Oral Answers to Questions

George Freeman Excerpts

Tuesday 29th January 2013 Commons Chamber

[Greg Clark]

I note and receive my hon. Friend’s bid for consideration in the Budget, but he will know that we have taken people out of tax, which has been important in restoring incentives and the rewards people have for going back to work.

[George Freeman (Mid Norfolk) (Con)]

12. What recent steps he has taken to increase the level of infrastructure investment.

[The Chancellor of the Exchequer (Mr George Osborne)]

By making the hard choices to save money in areas such as welfare, this Government have been able both to reduce the deficit and to increase capital spending on the infrastructure that is vital to our economic future. That is funding more roads and rail, and faster broadband, than in the years of the previous Government, when money was wasted. Indeed, public investment as a percentage of gross domestic product is higher on average in this Parliament than under the previous Government.

[George Freeman]

I thank my right hon. Friend for his commitment to upgrading our infrastructure, which was so woefully neglected in Labour’s 13 years of waste. In particular, I welcome the £5.5 billion in the autumn statement for science, roads and free schools. We will never build a 21st-century economy on 19th-century infrastructure. Given the pressure on public finances, does he agree that we may need to be bold in unlocking new models in private investment? I am thinking particularly of mutual and local investment such as the tax increment financing that has financed so many American cities.

[Mr Osborne]

I agree with my hon. Friend. In East Anglia, where his constituency is, we have invested more than £280 million in life sciences, and are providing infrastructure by, for example, upgrading the A11. He is completely right that we should look at new forms of financing. We have introduced tax increment financing, as he suggests. From April this year, all authorities will, within prudential limits, have unfettered access to standard tax increment financing.

Oral Answers to Questions

George Freeman Excerpts

Tuesday 11th December 2012 Commons Chamber

[Sajid Javid]

My hon. Friend is absolutely right. The Government are relentlessly focused on eradicating poverty and the measures he has talked about, such as universal credit, increase work incentives and help people back into work.

[George Freeman (Mid Norfolk) (Con)]

Is it not the truth that the best way to tackle child poverty is to have parents in work? Does my hon. Friend agree that the creation of 1.2 million new private sector jobs, the taking of more than 1 million of the lowest paid out of tax and the abolition of the rise in fuel duty planned by the previous Government make the average family more than £125 better off and does more for child poverty than any scaremongering by the Opposition?

[Sajid Javid]

That is right. If we can deal with worklessness, we can help deal with poverty. In the past two years, 1.2 million private sector jobs have been created—more than were created on a net basis by the previous Government over 10 years.

The Economy

George Freeman Excerpts

Tuesday 11th December 2012 Commons Chamber

[Mr Michael Meacher (Oldham West and Royton) (Lab)]

I cannot help but begin by noting that, with nearly two hours to go, there is not a single Tory MP rising to defend the Chancellor’s policies. That speaks for itself—I cannot remember the last time it happened.

[George Freeman (Mid Norfolk) (Con)]

rose—

[Mr Meacher]

No, I am not going to give way; I have not even started. I am just observing what has happened.

I congratulate my three new hon. Friends the Members for Middlesbrough (Andy McDonald), for Rotherham (Sarah Champion) and for Croydon North (Steve Reed) on what I thought were quite remarkable speeches—confident, informed, quite amusing in places and committed. When I first came to this House—a long time ago—new Members took their listeners on a tour of their constituencies, touching on the buildings, the people and the history, but saying nothing about politics. That was not the protocol. I am glad that that rule has gone. We heard passionate speeches today that were all about politics, including the national health service, child care services and the defence of the unemployed. I think that all three of my new hon. Friends will make a big contribution to this House.

--- Later in debate ---

[George Freeman (Mid Norfolk) (Con)]

It is pleasure to rise and to prove the right hon. Member for Oldham West and Royton (Mr Meacher) wrong through my passionate defence of the Chancellor, not that he needs it, and my welcome for the autumn statement.

I am old enough to remember the 1970s and when the economic history of that period is written, I think it will be rather simple: in 1979 a Conservative Government inherited bankrupt public finances and put them straight with an enterprise economy. A Conservative Government sorted out the mess of the European currency-inspired recession of the early 1990s and gave the future Labour Government a golden legacy in 1997. After two years of sound public finances following the previous Conservative Administration’s public spending commitments, the previous Labour Government embarked on an unprecedented spending spree—a boom disguised under various labels, such as cool Britannia—that left this generation with an historic debt legacy for which we, our children and our grandchildren will be paying the bills for many years to come.

