Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)
I also commend the hon. Member for Norwich South (Clive Lewis) for bringing this important debate here today. He started by talking about people’s incredulity that any bank could act in this way, and we have heard from right hon. and hon. Members from all parts of this House about how these things have impacted on people. As the hon. Member for Edinburgh West (Christine Jardine) said, families have suffered. That is the background to this; it is not just businesses that have suffered. People have lost businesses, lost incomes and lost homes. We have seen the break-up of marriages and mental health impacts. Grimly, as we heard from the Treasury Committee memo, the view was that customers could just hang themselves, and there is testimony of people attempting suicide. It is shocking stuff.
Some of those affected feel responsible for losing their family businesses and feel deep shame at that happening. These things have devastated people, many of whom, as we have heard today, had good businesses that were ready to contribute to the economy and to aid productivity. Earlier, the hon. Member for West Bromwich West (Mr Bailey) described GRG as death row, and it was for some.
When people tried to fight these injustices, they would face enormous financial costs. I understand that it cost £10,000 just to raise an action, which was beyond the capability of many people in those circumstances. Businesses with as few as 10 employees have been affected. This issue has had an enormously wide reach. If people could look to take forward legal action, they would find that the banks had sewn up all the solicitors in the area, making it impossible to get the correct level of representation.
As we have heard from Members on both sides of the Chamber—and the SNP feels just as strongly about this—we need to see justice for people. Those on the Government Front Bench should have heard loud and clear today the strength of feeling from all parts of this Chamber and beyond. People will be shocked and disappointed that these things have been allowed to happen. It is unacceptable that banks have devastated firms, spreading misery by making people bankrupt and homeless.
The FCA’s final summary of the Promontory report exposes a set of serious failures by RBS to protect companies it should have been serving. As the evidence mounts, so too does the responsibility to act.
Drew Hendry
I am glad to see the Minister nodding and that he seems to be willing to take this forward. I hope that substantial action is taken.
We in the SNP believe that the current system of dealings with the regulator and the litigation process on mis-selling is inadequate. It must be a priority for the Government to ensure that every victim of mis-selling is given fair and equal access, so that they can see justice done. As the hon. Member for Stirling (Stephen Kerr) mentioned, an independent body is required. We call on the Minister to commit to and create a permanent commercial financial dispute resolution platform to serve the victims of mis-selling. He must pick up where the FCA has failed and produce a comprehensive review of banking culture to avoid a repeat of these things.
In the aftermath of the financial crisis, when all banks were required to rebuild their capital, it was alleged that the main focus of the Global Restructuring Group was to liquidate, rather than support, businesses through further lending. The main charge against GRG is that it prioritised the realisation of assets over other, more business customer-supportive actions. Recently, we have also heard accusations of the mis-selling of rate swaps, and GRG is not alone in drawing criticism. As my hon. Friend the Member for Dundee East (Stewart Hosie) mentioned, SMEs have complained about tailored business loans sold by the Clydesdale Bank.
The Tomlinson report was damning of GRG. Much of the evidence pointed to businesses that were otherwise perfectly viable in the medium to long term, as we have heard in much of the testimony today, being moved into the RBS turnaround division—the GRG—and being trapped there, with no escape. Businesses were sunk by the bank, with the bank taking out all it could, beyond what was reasonable, and to such an extent that it directly contributed to the businesses’ financial deterioration and, in some cases, collapse. Technical breaches were used as excuses. There was evidence in some instances of covenants being used to put businesses in default and to transfer them out of local management.
Time does not allow me to go further into some of the details of the inequities that have been visited on people who have suffered at the hands of GRG and as a result of the unfair business banking practices we have heard about today. The Government must ensure that there is a firm mechanism that is fair for people, so that they can get justice in this case. I look forward to hearing what the Minister will tell us at the end of this debate.
