Independent Financial Advisers

Andrea Leadsom Excerpts

Wednesday 20th October 2010 Westminster Hall

[Harriett Baldwin]

My hon. Friend raises an important point, and I will come to that.

The FSA has come up with proposals to address the issue. They are close to final, and the board is likely to take a decision in December. Under the current plans, the proposals will be implemented by the end of 2012. As they stand, the proposals are known as the retail distribution review. As colleagues have suggested, they raise real questions about the role of regulation and the laws of unintended, and indeed intended, consequences in terms of regulation.

[Andrea Leadsom (South Northamptonshire) (Con)]

Is it not also true that not only will there be a reduction in the number of IFAs, but many of those who have been in the industry for a long time, who are very experienced and who understand the market and customers very well, will unfortunately inadvertently fall foul of the regulations?

[Harriett Baldwin]

My hon. Friend, who is also a member of the Treasury Committee, makes an extremely important point, which I will mention in a moment.

The impact of the proposals has been brought to my attention by a range of independent financial advisers, who are also constituents. Acting independently of one another, they all came to see me in my advice surgeries. Under the RDR proposals, each IFA should pass a set of exams and then spend at least 35 hours per annum on continuous professional development. Hon. Members should note that the requirement is 35 hours and that 34 hours would not be acceptable. IFAs also need to obtain a statement of professional standing from an accredited body. Someone who, today, is a qualified and approved IFA but who does not meet those requirements by 31 December 2012, will no longer be able to practise his or her profession, despite many years’ experience.

Draft EU Budget 2011

Andrea Leadsom Excerpts

Wednesday 13th October 2010 Commons Chamber

[Andrew Percy]

Indeed, as my hon. Friend says, there is no incentive for any sort of reform.

Those who support the budget increase have made great play of the fact that the amount spent on the common agricultural policy has reduced. It has indeed reduced: it is down to about 42%. However, even without the fraud and mismanagement that we all know about, the OECD has warned that the real cost of the CAP is £125 billion a year, so we could go a great deal further. The hon. Member for Glasgow South West mentioned the fact that we are now in the strange situation whereby farmers are effectively farming subsidies. However, I have talked to many of the farmers in my constituency, and I have to say, “If only they were.” Instead, we are asking them to manage environmental schemes, and at the very time when we are becoming more and more reliant on imported food.

I mentioned in an intervention on the shadow Minister that we cannot get away from the fact that the EU budget has not been signed off for some 15 years, and there is no doubt that it will not be signed off again, as my hon. Friend the Member for Daventry (Chris Heaton-Harris) said. Like other right hon. and hon. Members who are present, I am expected to go to my constituents and tell them that we would like to take more of their money to put into an institution that cannot guarantee that the money will be spent where it says it will be spent. I am not prepared to do that on behalf of the good people of Brigg and Goole who sent me here and whom it is my privilege to serve.

There is a broader issue, about the relationship between this country and the European Union, which touches on people’s engagement with and perception of the European Union, which was mentioned in earlier speeches. I note that Open Europe, which is a very sound pressure group, conducted a poll that found that 54% of people agreed with the statement that the Government should drop the Lisbon treaty and not try to ratify it. That 54%, as was proved in other polls, was ignored; the previous Government forced the Lisbon treaty through and broke an election promise. Some 65% of people believe that the European Union is out of touch with normal people, but sadly it is normal people’s hard-earned cash that is used to fund the EU, while 88% could not name their MEP. I wish that I did not know the names of some of my MEPs. Turnout for European parliamentary elections was at its highest in 2004, an abysmal 38.5% when I was up for election as a councillor, and it is a pretty poor pass when councillors such as me are used to drag up the European election turnout.

There is a general view in this country that the political elite is out of touch with the British public on the issue of Europe. My concern is that, if we approve yet more cash for the wasteful institution that is the EU, the gap between what the public expect and the position of the political elite will widen yet further. That would not be healthy.