[Sheila Gilmore]

One of the problems with the hon. Gentleman’s retelling of history is that the Labour Government paid down national debt so that it was lower after the first few years of that Government than it had been at the end of the previous Tory Government.

[George Freeman]

I am grateful for that intervention. If the previous Labour Government paid down the debt, why have we inherited this historic debt legacy—a legacy, it is worth reminding the House, that sees us paying debt interest payments that are set to rise to £76 billion a year, which is more than the amount spent on more than three Departments? This is a historic legacy, for which the Labour party should be ashamed.

[Kwasi Kwarteng]

I was wondering what my hon. Friend thought about the fact that the previous Labour Government ran consistent deficits from 2001 to 2007—even while the economy was growing.

[George Freeman]

My hon. Friend makes an excellent point, principally about the structural deficit. The public are not daft: they know the difference between a Government who spend more each year than they receive and one who wilfully disregard the underlying causes of the deficit, which were and still remain for us to tackle—the problem of an ageing society for the NHS, the public sector pensions bill and the out-of-control welfare state. I shall say something shortly about the Government’s important reforms in that regard.

I welcome this autumn statement, which begins the process of tackling once again the toxic debt legacy left to us by the Labour party. I welcome the fact that a Conservative Chancellor in a coalition Government has been able to deliver substantial savings—£33 billion in the welfare budget, £60 billion savings in interest repayments and £70 billion savings on the cost of government in Whitehall—allowing us to create the incentives for work, taking a million of the lowest-paid employees out of tax altogether, raising the tax threshold and abolishing Labour’s planned fuel duty rise, with the net result that over the last two years we have seen the creation of more than 1.2 million net new jobs in the private sector.

[Frank Dobson]

Does the hon. Gentleman not think it rather odd that the Government are unprepared to give any estimate of how many of those “new private sector jobs” are ones that have been outsourced by the public sector? Has it not been estimated that even in the field of further education, the total approaches 200,000?

[George Freeman]

I am grateful for that intervention because it gives me the chance to make the fundamental point that Labour Members seem constantly unable to grasp—that every penny they spend from this Dispatch Box is money that has to be taken off this country’s citizens in tax, and that they will receive it only if it is earned by the private sector. It is the private sector that ultimately earns the money that the public sector spends. This Government’s rebalancing programme to restore our public finances will allow us once again to spend on the public sector sustainably with moneys earned by the private sector. That is one of the most crucial and important reforms made by this Government, and I welcome it.

Yes, the Office for Budget Responsibility has made clear what the Chancellor has consistently said—that this will be a long a fragile recovery and that it has been made worse by the crisis in the sclerotic eurozone, with the debts of the 2008 recession now being clearer than they were at the time. That has become clear not least because we now have the OBR—another of this Government’s important reforms—putting some transparency and honesty at the heart of Government statistics. That is not always comfortable, but it is an important—

[Frank Dobson]

Will the hon. Gentleman give way?

[George Freeman]

No, I have already given way to the right hon. Gentleman.

Of course we are in the process of a long and slow recovery, but the evidence—in terms of new jobs, the data on private sector growth, and the business community’s strong support for this statement and the measures previously announced by the Government—suggests that the policy of rebalancing the economy is right and working. We must have an economy that is led by the private sector. We need to do more to support industry and the knowledge economy, which this Government are doing, and we need to do more to support regional growth outside Greater London and the south-eastern area.

It is an irony of the last Labour Government that, despite preaching the language of regional economics, what it came down to was a vast tax transfer through the regional development agency structure. In my own field, more than £15 billion was spent on business support, but according to the Richard report, only 0.5% of that was received by businesses on the ground floor, as it were. The last Government embarked on a major boom in regional spending, but it was not sustainable. One of the sadnesses of this crisis is that many of the people who were offered jobs during that boom in the public sector are paying the price now. That is not their fault; it is the fault of those who were running the economy at the time, and I for one am waiting for them to say sorry.

The net growth figures are low at present, but that disguises a very important and profoundly positive change. We have rightly taken money out of the public sector in order to rebalance the economy and bring our public finances under control. The fact that the net growth figures are positive is a sign of the profound growth that is beginning to happen in the private sector, and which bodes well for our public finances in the long term.

I welcome the Government’s plan A-plus, which is intended to restore our public finances and get the deficit under control, and I welcome the fact that the annual deficit is now down by 25%, although there is more to be done. The plan is also intended to free up money to be invested in infrastructure. More than £20 billion has been committed to infrastructure projects that are long overdue, and last week £600 million of extra investment in science and the knowledge economy was announced. I shall say more about that in a moment. The truth is that we need a plan A-plus plus plus, but we do not need the plan B espoused by the Opposition. That B stands for borrowing, it stands for the bankruptcy of our public finances, and it stands for Balls.

