Northern Rock

Chris Evans Excerpts

Monday 21st November 2011 Commons Chamber

[Mr Hoban]

At the moment, Virgin Money operates primarily in the retail financial services field. It offers a range of products to personal customers. However, it has said that it will look to provide a range of products to small businesses in the future and we would welcome that increased competition in that key area.

[Chris Evans (Islwyn) (Lab/Co-op)]

Will the Minister please explain how using £240 million of Northern Rock’s own capital somehow represents a good deal for the bank and for consumers?

[Mr Hoban]

As I have already made very clear, Virgin Money is paying £747 million to the taxpayer, and other proceeds of sale will come our way. Our view is that this is far and away the best deal on the table. It is the best deal when it comes to value for money for the taxpayer, it is the best deal for consumers and the best deal for the north-east. I am sorry that the hon. Gentleman has not sought to welcome this opportunity to give the people of the north-east and those who work at Northern Rock some new hope for their future.

Jobs and Growth

Chris Evans Excerpts

Wednesday 12th October 2011 Commons Chamber

[Chris Evans (Islwyn) (Lab/Co-op)]

It is a pleasure to be called to speak in the debate, and a pleasure to follow the hon. Member for Wycombe (Steve Baker). As a history graduate, I have enjoyed the history lessons during this afternoon’s debate. I enjoyed the intervention from the hon. Member for Monmouth (David T. C. Davies), telling me all about the ’40s, ’60s and ’70s. I have heard many Members tell me what happened under a Labour Government long before I was born, but it seems to me that we have always bounced back to the same point: those on the Tory Benches say that it is all Labour’s fault, while we say that it is all the Tories’ fault. The truth is, where is that getting us?

In my constituency, 2,000 people are claiming jobseeker’s allowance. Some 40% of those are under the age of 24. Behind those figures, there are real human tragedies: kids leaving school believing that there is no hope for the future other than being driven—let us hope not—into the hands of drug dealers or becoming involved in crime; the hard-working father who comes home one night and says to his family, “I’ve been made redundant after 20 years,” and his wife who worries; the single parent who is bringing up children on her own and who has just lost her job. What does she do? It is all very well quoting statistics and figures, but what can we do for those people?

Unemployment is not a price worth paying. For me, anybody losing their job is a total tragedy. That is why the motion is so important: we should use bankers’ bonuses to create youth jobs and do something to help people, not after being out of work for six months, as the Prime Minister said in his speech, but from day one. I remember when I was a trade union official and jobs were going as, unfortunately, they were being offshored. A scheme was created so that when people were made redundant the company matched half their redundancy to be used for training. Some people decided to become driving instructors, whereas others in the Solent decided to become ship builders, and so on. It interested them and that was what they wanted to do. I want some incentive in the tax system for companies that make people redundant to use similar ideas.

[David T. C. Davies]

Will the hon. Gentleman give way?

[Chris Evans]

I am sorry, I cannot take an intervention because other people want to speak, although I would love to give way to the hon. Gentleman.

As I was saying, when a person is unemployed—I do not know how many people in the Chamber have been unemployed—it is soul destroying. It reduces confidence and, in the worst cases, it brings about depression. If anybody wants to see a microcosm of the economy, they should walk down the local high street. There is nothing more sad and depressing than seeing the butcher, the baker and even the candlestick maker all boarded up. Nothing says more clearly that the economy is not working.

So what can we do? We could reduce VAT on a temporary basis to encourage people to come back to the high street, but we could do more than that. We could encourage local authorities to reduce their business rates so that people can stay in their businesses and we could encourage communities to come in so that these places are not boarded up. Above all, we could ask authorities to start providing free car parking. That might be a bit more simplistic than the credit swaps we have heard about, but I am concerned.

I am going to say something quite shocking which is not in vogue at the moment. This afternoon, I spoke to Lloyds TSB and I thought, “It's all very well to bash the banks”—and we should bash those who have been responsible—"but we have to make an assertion and realise that only one part of the banking industry failed." It was not the retail banker or the cashier in Blackwood High street or Newbridge, who serves their community; it was the bankers in the City, and that part should be reformed. However, we have to be very careful when we talk about reform. We cannot introduce regulation that hinders financial innovation. That would be impossible, and I am very concerned about that.

