Tyrie’s Treasury committee is only group to emerge from HBOS affair with credit

However belated the report into the bank’s collapse and the new inquiry may be, they remain jobs that were worth doing

The British establishment, it is often said, is capable of decisive and clear-minded action only when it is confronted by a crisis. At other times, it prefers insularity, hates self-analysis and loathes outside criticism.

This character trait was seen clearly during and after the great banking crisis of 2007-09. The disaster itself arrived with the run on Northern Rock in September 2007 but only became truly dangerous in October 2008 when HBOS and then Royal Bank of Scotland were on the brink of failure.

Alistair Darling, the Labour chancellor at the time, opened his memoirs by recalling how Sir Tom McKillop, chairman of RBS, phoned on 11 October to say his bank would collapse within hours. “We had to make some enormous decisions,” wrote Darling. “Had we got them wrong, which could easily have happened, the results would have been catastrophic.”

Happily, the financial establishment rose to the occasion. HBOS and RBS were bailed out, albeit at a phenomenal cost to taxpayers of £50bn, a broader support package for the UK banking sector was assembled, and by the spring of 2009 a sense of relative calm was restored. Deep recession followed, but life could have been worse: cash machines could have stopped issuing banknotes in October 2008. It was a close-run thing.

After such a calamity, you would have assumed the authorities would want to know every detail of what went wrong, and let the electorate know. Not a bit of it. The instinct for self-protection reasserted itself immediately, which is one reason why the official report on the failure of HBOS was published only last week.

The only body to kick against the system has been the Treasury select committee. Andrew Tyrie, its chairman in the last parliament and this, was entitled to blow a self-congratulatory trumpet after the HBOS report finally appeared. “The Treasury committee has been instrumental in ensuring that the public finally gets the explanation it deserves about the twin failures of RBS and HBOS,” he said. “It was persistent pressure from the committee that ensured these failures weren’t swept under the carpet.”

Absolutely. Indeed, Tyrie reminded us that the now-defunct Financial Services Authority’s first attempt at explaining RBS had been a 298-word press release concluding that no further action was necessary. The ensuing uproar ensured that a full 450-page report followed in 2011.

In the case of HBOS, the struggle has been harder. Tyrie and co appointed their own special advisers to oversee the report – to guard against the obvious danger when a regulator, to a degree, is asked to mark its own homework. Those advisers also demanded that the FSA’s original enforcement investigation – the one that singled out Peter Cummings, HBOS’s former head of corporate lending, for a £500,000 fine and a ban – be reviewed.

The latter demand led to last week’s important finding that the original FSA investigation was essentially worthless. Andrew Green QC called it “materially flawed”. Andy Hornby, HBOS’s former chief executive, was not investigated even though the FSA itself had thought there were grounds for doing so. Records of FSA meetings weren’t kept. Green found it impossible to establish which FSA officials had taken what decisions and on what evidence.

In short, the regulator’s response in 2009-10 was a shambles. A fresh investigation will now happen and the net will be cast more widely among HBOS’s top brass, including chairman Lord Stevenson and former chief executives James Crosby and Hornby.

Some argue that the passage of time makes the HBOS report, and the new investigation, irrelevant. Rubbish. The delay has been a disgrace but a failure to examine the evidence independently would have been much worse. Cummings’s bosses would have escaped proper scrutiny and the FSA’s shoddy investigation would have been kept from public view. A competent report in 2010 would have been better; that goes without saying. But transparency remains a good disinfectant, even when it is applied belatedly. Well played, Tyrie and co.

Twitter must turn profit into reality

Jack Dorsey, a key figure in the US tech industry as chief executive of both Twitter and Square, is leading a stampede of unicorns. The “unicorns” are startup tech companies with putative valuations of more than $1bn, so-called because they are so rare. Now Dorsey finds himself running two of them, as listed businesses. And he had better not fail because there is a veritable herd, also hoping for successful flotations, gathering behind him.

After slashing its expected float price, shares in Dorsey’s Square – a system that allows small businesses to take credit card payments via a reader plugged into a smartphone or tablet – got off to a good start at their New York Stock Exchange debut last week.

So, job done for Dorsey? Not at all. He has to pilot Square, which is still losing money, towards break-even. Using a float to raise money for a lossmaking business to gain scale and profit is a well-worn tactic; just look at Amazon. But Dorsey is trying to do it with two companies at once. His bigger problem is Twitter, where user growth has stalled amid hefty losses – $208m in the past 12 months, on revenue just under $2bn.

A recent round of firings in the engineering team has not instilled confidence. Wall Street is even gloomier: Twitter stock has slumped from its market debut of $40.50 two years ago to about $25. That performance is dangerous for the tech sector as a whole, because investors will blanch eventually if the most exalted brands are shown to be failed bets. Today there are 82 $1bn pre-IPO startups in the US and a total of 125 worldwide, according to analysis by the Wall Street Journal.

If Dorsey can’t turn Twitter around, it could crash. It has $1.9bn in cash, after debt, but that could begin to be burned away. Google and Facebook are pushing it aside in the online advertising stakes, and with investors still nervy about a tech crash, Dorsey runs the risk of being the man who soured the market for tech IPOs.

Is Dorsey up to it? It’s a tall order. Beware the unicorns’ horns.

Network Rail shambles will be shunted into sidings

Few might look to the austere George Osborne seeking comfort or protection. But the assembled miscreants of the British railway investment fiasco may just find a safe spot in his shadow this week. Two reviews commissioned into quite how Network Rail’s £38.3bn programme of works went so swiftly and staggeringly wrong are expected to be slipped out around the autumn statement. The Hendy review may shelve yet more promised improvements for the creaking railways. And the Bowe report should point fingers at the circle of shame comprising Network Rail, the Department for Transport and the Office of Rail and Road – the watchdog that didn’t bark, and the easiest target to kick.

Ministers, of course, also promised railway goodies that no one could deliver, right up to the election. But the tax credit row means the chancellor will have even bigger pre-election mis-speakings to deal with – and rail’s bunglers will thank George for that.

The GuardianTramp

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