[Nigel Adams (Selby and Ainsty) (Con)]

My hon. Friend said earlier that he remembered the 1970s. I wonder whether he remembers the late 1960s, when Viv Nicholson, the pools winner, said that she would “Spend, spend, spend.” She eventually went bankrupt. Does my hon. Friend agree that even she would be embarrassed by the Opposition’s approach to spending and debt?

[George Freeman]

My hon. Friend has made an excellent point. One must choose one’s advisers carefully. When taking advice from rock stars, one should listen to the music, but not spend accordingly. “Spend, spend, spend” is exactly what the last Government did, and we are all paying the price now.

I entered the House after a 15-year career starting companies in the life sciences sector—which involves some of the most exciting parts of the country’s economy: medicine, agriculture and the clean technologies—in Cambridge, Norwich, Scotland and some of the northern cities, and in London. I believe that that sector represents a hugely exciting opportunity for the country as we rebalance our trade away from the sclerotic eurozone and towards the faster-growing emerging nations of the world—some of the BRIC economies, and the “next 11” that were identified by Jim O’Neill in his seminal paper.

Those economies are growing at a rate of 7% or 8% a year, which, compounded over 10 years, amounts to 100% growth. They are the vibrant markets of tomorrow, and we have an opportunity to support them with our knowledge economy and our life sciences. Today that means helping them to develop the basics of public health care, such as nutrition, food security and medicine, but tomorrow they will quickly grow and develop much more sophisticated needs and markets.

The life sciences sector is crucial to our economic recovery and to a sustainable model of economic growth, and I strongly welcome the support for it that has come from the Chancellor and his team. Last week a further £600 million was announced for our science base, which is already paying dividends—in the last year alone, more than £1 billion has been invested in early-stage life science ventures funds in this country—and GlaxoSmithKline has announced a £500 million investment in an advanced manufacturing facility. The strategy is working, and I encourage the Government to stick to it.

I am the Member of Parliament for Mid Norfolk, a rural area which, in recent decades, has been viewed as something of a rural backwater, and has received all too little investment. In our region, the dualling of the A11, the investment in the Cambridge-to-Norwich rail link between the two life science clusters and the £90 million announced recently for support for our research and innovation centres have all been extremely welcome, and are already having positive effects locally. I was in Cambridge on Monday with the Prime Minister, launching the new cancer genomics centre.

There is a spirit of optimism afoot in our region. That speaks for the success of this strategy, which I welcome and commend to the House.

Financial Services Bill

George Freeman Excerpts

Monday 10th December 2012 Commons Chamber

[Greg Clark]

I did not have the privilege of participating in that debate, but I can tell the hon. Lady our policy. I also wanted to talk about the very important matter that the hon. Member for Nottingham East and several others raised about the transparency of the information that should be provided, as is the case in the United States, on the actual practice rather than just the intentions of lenders. This is a particularly important point, and what we have said in public—I mentioned this to the Chairman of the Treasury Committee earlier—is that the Government are working with the industry to get a commitment from the banks that they will publish granular data on their lending, particularly in deprived communities. We are meeting the British Bankers Association shortly on that. We have been absolutely clear that if we are not satisfied with that information we will use the forthcoming banking reform Bill to legislate to that effect. That will concentrate minds and I think everyone will be aware of the importance of that question.

It is important to address the context in which we are operating. The Financial Conduct Authority must not regard itself simply as a regulator of incumbents, although it has important responsibilities in that regard. It also has the important objective that my hon. Friend the Member for South Northamptonshire (Andrea Leadsom) mentioned, which is to promote competition. I regard the degree of competition in retail banking as unacceptable. I would like to see more new entrants and I would like them to concentrate, in particular, on reaching those parts of the market that existing incumbents find it difficult to reach. I have made it absolutely clear in the meetings I have had with the shadow Financial Conduct Authority that the competition objective is to be taken extremely seriously, and I and my colleagues in the Treasury will be looking for progress on that.

[George Freeman (Mid Norfolk) (Con)]

I am extremely grateful to the Minister for giving way, and I want to endorse his sentiments and those of my hon. Friend the Member for South Northamptonshire (Andrea Leadsom). Constituents in my area have come to wonder whether there is a danger of our regulating after the horse has bolted. They look to America, where there are more than 20,000 high street banks, and wonder whether we could be doing more to encourage an insurgency, as it were, of new banks to provide the high-street banking service that we need at a time when the old banks are locked up, dealing with the legacies of their mistakes. I echo the Minister’s remarks and wonder whether we can look to the Government to do anything—perhaps not in this Bill but in the coming years—to make that a reality.