We have to ask ourselves how we are going to encourage manufacturing when we do not encourage banks. I will be honest: I have been one of the banks’ biggest critics, but at the moment we are asking them to do something that is almost impossible—we are asking them to save money and lend at the same time. How will they do that? I do not know, but tonight I will walk through the Lobby and support the motion, because I genuinely believe that we need to do something to promote growth.

The Economy

Chris Evans Excerpts

Wednesday 22nd June 2011 Commons Chamber

[Chris Evans (Islwyn) (Lab/Co-op)]

It is always a pleasure to follow the hon. Member for Gloucester (Richard Graham), whose constituency always brings back happy memories for me—we like to visit friends there.

One thing that I have noticed in this debate is that there has been a lot of rewriting of history on the Government Benches. Straight away, all we have heard is, “Labour got it wrong in 13 years of government.” Well, if Labour got it wrong, why were those who are now on the Government Benches so quiet? We did not hear a word. We did not hear them say anything. In fact, in September 2007, a month before Northern Rock went down the plughole, the then shadow Chancellor said, “We’re going to follow Labour’s spending commitments for the next few years.”

[Alun Cairns]

rose—

[Chris Evans]

A voice from Wales. I hope that it is sensible.

[Alun Cairns]

I am grateful to the hon. Gentleman for giving way, but the conclusion that Labour got it wrong was demonstrated 12 months ago in the last general election.

[Chris Evans]

Why did I bother giving way? That is another complacent attitude.

When the Government talk about deficit denial, they miss the point completely. There seem to be two theories. If we follow the Chancellor’s logic, cutting the deficit by £112 billion will encourage the private sector to create jobs. The private sector is going to come to the rescue and all those people who worked in the public sector will get jobs in the private sector. Wonderful—if it works. The other theory is that the Chancellor’s taking £112 billion out of the economy is doing nothing for consumer confidence. When I talk to the shopkeepers on the high street in Blackwood, they say, “The cuts haven’t even bitten yet, Mr Evans, but we are already feeling the pinch.” I am worried about that.

We talk about short-termism, and there seems to be no realisation that the policies to cut the deficit that we put in place today will have ramifications down the generations. There has been a lot of talk about the ’80s. I know that Conservative Members like to worship at the altar of Baroness Thatcher, but when I say that name to anyone in the valleys, they think of two things: fear and hurt. We have had problems with Scottish Power putting its prices up, affecting the most vulnerable in society, but we could do absolutely nothing about it because everything was sold for short-term gain. In 1992, I remember talking to a friend down the pub, and he was in tears. He had gone for a job as a grass cutter and when I asked him what was wrong, he told me that he had not got the job because there had been 60 applicants. “I’m not good enough to cut grass”, he said.

Now, those people have children of their own, and they are worried, too. Figures released in June show that one third of jobseeker’s allowance claimants in my constituency are young people under the age of 24, and I am seriously worried that we are going to have another lost generation. People talk about all this anger against the Labour party, but the only anger I have heard is against the banks. Privately, those on the Government Benches will admit that it was the bankers who did it, but for reasons of political point scoring and advantage, they would rather say that it was the Labour Government who did it—[Interruption.] That is the truth.

[John Hemming]

Does the hon. Gentleman acknowledge that Tony Blair said in his memoirs that it was the Labour Government who did it?

[Chris Evans]

No, he did not. This debate would be far more honest if we said that it was the banks. This is like the sword of Damocles hanging over our heads. The banking sector is too large. We have too many large banks. I welcome some of what the Chancellor has said about this—he said that there needs to be ring-fencing between the banks’ retail and investment operations—but if we do not break those banks up and just one of the big six goes under, the economy will be back in trouble. However, we have sent the banks a message that we would send to no other business. We have said to them, “What you’re doing is okay. However you run your businesses, we will bail you out.”

[Matthew Hancock]

I am listening to the hon. Gentleman trying to blame everything on the banks. The question is, who designed the regulation of the banks?

