provisions of section to be extended to the full length of a referendum campaign.’
The committee was also highly critical of the way David Cameron held the referendum to ‘call the bluff’ of his critics and to ‘close down unwelcome debate’ and then resigned when he lost.
It said that in future referenda, the prime minister of the day should be prepared to carry on in office and to implement the result, whatever the outcome.
MPs also said the civil service under Sir Jeremy had failed to prepare for the possibility of Brexit.
They said: ‘In 1975, Whitehall undertook contingency planning for a possible vote in favour of withdrawal from the European Communities and there was no adequate reason for a refusal to prepare for either eventuality in 2016. Civil servants should never have been asked to operate in a climate where contingency planning was formally proscribed by the Government.’
The MPs added: ‘There was no proper planning for a Leave vote so the EU referendum opened up much new controversy and left the prime minister’s credibility destroyed.
‘It should be reasonable to presume that the sitting prime minister and his/ her administration will continue in office and take responsibility for the referendum result in either eventuality.’
Tory MP Bernard Jenkin, chairman of the committee, said: ‘The use of the machinery of government during referendums has a significant effect on public trust and confidence.
‘Referendums, therefore, need to be designed in such a way as to provide the utmost clarity for parliamentarians, campaigners and, above all, the electorate.
‘It is of the highest importance that the referendum process is seen to be fair, by both sides, and that the result is agreed to, even if not with, by both sides.’
An acrimonious Brexit could cause the European Union to lose its top credit rating, financiers have warned.
The EU claims Britain owes 60billion euros and has demanded it pay up as part of the divorce negotiations.
But Standard & Poor said the demand was unlikely to be legally enforceable, and that the EU’s ‘double A’ rating could then suffer if the UK didn’t stump up the money.
CONFIRMING everything this paper has warned since last summer, an all-party group of MPs finds David Cameron and George Osborne behaved deeply improperly during the referendum campaign, blackening the Civil Service’s precious reputation for impartiality by dragooning officials into Project Fear.
In a blistering report, the Public Administration and Constitutional Affairs Committee condemns their ‘inappropriate and counterproductive’ decision to spend £9.3million of public money on a propaganda leaflet for Remain, while damning them for distorting Treasury analyses.
It further castigates Cabinet Secretary Sir Jeremy Heywood for failing to make any contingency plans for Brexit. (‘Sir Cover-Up’ was also implicated yesterday in the Libor rate-rigging scandal. Is there any poisonous pie in which he hasn’t had a finger?)
It is impossible to exaggerate the importance to good and honest government of an independent, neutral civil service. Tony Blair started the rot by politicising Whitehall. Theresa May must act with all haste to repair the damage.