Oral Answers to Questions

Guy Opperman Excerpts

Tuesday 9th December 2014 Commons Chamber

[Danny Alexander]

I beg to differ with the hon. Gentleman. The policy of increasing the income tax threshold to £10,600, which was put on the table by my party the Liberal Democrats back in 2010, is putting £825 back into the pockets of 26 million working people on low and middle incomes. Improving work incentives and earnings for people in work is something he should celebrate and everyone in the House should welcome.

[Guy Opperman (Hexham) (Con)]

Is the Chief Secretary aware that in the north-east of England we have the fastest rate of growth in private sector businesses in the autumn quarter and the most tech start-ups outside of London? Does that not show that the long-term economic plan is beginning to work?

[Danny Alexander]

Actually, I was not aware of either of those facts, but they do not surprise me because of the entrepreneurial spirit and the brilliant businesses we have in the north-east of England. I believe it is the only region of this country that is a net exporter to the rest of the world. Through the measures we are putting in place, including the investment in infrastructure, we need to continue to support that part of the country.

Financial Conduct Authority Redress Scheme

Guy Opperman Excerpts

Thursday 4th December 2014 Commons Chamber

[Guto Bebb]

I entirely agree. The argument has been that as the reviewers are independent the FCA can have full trust in them, but in view of the inequitable outcomes reported to us and the information provided by the whistleblower who used to work in the independent review team on RBS, there is clearly much merit in the appeal process that I have identified as a way forward. I cannot think of any arguments against such a simple way forward.

[Guy Opperman (Hexham) (Con)]

I suggest that there is middle ground on that point. Ministers would probably be nervous of encouraging excessive litigation and the escalation of legal costs, but it is not beyond the wit of man for an independent mediator to be brought in to address key cases, as is tried in other parts of the dispute resolution system.

[Guto Bebb]

I accept that point, but I stress that if an independent reviewer of another bank has been approved by the FCA—the scheme is a voluntary, not a judicial one—I seriously do not think that going down such an avenue would create cost. The FCA’s current view is that if a client is not happy with a decision made by a bank and its independent reviewer, then it can resort to law, but the whole reason for establishing the redress scheme was to save small businesses that cannot afford to go to law.

I want to talk in detail about consequential losses. When the redress scheme was announced back in 2013, it was made very clear that the scheme was for consequential losses and interest payable. The Financial Services Authority, as the FCA then was, highlighted that consequential losses would be determined by reference to the general legal principles relevant to claims in tort or for breach of statutory duties.

I have already given the figures. It is more than acceptable and very welcome that £305 million has been paid out in relation to interest at 8%, but only £5 million has been paid out in consequential loss claims. Part of the redress scheme has therefore completely fallen down. I have seen case after case of well-argued and reasonable claims for consequential losses from businesses acknowledged to have been mis-sold and as a result to have lost millions of pounds in turnover, but when a detailed claim that will have cost a significant amount is made the response from the banks is a simple no.

--- Later in debate ---

[Mr Russell Brown (Dumfries and Galloway) (Lab)]

I congratulate the hon. Member for Aberconwy (Guto Bebb) on what can be classed as nothing less than sheer determination in continuing the battle for justice for so many businesses the length and breadth of the country.

I would like to think that we could use the words fair and equitable today, but this issue is anything but. I suspect that by the end of my speech I will have come to a point where I support the hon. Gentleman and the all-party group. We have all witnessed a lack of consistency and a deplorable lack of transparency. We look down on a situation that far too many business people have experienced, bringing them to their knees. Many have been broken. The fact that there is no appeal process is, quite frankly, unbelievable. People have been put in a “take it or leave it” situation and their plight is just not acceptable in this day and age.

The hon. Gentleman referred to the 10-year cap. This is a product that no one wanted: it was not sold to people, but forced on them. The campaigning group Bully-Banks yesterday put out a press release that sums it all up. It said that more than 90% of sales reviewed by the banks had been mis-sold. There is no argument: the banks’ conduct in selling these products was misconduct. Nothing could be clearer.

