Who judges?

UPDATE 2: Sir George Young has now confirmed that Backbench Business Committee debates scheduled for Thursday will be moved to make way for an afternoon's debate on the two alternative visions of how the inquiry should work. BBBC chair Natascha Engel isn't happy, and neither are other MPs who want to debate the issues originally set down. But the government clearly wants this issue decided and believes that a head-on Commons clash is the way to resolve the issue.

UPDATE: The government is to offer MPs a choice of the kind of banking inquiry they want, in two votes in the Commons this Thursday. The first option will be on a Leveson-style inquiry and the second will be on a parliamentary inquiry. The Leader of the House, Sir George Young, is expected to set out more details in the Commons in the next half hour. Further updates to follow…

Parliament or a judge? Who should investigate malpractice in the City?

George Osborne wants a special joint committee of MPs and peers under the chair of the Treasury Committee, Andrew Tyrie, to conduct a brisk investigation and put forward new safeguards which can be put into law via the Financial Services Bill now before Parliament, or the forthcoming Banking Bill.

Labour wants a Leveson-style inquiry into banking, which would undoubtedly range wider and take longer.

Bob Diamond will be appearing before the Treasury Committee

It's unusual for a procedural issue of this kind to become as charged as this one has - Mr Tyrie has let it be known that he would not wish to chair a committee that did not command all-party support, but the government seems keen to press ahead in the teeth of Labour opposition. The first test will come later today in the House of Lords, where Labour peers have put down a "manuscript amendment", designed to require a judicial, rather than parliamentary inquiry.

The timing of the vote could be important here: if debate is strung out till after dinner, many crossbenchers may head home, reducing the potential vote against the government.

Assuming the government wins the Lords vote, the next move is the government's. The Leader of the Commons, Sir George Young, will have to put down a motion to set up the joint committee, which it could expect to be carried, given the coalition's majority. Labour would probably attempt to amend the motion to require a judicial inquiry - but might also try to re-engineer the joint committee, so that it did not have a government majority.

Normally, select committees reflect the composition of the Commons, which means that the government of the day has a majority on them. This being a hung parliament, the committees are hung too; there may be a notional coalition majority, but the swing vote is the Lib Dem member, as demonstrated on the Culture Committee's phone hacking report, when the finding that Rupert Murdoch was not a fit and proper person to be running a major news organisation was carried when Lib Dem Adrian Sanders sided with Labour.

But Labour says that the government should not have straight majority control (I can't help wondering how this argument would have played with Prime Minister Gordon Brown and Chief Whip Nick Brown, during the last parliament).

If the government gets its way, what happens then? Does Mr Tyrie refuse to chair the committee, because it doesn't command all-party support? If so, does the government nominate an alternative chair - perhaps the former Cabinet Minister Peter Lilley, who chaired the joint committee which scrutinised the Financial Services Bill? And do Labour members take part or boycott a committee they didn't want? In a point of order yesterday, Labour procedure wonk Chris Bryant obtained confirmation that joint committees operate under Lords standing orders, which means that the committee chair will have both a vote in their own right and a casting vote - which could give the government point of view more clout in deciding its conclusions.

This is not an argument about Mr Tyrie, who is regarded as an independent and robust committee chair. It is an argument about who should deliver a verdict on what everyone in Westminster realises is an ultra-toxic issue.

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