Finance Bill

Debate between Mark Lazarowicz and Mark Hoban

Tuesday 3rd July 2012 Commons Chamber

[Mark Lazarowicz]

I want to say a few words in support of a bank bonus tax. I emphasise that I am supporting that not to bash the bankers, but to end the unacceptable face of banking in the form of an excessive bonus culture that is still far too widespread.

As I said earlier, the vast majority of people who work in financial services certainly do not get vast bonuses; many thousands of people in my constituency work hard behind bank counters or in bank offices serving customers, and they are often on modest incomes. Many have paid with changes in working conditions, while others have paid with their jobs, when redundancies flowed from the financial crisis caused by the irresponsibility of senior executives. We are not targeting those people; we want to do something about the small minority who are still getting excessive rewards.

A study published at the end of June showed that average pay for chief executives at 15 leading banks in the US and Europe increased by 12% over the last financial year. That may be less than the 36% increase in the previous year, but whatever the increase—it is about 50% when we add both increases—it is wildly out of line with falls in profits and share prices that have frequently characterised the sector. That is not performance-related pay in any sense that most people would understand and it is certainly not a performance that would justify what is effectively a further tax cut on top of a tax cut for the highest paid.

A tax targeted on bank bonuses is necessary because the existing attempts to curb the bonus culture have so obviously failed. That is the key point. The issue is not about saying that people should not be very well paid at the top of banks and financial institutions, but we want to get away from a position in which sums wildly in excess of anything that could be said to be deserved are paid as a matter of course. None of the steps taken so far has changed that culture, even in an era of financial crisis among the banks and beyond.

The second reason why we want a bank bonus tax is that it would raise money for some valuable purposes. The issue of jobs for young people affects all our constituencies. My constituency normally comes in the middle range of unemployment across the UK, and we have seen a substantial increase in youth unemployment. I certainly want that issue to be tackled in my constituency.

We are also saying that the bank bonus tax would be used to provide affordable housing. That, of course, would bring two benefits. First, it would bring more housing into the sector. Constituencies such as mine have to some extent, although on a lesser scale, experienced the same phenomenon as happened in London, where high rates of pay in certain sectors such as financial services have pushed up house prices and made it harder for people on lower incomes to get affordable housing, so this proposal would be important for those people as well. Of course, building affordable housing and new homes also gives a boost to the economy through providing new jobs in the construction sector and helps people who have been out of work because of the collapse of that sector in many parts of the country.

Our proposal of a bank bonus tax would not only tackle the excessive bonus culture but provide jobs for our young people and affordable homes, giving a boost to the construction sector. I therefore hope that the House will support it.

[Mr Hoban]

We have heard a series of slightly strange speeches by Labour Members. We have become accustomed to their belief that they left us a golden economic legacy, but the reality is that when they left office unemployment was higher than when they came into office. They seem to believe that the problems of youth unemployment started under this Government. At least the right hon. Member for South Shields (David Miliband) has the good sense to recognise that it is a long-standing and deep-seated issue and that its growth started under the previous Government.

Labour Members seem to forget that when they left office the deficit was out of control. We have tackled that and reduced the structural deficit by a quarter.

--- Later in debate ---

[Mr Hoban]

The challenge that we face is dealing with the economic legacy left by Labour, with the huge boom in financial services and the huge bust that followed.

We have heard Labour Members’ story that they presided over a golden age in the financial services sector. The hon. Member for Newcastle upon Tyne North (Catherine McKinnell) could not bring herself to admit that the scandal over LIBOR fixing took place between 2005 and 2008 or that the interest rate mis-selling that affected so many small businesses took place in the same period leading up to the financial crisis.

Labour Members deplore the bonus culture, but let us not forget that when they were in government, bonuses were paid out in the year that they were earned and paid out in cash. That was the hallmark of the age of irresponsibility that characterised their time in office. This Government are taking action to tackle the bonus culture. This Government have introduced rules to ensure that bonuses are not paid out in the year they are earned but spread over a three-year period, that they are not paid out in cash but in shares, and, crucially, that they can be clawed back where there have been problems in the business or where there has been wrongdoing. This Government have tackled the bonus culture in the UK whereas the previous Government let it run riot, and we have seen the financial consequences of their so doing.

[Mark Lazarowicz]

rose—

[Mr Hoban]

Perhaps the hon. Gentleman will apologise for the approach that his party’s Government took towards the bonus culture.