[Andrea Leadsom (South Northamptonshire) (Con)]

Many people at the last general election who cared a great deal about Europe and were furious about it felt that voting Conservative was the way to ensure that something would be done about the massive amount of waste and bureaucracy in Europe. We owe it to them to achieve that.

[Andrew Percy]

I could not agree more with my hon. Friend. As I said earlier, what we heard from the Economic Secretary to the Treasury today was incredibly refreshing, and I am heartened that she is going to fly off to Brussels tomorrow and bang the table on behalf of British taxpayers. The British people expect someone to stand up for them in Europe, and I have no doubt that the Economic Secretary will do so.

Oral Answers to Questions

Andrea Leadsom Excerpts

Tuesday 12th October 2010 Commons Chamber

[Mr Gauke]

As I said earlier, we do not currently have the capability to examine the situation on a household basis, but we do need to make difficult decisions. If the Opposition want to oppose each and every cut, including in the child benefit that is given to some of the wealthiest in society, they can take that position, but we are prepared to take those tough decisions.

[Andrea Leadsom (South Northamptonshire) (Con)]

Does my hon. Friend think that the Opposition believe it would be fairer to tax the lower-paid and give the tax revenue to the higher-paid?

[Mr Gauke]

That appears to be their solution given that, as I understand it, they still advocate the increase in the national insurance contributions that we are going to counter by raising thresholds. If the Opposition wish to take that position, so be it.

Equitable Life (Payments) Bill

Andrea Leadsom Excerpts

Tuesday 14th September 2010 Commons Chamber

[Andrea Leadsom (South Northamptonshire) (Con)]

I, too, congratulate the Government on getting to this issue so quickly, in line with the promise that we made before the general election. Will the Minister comment on the case of two of my constituents who between them had an annuity of about £11,000 a year? It is now worth roughly £4,000 a year and will continue to reduce; that is a loss of more than 55%. I should be grateful for the Minister’s comments on what I am to say to them.

[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.

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[Andrea Leadsom (South Northamptonshire) (Con)]

I am very conscious that I have only two minutes in which to speak. Let me begin by adding to the voices of many who have expressed their sorrow that this has happened. For so many years since the early 1990s there has been an injustice needing to be rectified. I pay tribute to the Government for their determination to do just that, in short order, and in particular for their commitment to a transparent, independent and clearly timetabled process.

Those developments are extremely positive, and I am very proud of them. Nevertheless, like many other Members, I have many constituents who are in dire straits as a result of the loss of their Equitable Life annuities, and I believe that we must take every possible step to put that right. I am well aware that we have been left in an impossible position by the last Government, with an economy that is on its knees and no money to spend in a discretionary way, and that the need to take into account the impact on the public purse is therefore very great. I have no doubt that some tough decisions will have to be made in the comprehensive spending review.

So much has already been said about justice and the need to put things right for Equitable Life policyholders that I do not need to add to it, but as a banker myself, I want to stress the importance of encouraging people to save. The last Government managed to destroy what was one of the best pension schemes in Europe, which was very strong and is now very weak. Not enough people in this country are saving for their pensions. We need to encourage people to have the confidence to save for their retirement, and that has never been more important than it is now.

I urge Ministers to take account of the fact that the country will be watching the results of this debate about compensation for Equitable Life policyholders, and will be expecting justice to be seen to be done.

Finance Bill

Andrea Leadsom Excerpts

Tuesday 20th July 2010 Commons Chamber

[Mr Byrne]

I hope that at some point in his future illustrious career in this House the hon. Gentleman has the chance to put that argument to the chief economist of the Treasury, David Ramsden. The growth forecasts that were published in our Budget were set out by Treasury civil servants. Like me, the hon. Gentleman will have noticed that the rebound in growth that was projected by the then Chancellor—now the shadow Chancellor—was very much in line with the rebound in growth that we saw after recessions in the 1980s and 1990s, but it was supported by far stronger monetary policy action. We were comfortable with the growth forecasts that we presented. The hon. Gentleman will have to reconcile himself in the months to come to the impact of slower growth and the fact that we are now having to put taxes up—something that I always thought the Conservatives opposed—because demand has been depressed to such an extent.