[Greg Clark]

I completely agree with my hon. Friend. The Bill has a role to play, because it is very important that the authorities do not put insuperable barriers in the way of new banking bodies and entrants to the market that are seeking approval, because such prospective competitors could offer new services to consumers who are not well served at the moment.

The hon. Member for Nottingham East raised questions about the scope of the FCA’s rule making. That relates to a point made by my hon. Friend the Member for Chatham and Aylesford (Tracey Crouch) too, so let me confirm that the FCA will be able to make rules on the cost of credit from payday lenders, as well as pawnbrokers and any other provider of consumer credit. It is important that the FCA’s discretion allows it to protect the consumer and the consumer’s interest in all these matters.

The hon. Member for Bishop Auckland (Helen Goodman) is not in her place, but she was concerned about the branch network, as were certain others. It is not possible or right for the Government to require particular branches to be kept open and I am sure that no hon. Member would expect that. Lords amendment 25 will require the FCA to have regard to

“the ease with which consumers…including consumers in areas affected by social or economic deprivation, can access”

the services they wish to use. The FCA might wish to consider that.

The hon. Member for Harrow West (Mr Thomas) is also not in his place, but I think I have addressed his concern about whether the information provided by the banks on their practice in lending will be sufficient. I have commented on the remarks made by my hon. Friend the Member for Chatham and Aylesford, and Lords amendment 78 also applies to the lenders about whom she was concerned.

I join the tributes paid to the hon. Member for Walthamstow (Stella Creasy), who has been energetic in pursuing this issue. She was slightly unfair to refer to a damascene conversion, as some of us on the Government Benches have always regarded the powers that were going to be invested in the FCA as necessary. We have been pleased to clarify that. She will understand that the transition to the new regime will take some time during the next year. The Chairman of the Select Committee chided me earlier for introducing these provisions in a hurry. It is necessary to have a degree of pace. The hon. Lady is absolutely right that during its remaining supervision of these matters the OFT in particular will have the opportunity and the power, given the amendments, to suspend a credit licence if it thinks it is necessary. The discussions that we will have, and I am sure she will have with it, will cause it to be forward-looking rather than simply regulate what has been in place so far. My hon. Friend—

Autumn Statement

George Freeman Excerpts

Wednesday 5th December 2012 Commons Chamber

[Mr Osborne]

There will be additional capital spending. We have a devolved arrangement so it will be up to the Scottish Government and the Scottish Parliament to make a decision about how that money is spent. Of course, I expect Scottish Members here and Labour, Conservative and Liberal Democrat Members of the Scottish Parliament to hold the Scottish National party to account for the decisions it takes. More broadly, its independence programme would be a disaster for the Scottish economy.

[George Freeman (Mid Norfolk) (Con)]

Families and businesses in my constituency will welcome the news that £76 billion-worth of reductions in the cost of government, £18 billion-worth of reductions in welfare and £33 billion-worth of savings in interest payments have allowed a Conservative Chancellor to lower taxes for the poorest and create a million new jobs. Does my right hon. Friend agree with me that plan B is nothing more than a plan for borrowing and bankruptcy?

[Mr Osborne]

I am not sure that I can add much to that, except to say that I completely agree with my hon. Friend.

Oral Answers to Questions

George Freeman Excerpts

Tuesday 6th November 2012 Commons Chamber

[Mr Speaker]

Order. The shadow Chancellor is perfectly free to decide not to speak when he is on his feet, but that does not mean that instead he can speak from his seat.

[George Freeman (Mid Norfolk) (Con)]

On behalf of my constituents, I welcome the news that the economy has returned to growth, and I draw the Minister’s attention to the success in the life sciences sector. Eli Lilly has announced a new early-stage neuroscience facility in the UK, Johnson and Johnson has made Britain the home of its new global innovation centre, and more than £1 billion has been raised this year in early stage funds. Is that not the only sustainable route to a really balanced recovery?

[Sajid Javid]

My hon. Friend is absolutely right. The only sustainable growth is long-term growth in private sector jobs.

Banking Competition

George Freeman Excerpts

Thursday 12th July 2012 Westminster Hall

[George Freeman (Mid Norfolk) (Con)]

I thank Mr Speaker for allowing this important debate to take place, and for my chance to contribute to it. I congratulate my hon. Friends on securing the debate and on their contributions, particularly my hon. Friends the Members for South Northamptonshire (Andrea Leadsom), for Wyre Forest (Mark Garnier) and for Wells (Tessa Munt), but other hon. Members who have spoken, too.