The first contact I had relating to this whole sad saga was about six years ago when a constituent came to see me. I have to admit that, not coming from a financial background, I had great difficulty in understanding what he was telling me. I have shared this experience with others in the House before. This was a guy who, along with his father, had worked for more than 20 years in the leisure park industry. Their bank, Barclays bank, had decided to set up a specific arm to offer products and loans to businesses for investment. After an approach from the bank, they decided to take out what turned out to be a hedge. After some time, they were then encouraged to change product. Some of the penalties involved with that product resulted in pressure to meet payments, and investment did not go into the business in the way they thought it would. They went from owning four leisure parks—one in my constituency and three in England —to selling them off one at a time, just to meet the bank’s demands.

Eventually, my constituent came to see me to make me aware that he was now under real pressure. I asked him whether he needed me to contact the bank, but that was the last thing he wanted. He was afraid to contact the bank and make it aware of just what a desperate plight he was in, in case it closed in on him.

[Guy Opperman]

Does the hon. Gentleman agree that the reason the FCA redress scheme needs reform is that there is no alternative? Like the hon. Gentleman’s constituents, my constituents who ran a bed and breakfast or a small and medium-sized enterprise could not go to the bank because of that fear. There is also an inability to go to law, because that would mean taking on a very large institution with deep pockets that they could not possibly hope to take on properly. The only way they can go forward is through the redress scheme, which has its deficiencies.

[Mr Brown]

I thank the hon. Gentleman for that intervention. As I continue this sorry tale, he will see that the business went into litigation on this issue.

--- Later in debate ---

[Sir Edward Garnier (Harborough) (Con)]

I begin, as have others, in congratulating my hon. Friend the Member for Aberconwy (Guto Bebb) on initiating this debate. It is sad, as he said, that this is the second or third time he has had to bring this matter to our attention either on the Floor of the House or in Westminster Hall. He has plugged on, and my constituents and I are very grateful to him.

I have no doubt that all who contribute to the debate will mention constituency cases. It is right for us to do so. I had originally intended not to mention my constituents’ names or the name of the bank with which they had to grapple because I thought it unfair, but since the hon. Member for Newcastle-under-Lyme (Paul Farrelly) and other hon. Members have already mentioned the bank and because I think the bank is big enough to look after itself, I shall not shrink from doing so.

My constituents, Bob and Stephanie Hamblin, are directors of a small property company called Hybeck Estates, which they founded in the early 1990s. Their companies had banked with RBS for many years since the 1980s, and they entered into first one and then a second lending arrangement. Sixty years ago, it might have been seen as somewhat unorthodox, but in the conditions that operated in the 1990s and the early part of this century, such arrangements have become increasingly usual, if not wholly orthodox.

All went well until about 2006, when the bank decided that the Hamblins and their company needed to restructure its existing hedging arrangements, and the bank recommended replacing the second loan arrangement with a swap, a collar or a knock-in collar on the basis that this would reduce the company’s quarterly premium payments. On 16 February 2006, the bank sold the Hamblins a £3.5 million, 10-year amortising base rate collar.

In August 2012, the company submitted a complaint regarding the sale of the replacement collar in the context of the interest rate hedging product mis-selling review, and submitted further written evidence on 28 January this year. The complaint was essentially that the replacement collar was unsuitable for the company because of the risks involved—risks that were never adequately explained by the bank. The bank should have allowed the company to continue with the protection of its earlier arrangements, which would have protected it against the possibility that interest rates would rise, without exposing it to the risks inherent in the new replacement collar.

On 1 July this year, the bank wrote a letter to the company, containing the bank’s provisional offer of redress. It acknowledged that in the course of the sale of the replacement collar, the explanations it had provided to the company, initially in a crowded pub,

“in respect of the features, benefits or risks of alternative products did not comply with the standards agreed with the FCA.”

The bank’s failure to explain the

“features, benefits or risks of alternative products”

also extended to the appropriate alternative strategies, which were not explained at all. The company’s desire for premium reduction could have been satisfied in a number of simple and risk-free ways—but they were not. The risks were simply not explained. The second cap—the earlier lending arrangement—exposed the company to no risks at all, but the new one exposed it to potential losses of more than £950,000 in the event of interest rates falling. That risk was not disclosed to the company; neither was the fact that, as a consequence of the liability incurred via this collar, the company’s flexibility to refinance with another bank would be seriously impaired.

It seems reasonable to draw the inference—I am sure others would concur on the basis of their own constituency experiences—that the bank’s poor sales practices were driven by the additional profit it could make by putting the company into this new vehicle. Derivatives pricing experts calculate that the expected net gain to the bank on the day of the transaction was over £43,000, and it incidentally cost the Hamblins and the company £0.33 million to extract themselves from it this year. The replacement collar, furthermore, is in serious breach of the 7.5% rule announced by the FCA at the outset of the review. This collar exposed the company to potential losses of very nearly £1 million—equivalent to 27% of the amount notionally hedged, which is almost four times higher than the stated 7.5% maximum.

