European Union (Withdrawal Agreement) Bill and Extension Letter

Debate between Steve Barclay and Charlie Elphicke

Monday 21st October 2019 Commons Chamber

[Stephen Barclay]

The answer is to listen to the Governor of the Bank of England, who says that passing the deal will be a boost to our economy, because a huge amount of investment is ready to be released if we get this deal. Business voices up and down the country want a decision and want the UK to move forward in a smooth and orderly way, and the best way of addressing the hon. Gentleman’s constituents’ concerns is to get Brexit done.

[Charlie Elphicke (Dover) (Ind)]

At the Dover frontline, we have long been ready to leave the European Union in any eventuality—deal or no deal—but we now need certainty, because uncertainty is dragging on and becoming economically damaging. Has the Secretary of State received any representations from the Labour party as to how it will assist with getting on with Brexit, or has he only ever heard, as I have, that it simply wants to cancel Brexit and defy the British people?

[Stephen Barclay]

I absolutely agree with my hon. Friend that we need certainty, and the Prime Minister’s deal offers exactly that. What we have from those on the Opposition Benches is more dither, more delay, and a desire for a second referendum, but no clarity on how long that second referendum would take.

UK’s Withdrawal from the EU

Debate between Steve Barclay and Charlie Elphicke

Thursday 14th February 2019 Commons Chamber

[Stephen Barclay]

I agree. That is already agreed by the European Union and the United Kingdom in its reflection in the political declaration. I have been discussing that issue with hon. and right hon. Friends in the alternative arrangements working group. I also raised it in my discussions earlier in the week with Monsieur Barnier, as I committed to do. I must be frank with the House that he was sceptical about the timescale, but we are actively discussing it. I simply point out that that is already accepted in the political declaration, and following the working group, we are exploring what can be done in terms of the timescale of that work.

[Charlie Elphicke (Dover) (Con)]

Is it now Government policy to take forward the Malthouse compromise that we have all read about? Will the Secretary of State take a fully worked-up proposal to the European Union as part of the negotiations?

[Stephen Barclay]

I can confirm that we have taken it forward to the European Union, in that I have raised it with Monsieur Barnier. I will be discussing it again with him. He has raised some initial concerns, but we are making that case and discussing it with him. It is already accepted by the European Union in terms of the political declaration and the workstream that will flow from that.

Banking Reform

Debate between Steve Barclay and Charlie Elphicke

Monday 29th November 2010 Commons Chamber

[Stephen Barclay (North East Cambridgeshire) (Con)]

It is a pleasure to follow the well-crafted speech of the hon. Member for Streatham (Mr Umunna). I, like him, welcome the chance to debate this important issue. I must preface my remarks by declaring, in the interests of transparency, that I too used to work in the industry. I worked on both sides of the regulatory fence—as a regulator in policy and supervision roles, and in the insurance and banking sector—prior to entering the House.

The depth of anger felt by our constituents is very much underestimated in the City and in Canary Wharf. Constituents might hear the technical jargon that is often used in such debates, but they are not confused by what went on: they know that senior bankers made big mistakes yet kept their massive payments; they are incredulous that the banks have returned so quickly to paying bonuses, as the hon. Member for Leeds East (Mr Mudie) said; and they are frustrated that the rhetoric of reassurance from the banks is so often at odds with their own experience as customers, particularly when it comes to the fair treatment of customers.

As my hon. Friend the Member for South Northamptonshire (Andrea Leadsom) pointed out, the motion is—dare I say it—poorly drafted when it states that “no action” has taken place. Indeed, the hon. Member for Streatham endorsed that view from the other side of the House. There has been a flurry of regulatory initiatives, such as more intensive supervision by the Financial Services Authority following its admission of regulatory failure over Northern Rock; and on derivatives, which the motion mentions, the capital requirements directive will subject contracts that are not cleared through a funding house to higher capital requirements. So, action is taking place. Likewise, the Government’s amendment rightly focuses on structure and, indeed, prudential policy, but it is silent on the key issue on which I shall concentrate: enforcement against individuals in banks.