[Andrea Leadsom (South Northamptonshire) (Con)]

Only this morning in the Treasury Committee we were talking with Sir Alan Budd and some of the members of the OBR, who made it clear that their role in challenging Treasury forecasters was strong and robust. They see the role of the OBR—as confirmed by Dave Ramsden when he was interviewed—as extremely positive. In fact, Mr Ramsden said that the OBR has achieved, in transparency terms, 20 years of progress in eight weeks.

[Mr Byrne]

The hon. Lady is right to underline the virtues of the OBR. I, too, welcome it, which is why it is so regrettable that it moved forward its press releases and gave the appearance of supporting the Prime Minister through what was a sticky Prime Minister’s questions. I look forward to the day when Members of Parliament have the right to appoint the leadership of the OBR, just as I look forward to the day that we have the right to appoint leaders of the Office of Tax Simplification, who—we learned this afternoon—appear to have been appointed on some kind of whim.

My final point is the basic failure of fairness in the Bill. The truth is that the Government were so embarrassed—perhaps some of their members were even slightly ashamed—that the Budget was so regressive that they only dared describe its effects flattered by Labour measures and three years before the full horrors take effect. We did not hear a word from the Government about the £8 billion hit that our country’s pensioners will take in new VAT bills. Nor were we told about the £70 million of extra, irrecoverable VAT that our charities will now pay.

We gave both the Conservatives and the Liberal Democrats a chance to vote for an amendment to delay the VAT increase until a plan was in place to compensate pensioners and charities fully, and they voted against it. The public will draw only one conclusion—that this Government simply do not care. If I am not mistaken, the entire contribution of the big society bank that Labour created will be wiped out by the VAT increase—[Interruption.] I hear protests from the other side of the House. If they read the March Budget they will see clearly set out the measures to recycle dormant accounts into the social investment wholesale bank. The proposals appeared under that heading in many manifestos.

What a cruel con trick to perform on some of Britain’s most deserving. Yesterday, the Prime Minister told us that he wanted to put some oomph into Britain’s communities. Many of us would agree that it was a phrase worthy of the Mayor of London. This Budget tells us that the only thing going into communities from this Government will be the boot. That is why we will campaign up and down the country for a proper plan for growth and jobs, and for proper protection from this Budget for our pensioners. It is also why we will oppose this Bill in the Lobby tonight.

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[Mary Creagh]

In that case, Mr Deputy Speaker, I am happy to take all interventions, even though I have spent three minutes clarifying those points.

[Andrea Leadsom]

Will the hon. Lady give way?

[Mary Creagh]

I will happily give way.

[Andrea Leadsom]

That is the sisterhood.

I want to make a point about pushchairs, prams, car seats and cots. To my certain knowledge, from having been involved for a long time with a charity that works closely with families and their babies, there is a surplus of those items in charity shops. People refuse to purchase or even to accept them, and I was interested to learn that the hon. Lady believes that part of the definition of poverty is if someone cannot have all those items new.

[Mary Creagh]

I am not saying people should buy everything new, but I am certainly not telling families in my constituency that when they have a second baby they should trawl around to the local hospice shop or British Heart Foundation shop in a desperate quest to get a car seat so as to take their child home from hospital without breaking the law. The hon. Lady says that those goods are in abundant supply. One of the important things about car seats is that if we buy them second hand, we have absolutely no idea whether they have been involved in a car accident. I am certain that no Member of this House has bought a car seat for their child—for their new baby—from a charity shop. What we ask for ourselves we should also stand up for in this House, and ask for our constituents.