Given these circumstances in which the bank has acknowledged that it neither explained the risks of the new collar, nor offered any of the simple premium-reducing strategies outlined above, the bank’s conclusion that the company

“would have chosen a vanilla collar in any event”

is clearly absurd.

Here we have a company that has been in the property business for some little while, and a director of that company who knows something about—indeed, quite a lot about—the financial services industry, but is not an expert on hedging. To suggest that he would expose himself, his wife and his company to a product that would place them in such dire jeopardy is absurd. Nevertheless, the bank has concluded—through its internal review process, which has been validated by the FCA’s independent review system—that they are not entitled to redress. The bank has made an admitted mistake and has caused admitted consequential loss, but it has said “You would have bought one of these anyway, so we will not pay you any compensation.”

[Guy Opperman]

I am following the case of my hon. and learned Friend’s constituent with interest, because it is very similar to cases that I have encountered in my constituency. If, like me, my hon. and learned Friend has met senior managers at RBS—the bank that is involved in both our constituents’ cases—he will know that while they are very keen to resolve these cases, the middle managers who are dealing with the individual claims that are being assessed seem incapable of accepting the principle that they were at fault and are to blame. The Government ought to make it clear to senior management at RBS that they must ensure that there is true accountability in their own organisation.

Autumn Statement

Guy Opperman Excerpts

Wednesday 3rd December 2014 Commons Chamber

[Mr Osborne]

Yes, I will. When it comes to these Pacer trains—[Interruption.] Labour Front-Benchers had all those years in which they could have got rid of the Pacer trains. They complain about them now, but what about all the endless Labour Transport Secretaries who did nothing about them? This is happening now, with a Conservative Chancellor, a Conservative Transport Secretary, and a Conservative Member of Parliament for Harrogate and Knaresborough.

[Guy Opperman (Hexham) (Con)]

People in the north-east will welcome the news about the NHS, hospices—including those in my constituency—carers, who will set great store by the Chancellor’s announcement, and home buyers. I also welcome the Chancellor’s comments about northern airports and air passenger duty. May I urge him to revisit the north-east in the spring, when we will introduce him to a region that has the most technology start-ups outside London, and has experienced the fastest rate of growth in private sector businesses over the last quarter?

[Mr Osborne]

Of course I am always very happy to visit the north-east. I was there quite recently, and will be going again very shortly.

There have been a number of great pieces of news for the north-east this week. There are the improvements to the A1 around Newcastle and Gateshead and up to Ellingham, and the commitment to look at dualling beyond that. There are the improvements that we are looking at for the A69 and the A66, which is something that my hon. Friend has raised with me personally. There is also the big investment in science in the north-east. I am particularly pleased to support investment in the brilliant work that Newcastle university does on ageing.

Money Creation and Society

Guy Opperman Excerpts

Thursday 20th November 2014 Commons Chamber

[Zac Goldsmith]

That is a really important point. There is a move towards such lending, but unfortunately it is only a fringe move that we see in the credit unions, for example. It is much closer to what original banking—pure banking or traditional banking—might have looked like. We even see it in some of the new start-ups such as Metro bank; I hesitate to call it a start-up because it is appearing on every high street. Those banks have much more conservative policies than the household-name banks that we have been discussing.

Most people understand the concept of fractional reserve banking even if they do not know the term—it is the idea that banks lend more than they can back up with the reserves they hold.

[Guy Opperman (Hexham) (Con)]

My hon. Friend mentioned Metro, whose founder is setting up a bank—in which I should declare an interest—called Atom in the north-east. It is one of some 22 challenger banks of which Metro was the first. I missed the opening of the debate, so I have not heard everything that has been said, but I do not accept that it is all doom and gloom in banking. Does he agree that these new developments are proof that the banking system is changing and the old big banks are being replaced with the increased competition that we all need?

[Zac Goldsmith]

I certainly agree with the sentiment expressed. I am excited by the challengers, but I do not believe that it is enough. Competition has to be good because it minimises risk. I know that my hon. Friend the Economic Secretary has dwelt on and looked at this issue in great detail.