Before doing so, I must say that so far the debate has been silent on the short-termism fostered by the pension fund management, and in particular on the pressure that that puts on chief executives, who risk being fired if they do not add shareholder value. In banks, people fear missing the targets set by their chief executive more than they fear the regulator.

[Charlie Elphicke]

Is not one of the serious issues with bonuses, and the point that my hon. Friend makes, that there emerged a kind of cool option, whereby bankers could receive a bonus but never lose out? Should the system not be reformed, so that bankers are able not only to receive a bonus, but to incur a loss? That would align them more with the return on whatever their bank is up to.

[Stephen Barclay]

My hon. Friend is absolutely correct, and I shall come on to consider the quantum of fines that have been imposed, because it makes very strongly the point that he makes.

On the regulatory structure, I am sure that my hon. Friend the Financial Secretary to the Treasury will talk about the changes that the Government are rightly making, because we need to be clear who is in charge in the event of failure. The tripartite system did not make that clear. However, I am sure that he, like the previous Chancellor in his White Paper, accepts that there is no single institutional model to insulate us from a future crisis.

The Government are also right to focus on prudential policy, but I caution against a reliance on policy itself, because we need only look at how often it has changed. We are already on Basel III, Solvency II and MiFID II —the markets in financial instruments directive—and the next debate is on commission in the retail sector, which has been debated for many years.

To give a specific example of the flaws in new policy, let me direct the House to “best execution”—one of the features of MiFID that required banks to shop around to obtain the best price. It will not surprise Members to discover that when banks shopped around they happened to find, in accordance with their written policy, that the best possible price just happened to be the one offered by their investment banking arm. Notwithstanding, therefore, the limits of new structures and policy, I believe a clearing house for derivatives would be a welcome step and a key component in addressing opaque financial instruments, such as securitisations, which stopped people obtaining the required visibility in respect of bank balance sheets and which was central to stopping banks lending to each other. Alan Greenspan’s claim that derivatives efficiently dispersed risk throughout the financial system ignored the concentration of risk in individual firms. We need only look at AIG to see the effect of that sort of concentration of credit risk.

A perhaps more technical point is that clearing houses should be more consistently valuing collatoralisation requirements across all banks. The reason for that is the different requirements that apply to UK and German banks, for example, in terms of their capital standards and liquidity requirements.

The most glaring issue that needs to be addressed is that of enforcement—in particular, the lack of transparency that goes to the heart of the sense among constituents that people have had a one-way bet. That was the point to which my hon. Friend the Member for Dover (Charlie Elphicke) alluded. To give an example, the failure of enforcement and the lack of a taxpayer’s guarantee has been material, particularly now that investment banks are not partnerships; I do not think that many partnerships would have leveraged their capital up to 40 times, as many of the banks did. Put simply, the alignment of interest between shareholders who provide the capital and employees who allocate it is not as strong as was historically the case. That is one of the features of a shadow banking system in which the banks had no long-term interest in the securitisations that they structured and underwrote. We would not allow such a thing with an aviation or pharmaceuticals company; they could not design and profit from products that they expected to fail, as Goldman Sachs did with the Abacus deal.

In the final minute allocated to me, I turn to the quantum of fines. To put the matter in context, no fine has been imposed on any senior executive at HBOS, HSBC, Barclays, Lloyds or Royal Bank of Scotland. The biggest three fines, applied to Northern Rock, amount to less than £1 million—that is, less than the chief exec earned as a bonus the year before. The fines were subject to 20% and 30% discounts as a result of early settlement and on the grounds of hardship. For that reason, our constituents feel that no one has been held accountable. They have seen people walk away with the profits without being held accountable for the things that went wrong. As the Minister looks at the structure and policy, we also need to learn the lessons of why enforcement against individuals has failed.