The Economic Secretary to the Treasury (John Glen)
It is a privilege to stand at the Dispatch Box in my new role as Economic Secretary to the Treasury. I think we all feel the privilege of being Members of this House, but listening to today’s debate I also feel a great responsibility—to respond fully to the many serious examples that have been given of how the banking sector, and this group in particular, has failed so many of our constituents. I want to make it clear that in doing this job and in addressing the issues that have been raised today, I will stop at nothing in making improvements.
I begin by thanking the hon. Member for Norwich South (Clive Lewis) and the right hon. Member for North Norfolk (Norman Lamb) for initiating the debate, and the Backbench Business Committee for granting it. I also thank my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) for his work in the all-party parliamentary group on fair business banking.
What we all care about—it has been made very clear in today’s debate—is that businesses form the lifeblood of our economy and they need a reliable mechanism to deal with disputes with banks. I am vividly aware of that, because I grew up not in a bank but in a small business. I know the risks, the anxieties, the sleepless nights, the pressures on family life and the lack of assurance over salary, so I understand that the experiences of small businesses and their relationships with banks really matter. The Government have always maintained a commitment to support and engage with businesses both small and large, and that commitment will continue unfettered.
The Government recognise that access to finance, which is the crux of the debate, is necessary for businesses to grow organically. We have a strong record of supporting businesses large and small, for instance, through measures in the Budget. The competitive tax regime—corporation tax was cut from 28% to 19%, the lowest rate in the G20—is a significant part of that, but what is really important is that businesses have access to money at a reasonable cost, with reasonable assurances on the terms of securing those funds.
A fantastic range of evidence has been presented to us today. We heard about Mr Smith’s engineering business in Bridgend and Mr Topping’s business in Hazel Grove. We heard vivid personal testimony from my hon. Friend the Member for Dumfries and Galloway (Mr Jack). My hon. Friend the Member for Thirsk and Malton gave the striking example of a monthly interest rate payment that rose, almost inexplicably, from £6,000 to £17,000 a month, leading to catastrophic losses. The hon. Member for Rutherglen and Hamilton West (Ged Killen) gave examples that went back eight years. There were further examples from the hon. Member for City of Chester (Christian Matheson) and my hon. Friend the Member for Stirling (Stephen Kerr), the hon. Member for Glasgow North (Patrick Grady), who spoke about Mr Mitchell, the hon. Member for Poplar and Limehouse (Jim Fitzpatrick), and the hon. Member for Ogmore (Chris Elmore), who mentioned Mr Richards. In those cases, tortuous processes were necessary to secure redress or a meaningful dialogue leading to an outcome. My hon. Friend the Member for Eastleigh (Mims Davies) has told me about the Sayers family, who have also suffered. We heard further powerful testimony from the hon. Member for Strangford (Jim Shannon), who used uncharacteristically strong language—legitimately so.
I too have been contacted by constituents and I have been saddened to hear the stories of many former RBS customers. The Financial Conduct Authority is reviewing the situation; it has said that it is considering the matters arising from the report it commissioned and considering whether there is any basis for further action within its powers. It would not be appropriate for me to comment further at this precise time, but I will say that although, on day seven of my job, I have not yet met the head of the FCA, this will be the first topic that I will be raising with him.
Bob Stewart
First, I congratulate the Prime Minister on having the extremely good sense to appoint such a wonderful new Minister—a great friend, and someone who is really going to sort this problem out. May I ask on behalf of everyone present for the Government to be onside to ensure that the people who have lost so much are recompensed properly? We are not talking just about the future; we are taking about dealing with the past.
John Glen
I thank my hon. Friend for his kind words. Of course we need to reach a stage where we have some answers. We need to know what went wrong, and we need to secure an outcome that is acceptable to our constituents.
It is important to recognise the fundamental need for financial providers to act in accordance with the rules of the FCA and the spirit of its principles. When they do not act in accordance with those principles, we need to have confidence in the mechanisms that exist to resolve disputes.
Norman Lamb
The Minister has not yet mentioned the role of whistleblowers. Does he agree that they are vital to maintaining the integrity of the financial system, that they need proper protection—an office of the whistleblower—and that they should be rewarded for being brave enough to reveal wrongdoing?