[Mark Lazarowicz]

The bank bonus tax was first introduced by the previous Government. In fact, I think that our Government should have done much more about the bonus culture in the banks in the past and was wrong not to do so. However, will the Minister at least accept that at no stage did his Government suggest any action whatsoever to tackle the bonus culture? He should not suggest that the responsibility lies only with Labour but accept his share of the responsibility as well.

[Mr Hoban]

We have taken action to tackle the bonus culture by ensuring that the interests of shareholders and management are aligned and that where there is wrongdoing bonuses can be clawed back. That is a significant change that has happened since this Government came to office. In the same way that we are remedying the regulatory failures left behind by the previous Government, particularly by the shadow Chancellor, the inquiry set up into the fixing of LIBOR will ensure that in future LIBOR is regulated to fill the hole in the Financial Services and Markets Act 2000 and ensure that there are criminal penalties for manipulating LIBOR—again, filling the hole left by the shadow Chancellor when he designed the regulatory system.

Royal Bank of Scotland (FSA Report)

Debate between Mark Lazarowicz and Mark Hoban

Monday 12th December 2011 Commons Chamber

[Mr Hoban]

My hon. Friend makes an important point. We have made it clear that we want to give the new regulatory organisations that independence, power, authority, discretion and judgment to get on with their job, so that we ensure that we tackle issues that need to be tackled and ensure that there is tough regulation where that is needed. For example, we are going to introduce powers for the Financial Conduct Authority to ban particular products—a power that has not been available so far. We are prepared to take those tough decisions and let the regulators get on with their job.

[Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op)]

One of the features of the RBS takeover of ABN AMRO was that lots of people warned against it at the time, and not just with hindsight—many people in the financial services and elsewhere warned of severe consequences. Was the decision to go ahead with that takeover about not just the role of Sir Fred Goodwin, but the fact that those who were meant to prevent him from doing such things did not do so? Was this not only about a question of regulation, but about a culture of takeover, acquisition, internationalisation and over-ambition which was at the heart of the problems of RBS and other places? What will the Minister’s proposals do to prevent that kind of attitude from affecting future managements and future banks when the current financial crises have passed?

[Mr Hoban]

The hon. Gentleman makes some important points. It is important that shareholders play a more active and engaged role in businesses in which they have a holding. My right hon. Friend the Secretary of State for Business, Innovation and Skills has commissioned John Kay to conduct a review of long-term interest in business and business investment. We need to strengthen corporate governance in boards, as they clearly were not sufficiently robust in their challenge to executives. One of the things that has happened in the FSA is that a much more robust approach is being taken to understanding and examining people who want to hold positions of significant influence in our major banks, including those who want to become board members. That is a good way not only of raising the quality of people in the boardroom, but of ensuring that they are robust enough to stand up against a dominant and aggressive chief executive officer.

Equitable Life (Payments) Bill

Debate between Mark Lazarowicz and Mark Hoban

Tuesday 14th September 2010 Commons Chamber

[Mr Hoban]

I am not familiar with the policies held by every single Equitable Life policyholder. There are 1 million policyholders with 1.5 million policies, and 30 million policy transactions went through during the period concerned. That is why it is important that Towers Watson, which has provided actuarial advice to the Treasury, should look at the calculation of losses.

I suspect that my hon. Friend’s constituents may be part of one group for whom there is a great deal of sympathy. They are the so-called “trapped annuitants”—people who bought with-profits annuities policies. I have raised that topic with Towers Watson, to try to understand the losses that people in that category of policyholder have suffered, so we can understand the right approach in terms of compensation. Many people from that group believe that they have suffered quite significant losses, and we need to ensure whether that is the case. At the moment, I am trying to do some more work to establish that.

[Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op)]

The hon. Gentleman knows that I have spoken up for Equitable Life members represented on both sides of the Chamber. One of the issues that concerns everyone is speed—when people are going to get some money paid out. I do not expect him to give a specific day, week or month, but can he give some indication of when policyholders might expect to see payments beginning? I suggested in an intervention a few weeks ago that it might be well into 2011; what does he think would be a reasonable time scale?

[Mr Hoban]

The hon. Gentleman makes an important point. Speed is of the essence, and we want to make sure that payments start to be made as quickly as possible. There is quite a lot of work to be done before we get to that point; I will say a bit about that work later on.