Eve of the battle of the banks

By Ian Dunt

The battle for the future of Britain's banking industry is set to kick off tomorrow following the publication of the Vickers report.

With Lib Dem and Conservative coalition partners already issuing blunt correctives to each other over the 50p tax rate, the report could cause more tension in the coalition as both parties approach their annual conference.

Meanwhile, Ed Miliband waded into the debate with a call for irresponsible bankers to be "struck off" like doctors or lawyers.

"Bankers say the era of remorse is over, but that's not good enough. I just don't think anything has really changed. Nobody has paid a price for what happened – that is what really angers people," the Labour leader said.

"Frankly, I think the industry should take some responsibility and strike people off who do the wrong thing."

Tomorrow's long-awaited Independent Commission on Banking's (ICB) report on how to prevent another financial crisis will call for banks' retail and investment functions to be separated – a move bitterly opposed by the sector, which has suggested that such a move would prevent it lending.

Vince Cable shrugged off the campaign, saying simply that "reform is coming".

Writing in the Mail on Sunday, the business secretary argued: "The recession is not an excuse for postponing banking reform. Indeed our economic recovery depends on it."

The ICB will offer its own cost/benefit assessment of its plans tomorrow, but some analysts already claim its reforms could cost the industry £10 billion.

Campaigners say that is comparatively little compared to the cost of the last crisis to the taxpayer.

The banking sector also suggests that senior figures could flee London if the UK tries to separate functions without any other countries following its lead.

Mr Cable suggested that banks are unlikely to do so, given that most other major financial centres, including "Hong Kong, Singapore, Beijing, even the US" would refuse to make their taxpayers liable for such gigantic operations.

Speaking on SKy News today, chief secretary to the Treasury Danny Alexander insisted that Mr Cable was not prepared to resign if the reforms were not implemented in full, branding the idea "total nonsense".

He also attacked those still calling for a reduction in the top rate of income tax, saying they were living in "cloud cuckoo land". 

George Osborne is expected to endorse the plans, although backbench Conservative opposition is likely to be extremely vocal.

Weekend responses from the Treasury suggested he chancellor had read John Vickers' report and was happy to support it.