The Government and Labour clash over the scale of inquiry into the banking scandal. Labour want a full, independent one.
The new government inquiry will look both into the culture of banking and into the setting of Libor rates
The Chancellor's team says his announcement to the Commons will "shoot Labour's fox."
Labour has called on ministers to impose tax on bank bonuses in the in the wake of the latest scandals to hit the City. The Government was urged to impose the tax in addition to its existing bank levy and use the funds to finance job opportunities to save youngsters from the dole queue.
Shadow Treasury minister Catherine McKinnell said the plan would make the banks "pay their fair share in tax instead of letting them get away with it". Ms McKinnell said:
Barclays, and who knows how many other banks now under investigation, broke the rules to make a profit and put global economic stability at risk.
All of these actions of the banks are totally unacceptable. The banks have been taking without giving back. The Government can take action now to put that right.
The money raised would create 100,000 jobs for young people, she added.
Conservative MPs racheted up the pressure on Labour peers today after Barclays' documents revealed that "senior Whitehall figures" were reportedly involved in a banking scandal.
Tories highlighted the reference in the phone call record between Barclays boss Bob Diamond and the Bank of England's deputy chief Paul Tucker. Backbencher Matt Hancock said:
"It is now shockingly clear that senior figures in the Labour Government were involved in the question of what happened to Libor rates. Labour figures have serious questions to answer."
Lord Ian Blair, the former head of the Metropolitan Police and an independent crossbench peer, said today that evidence given to a judicial inquiry was given on a "completely different basis" to evidence given in court or to a parliamentary inquiry.
It follows a Parliamentary dispute over an inquiry into the bank rate-rigging scandal. Lord Blair said: "What I don't understand is the sense there needs to be any dispute between the two sides of the House.
"Have a criminal inquiry, have Tyrie and have a judge-led inquiry into the ultimate circumstances of the way the banking culture has taken over parts of our society."
Former Chancellor Alistair Darling told Channel 4 News tonight that it would have been "indefensible" for anyone in his Department to call for the manipulation of Libor rates.
Shadow Treasury Minister Lord Eatwell told peers today that while a banking inquiry led by the chairman of the House of Commons Treasury Committee had "a contribution to make" its terms were "too narrowly drawn".
Lord Eatwell said a public inquiry "may lead to some criticism of the policies adopted by previous governments, including governments formed by my party" but called for peers to back it:
They have their particular contribution to make, but the financial services industry is too big, too complex too far-reaching and too important for there not to be a full independent judicial inquiry as is proposed in this amendment.
The rigging of the Libor interest rate is only just a symptom of a much wider cancer in the UK's financial services industry, former City minister Lord Myners said today.
He told peers that since last year he has asked ministers repeatedly about the manipulation of the interest rate but has received "backhanded" responses from the Government. Speaking in the House of Lords, he said:
"It goes well beyond Libor. Libor manipulation - the lying and deceit which we know took place systemically across the banking industry, not limited to Barclays alone - is but a symptom of a wider cancer at the heart of the banking industry.
"That is why we need a judicial review. The term of reference of the Tyrie review are extremely limited, they are ringfenced, they are very precise, they do not ask the questions that should be asked."
Shadow Chancellor Ed Balls has told ITV News that an "open, independent full-scale inquiry" was needed after documents produced by Barclays bank today allegedly showed the Bank of England's association with 'senior' Whitehall figures.
Peers have rejected Labour's plan for a judge-led inquiry into the bank rate-rigging scandal by 251 votes to 197, Government majority 54.
The bonus system in the civil service needs a fundamental overhaul, so that departments which do not meet targets do not get rewards, the Prime Minister told MPs today David Cameron said that he wanted only "genuine excellence" to be rewarded with a bonus.
Addressing the House of Commons liaison committee on the Government's civil service reform programme today, he said: "We have changed the bonus culture in the civil service but I agree that if divisions and departments don't perform, there should not be bonuses.
"I think we need to change the whole system more fundamentally." Mr Cameron said that he was weighing up options in introducing an 'earnback' scheme, but he was not "mad" about the idea.
Shadow Chancellor Ed Balls, who served as Economic Secretary to the Treasury in 2006/7, insisted he knew nothing about senior figures in Whitehall applying pressure over Barclays' high Libor pricing today.
He told BBC News: "I have absolutely no idea, that's why I want, as Ed Miliband does, a full open judicial inquiry at arms-length forensically to ask these questions to see whether anybody knew what was going on.
"Without that I don't think we can have confidence or the public can't have confidence that we are moving forward in sorting out this culture."