I am not, never have been and never will be a banker, unlike hon. Friends who have specialist expertise in the world of high finance and banking. It is important that hon. Members bring to the House expertise in sectors that we need to regulate and guide. My interest, and my contribution today, is offered not with great expertise in the specific measures needed to put the banking sector right, but to articulate concerns about the implications of the banking crisis for what is sometimes referred to as the real economy.

I speak as somebody with a deep interest in growth, small business, enterprise and innovation. In a 15-year career before coming to the House, I was involved in starting small companies in the field of science and innovation, principally the biosciences. Typically, they were companies with an idea, a small team, a business plan and no money, raising funding for ambitious businesses to develop innovative products and services, often through a number of financing rounds, before acquiring another company or being acquired, or achieving an exit through the public markets.

I therefore speak with a particular interest in the life sciences, of which colleagues will be aware. The sector has much to offer the nation, as we seek to build a rebalanced recovery and a sustainable economic model. It has vast potential to help us to grow our trade links with the emerging world—the BRIC economies. A reference to Jim O’Neill and Goldman Sachs has already been made, and we met recently to discuss his latest analysis that, on top of the BRIC countries, the next 11 coming behind have phenomenal rates of growth in already large economies. Our life sciences have the potential to allow us to seed—literally, in some cases—the markets of tomorrow and to grow the alliances of tomorrow, which will, among other things, have the benefit of de-leveraging our financial dependence on the sclerotic eurozone.

I speak also as somebody with a long and passionate interest in the East Anglian innovation economy, a region that the Government increasingly recognise as a key driver for sustainable growth. It is a net contributor to the Treasury and has at its heart Cambridge, a globally recognised centre of science innovation, entrepreneurship and companies in need of finance. In my own county of Norfolk, the Norwich Research Park, a globally recognised centre of innovation, is becoming increasingly linked to Cambridge through the Government’s excellent investment in infrastructure.

I speak also as the father of two children. I am concerned about the world in which they will grow up and the economy in which they will have to make a living. Our generation in Parliament is important if we are to get this right. I want to touch on the context in which it is helpful to view this issue. This is not just a crisis of debt, although it is surely that. It is not just a crisis of regulation. It is not even just a crisis of political leadership. We are living through a deep crisis of political economy, which is shaking the very foundations of the world as we have come to know it in the past 20 or 30 years. One of the profoundly unsettling things about crises of political economy is that they undermine the very legitimacy of the institutions through which we seek to tackle them. That creates something of a perfect storm—a financial and political hurricane that fuels itself. As we see trust in the media, trust in the political class, trust in the bankers and trust in the regulators undermined—not least by the way in which those groups, in the past 20 or 30 years, have become too cosy—we start to fuel a growing public distrust of the idea that there is any institution capable of fundamentally tackling this problem. I am more optimistic than that. If we are honest about the causes of the problem, and rigorous and robust in our analysis, we can be optimistic about the future.

[Steve Baker]

My hon. Friend is making an absolutely magnificent speech. He has reminded me that, in his Bagehot lecture, the Governor of the Bank of England said:

“Of all the many ways of organising banking, the worst is the one we have today.”

I am sure that my hon. Friend can be assured of Sir Mervyn King’s support.

[George Freeman]

I thank my hon. Friend for that helpful and extremely generous intervention.

As the Chancellor put it so eloquently in his Budget speech, the recovery will require a new economic model. That is at the heart of this debate. The banks have a crucial role to play in that economic model, but for them to play that role we need to restructure the way they work, and retune what we expect of them and the people who run them. I shall concentrate on that point.

At the heart of the new economic model, we need a much more profound commitment to an enterprise economy and to a rebalancing of the relationship between risk and reward. I do not think any of us on either side of the House—indeed, I think it was the former Member for Hartlepool who said he was passionately relaxed about wealth creation—have a problem with wealth creation through people who take risks, or for reward to flow from risks. At the heart of the problem is the fact that people have been receiving huge rewards without taking the risks. If the public saw people paying back some of what they have earned for success on failure, there would be much more public support for the industry. It is about the break-up of some of the old structures, the big and literally bankrupt structures, that are saddling this economy with debt and a lack of leadership. It is about unleashing a creative revolution of hungry, entrepreneurial little platoons who can rebuild an economy of which we can be proud and on which we can rely.

I come now to three points: the nature and causes of the problem; my particular rural constituency interest; and what we need to do, with particular emphasis on the importance of competition and new entrants, and encouraging new sources of finance for the small companies that we will need to grow our sustainable recovery.

