Financial Services (Banking Reform) Bill

Cathy Jamieson Excerpts

Monday 11th March 2013 Commons Chamber

[Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)]

We have had a wide-ranging debate and heard some useful, thoughtful and constructive contributions. Everyone has had the opportunity to make all the points they wanted to—except, perhaps, for the Father of the House, who understandably bemoaned the fact that he had only 12 minutes. He might well be disappointed not to have been here at a later stage of the debate to give us the benefit of his wisdom, as he certainly gave us an interesting contribution.

We heard the maiden speech of the hon. Member for Eastleigh (Mike Thornton). He paid tribute to his predecessors in the traditional style, but raised a number of important points, not least of which was about bank lending and particularly the lending scheme for small businesses.

I would like to pick up some of the general points and themes running through the debate. My hon. Friend the Member for Nottingham East (Chris Leslie) gave a comprehensive opening speech from the Opposition Front Bench. Other Members picked up the point that he made that we cannot have any repetition of the actions that led to the taxpayer bail-out. The actions and attitudes of the bankers meant that the banking sector—or individuals in it, as many hon. Members have said—thought that it was okay to retain the profits privately when the sun shone, to use that metaphor, but to let the losses fall to the public purse when the rainstorms arrived. We simply cannot allow a repetition of such risks to taxpayers in the future. That is why the banks must be reformed here in the UK, and further reformed in the EU and across the world.

As my hon. Friend the Member for Nottingham East outlined—it was echoed by my right hon. Friend the Member for Wolverhampton South East (Mr McFadden) and by my hon. Friend the Member for Wirral South (Alison McGovern)—our financial sector is larger than most. The greatest global financial centre is in the City of London, and there are important centres in Edinburgh and across the UK, so we have to take any additional steps required to guard against any risk of future collapse.

My hon. Friend the Member for Nottingham East also spoke eloquently about the passage of the Financial Services Act 2012, which sought to address some regulatory shortcomings. Many hon. Members will have heard him during the course of the Public Bill Committee speaking eloquently—and, I have to say, frequently—about many of the issues that we are looking to this Bill to address. He highlighted a number of them, including concerns about LIBOR.

I hope that the hon. Member for North East Cambridgeshire (Stephen Barclay) will take the point made by my hon. Friend the Member for Nottingham East. The hon. Gentleman talked a lot about regulatory shortcomings, but we need to remember how members of the public and ordinary people in the street will view this issue. People in the banks were culpable; they were individuals who somehow thought it was all right to take those risks and—[Interruption.] I hear the hon. Gentleman say, from a sedentary position, that it was our system. At the end of the day we can have systems, we can have regulatory reform, we can have all those rules in place, but if the culture and the attitude of the people involved do not change, that will simply lead to more problems in the future. Members on both sides of the House have recognised that today. I am surprised that the hon. Gentleman, who, I understand, previously had a career in the banking industry and, indeed, in regulation, does not seem to accept that individuals as well as systemic failures bear some responsibility.

[Stephen Barclay]

rose—

[Cathy Jamieson]

I am happy to be corrected if I have misunderstood the hon. Gentleman.

[Stephen Barclay]

The hon. Lady seems to be misrepresenting the entirety of my speech. The whole speech was about the need for individual accountability. I said that under the system established by the hon. Lady’s party, there was no such accountability. That is why Sir Fred Goodwin walked away with his huge bonus untouched. Under that system, there were no real fines and no individual accountability. That is the essence of it.

[Cathy Jamieson]

I understood the hon. Gentleman to be blaming the regulators rather than the individuals who were involved in the wrongdoing. Let me repeat that, notwithstanding the amount of regulation that is introduced, if there are people who are intent on wrongdoing, we need to address the culture and the expectations in banking. I think that members of the public expect us to do that.

