Rebekah Brooks will appear before MPs

News International chief will be questioned next Tuesday. Summons have been issued for Rupert and Ja

Rebekah Brooks, the chief executive of News International, has agreed to give evidence on Tuesday to the Commons culture, media and sport committee.

However, Rupert Murdoch and his son James declined to attend the hearing and will be personally served with summons. The younger Murdoch offered to appear on 10 August instead, while the older said that he would not attend the select committee, but would be questioned at the judge-led inquiry. It is unclear whether parliament can compel the men to attend, as they are US citizens.

In a statement which makes clear the extent of their displeasure with Murdoch, the committee said:

The Committee has made clear its view that all three should appear to account for the behaviour of News International and for previous statements made to the Committee in Parliament, now acknowledged to be false.

Accordingly, the Committee has this morning decided to summon Rupert Murdoch and James Murdoch to appear before the Select Committee in Parliament at 2.30pm on Tuesday 19 July 2011.

In her response, Brooks said that she will be unable to discuss certain matters "in detail" because of the on-going police investigation.

As you are well aware, the Metropolitan police investigation into illegal voicemail interception continues and we are fully cooperating with that. Aspects of the work to which your committee may wish to refer are likely to be relevant to that investigation. Indeed, the police have already asked us specifically to provide information about those matters.

I understand that various select committees have approached the police over time in relation to this and other cases. The police's position has been to co-operate where this did not directly impact on the investigation in question. In those cases where it did potentially impact, the police have historically declined to comment at that stage. Our understanding is that this approach has not been challenged. Given that we are in the midst of an investigation, and we do not want to prejudice it, I hope you will understand why we feel it would not be appropriate to respond to such questions at present in order to be consistent with [the] police's approach, and that as a result this may prevent me from discussing these matters in detail.

The news comes after Neil Wallis, a former News of the World editor, was arrested by police this morning in relation to phone-hacking. Wallis, 60, was executive editor at the newspaper from 2007-09, and was previously deputy editor of the Sun.

 

UPDATE: Rupert and James Murdoch have both agreed to attend the hearing on Tuesday.

 

Samira Shackle is a freelance journalist, who tweets @samirashackle. She was formerly a staff writer for the New Statesman.

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Let's turn RBS into a bank for the public interest

A tarnished symbol of global finance could be remade as a network of local banks. 

The Royal Bank of Scotland has now been losing money for nine consecutive years. Today’s announcement of a further £7bn yearly loss at the publicly-owned bank is just the latest evidence that RBS is essentially unsellable. The difference this time is that the Government seems finally to have accepted that fact.

Up until now, the government had been reluctant to intervene in the running of the business, instead insisting that it will be sold back to the private sector when the time is right. But these losses come just a week after the government announced that it is abandoning plans to sell Williams & Glynn – an RBS subsidiary which has over 300 branches and £22bn of customer deposits.

After a series of expensive delays and a lack of buyer interest, the government now plans to retain Williams & Glynn within the RBS group and instead attempt to boost competition in the business lending market by granting smaller "challenger banks" access to RBS’s branch infrastructure. It also plans to provide funding to encourage small businesses to switch their accounts away from RBS.

As a major public asset, RBS should be used to help achieve wider objectives. Improving how the banking sector serves small businesses should be the top priority, and it is good to see the government start to move in this direction. But to make the most of RBS, they should be going much further.

The public stake in RBS gives us a unique opportunity to create new banking institutions that will genuinely put the interests of the UK’s small businesses first. The New Economics Foundation has proposed turning RBS into a network of local banks with a public interest mandate to serve their local area, lend to small businesses and provide universal access to banking services. If the government is serious about rebalancing the economy and meeting the needs of those who feel left behind, this is the path they should take with RBS.

Small and medium sized enterprises are the lifeblood of the UK economy, and they depend on banking services to fund investment and provide a safe place to store money. For centuries a healthy relationship between businesses and banks has been a cornerstone of UK prosperity.

However, in recent decades this relationship has broken down. Small businesses have repeatedly fallen victim to exploitative practice by the big banks, including the the mis-selling of loans and instances of deliberate asset stripping. Affected business owners have not only lost their livelihoods due to the stress of their treatment at the hands of these banks, but have also experienced family break-ups and deteriorating physical and mental health. Others have been made homeless or bankrupt.

Meanwhile, many businesses struggle to get access to the finance they need to grow and expand. Small firms have always had trouble accessing finance, but in recent decades this problem has intensified as the UK banking sector has come to be dominated by a handful of large, universal, shareholder-owned banks.

Without a focus on specific geographical areas or social objectives, these banks choose to lend to the most profitable activities, and lending to local businesses tends to be less profitable than other activities such as mortgage lending and lending to other financial institutions.

The result is that since the mid-1980s the share of lending going to non-financial businesses has been falling rapidly. Today, lending to small and medium sized businesses accounts for just 4 per cent of bank lending.

Of the relatively small amount of business lending that does occur in the UK, most is heavily concentrated in London and surrounding areas. The UK’s homogenous and highly concentrated banking sector is therefore hampering economic development, starving communities of investment and making regional imbalances worse.

The government’s plans to encourage business customers to switch away from RBS to another bank will not do much to solve this problem. With the market dominated by a small number of large shareholder-owned banks who all behave in similar ways (and who have been hit by repeated scandals), businesses do not have any real choice.

If the government were to go further and turn RBS into a network of local banks, it would be a vital first step in regenerating disenfranchised communities, rebalancing the UK’s economy and staving off any economic downturn that may be on the horizon. Evidence shows that geographically limited stakeholder banks direct a much greater proportion of their capital towards lending in the real economy. By only investing in their local area, these banks help create and retain wealth regionally rather than making existing geographic imbalances worce.

Big, deep challenges require big, deep solutions. It’s time for the government to make banking work for small businesses once again.

Laurie Macfarlane is an economist at the New Economics Foundation