[Chris Evans]

We have heard about the FSA, and we have admitted that that did not work, but before that, there was self-regulation. There was no attempt to tie them down, and there is still no such attempt. When the Minister responds to the debate, we need to hear from her what the future of the banks will be. We need to know that.

This is the problem that I have with the entire debate. People say, “It was the Labour Government overspending”, but faced with the same problem of the banks going under, what would the present Chancellor have done? He would have done one of two things. Since his road to Damascus experience, he wants to cut everything, and following that logic, he would have done nothing. The economy would have gone under, and everyone with a mortgage would have been written off. Alternatively, bearing in mind his mates in the City, I suspect that he would have bailed the banks out just like we did. He would have been faced with a deficit, just like we were. We never hear anything about the future of those banks from Members on the Government Benches.

[Susan Elan Jones (Clwyd South) (Lab)]

Conservative Members seem to forget what the Prime Minister said. In speech to the CBI, he said that the Government were sticking to Labour’s spending totals. Just weeks before the collapse of Northern Rock and for several months after it, he said to the Institute of Directors that if it wanted lower taxation and less regulation, he would—

[Mr Deputy Speaker (Mr Nigel Evans)]

Order. I think that the hon. Gentleman has got the point.

[Chris Evans]

I thank my hon. Friend. After the debacle of the intervention by the hon. Member for Vale of Glamorgan (Alun Cairns), she proves that we have some sensible voices in Wales.

Let me comment on the blasé attitude that these policies are going to work. That is what Government Members say, but what if they do not? I suspect the Chancellor would say, “Not my fault, guv. It was the snow.” It could be hailstones next time or perhaps it will even be too sunny. I imagine that his plan B is quantitative easing. It is all very well printing money, but the key to it is spending. We have to prove to people—[Interruption.] I mean consumer spending—we will speak about the other issue tomorrow. We need to give people the confidence to spend in our shops and ensure that people are in jobs.

[Bob Stewart (Beckenham) (Con)]

This is not particularly my field, but when the hon. Gentleman says that the key to it is spending, I have to ask “With what?”, as there is nothing left.

[Chris Evans]

That is just a PR question. As I say, consumer spending is about giving people the confidence to spend their wages in the high streets so that shops can thrive. That is what it is about: consumer confidence is down. I support the motion. Let us cut VAT and bring a bit of confidence to the high street. Let us get Britain back on track.

Oral Answers to Questions

Chris Evans Excerpts

Tuesday 21st June 2011 Commons Chamber

[Danny Alexander]

I can certainly confirm that we will not repeat that mistake. We have all seen the document entitled, “We’ve spent all this money, but what have we got for it?” It is very important that this country maintains the spending plans we set out in the spending review, in order to deliver the deficit reduction that this country needs to establish confidence in our economy.

[Chris Evans (Islwyn) (Lab/Co-op)]

7. What assessment he has made of trends in bank lending to small businesses in the first quarter of 2011.

[The Financial Secretary to the Treasury (Mr Mark Hoban)]

Under Project Merlin, the banks loaned a total of £47.3 billion to UK businesses in the first quarter of 2011, including £16.8 billion to small and medium-sized enterprises. The Government are encouraged that banks are broadly on target to meet their overall commitments. However, it is disappointing that banks are behind schedule on SME loans, and they clearly need to do much more work to deliver on their commitments.

[Chris Evans]

A number of small businesses in Islwyn tell me they have experienced an increase in the overall interest rate charged by banks, despite the base rate being at an all-time low. What are the Government doing to address that?

[Mr Hoban]

We must ensure that banks signal to businesses that they are open for business and that they have the capacity to lend to businesses. That is why we work with the banks to deliver Project Merlin, but, as I have said, there is more work for the banks to do to ensure they lend to small businesses, and we will continue to hold them to account on that.

Budget Responsibility and National Audit Bill [Lords]

Chris Evans Excerpts

Tuesday 22nd March 2011 Commons Chamber

[Geraint Davies]

I am glad that the hon. Gentleman is wearing a badge saying that he has a GCSE in economics, but I doubt it.