[Mary Creagh]

I think it does, and I also think it is indicative of the idea that the poor are no better than they should be, and that they should aspire to nothing better than charity shop purchases.

[Andrea Leadsom]

Will the hon. Lady give way?

[Mary Creagh]

No, I want to finish my point. There is an important point to make about cots. No matter where people get their cot from, they should never put a baby to sleep on another child’s mattress, because they do not know what has happened to that mattress—whether it has been vomited or urinated on, for instance.

We talk about putting babies “back to sleep”, and about cutting the rate of sudden infant death—which predominantly happens in lower income households. There are issues here to do with families living in overcrowded housing and babies sharing beds with their parents, yet the hon. Lady is saying that new mums and expectant mums are supposed to go round hauling cots home in their eighth and ninth month of pregnancy and then putting them up. Frankly, she ought to think a little more about what she wishes for her constituents.

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[Mary Creagh]

I will make my point first. I bet that there is not a single Member sitting on those green Government Benches whose children’s life savings amount to £50. I shall happily give way to any hon. Member for whom that is the case.

[Andrea Leadsom]

Will the hon. Lady explain whether those children also knew that they had about £23,000 of debt each?

[Mary Creagh]

That is one of the figures put about by the Conservatives during the election as a way of frightening people about the level of debt. Labour Front Benchers have comprehensively set out that the best way to reduce the debt is by growth, and not by frightening people. Most people who have a mortgage understand that they have tens of thousands of pounds of debt—but the point is that when someone is paying off their mortgage they do not stop feeding their children, and they do not stop running their car. In effect, the Government are paying off the mortgage much more quickly than they need, and the consequences of the political choices that they are making will have huge impacts on every constituency.

For Members on the Government Benches, £500—the amount of the Sure Start maternity grant—may be what they spend on a good meal at the Fat Duck in Bray. We debated that before in the House in relation to one newspaper columnist, Stephen Pollard, when the matter was raised by a Conservative Member—I believe it was the hon. Member for Kettering (Mr Hollobone). For children on the Eastmoor estate in Wakefield, however, that £500 is a life-changing sum, and will change some of the life choices that they make.

Equitable Life

Andrea Leadsom Excerpts

Tuesday 20th July 2010 Westminster Hall

[Andrea Leadsom (South Northamptonshire) (Con)]

Does my hon. Friend agree that the problem is that, because it has taken so long to get to the point we have reached today, we are in a worse position than if the situation had only recently occurred? Therefore, having promised to make good the damage left by Labour, we must put the matter to rest as quickly as possible—even quicker than in normal circumstances.

[Mr Hoban]

My hon. Friend makes an important point. The crisis has gone on for too long. Lord Penrose’s report was back in 2000, and the previous Government could have tackled the issue then. They blocked the ombudsman’s second inquiry into Equitable Life, and they took six months to respond to the ombudsman’s report. At every step in the process, the previous Government delayed. We want to make rapid progress, but fairly and transparently for policyholders and taxpayers.

In our coalition agreement we pledged to make fair and transparent payments, through an independently designed scheme, to policyholders for their relative loss as a consequence of regulatory failure. In the two months since we have been in office, we have made real progress and will continue to do so over the coming months. In May, in the Queen’s Speech, we announced an Equitable Life Bill, which will give the Treasury the statutory authority to incur expenditure in making payments to those who have suffered loss in connection with maladministration and the regulation of Equitable Life. The Bill will be introduced shortly and will be an important step towards resolving the issue.

Another important step will be the imminent publication of Sir John Chadwick’s final report on Equitable Life. It will give us a greater understanding of the losses that policyholders have suffered. Some have called for us to abandon the Chadwick process or to alter Sir John’s terms of reference. However, after careful consideration, I decided to allow Sir John to continue with his work under the current terms of reference. His work has been the culmination of almost 18 months of detailed analysis and evidence gathering. He and his actuaries have delved deeply into the issues, and their work has been informed by consultations with interested parties. For example, his flexible approach to establishing loss removes from policyholders the burden of proving what they would have done had they been aware of problems at Equitable Life. It is important to have his work available, as it will aid us in providing a swift response.