As other hon. Members have more eloquently testified, we are seeing multiple failures: the mis-selling of payment protection insurance; a manipulation of LIBOR, which, of course, is a benchmark used to set payments on a vast amount of money, up to $800 trillion-worth of financial instruments affecting the price of everything from simple mortgages to interest rate derivatives, as The Economist set out clearly recently; and the mis-selling of complex interest rate products. They are symptomatic of a much deeper shift in recent years in our banking culture out in the regions.

Banks in Norfolk and East Anglia have moved from the traditional model of looking after savings and lending money to small companies. They have shifted their emphasis, closing local branches and investing in new types of staff who are more salesmen than bankers in the traditional mould, and they seem to be much more interested in making money from complex charging structures, and instruments and derivatives. Instruments and derivatives may be appropriate—indeed, vital—for the City of London. There is a perfectly legitimate trade in such instruments; indeed, they sit at the heart of any functioning market economy. They are not, however, appropriate instruments on the high streets of such towns as Watton in my constituency, which has been the victim of the inappropriate selling of inappropriate products. I will say a little more on that in a moment. Swaps, options, warrants, futures and forwards should not be the concern, and are not the concern, of most couples taking out their first mortgage, or most entrepreneurs starting a small business. The mentality which says that complex bank products and charging structures are a more attractive source of revenue than the traditional role of banking has been deeply corrosive of the real economy.

I plead guilty to being slightly misty-eyed—I am, after all, a Conservative. I remember as a boy going with my stepfather, who was starting a business, to our local bank. The bank manager knew his name. Rather to my amazement, he knew mine. He offered us a cup of tea. He had a notepad and a file, he knew the business and he knew what had happened at the last meeting. He wanted to talk about the cash flow, the harvest, the outlook for business and how he could help. What a long way that is from small businesses’ experiences of banks in today’s economy.

As for my particular constituency interest, the mis-selling of complex instruments has devastated a number of individuals and businesses, the most celebrated of which—if that is the word—is Adcocks of Watton, featured recently on the BBC. Adcocks is a historic business on the high street of Watton, one of the four towns in my constituency, that is now saddled with £175,000 in bank charges. They threaten to cripple that small business, which is at the heart of the high street as a major employer. Also, a constituent of mine, Mr Leonard, was the subject of international property fraud by an equity trust. Investigations have been conducted over the past several years, and still have not concluded.

Those are just a couple of examples, and the more the debate unfolds—I do not know whether other Members have had the same experience—the more people come forward. I believe that we are witnessing the beginnings of something rather bigger than has hitherto been apparent. There is an iceberg of hidden claims and effects in my constituency, and if that is true in Norfolk I suspect that it is true elsewhere. The impacts in a rural area are far more profound than in an urban area. It takes only one business to fail on the high street of a town like Watton for the whole town to feel the reverberation. In that context, it is important that whatever the small print in the contracts says and whatever the findings may be under contract law, the Government should be sensitive, as I know they are, to the need for accountability, responsibility and appropriate compensation in order to send a signal that such things must and will stop, and to prevent the fall-out from undermining the Government’s efforts to drive an economic recovery and growth in the regional economy.

I have one or two thoughts on what needs to be done. Several colleagues have discussed culture and the importance of a new culture, and whether we should agree with Bob. I remember hearing Mr Diamond say, as The Economist reported:

“We all know that these events are not representative of our culture.”

I do not believe that to be true. It is precisely because much of that activity was deeply representative of a culture that we need to tackle that culture.

Not all in the City take that view. I was struck by the comments of John Nelson, chairman of Lloyd’s of London, who stated in a recent Financial Times article that

“the future for banks…is dependent upon finding the right model, and critically the right culture…None of the revelations over the last week means that the City is inherently corrupt”,

but:

“It is imperative that we tie performance to longer-term incentives and sustainable profits.”

We need responsible banks with a culture of fostering local business growth and a strong understanding of their role in helping to generate economic growth and innovation on the ground, and good banks that encourage a competitive marketplace in which the local bank can flourish and real banking for the real economy.

A number of good measures have been put in place. I commend the Government for the fundamental restructuring in the banking reform Bill, and the Treasury White Paper issued in June on banking reform sets out numerous important initiatives and measures. I suspect that more may have to be done over the coming years. The Merlin agreement covered a number of important initiatives, and it is important that we ensure that it is enforceable and has appropriate teeth to guarantee that it is followed through.