On a serious point, I have already accepted that prior to the financial crisis there was a marginal deficit to be confronted, and it was going to be confronted through growth initiatives. We have since had the financial crisis, and the important thing now is to move forward with ideas for investing in growth. Clearly, there are big questions on tax and spend and where those will be deployed. Many new ideas might emerge in the Budget, such as a windfall tax on the energy giants, whose profit margins have suddenly increased by 38% because they did not adjust their prices when costs changed and so ripped off Britain’s consumers. That is obviously a legacy of the previous Conservative Government’s privatisation and the lack of controls.

There is money available to invest in growth and services and to close the deficit gap. The point about the amendment is that we must put growth centre stage, as that will enable us to move forward in a balanced way, rather than in the narrowly defined way that the Government prescribe. With those thoughts, I will give other Members the chance to make their own unique contributions.

[Chris Evans (Islwyn) (Lab/Co-op)]

After the epic speeches from my hon. Friends the Members for Bassetlaw (John Mann), for Swansea West (Geraint Davies) and for Edinburgh South (Ian Murray), I will keep my comments succinct and tight, and I will try to keep to the amendment.

The most important thing about the amendment is that growth is key and that there must be some plan for growth. It is all very well saying, as many Members have, that there is no plan B, but it seems to me that there is no plan A. There is no rationale for a plan A or a plan B. It is important to know what that rationale will be. We need to know how the Government reach their decisions.

I am going to say something quite shocking: I do not believe that the majority of people in this country care about the deficit. Government Members can call me a deficit denier all they want, but I believe that when people are sitting around their kitchen tables at night they are most concerned about their jobs, their borrowing, their mortgages and their houses. That is what keeps them awake at night, not the deficit. Yes, the deficit is important.

[Mr Marcus Jones (Nuneaton) (Con)]

Does the hon. Gentleman think that people such as me who are parents of young children do not worry about the deficit and the legacy that the Labour Government left their children and mine?

[Chris Evans]

If I was in the hon. Gentleman’s position, I would be more worried about whether I will have a job in four or five years’ time. That is what most people are concerned about, but they are concerned about what will happen in six month’s time—

[Mr Deputy Speaker (Mr Nigel Evans)]

Order. I will tell Members what I am concerned about: no one is talking to the specific amendments before us. If it is at all possible for you, Mr Evans, to mention the amendments now and again, that really would be very useful.

[Chris Evans]

Thank you for your advice, Mr Deputy Speaker—I have not been here very long.

Getting back to the amendment, it is important that we have the rationale for growth and know how the Government reach their decisions. We cannot talk about this in the microcosm of a dry subject of forecasts. We cannot debate forecasts in this House; we can only debate judgments on how the Government arrive at those policies.

[Geraint Davies]

The hon. Member for Nuneaton (Mr Jones) mentioned his children. Surely the important point about growth and the amendment is that if we invest in his children, in their education and in the opportunity to go cost-effectively to university, to add value and to promote future growth, that is the future they can look forward to. That is why his children are probably a bit disappointed that he supported the increase in tuition fees. Let us have growth.

--- Later in debate ---

[Chris Evans]

I totally agree. If I may digress a little from the amendment, it is all very well paying off the deficit, but if there is no economy at the end of it we can forget about it all and worry about all our futures. I have tried to keep my comments brief and say in closing that I support the amendment because we need to know how the Government arrive at their decisions so that this House can properly scrutinise them.

[Justine Greening]

I am pleased to have the opportunity finally to respond to some of the points that have been made and to the amendments that have been tabled. It is important to say first that I very much welcome the contribution that Members not only in this House but in the other place have made to get the Bill to its current stage. Despite the debate we have had on growth, which of course is important, I think that there is broad support across the Chamber, as there was in the other place, for what the OBR is intended to do and for setting up such an office that can work effectively.

All the amendments relate to growth, so perhaps we have stared the debate that will no doubt continue tomorrow after the Budget. We believe that economic growth and job creation are absolutely vital, and Members will see tomorrow that that is a core part of the Budget. I agree with many of the comments that have been made about why we need to see growth as part of the Budget. I want to take the time to clarify some points that have been raised.