Finance Bill

Andrea Leadsom Excerpts

Monday 12th July 2010 Commons Chamber

[Andrea Leadsom (South Northamptonshire) (Con)]

Is the hon. Gentleman confusing a healthy banking sector that can contribute to the regeneration of a healthy economy with the issue of banks paying bonuses? I do not see what reducing the headline rate of tax that banks pay, which inevitably leads to healthier balance sheets and greater ability to lend to companies and is good for our economy, has to do with what I think he is talking about, which is the banks’ payments to themselves. I see those two issues as being very different. Perhaps he can explain.

[Chris Leslie]

I am grateful to the hon. Lady who, I am sure, would have wanted to declare an interest had she been in her previous guise. I understand that she was previously employed in the banking industry, although I may be wrong and I do not want to disparage her in any way. However, it is important to know.

[Andrea Leadsom]

It was 10 years ago.

[Chris Leslie]

I just wanted to place the hon. Lady’s comments in their particular context.

It is certainly true that the general public have a distaste for the excessive bonuses and remuneration of those in the banking industry, but such remuneration would not be possible were it not for the high profit rates that the banks were able to post and report on so many occasions. We are indeed all shareholders in many ways—either directly, or indirectly through our pension funds or as taxpayers—and Members on both sides of the House will hope that, over time, the banks will be returned to some level of normalcy. However, necessarily, they must not, as institutions, evade—or avoid; I want to use the correct parlance—paying their fair share.

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[Chris Leslie]

I would not want to set the hare running across the City of London that the long arm of the law is necessarily about to grab them on the shoulder, but I understand the frustration and anger of the British public more widely, and all politicians in this House should be angry. While it is fun and games for the Conservatives and Liberal Democrats constantly to say, “Ah well, it was the Labour party that left us in this predicament”, they know very well that the root cause was the greed and excess of the banking sector, which ought to pay its fair share.

[Andrea Leadsom]

The banking sector is far from being given a free ride by this Government. We are absolutely not going to allow it to get away with past transgressions—far from it. In fact, it is this Government who are going to restore banking supervision and lender-of-last-resort powers to the Bank of England. The tripartite system that Labour put in place, and which led to some of the failings of the banking system, was a key mistake. This Government are not going to ignore those issues. We also have a commission to look at competition, which is key, because we have to re-establish fair competition in our banking system and get rid of the tendency towards ever larger and more consolidated banks. I agree, in part, with the hon. Gentleman, in that we have to take the banking system seriously, we have to improve it and we absolutely have to make it more competitive. However, I do not agree that we should consider a differential rate of tax, as that is simply uncompetitive.

[Chris Leslie]

The hon. Lady makes her case. We can all, in hindsight, say that regulatory improvements should clearly have been made. The British Government could claim that work should have been done to ensure that that was the case in America, in every country in Europe and all the around the world. It is absolutely true to say that the whole worldwide banking system ought to have been more closely regulated, but that was the first time I have heard a Conservative Member defend the reduction in the corporation tax rate—that is the specific measure that we are discussing. There may be a need to debate the regulatory changes that should apply to the financial services industry—I look forward to those proposals being made—but I still do not understand her argument about anti-competitiveness. It is important to hear why the Government believe that the banks deserve this particular cut.

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[Chris Leslie]

Indeed. I cannot keep track of the turns and U-turns, with so many permutations, that the Government go through or of the chamaeleon-like arrangements of some hon. Members. There are honourable ladies and gentlemen in all parties—even in the parties opposite—and I appeal to them to consider the amendments carefully. These are incredibly important suggestions. I have not yet heard a case in the interventions—except, perhaps, for the competitiveness argument, which I shall discuss in a moment—for why there should be a corporation tax windfall, this boon for our large banks. Perhaps I shall hear one from the hon. Lady.