John Glen
I listened very carefully to the right hon. Gentleman’s remarks and he is absolutely right. We need a change to the culture to enable wrongdoing to be exposed and dealt with, and I will look very carefully at this matter and the principles in his suggestions.
I am very aware of the allegations and the powerful testimony made against RB. I have taken on board the discussions we have had today, and later I will refer to some of the other substantive points raised across the House, but I want to be clear with Members: I saw the front page of City A.M. today, whose headline is “Go Hang”, and I do not condone the language in the GRG letter that RBS itself chose to release yesterday. I assure the House that the Government take these issues and any allegations of malpractice very seriously.
Nicky Morgan
Just for the record, will the Minister be very clear that RBS did not choose to release the letter; it was asked to do so, and like most other information, it has had to be dragged out of it by successive letters and attempts by Members of this House?
John Glen
I am grateful to my right hon. Friend for her intervention and acknowledge the work she is doing on the Select Committee, and it would be much more helpful to this process if RBS were more co-operative with the Committee and the legitimate process of scrutiny that she and her Committee members are seeking to undertake.
Not only do the Government take these matters seriously, but the FCA is well aware of them and continues to address this issue. As I said, it will be the first thing I raise when I meet Andrew Bailey very shortly. In October, the FCA released a detailed summary of its skilled persons report, which examined RBS’s treatment of SMEs in financial difficulty. The FCA is now investigating the matters arising from the report.
I am aware of the frustration over the time the process is taking. The outcome of this investigation and the action the FCA proposes to take is critical to small businesses across this country, but I remind Members that the FCA is an independent body. That is vital to its role, credibility, authority and value to consumers, and they would be undermined if it were possible for the Government to intervene in day-to-day decision making. We can set the law, but we then must be bound by it and respect the judgment and independence of the FCA.
It would not be productive for me to address from the Dispatch Box every specific case and allegation, and I want now to turn to the wider issue of SMEs and how disputes are resolved between them and their banks.
Ian Paisley (North Antrim) (DUP)
The Minister is making a thoughtful speech. Can he assure the House that the FCA will not be a toothless bulldog and that it will actually have some bite?
John Glen
I think the FCA understands, in the light of today’s debate, where the pressure is leading to and what action we will need to take if its response is not effective.
The key issue for the debate today, which I discussed with all-party group members yesterday afternoon, is that we must remember that there are already multiple avenues for resolution. I understand the frustrations Members have expressed about their effectiveness, but our smallest businesses have redress via the Financial Ombudsman Service for quick and informal resolution of disputes, the FCA has the power to take action to address issues that require resolution, and there is also the usual legal recourse available for businesses.
John Glen
No, I am going to make some more progress, but I might give way later.
The motion calls for an independent inquiry into the treatment of SMEs by financial institutions, reflecting the frustration addressed by Members across the House today in respect of the experience of their constituents. A number of contributions have also focused on the proposed new tribunal system to deal with financial disputes between banks and SMEs.
As the industry, the FCA and the Treasury progress discussions on this issue, all avenues will be considered. The FCA is undertaking a review, and it launched a discussion paper on SMEs in November 2015. I feel that that is a very long time ago, so I am reassured to be able to report to the House that it will be making a statement on Monday 22 January on its 2015 SME paper and on its consultation on widening SME eligibility for the Financial Ombudsman Service. I shall look carefully at what it comes up with. The FCA has promised to consult on widening the remit of the FOS for small businesses—the detail of that will be known—and to take a view on SMEs’ access to redress more broadly. I hope and believe that we will see significant steps forward.
I have thanked the hon. Member for Norwich South and the right hon. Member for North Norfolk for raising this issue. I also want to mention the hon. Member for Sefton Central (Bill Esterson), who mentioned Lloyds’ support for SMEs in the Carillion supply chain. I am pleased to report that it has been announced since we have been in the Chamber that Lloyds is taking the required steps to help those facing short-term problems as a result of the Carillion group going into liquidation by providing £50 million to support the SMEs affected. It is essential that the small businesses exposed to the Carillion insolvency should be given the support they need by their lenders. I was with the Business Secretary yesterday when we met representatives of the banks to explain that to them. It is in the UK’s interest that our businesses continue to prosper and thrive. That will mean allowing them ready access to finance at a serviceable cost. This is about getting the balance right, and that is what the Government are helping them to do.