The debate so far has been about policy and strategy, but the OBR is not a policy-making body; it is there is look at the forecasting and produce the official forecast for the UK Government. It is precisely not intended to make policy. One of the things we have been very careful to do in setting out how the clauses and the charter work is ensure that the OBR’s independence, impartiality and transparency, which are also vital, are not compromised.

Fuel Prices and the Cost of Living

Chris Evans Excerpts

Wednesday 16th March 2011 Commons Chamber

[Charlie Elphicke (Dover) (Con)]

It is a privilege and honour to follow the hon. Member for East Antrim (Sammy Wilson), who made an entertaining, engaging and thoughtful speech on this issue, which we all feel strongly about. It has been an emotional debate on both sides of the House. Constituents write to me daily expressing concern about the cost of living and how they will manage, given the way the cost of fuel has risen in recent times. It is a just concern that is understood on both sides of the House. Hauliers in my constituency write to me expressing grave concern about the situation they find themselves in and their ability to compete with operators on the continent who undercut them.

However, I must say that for the Opposition to bring forward such a motion is the most extraordinary and shameless opportunism I can recall seeing in this House. It is shameful because we know that the Labour party increased duty 12 times in its period in office. We know that it took away the 10p tax rate. We know that tax discs went through the roof, and we know that the haulage industry was decimated in the last decade because the Labour Government had no interest or desire to ensure that that industry was safeguarded.

[Chris Evans (Islwyn) (Lab/Co-op)]

Does the hon. Gentleman agree that the most damning verdict on the coalition’s first year in government was when someone wrote to me and said, “Mr Evans, thanks to the increase in VAT on fuel duty, I’m worse off than I was a year ago”? Does the hon. Gentleman agree that most people in this country are worse off than they were a year ago?

[Charlie Elphicke]

Measures taken by this Government will take 800,000 of the poorest people in the land out of tax. The Chancellor is not in his place today; I hope very much that he is working out how he can look after the least well-off people in this country in his Budget. I hope that he will be listening and thinking carefully about how he can engage with people’s understandable concern about the cost of fuel and how the country can be put right after 10 years of being driven into the international sidings.

Financial Mutuals

Chris Evans Excerpts

Wednesday 16th February 2011 Westminster Hall

[Mr Hoban]

It would be a way for credit unions to make the greatest opportunity of this. We are trying to open up more possibilities for the financial and mutual sector through a number of our measures. I go back to the debate about capital. One of the challenges that I put to the building society sector and others is that if it had the opportunity to raise more capital, what would it do with it. How would it benefit more people as a consequence of having that flexibility? I say to my hon. Friend that corporate members could include charities and voluntary groups, and their deposits could help credit unions to expand their base, so that they can lend more to local communities. There is an opportunity there for the voluntary service to help expand that base. That will also help to create a much more viable credit union sector. Like me, my hon. Friend will have had conversations with Mark Lyonette, who wants to make sure that we move the credit union sector on to a much more stable and viable footing, enabling it to take deposits from others and pay interest on them.

[Chris Evans (Islwyn) (Lab/Co-op)]

The Minister may be aware that in Wales everybody has access to a credit union. Has his Department made any study of the policy of the Welsh Assembly in that regard?

[Mr Hoban]

That point about access to credit unions in Wales was made before the hon. Gentleman came into Westminster Hall for the debate. We need to learn the lessons. The Treasury is very open to new ideas and any thoughts that he has about why Wales has that degree of access to credit unions would be much appreciated.

We will also implement the Co-operative and Community Benefit Societies and Credit Unions Act 2010 once the legislative reform order comes into force. That will modernise the industrial and provident society name and the powers available to update the legislation in the future. Other reforms include a consultation on the use of electronic communications in the mutual sector. That consultation closed at the end of January, and we will lay an order shortly to enable mutual societies to have the option of using electronic communications to engage with their members, which would reduce their costs.