[Andrea Leadsom]

I want to clarify. It is to all our benefit to have a healthy financial services sector. Obviously, all parties agreed, when we had the financial crisis, that we simply could not afford to see our banking system go into meltdown. There is no doubt that that is precisely what would have happened. Nevertheless, through the banking levy the Government are seeking to make the banks compensate the taxpayer for the undoubted support that they received. If there were a reduction in corporation tax alone with no offsetting bank levy, of course the Opposition could say that the banks were getting a free ride. However, the existence of a bank levy means that the banks are paying compensation to taxpayers for their largesse while at the same time ensuring that we retain a highly competitive financial services sector that can encourage and help our economy to recover.

[Chris Leslie]

I am interested in the hon. Lady’s arguments. She is saying that it would be wrong for the banks to receive a corporation tax cut—that is an important concession—but that it is all right because they are paying the banking levy. As I reckon it, that puts them right back to the standstill that they were at in the first place. In other words, they would not be paying any more and there would be no reparations, as I see it, for the public at large. They would simply be standing still. It beggars belief that the Government, having talked tough before the election, are now going to give a free ride to the banks and offset some of the costs of the banking levy.

The hon. Lady mentioned earlier that there is, of course, the Government’s independent commission on banking. I understand that the Secretary of State for Business, Innovation and Skills is a promoter of it and I would be interested to hear his views on whether we should give a corporation tax cut to the banks. He has gone from saint to axeman in a matter of weeks, but it is the impact on public services that we are worried about most of all.

As I was saying, it is the unfairness of this measure that strikes home most of all. People who are in a comfortable position are lecturing the world about the cuts to our public services that are needed. What really sticks in the craw is the statement, “We are all in it together”, which hon. Members will have heard. Well, that is not the case for the banks. They are not in it with the rest of us.

It reminds me a little of the polite and well-spoken cat-burglar who sneaks in to one’s home as a thief in the night and tries to purloin all sorts of goods and chattels but, when caught red-handed, explains, “No, I’m not stealing from you. I’m just rearranging the furniture and decluttering the house.” It is a grab of the worst possible kind—a grab on the public services on which the poorest in our community rely. The revenue from this measure and from reducing the corporation tax on the banks is needed by our vital public services. I hope that the Treasury will take the amendment seriously. The banks have not earned the right to this windfall. They do not deserve it and I commend the amendment to the Committee.

Budget Resolutions and Economic Situation

Andrea Leadsom Excerpts

Tuesday 22nd June 2010 Commons Chamber

[Andrea Leadsom (South Northamptonshire) (Con)]

According to the Bank for International Settlements, the amount of global derivatives outstanding is now $1.14 quadrillion; that is more than $1,000 trillion and more than 10 times the GDP of the entire world. It is a vast risk, and not only that; it is largely unregulated and traded between the banks themselves.

I am grateful for this opportunity to give my maiden speech during today’s crucial Budget debate. There is no doubt that the actions we take now to cut our deficit and make our banking system safer will determine how quickly our economy recovers.

In speaking today, I am following in the big footsteps of my predecessor, Tim Boswell. He made his maiden speech during a debate on the Finance Bill in 1987, and I hope I am not tempting fate, because within a few months of his speech the stock market spectacularly crashed.

It is a great pleasure to pay tribute to Tim’s 23 years of service in this House. He is one of a small number of politicians to have been called a saint by The Daily Telegraph and he has certainly been an honourable Member of this House. As well as his many virtues, however, he also has a wicked sense of humour. He recently e-mailed me to tell me he was never going to vote for me again—ever. It was only after a few minutes of sheer panic that I realised that that was his way of giving me the great news of his elevation to the other place. Tim has many friends on both sides of the House and I am sure many Members will want to join me in congratulating him on his well-deserved new role.

