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The Economic Secretary to the Treasury (John Glen)
It is a pleasure to serve under your chairmanship, Mr Robertson. This has been the fourth such debate since I was appointed on 9 January. In each of those debates we have had a number of passionate contributions from Members across the Chamber. Today has been the same. We have had 10 speeches, each of which has contained compelling evidence of a situation where banks have failed small businesses. We must be honest and true to the reality of the experiences of the many people who have come to the House today to challenge me, as the Government’s representative in this area, over what can be done to achieve proper redress.
I pay tribute to my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) for his campaigning on the matter and to my hon. Friend the Member for Hazel Grove (Mr Wragg), who set out powerfully the case that justice needs to be blind, that it needs to be done and that it needs to be seen to be done.
My deliberations will reach a conclusion imminently; I have not been putting the matter off. As has been discussed, a series of pieces of work are being undertaken, two of which will report in the next few weeks, and I will then make a judgment about the best way forward. Financial sector fraud has had a severe impact on SMEs—we heard today about several individual cases in which lives have been destroyed and families ruined. This is not a subject that I treat lightly; I have been very focused on it over the past nine months.
Bob Stewart
The Minister is a decent and honourable man. Will he please, please concentrate very hard on getting redress for the people who have lost so much money and so much of their lifestyle?
John Glen
I am very grateful to my hon. and gallant Friend for his contributions, which I shall address in a moment. I will also set out some of the changes that have taken place, but let me say from the outset that the cases that have been raised today all demonstrate that, whatever mechanisms we have implemented—from the tripartite regulation of banks and the financial system to the redress schemes of recent years—the banks need to deal with the very real legacy of this issue. Simon Walker’s review for UK Finance must listen to what has been said today about that legacy, which will not go away unless the banks face up to and take responsibility for what happened in the past.
Tackling fraud is a Government priority. I want to reflect on a new theme raised today: access to justice and the mechanisms by which it is delivered. The decision to investigate a crime rests solely with law enforcement; I cannot make it myself. Like any Member of Parliament, I can refer a crime to the relevant chief constable, but they will take account of available resources and the likely eventual outcome. It is the chief officer of the local force who is ultimately responsible for such operational decisions, and it is the responsibility of police and crime commissioners to set the budget for local forces, which the chief officer must take into account. Forces can apply for special grant funding to help meet the cost of unexpected events, but I know from conversations with my hon. Friend the Member for Thirsk and Malton that there is sometimes a gap between the costs covered and the actual costs accrued. These are real matters that need to be addressed.
Mr Khalid Mahmood
The point is not whether the funds can be squeezed out of current budgets—police budgets are under huge stress at the moment. This is not a one-off; it is a long-standing issue about criminal activity by the banks, and resources need to be available to deal specifically with it.
Kevin Hollinrake
The Minister rightly mentions resources, which are always tight, but does he see a potential opportunity here? HBOS has not yet been fined for its scandalous abuses of 2007 and 2008, which tore apart many businesses. Would it be appropriate to use that fine to pump-prime a crime agency to deal with these issues? That agency could then be self-funding, because it would constantly be levying fines for abuses.
John Glen
We clearly need to find an effective mechanism to deal appropriately with the scale of the unaddressed challenges, and I will look at all options for that.
The City of London police have secured funding from the Home Office police reform and transformation fund to provide training for 600 investigators across police forces. There is also now a national register of fraud specialists; I acknowledge that the sentiment in this Chamber is that that is insufficient, but I should point out that it exists.
The regulatory framework has changed considerably since the events of the crash 10 years ago. I will not go through the whole history, but we have now established a network of robust and specialised financial regulatory bodies, each with a clear mandate and a set of responsibilities. However, I understand the concern about the reach of those bodies to deal with outstanding historical matters that our constituents are still raising with us. As part of that network, the Financial Conduct Authority is focused on ensuring that the conduct of firms and the interests of consumers are placed at the heart of the regulatory system and given the priority they deserve. That statutory objective will continue to guide the FCA’s work as it ensures that the highest possible standards are applied to the sector.
On SME lending, I am acutely aware that concerns remain about past cases of misconduct, the effects of which are still being felt today. There has been a great deal of justified anger within Parliament and beyond about cases such as those of the RBS Global Restructuring Group, HBOS Reading and the mis-selling of interest rate hedging products. I have been clear that the inappropriate treatment of SMEs by RBS GRG was unacceptable; I have made that point personally to the chief executive of RBS. The issues surrounding RBS GRG are firmly on my radar in the Treasury and I continue to work on the matter. The case of HBOS involved criminal activity, and it was right that those responsible were brought to justice. RBS and Lloyds, which now owns HBOS, have rightly set up compensation schemes for businesses affected by GRG and HBOS Reading.
My hon. Friend the Member for Stirling (Stephen Kerr) and other Members raised gagging clauses and the need for transparency. I am very sensitive to the pattern of settlements being offered that are effectively gagging clauses, such as in the case of Mr Shabir that the hon. Member for Cardiff Central (Jo Stevens) raised. That does not seem an honourable way of dealing with legitimate complaints, so I will examine the matter carefully before I report back.
I am glad that to say that in response to direct loss claims relating to the GRG scheme, 978 outcome letters have been sent to customers and £15 million has so far been paid out in redress, on top of £115 million in complex fees. Offers have been also made to more than 90% of customers within the scope of the HBOS Reading review, and more than 85% of customers have accepted.
I am acutely conscious of time, but I think that it is important that I give a succinct update of what I will be doing over the next few weeks. I firmly believe that by increasing the emphasis on individual accountability, the senior managers and certification regime will prove hugely important in improving conduct standards in the financial services sector and allowing regulators to deal effectively with cases such as that of RBS GRG. The regime will be extended to the insurance sector in December and solo-regulated businesses will come in next year.
I look forward to Simon Walker’s review because it will allow me to reach a conclusion about what needs to happen. The Government have done a lot of work, but I accept that more is required. I have spoken to Andrew Bailey, to the retired High Court judge Sir William Blackburne, to Ross McEwan, to the chief executive of Lloyds, to the chief executive of the Financial Ombudsman Service and to UK Finance, and I have met members of the all-party group. I am keen to give my hon. Friend the Member for Hazel Grove the opportunity to reply, but let me confirm that there will be action and that I will come back in a matter of weeks.