Even fractional reserve banking is only the start of the story. I will not repeat in detail what we have already heard, but banks themselves create money. They do so by making advances, and with every advance they make a deposit. That is very poorly understood by people outside and inside the House. It has conferred extraordinary power on the banks. Necessarily, naturally and understandably, banks will use and have used that power in their own interests. It has also created extraordinary risk and, unfortunately, because of the size and interconnectedness of the banks, the risk is on us. That is why I am so excited by the challengers that my hon. Friend has just described. As I have said, that is happening on the fringe: it is right on the edge. It is extraordinary to imagine that at the height of the collapse the banks held just £1.25 for every £100 they had lent out. We are in a very precarious situation.

When I was much younger, I listened to a discussion, most of which I did not understand, between my father and people who were asking for his advice. He was a man with a pretty good track record on anticipating turbulence in the world economy. He was asked when the next crash would happen, and he said, “The last person you should ask is an economist or a business man. You need to ask a psychiatrist, because so much of it involves confidence.” The point was proven just a few years ago.

The banking system and the wider economy have become extraordinarily unhinged or detached from reality. I would like to elaborate on the extraordinary situation in which it is possible to imagine economic growth even as the last of the world’s great ecosystems or the last of the great forests are coming down. The economy is no longer linked to the reality of the natural world from which all goods originally derive. That is probably a debate for another time, however, so I will not dwell on it.

Income Tax

Guy Opperman Excerpts

Wednesday 5th November 2014 Commons Chamber

[Mr Gauke]

But it was the OBR that signed off the numbers in the March 2012 Budget. The hon. Gentleman seeks to pray in aid both the OBR and the IFS, but their position has been supportive of the Government. The fact that he suggests there is no behavioural impact here—that appears to be his position—is absolutely absurd.

Let us set out a few facts. As my right hon. Friend the Member for Gordon (Sir Malcolm Bruce) mentioned, the previous Government had a top rate of 40p for all but 36 of their 4,758 days in office. It is also the case that the richest in our society now pay more than at any point under the previous Government, with HMRC statistics showing that the top 1% is expected to pay 27.4% of all income tax this year. At the same time, 25 million working people are paying less income tax than they did in 2010. It is of course right that those with the broadest shoulders bear the greatest burden, and I will set out our actions in a few moments.

Consideration must also be given to ensuring that the United Kingdom is competitive in attracting wealth-creating individuals to locate and stay in this country, which is a point that even the previous Labour Government recognised for most of their time in office. Making our country an attractive place in which to invest is something that this Government are committed to doing. Indeed last week, the World Bank published its 2015 Ease of Doing Business report, placing the UK eighth overall and sixth among the OECD countries.

As I have already noted, the right hon. Member for Edinburgh South West (Mr Darling) announced in his 2009 Budget that the additional rate of income tax would come into effect in April 2010. It was accepted by that Government that there would be behavioural changes as a result of this policy. To be specific, not including forestalling, they accepted that it would result in revenues from the additional rate being around £4 billion lower than the static cost of the change. That is an important point. The 2009 analysis that Labour produced suggested that it would raise £2.5 billion, with £4 billion having been lost because of behavioural changes. Those behavioural changes are now being ignored by Labour, which is extraordinary.

The previous Government told us that the increase from 40p to 50p for incomes above £150,000 would raise approximately £2.5 billion a year. But the evidence suggests that it fell short of even that, raising at best £1 billion and at worst less than nothing. That is the conclusion not of my party, but of the HMRC report, which was laid before the House by the Chancellor alongside the Budget in 2012. The report lays out thorough and compelling evidence on the impact of the 50p rate. It showed that the additional rate was distorted, inefficient and damaging to our international competitiveness and that the previous Government greatly understated the impact of the additional rate on the behaviour of those affected. It has been criticised by business and has damaged the UK economy. The Government have decided not to stifle the economy further, but to show that we are open for business, which is why we reduced the rate to 45p.

[Guy Opperman (Hexham) (Con)]

Lower taxes allow more businesses to be set up and create employment, and we are beginning, slowly but surely, to see that in the north-east. I am sure that the Minister will wish to celebrate with me the fact that the north-east has seen the highest rise in the value of exports, the fastest rate of private sector growth in the past quarter and the most tech start-ups of any part of this country outside London.