South Northamptonshire is a new constituency, with two thirds of it from Tim Boswell’s Daventry and a third from Northampton South. My family members have worked and farmed there for generations. It is a wonderful place in the heart of England: we have a mixture of ancient villages, with the market towns of Brackley and Towcester; we have thriving new communities on the outskirts of Northampton; and, of course, we have the world-famous Silverstone circuit. Engineering and technology businesses are a great strength, and we also have some big local employers, such as Barclaycard and Carlsberg.

We do have our own challenges, however. Under the last Government Northamptonshire was a huge target for housing growth, with little regard for the needs and desires of existing long-standing communities, and I am very glad that my right hon. Friend the Secretary of State for Communities and Local Government has announced plans to scrap the regional spatial strategies, thereby giving power back to local people.

We have been beset with applications for wind turbines on the edge of villages, where local residents have felt unable to defend their own environment.

More recently, we have whole communities under threat from Labour’s preferred route for high-speed rail. It would literally cut through farms and villages in my constituency, in some places on a 6 metre-high embankment. We all know that we cannot build new infrastructure painlessly, but there is a huge price to pay by people whose homes and businesses would be destroyed by the track. I urge our Government to make sure that the consultation on high-speed rail gives to everyone whose life and business will be affected the opportunity to have their voice heard. South Northamptonshire is a gem of a place to live, to work and to visit and I am hugely honoured to be its first Member of Parliament.

Let me return to the subject of the debate. To me, it is absolutely key to restore the health of our financial services sector as a critical part of restoring our broken economy. There are two ways of doing that. First, I am glad that my right hon. Friend the Chancellor of the Exchequer has already decided to give back extra responsibility to the Bank of England.

In 1995, Barings bank collapsed due to rogue trading in the far east. Nick Leeson had found a way to put on massive uncovered derivatives exposure without the knowledge of Barings’ treasury in London, in a different time zone if not on a different planet. At the time, I was managing the investment banks team at Barclays, and we were the principal banker to Barings. The collapse came on a Friday evening and the markets were threatening chaos, but Eddie George, the then Governor of the Bank of England, called together a small group of bankers, including myself, and we worked over the weekend to calm the fears of banks that were exposed to Barings. The direct result was that there was no run on the banks on the Monday morning, Barings was allowed to fail and there was no systemic contagion.

The difference between that experience and the more recent experience with Northern Rock is the difference between accountability and the tripartite system. In 1995, Eddie George knew that it was down to him to prevent a run on the banks, whereas in the case of Northern Rock, we had the Financial Services Agency looking to the Bank of England, which was looking to the Treasury for action. The result was the first run on a bank in 150 years and a taste of the financial meltdown to come.

From my experience, I am positive that a key to restoring the health of our financial sector is giving back powers and accountability to the Bank of England, and I am delighted that my right hon. Friend plans to do just that.

There is a second key action that we need to take as well. The financial crisis was not just a failure of regulation; it was also a failure of competition. The great Adam Smith always said in his wealth-creation ideas that for markets to be free and for us to create new wealth we have to have free entry and free exit of market players.

But in the world of finance those principles have not been true for years: cost and complexity have created huge barriers to new entry; we have already seen that Governments cannot possibly allow a single bank to fail when there are issues of systemic contagion; and we see every day the distortion of free competition in the power of investment banks to charge huge margins for derivatives trading and underwriting.

So, I and many of my ex-City colleagues argue that a key way of making our banking system safer is through measures to change the culture of our financial sector. The banks that are supposedly too big to fail must be broken up. The barriers to entry must be removed. The ability to charge monopoly prices must be taken away.

In South Northamptonshire, businesses are struggling because of the lack of available working capital, but with our high-tech and engineering expertise we should be really well placed to build new jobs in the low-carbon economy that our Government want to create.

The Government are right to want to promote a broader mix of business in our economy. That mix must contain a successful financial services sector with healthy competition and the free availability of working capital.

It is a mix that will be at the core of our economic recovery.