A number of important points were made at the outset of the debate about the timing of the Committee stage. My hon. Friend the Member for Nottingham East, and a number of those who intervened subsequently, expressed concern about the fact that the Bill provides such a slim framework for further secondary legislation, largely by Treasury order. My hon. Friend the Member for Bassetlaw (John Mann) described it as an “Is this it?” sort of Bill, and my right hon. Friend the Member for Oldham West and Royton (Mr Meacher) called it a mini-Bill.

The Minister seemed to suggest that we would have adequate opportunities not only to scrutinise the Bill itself, but to scrutinise and respond to whatever other measures or recommendations were made by the parliamentary commission at a later stage. I think that how, when, and where that scrutiny will take place remains rather uncertain. The hon. Member for Chichester (Mr Tyrie), the chair of the commission and of the Treasury Committee, asked for two days to be provided on Report, but it seems that Ministers did not consider that appropriate, or did not wish to do so. That is serious, because the Bill is very thin as it stands, and a great deal of work will be needed in connection with the secondary legislation. We ought to have every opportunity to scrutinise not just the good work that has already been done by the commission, but what it will do in future.

The commission report has helpfully provided us with a series of amendments and explanations of why they are important. It has also provided us with information on why the members of the commission feel that certain amendments should be proceeded with even if the Government do not agree with them. I think that we should have an opportunity to look at those amendments properly. I think that the public would expect us, having given the responsibility to the commission to make recommendations, to pay proper attention to them, and would expect the Government to take heed of them.

It is hard for the public to believe that things have changed when they perceive that a massive bonus culture is alive and kicking, and that has been reflected in the debate. A number of Members pointed out that debates of this kind may appear to be technical, and concerned very much with the rules and regulations. People watching may wonder how it affects their everyday lives. A number of hon. Members made the point that we have to ensure that we use the opportunity of legislation to rebuild consumer confidence, but we also have to talk about financial inclusion and diversifying the sector, and we have to change the culture of high-risk banking and see an improvement in standards, because that is what people expect legislation and the change to deliver. We also want action to support growth and to create a banking system that serves the needs of our economy, a point well made by hon. Members on both sides of the House.

[Paul Farrelly (Newcastle-under-Lyme) (Lab)]

I, too, used to work for Barclays in a past life. Does my hon. Friend agree that it would not do justice to the reputation and professionalism of this House, and to the many months of work by the Parliamentary Commission on Banking Standards and the Select Committee, if this Bill were not given the most time possible for scrutiny, because it is so important for this country? Does she also agree that one thing we should be very wary of is the watering down of recommendations that have been made by experienced people on commissions, in much the same way as experienced people have looked at the press?

[Cathy Jamieson]

My hon. Friend makes very good points. There would be real concerns if the Committee stage of the Bill was seen as a rubber-stamping process and the Bill was not scrutinised properly. The Economic Secretary to the Treasury likes to think of himself as a listening Minister—he says that often—so I hope he is listening today to the real concerns expressed by hon. Members. [Interruption.] He does not seem to be listening at the moment, but perhaps someone will give him a nudge and tell him what points I am making on behalf of other hon. Members about the Committee timetable.

I wish to make a number of points about the particular issues that hon. Members have raised. On leverage, I was reminded very much about our discussions on the pronunciation of “schedule” in a previous financial services debate. Obviously, it will be important for us to have the opportunity to look at the issue of leverage properly. I heard the Financial Secretary to the Treasury talk about the dilemma of trying to ensure that he not only does the right thing for the taxpayers, but listens to the industry. It is very important that the leverage ratio powers need to be clearly taken in the Bill and, as was said during the opening speeches, phased in ahead of the European Union plans for the end of the decade.

The Parliamentary Commission on Banking Standards highlighted that issue, particularly in respect of building societies and the concern about the 3% ratio. Indeed, my hon. Friend the Member for Bassetlaw raised particular issues about small building societies, with others raising the more general issue of the building societies and how the matter could be dealt with. I would hope that proper scrutiny of the Bill would give us the opportunity to overcome any negative impact or any problems that would arise for building societies, which clearly have different equity structures. I would argue, as did my hon. Friend the Member for Nottingham East, that that is not a reason for not putting safeguards in place. I wonder whether the Government have looked at the matter specifically or will do so. Could they give us some further information, perhaps in the Economic Secretary’s closing speech?