[Mr Gauke]

My hon. Friend makes a good point. He also made a good point when he intervened on the Prime Minister earlier today. I am delighted that he has again had the opportunity to talk about what the Government are doing and the benefits that are being spread across this country.

The move to 45p, based on the central estimate of the taxable income elasticity, only cost £100 million a year, which is a small price to pay to regain some of the international competitiveness that we lost as a result of the previous Government’s decisions. The additional rate not only harmed our economy and contributed little to the Exchequer, but had significant impacts on our international competitiveness. It placed us in the unenviable position of having the highest statutory rate of income tax in the G20, which is precisely what we do not want when we need investment, jobs and long-term economic growth. By creating a competitive tax environment, this Government’s actions to reduce the additional rate have unambiguously been in the UK’s best interest. A return to the 50p rate would be to ignore the long-term interest of this country.

As a Government, our tax policy has focused on three broad areas: it has ensured that people play by the rules and pay the taxes they owe; that the highest earners make a fair contribution without damaging this country’s competitiveness; and that we lower taxes for hard-working people. I am proud that we have taken concrete action on all three fronts in every single Budget while delivering the fastest economic growth in the G7. This Government’s policies have repeatedly increased the tax contribution of the wealthy, creating a fairer tax system in which those with the broadest shoulders bear the greatest burden. We increased the rates of capital gains tax to 18% and 28%, ending the situation in which a director could pay a lower rate of tax than their secretary. We have introduced a stamp duty rise that will raise around £200 million a year from those who buy properties worth more than £2 million, and we have been particularly harsh on evasion and aggressive tax avoidance. For example, at Budget 2011, we introduced the disguised remuneration legislation, which raises £3 billion and protects almost £3 billion over the next five years, mainly from higher and additional rate taxpayers—a policy, by the way, that Labour voted against.

The loopholes that were closed at various Budgets mean that we have around three quarters of a billion pounds more coming into the Exchequer. Our policies do not stop there. We have also imposed a 15% rate of stamp duty land tax on residential properties bought through companies; introduced a cap on certain unlimited reliefs to limit their excessive use to reduce taxable incomes; and introduced the general anti-abuse rule. We are also requiring that tax is paid up front, preventing the richest from gaining unfair cash flow advantage by delaying tax payments. As we recognise that tax systems no longer operate on just a national level, we have signed information-sharing agreements with many countries to tackle overseas tax evasion, ensuring that no one can get away with evading payment of the tax they owe.

Oral Answers to Questions

Guy Opperman Excerpts

Tuesday 4th November 2014 Commons Chamber

[The Chief Secretary to the Treasury (Danny Alexander)]

The hon. Gentleman raises an important point about child poverty, which under this Government is down. That does not in any way reduce the need for us to continue taking steps to reduce child poverty, the most important of which is having an economy that creates jobs. In the end, for most people the best route out of poverty is to get back into employment.

[Guy Opperman (Hexham) (Con)]

May I urge the Chancellor to meet me and my hon. Friend the Member for Carlisle (John Stevenson) so that we can make the case for including the dualling of the A69 in the autumn statement? Hopefully such a meeting could be before the autumn statement takes place.

[Mr George Osborne]

My hon. Friends the Members for Hexham (Guy Opperman) and for Carlisle (John Stevenson) have made a strong case for improving transport links in the north of England and between the north-east and Carlisle. They have already brought the A69 to my attention, and I would be happy to have that meeting.

Oral Answers to Questions

Guy Opperman Excerpts

Tuesday 2nd September 2014 Commons Chamber

[Priti Patel]

I thank my hon. Friend for his warm welcome and kind remarks. This Government scrapped the previous Government’s fuel duty escalator, which would have increased fuel duty by 1p per litre above inflation from 2011 to 2014. Were it not for this Government’s very clear actions on fuel duty since 2011, current pump prices would be 16p per litre higher and would be nearly 20p per litre higher by the end of this Parliament. I know that my hon. Friend’s constituents and businesses in Worcester will support the clear action that this Government have taken.

[Guy Opperman (Hexham) (Con)]

T1. If he will make a statement on his departmental responsibilities.

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

The core purpose of the Treasury is to ensure the stability and prosperity of the economy. That is delivered by our long-term plan. I can tell the House that the plan will be further expanded in the autumn statement, which I will deliver on Wednesday 3 December.