I thank all hon. Members who have contributed to the debate, and I will try succinctly to summarise the Government’s position. We certainly note the many intensely painful experiences and issues raised in the motion and by hon. Members in the debate. On GRG, it is right that we should wait for the conclusion of the FCA’s investigation of the matters arising from its skilled persons report before determining what further action needs to be taken. On the broader issue of dispute resolution, I remind the House of the existing avenues that are open to businesses, but the FCA is undertaking work to look at the relationship between SMEs and financial services providers. It is also right that we await the next steps in that area. However, I assure the House that this Government will continue to support businesses large and small when addressing these challenges.
Let my final words be these: small businesses and their continued success are critical to the continued growth and improvements in productivity of our economy, and SMEs’ improved confidence in the mechanisms to achieve redress from banks is crucial. In my role in this Government, I will be doing everything I can to ensure that the injustices that have been discussed today are addressed.
Clive Lewis
I thank the Minister for his response, and I thank all the hon. Friends and hon. Members across the House who have taken part in this passionate debate today, whether they are self-confessed capitalists, such as the hon. Member for Hazel Grove (Mr Wragg), seeking to challenge crony capitalism or those such as my right hon. Friend the Member for Tynemouth (Mr Campbell) who are perhaps seeking more traditional socialist transitional demands. There has been almost unanimous support across the House for the motion. We want justice for our constituents and a banking system fit for the 21st century. In effect, we seek nothing less than the renewal of the broken social contract between banks and the public. Unfortunately, the language used in today’s debate has painted a picture of a social contract that lies in tatters. We have heard references to a web of deceit, a dash for cash, systemic abuse, parasitic relationships and asset stripping. Three words that we have heard repeatedly today are “enough is enough”.
I want to make a couple of comments about the Minister’s input. He said in his opening remarks that he and his Government would stop at nothing and spoke of the need for a fundamental culture change, but he then offered little except more warm words. I understand that he has been in his job for just seven days, but this situation has been going on for some time now and the issues are out there, a point which has been made clearly by Members across the House. The Government still seem to favour a solution involving the Financial Ombudsman Service, but even with some extension of its role, it is suitable only for low-level disputes. It has no powers of disclosure. It cannot enforce decisions. It has no teeth. It cannot adjudicate. It cannot deal with complex cases.
John Glen
I fully recognise the frustration that the hon. Gentleman is expressing, but I also said that the Government rule nothing out. We will see what the proposals are and respond accordingly. I think that that is a reasonable position given the relationship between the Government and the FCA.
Clive Lewis
I acknowledge the Minister’s remarks, but time is not on the side of many people, so many of whom have been affected for so many years. I understand the Government’s reluctance to say anything today, but they must come to a conclusion quickly. From listening to Members from across the House, we understand that if we rebuild justice and confidence in our banking system, that would be good for business and good for banks and would maximise our country’s economic potential. I will conclude with the words of the late, great Errol Brown of Hot Chocolate fame—one of my favourites—because if we get this right,
“Everyone’s a winner, baby”.
Question put and agreed to.
Resolved,
That this House is deeply concerned by the treatment of small and medium-sized enterprises (SMEs) by the Global Restructuring Group of the Royal Bank of Scotland; notes that there are wider allegations of malpractice in financial services and related industries; believes that this indicates a systemic failure to effectively protect businesses, which has resulted in financial scandals costing tens of billions of pounds; further believes that a solution requires the collective and collaborative effort of regulators, Parliament and Government; and calls for an independent inquiry into the treatment of SMEs by financial institutions and the protections afforded to them, and the rapid establishment of a tribunal system to deal effectively with financial disputes involving SMEs.