Another issue raised by a number of hon. Members was the derivatives inside the ring fence. A number of references have been made to the Vickers report and the fact that derivatives trading should not be allowed—that was of course the position. However, the parliamentary commission recognised that there was a case for some simple derivative products. A lot of hon. Members have sought a definition of a “simple derivative product”. Again, we need clearer protections to prevent abuses within the ring-fenced retail banks where derivatives are being sold. Again, I expect us to examine that more fully in Committee. I hope that we will be able to get assurances from the Economic Secretary about the Government’s intentions, as this is one area where they depart significantly from the original recommendation of the Vickers report.

I mentioned that the Economic Secretary likes to think of himself as a listening Minister, and we heard that again from the Financial Secretary when he opened the debate. I have heard that comment on a number of occasions, as I have been on a number of Committees and in Bill debates with the Economic Secretary. Although he has certainly appeared to listen, I am not sure that that has translated very often, if at all, into the acceptance of Opposition amendments or to any change in Government policy. I hope that on this occasion, even if he does not accept amendments tabled by my hon. Friend the Member for Nottingham East and me, he might at least be persuaded to accept the amendments proposed by the Parliamentary Commission on Banking Standards, which are very important.

I also want to pick up on a number of areas where the Bill makes no comment or does not do enough, as discussed by a number of Members. The hon. Member for Wycombe (Steve Baker) mentioned the Bank of Dave and the Bill does not address the issue of challengers or new entrants. There is nothing in the Bill on a universal obligation for banks on basic bank account services, which is very important. We take it for granted that we have a bank account, but it is not quite so simple for many people on low incomes.

Questions were asked about switching and bank account portability. There is nothing in the Bill on mutuality and I do not see anything about a fiduciary duty of care, which was mentioned by my hon. Friend the Member for Glasgow North East (Mr Bain).

My hon. Friend the Member for Wirral South talked eloquently about how in such debates everyone on the inside speaks in code, making it difficult for those who are external to break through and understand how important such discussions are for them. She put that into perspective very well when she talked about some of the issues that matter to ordinary people. The theme was picked up by my hon. Friend the Member for Hayes and Harlington (John McDonnell), who rose to the challenge of the dropping of the 12-minute limit on speeches and gave us a clear account of some of the challenges for his constituents in the current economic circumstances.

Of course, it is important that we have a banking system that enhances our economic prospects. We want to see support for enterprise, we want to see growth and we want to see the supply of lending and credit to the economy. A number of Members mentioned that, particularly in relation to small businesses. I hope action will be taken in the Budget, but if it is not, I hope that we will at least see an improvement made through this Bill to the funding for lending scheme so that we give priority to lending to small and medium-sized enterprises. We called for that last summer when the scheme began, but it has not been as successful as the Government might have liked.

We heard a number of interesting suggestions from my right hon. Friend the Member for Oldham West and Royton and my hon. Friend the Member for Glasgow North East about the idea of a national investment bank as well as about how regional banking could be organised along the lines of the German model or in other ways to support SMEs. I hope that we can consider those issues as the Bill makes progress.

We heard a couple of comments about whether the Bill would become known as the Clark-Javid Act. It has certainly seemed that it might end up being known as the Chancellor’s disappearing Act, given that he did not come to the Chamber and does not seem to have prioritised the debate today. When we discussed timetabling and the Committee, the shadow Chancellor asked the Financial Secretary whether he would take the opportunity to go out to track down the Chancellor and ask whether he would be prepared to amend the timetable to allow for proper scrutiny of the Bill.

In conclusion, we will not oppose the Bill’s Second Reading today because reforms are clearly needed, but there are many important policy changes that are conspicuous by their absence from the Bill, and those must be addressed as we proceed.