[Guy Opperman]

I thank the Chancellor for that answer. This summer, the Labour party set out a summer spending plan of some £21 billion of extra spending a year. I suggest this further debt will make our constituents wonder whether it has actually learned anything from bankrupting this country under Blair and his successors. Has my right hon. Friend assessed the impact on the public finances of such a disastrous decision?

[Mr Osborne]

My hon. Friend is right, of course. The Treasury’s own independent analysis of the Labour party’s approach to public spending shows that it could borrow over £166 billion more in the next Parliament. Labour Members have started to contribute to that with a £21 billion shopping list this summer. Perhaps the shadow Chancellor can get up and explain how he is going to pay for it.

Oral Answers to Questions

Guy Opperman Excerpts

Tuesday 24th June 2014 Commons Chamber

[Andrea Leadsom]

The hon. Gentleman will know that the great recession in 2008-09 that the previous Government presided over left banks in an absolute mess, and it takes a very long time to recover from such a devastating position. The banks are still trying to sort out their balance sheets, and net lending has been down. It will take time to recover, but this Government are putting measures in place to create new access to finance from all sorts of different lenders. I was delighted yesterday to support the credit union movement on its 50th anniversary with a call for evidence on how we can expand that area of activity for.

[Guy Opperman (Hexham) (Con)]

I draw attention to my entry in the Register of Members’ Financial Interests. Does the Minister agree with me that, as well as stabilising and reforming the banking system, one of the key aspects of the long-term economic plan is the creation since 2010 of many new local banks that provide alternative and expanded lending to retail and business customers?

[Andrea Leadsom]

Yes, I absolutely agree with my hon. Friend. The Government want more competition and diversity in the banking sector, which is why we asked the old Financial Services Authority to review the barriers to entry for banks, why we legislated to give the Financial Conduct Authority strong competition powers, and why we created the payment systems regulator to look at fair access to payment systems.

Financial Services Authority and Connaught Income Fund

Guy Opperman Excerpts

Wednesday 7th May 2014 Westminster Hall

[Alun Cairns (Vale of Glamorgan) (Con)]

It is a pleasure to serve under your chairmanship for the second time today, Mr Brady. I welcome the Minister to her role, and welcome her involvement in this important issue.

As you can see, Mr Brady, this debate has drawn much attention from colleagues and investors alike. Naturally, investors want explanations of what went wrong and why. Colleagues who have looked into the case recognise the scale of the wrongdoing, and want to know how it happened and about any recourse available to their constituents.

This issue has developed over some time, but this is the first time we have had the opportunity to raise concerns about it and ask questions on the record. The Connaught Income Fund was launched in April 2008. It was promoted and operated by Capita Financial Managers Ltd, which was also the custodian of investors’ assets. Its original name was the Guaranteed Low Risk Income Fund, series 1—something that proved not to be the case. It was a UK-based unregulated collective investment scheme. By definition, these funds are not subject to direct regulation. However, elements of the process and funds were regulated, which means that the regulatory framework and responsibilities are not necessarily straightforward—in fact, they are complex—and that there is a responsibility on the Financial Services Authority.

[Guy Opperman (Hexham) (Con)]

I congratulate my hon. Friend on securing this important debate. Both he and I have fought Capita for more than three years following the Arch Cru disaster, which entailed similar losses, and several constituents of mine lost money through Connaught. Does he agree that it is appropriate to invite the Minister to seek the police’s involvement and to find out whether an investigation should take place?

[Alun Cairns]

I pay tribute to my hon. Friend’s work on Arch Cru as secretary of the all-party group on the Arch Cru investment scheme, and on his involvement in issues relating to Capita. He raises pertinent points that I will come on to, so I am grateful for his contribution.

--- Later in debate ---

[Alun Cairns]

I am grateful for my hon. Friend’s question. I do not have the answer, but he points to a general defensive approach that has been taken by the FSA and the FCA. We are seeking greater transparency to get the answer to many such questions, so that we can identify where the responsibility lies.

Perhaps Mourant became aware of some of the issues that have now become apparent. Instead, Capita passed responsibility on to Blue Gate Capital Ltd, which agreed to the appointment in September 2009.

George Patellis was appointed chief executive of Tiuta in April 2010. He became concerned about the quality of the financial reporting at the company. In January 2011, a shortfall of at least £20 million was identified, suggesting insolvency. He also became aware that Tiuta had retained the proceeds when some loans had been redeemed, and of Land Registry DS1 inconsistencies.