Principally, my concern and my call are for much greater focus on competition and new entrants into the banking sector, as other Members have discussed. Colleagues may be familiar with some of these facts, but I think they bear repeating. The size of the top 10 banks in proportion to UK GDP in 1960 was 40%; in 2010, it was 459%. Something has gone profoundly wrong with how we have allowed the banking industry in this country to develop. It needs serious reform. In the US, the top 10 banks were equivalent to 10% of GDP in 1960 and 62% in 2010, so it is not a global phenomenon; it is a distinctively British one. Only one new high-street bank has launched in more than 100 years. The big five have an estimated market share of 85% for personal current accounts and 67% for mortgages.

Statistics from the Federation of Small Businesses show that 15,000 financial institutions compete in the US market: about 7,700 banks and 7,000-odd credit unions. The German Sparkasse network comprises 431 locally controlled banks, and Switzerland has 24 cantonal banks, which explicitly recognise social and economic responsibility. We should not be hidebound as we deal with the fallout from the crisis. There are other models for reforming our banking system in terms of retail banking on the ground that supports the local economy. I encourage us to look as far and widely as we can.

We need two things: a much more competitive retail banking sector with many more new entrants and a regulatory structure that encourages rather than hinders new entrants. After the glad, confident dawn of new entrants to the banking sector in recent years, I was depressed to see that a number of them had floundered against reportedly impossible regulatory barriers. It is shutting the stable door after the horse has bolted. What we need now are new banks. Cambridge Bank is one, and there are numerous other excellent local initiatives. We should do whatever we can to encourage local entrepreneurs to set up new banks.

Finally, alternative sources of finance are important for our innovation sector. In my 15 years of starting more than 20 companies, the banks never came in and invested in risky ventures in the first five years. They needed to see positive cash flow and revenues, and they always wanted all their risks covered. The innovation sector relies on a much broader group of people who should be promoted, celebrated and encouraged. Angel investors put their personal wealth into extremely high-risk ventures. Their return is often more personal wealth, but I argue that if the reward is balanced to the risk, it is all to the good and should be encouraged. Venture capital trusts have put substantial funds to work in less risky but still emerging ventures. Corporate venture funds are coming into the UK, and there is good news in the sector. In the past six months, we in the life sciences sector have raised more than £1 billion. International money is coming to the UK, not through banks but through new investment vehicles.

More locally, I highlight the importance of credit unions, mutuals and innovative microfinance schemes such as the excellent Kiva, which I commend to you, Mr Davies, when you are next browsing the internet. It is a powerful global microfinance network providing debt finance to small ventures in the emerging world. A lot of money in this country sits in our banks earning very little, and it could be put to use supporting small ventures. Particularly in the localities with which people are affiliated, such as counties, towns or urban neighbourhoods, we may be able to consider unlocking money from personal bank accounts to provide £500 or £1,000 microfinance loans to support small companies. We need an innovative, entrepreneurial and early-stage company financing sector, and we need to reform our banks to allow one.

Oral Answers to Questions

George Freeman Excerpts

Tuesday 26th June 2012 Commons Chamber

[Danny Alexander]

The right hon. Gentleman refers to borrowing, but his Front-Bench team wants us to borrow tens of billions of pounds more, which is not the right response. If he studies the figures carefully, he will see that departmental spending is rising much less than was forecast, but, of course, the automatic stabilisers in the economy are operating. That is precisely the flexibility in our plan, which is tough on the structural deficit but supportive of the economy.

[George Freeman (Mid Norfolk) (Con)]

Has my right hon. Friend seen the latest Office for National Statistics figures, which show that unemployment is down 50,000 in the last quarter and over 800,000 new jobs have been created since we took office? Does he agree that this suggests that the Government’s programme of deficit credibility, public sector restraint and support for business is laying the foundations for a sustainable recovery?

[Danny Alexander]

I am grateful to my hon. Friend for that question. He is, of course, right to say that the recent figures show that unemployment has been falling, and that is good news, of course. Inflation is also coming down, which is good news for hard-pressed consumers.

Interest Rate Swap Products

George Freeman Excerpts

Thursday 21st June 2012 Commons Chamber

[Mr Jones]

My hon. Friend is absolutely right. We are talking here about small businesses that do not have experience of these banking products, and they should never have been led down this route without very strong warnings explaining what they were taking on. The business in my constituency that I have mentioned feels precisely that way, and the consequence of all this is that it is now paying double what it would have paid if it had kept to the more traditional lending arrangements it initially had with the bank.

This business estimates that it has spent between £150,000 and £200,000 in extra fees and extra interest—on the friendly advice of its bank. As a direct result of the interest swap loan, it has struggled to repay its loan as interest rates have fallen. The bank said there was nothing it could do to help. Eventually, after being contacted on a number of occasions, the bank finally allowed the business to convert to interest-only payments, but that comes with its own consequence, because the capital is not repaid, leaving a legacy that eventually has to be dealt with.