Mr Patellis appointed BDO to investigate in January 2011, and it confirmed his initial concerns. He then resigned and alerted the FSA to the situation, to report financial irregularities at Tiuta. As a result, a case was opened by the FSA and supervisory engagement with Tiuta began. The FSA required Tiuta to engage investigative accountants to monitor its financial performance. That may relate to what my hon. Friend the Member for North Herefordshire (Bill Wiggin) mentioned. Tiuta was responsible for reporting to the FSA monthly. However, instead of undertaking independent investigations, BDO, which had secured the role, relied on information supplied by directors of Tiuta, which then produced a series of reports that persuaded the FSA that the firm should be allowed to continue to trade.

In May 2011, the FSA issued a consumer alert because marketing materials indicated that the fund was low risk, and that returns were guaranteed. The marketing material was amended for independent financial advisers, and Blue Gate was made aware of the issues with the security of the loans. In March 2012, Blue Gate notified the 1,200 investors that the fund had been suspended due to an inability to pay quarterly interest payments to investors. Tiuta was placed in administration in September 2012.

It is suggested that investors face losses of at least 70% of the £106 million that was invested. In addition, investors have to date lost up to £20 million in unpaid quarterly distributions. Since then, a number of MPs have written to the FSA—and now the Financial Conduct Authority—and the Treasury to establish whether there is a regulatory responsibility to investigate the fund, and whether there is any potential for compensating investors.

Having considered the background, I will make a number of points and ask a few questions of the Minister. Although I recognise that the Connaught fund was an unregulated investment scheme, various elements were regulated, as I mentioned at the outset. The advice process was regulated. I am not suggesting for a minute that advisers were responsible for the failings and misappropriation of funds. There is a need, however, to clarify where their responsibility ends.

In fairness to IFAs, they depend on the key financial documents, which were not accurate or adhered to, yet questions should be asked about why unregulated funds were recommended to investors in the first instance. The time for advice on such funds is clearly very limited. What did Capita know in August 2009 when it sought to pass on its responsibilities? What action did Capita take to ensure proper management of the fund at earlier stages? If Capita had doubts or questions, why was that not communicated to investors? Was Capita’s letter to investors misleading, or did Capita withhold information indicating there was unsecured and unauthorised lending from the fund?

[Guy Opperman]

Is it not incumbent on the Minister to clarify the legal position of investors on that specific point? If investors are to sue for their loss, they need to know the date of the knowledge of the fund’s decline. Secondly, they need to know the state of the assets at that time and the extent to which the FCA will assist in the recovery.

[Alun Cairns]

There could clearly be a statute of limitations that affects investors, on which I hope the Minister can offer advice.

There was obviously a gap between Capita’s original letter of 20 August 2009 advising investors of its intention to pass responsibility to Mourant and the letter of 24 September advising that Blue Gate would become responsible. Should Capita have suspended the fund when it realised that it was not being managed in accordance with the financial information documents?

As we have discussed, this is not the first time that Capita has needed to answer questions about its role. As the authorised corporate director of Arch Cru, Capita was forced to compensate investors to the tune of £32 million. Terms, how that sum was reached and Capita’s responsibilities and failings have still not been disclosed, but a sum of that size suggests some form of culpability.

Questions should be asked about the actions taken by the FSA, and now the FCA. Some investors believe that the FSA and FCA have taken little action, but the Minister’s predecessor, my right hon. Friend the Member for Bromsgrove (Sajid Javid), advised me in general terms of some of the work they undertook. That needs to be published to reassure people and to allow further questions to be raised about what could have happened.

Oral Answers to Questions

Guy Opperman Excerpts

Tuesday 29th April 2014 Commons Chamber

[Mr Gauke]

What this Government will do is continue to stick to a long-term economic plan that ensures that we are competitive, that we reduce the deficit and that we put in place the conditions for sustainable growth.

[Guy Opperman (Hexham) (Con)]

Cutting taxes surely promotes growth and investment and produces the jobs that we see in the north-east, where manufacturing is up and fuel duty is frozen. More specifically, last week I went on to the banks of the Tyne and saw 1,000 people working on shipbuilding for the first time in a very long time.

[Mr Gauke]

My hon. Friend is absolutely right. This is a Government who are determined to ensure that the recovery is broad based, not just in terms of sectors, but across the country. His experience demonstrates that we are making progress on that.