It can be argued that these are commercial business-to-business relationships, and that any small business should have taken further advice, and that would be my usual view. However, often these businesses were put under great pressure by their bank, which was aggressively selling the product in question and advising its customer to take it, and there was usually a wider business relationship as well, involving other banking facilities. There appears to me to be a clear conflict of interest, therefore. There is also the question of how suitable these products are for small businesses.

What action can businesses that find themselves in this situation take? As with any dispute of this nature, they can go to law, but as has been pointed out by many colleagues, the chances are that a business in this situation will not have the money needed up front to be able to take up a case against a bank, which is likely to be a huge multinational organisation. Also, as my hon. Friend the Member for Camborne and Redruth (George Eustice) rightly pointed out, there might be another conflict of interests in that some of the lawyers who might take on such litigation cases will have professional relationships with the bigger banks. That is also unhelpful.

[George Freeman (Mid Norfolk) (Con)]

I am grateful to my hon. Friend for giving way, not least as I now have the opportunity to add my name to those of the other Members supporting my hon. Friend the Member for Aberconwy (Guto Bebb) in raising this important issue. My hon. Friend has also given me the opportunity to highlight the case of Adcocks of Watton, a venerable old business in my constituency which has suffered terribly and whose case has recently featured on the BBC. Does he agree that whatever the whys and wherefores and the legal findings on the small print in the contracts, these wider cases are symptomatic of a deeper problem in our banking sector? The banks seem increasingly to have decided, in rural areas in particular, to make their money from charges and selling more glamorous derivative products, at the expense of backing small businesses and supporting growth on the high street, which is what we really want our traditional banking sector to do.

[Mr Jones]

I thank my hon. Friend for his comments. He is absolutely right to say that these products were not suitable for the type of business that he mentioned. As chair of the all-party group on town centres, I take a great interest in town centres and high streets. At this difficult time for them, the type of business that he mentioned can do without this type of additional pressure.

In the short time available to me, I wish to return to the recourse that businesses have and talk a little about the ombudsman and the Financial Services Authority route. Whether businesses take the ombudsman route, the FSA route or the route of going to law, one of the biggest problems small businesses face is that at the outset they have to divulge all the information about the particular case. They particularly have to divulge the information about the bank and a lot of information has to be gathered from the bank. As we have heard from hon. Members from across the Chamber, many small businesses feel that they are not in a position to do that because they feel that they will be prejudiced by that bank in relation to other loans and borrowing facilities that they hold with it. They find it difficult to move these things to other banks, because they may, for example, be in negative equity with property because of the economic situation.

So I wish to ask the Economic Secretary to the Treasury a number of questions. First, will she press the banks to give a clear and unambiguous commitment not to treat any complainant unfairly in other dealings between a business and a bank? Secondly, what steps will she take to persuade the banks to do the right thing at this point and support those small businesses that have been caught out by these products that have been inappropriately sold to them by the banks? Thirdly, will she write to the FSA to set out the concern of the House, to ask the FSA to expedite the work it is undertaking on this matter, to stress the importance of a thorough investigation with teeth and to ask it to look at the criteria that the ombudsman can use, because they are narrow at the moment for small businesses and the level of compensation is very low? I fear that if we do not do that at this point not only will the small businesses be disadvantaged, but we will also risk similar mis-selling scandals occurring in the future if the banks are not brought to account.

Oral Answers to Questions

George Freeman Excerpts

Tuesday 24th April 2012 Commons Chamber

[Mr Osborne]

The political opportunism and empty opposition of the Labour party was brutally exposed yesterday when the shadow Chancellor opposed the contribution to the IMF and the right hon. Member for Edinburgh South West (Mr Darling), a former Chancellor of the Exchequer and one of the few people to emerge with real credit from the last Government, completely contradicted him. Not only are the Opposition not taken seriously at home, they are not taken seriously abroad either.

[George Freeman (Mid Norfolk) (Con)]

Will the Chancellor join me in welcoming the announcement by GlaxoSmithKline of a £0.5 billion investment in advanced manufacturing in the north of England? Taken together with the £800 million investment by Tata in Wales and the IMF’s upgrade of our growth forecast by nearly 20%, does this not suggest that the Budget for business is working?

[Mr Osborne]

My hon. Friend is right to point to the GSK investment. The chief executive of GSK explicitly credited the falls in corporation tax and the patent box for that decision. We have also had the investment from Jaguar Land Rover in the west midlands, the great news of Nissan’s investment in Sunderland and steel-making has returned to Redcar.