Before I go on to talk about the regulatory framework, let me address the issue of Northern Rock. That issue was raised in the Treasury Committee, and I am aware of the work that has been done on it by Kellogg college. There is a degree of elegant circularity about remutualising Northern Rock, given its antecedence. But of course the responsibility for managing the Government’s investment in Northern Rock rests with United Kingdom Financial Investments Ltd. UKFI gave evidence to the Select Committee, and if the hon. Member for Harrow West reads the transcript of that sitting, he will see that it is open to ideas about the remutualisation of Northern Rock. The principal objective of UKFI is to promote and create value for taxpayers from its management of our stakes in banks, but it also has to pay due regard to financial stability and act in a way that promotes competition. Clearly a remutualised Northern Rock might help it to do those things.

Oral Answers to Questions

Chris Evans Excerpts

Tuesday 8th February 2011 Commons Chamber

The Chancellor of the Exchequer was asked—

[Chris Evans (Islwyn) (Lab/Co-op)]

1. What factors he has identified as underlying the fall in gross domestic product in the fourth quarter of 2010.

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

The Office for National Statistics attributes the actual fall in GDP to the bad weather in December, but we have been clear that even without that effect, the numbers were disappointing. In the past week, there have been more encouraging survey data showing services, construction, retail and especially manufacturing all growing more strongly—something the Opposition have been mysteriously silent about.

[Chris Evans]

Could the Chancellor please tell the traders on Blackwood High street whom I met this Saturday whether the rise in VAT will help or hinder them this quarter?

[Mr Osborne]

The VAT increase, like the other measures we are taking, helps to deal with the record Budget deficit that we inherited from the Labour party. By dealing with that, we have provided financial stability for the British economy. That has also been made clear by the previous Chancellor, the right hon. Member for Edinburgh South West (Mr Darling), who would also have gone ahead with a VAT increase.

Basic Bank Accounts (Scotland)

Chris Evans Excerpts

Wednesday 19th January 2011 Westminster Hall

[Sheila Gilmore (Edinburgh East) (Lab)]

It is a great pleasure to serve under your chairmanship, Mr Hood.

I am extremely grateful for the opportunity to introduce this debate. The stimulus for requesting it came from a report published in November 2010 by Citizens Advice Scotland—the umbrella group for citizens advice bureaux in Scotland—called, “Banking on the basics”. It was based on a survey that it carried out and the experiences of the many bureaux in the country. Many of the points and recommendations in the report are echoed in the report of the Financial Inclusion Taskforce, “Banking services and poorer households”, which was published in December 2010. It addressed the subject on a UK-wide level. Clearly, the issues are similar north and south of the border.

One of the relatively unsung but important pieces of work done by the Labour Government after 1997 was the detailed research, analysis and, most important, development of action plans to tackle poverty, deprivation and social exclusion. Outwith some of the political knockabout that sometimes takes place, I hope that we can all agree that it is only long-term, painstaking work of that kind that will make a real difference. It has to be sustained over a long period—we will not necessarily get instant results.

One of the strengths of the work was how it was spread across Government Departments, including the Treasury. It was not simply sidelined into the kind of Department that normally deals with poverty and deprivation. In 1999, Treasury policy action team 14 made its report on access to financial services, and from that flowed, among many other things, the basic bank account proposal.

Why is access to banking so important in this context? First, it helps people to manage their budgets more effectively and cheaply. Operating in cash is extremely expensive; for example, those who cannot pay fuel bills by direct debit pay a higher tariff, especially if they use prepayment meters. Buying essential household goods through catalogues, and mechanisms such as rent to buy are also extremely expensive. A useful report which highlights some of the issues for poorer families came out just this week from Save the Children.

Basic bank accounts also serve as a gateway to other mainstream financial services, including savings, insurance and credit, so people can make the journey from the basic bank account to other elements of financial inclusion in due course. Increasingly, many employers want to pay wages into a bank account. A number of bureaux survey respondents in the CAS report had encountered difficulties entering employment because of that. They could not get a bank account, or, if they got cheques, they encountered high bank charges to have them cashed.

Clearly, becoming “banked” will not in itself overcome poverty and deprivation, but it forms an important part of the jigsaw of policies and actions that are needed. There has been considerable progress. The goal of halving the number of the “unbanked” was met by 2009. Treasury figures for the UK in December 2010 show that the proportion of adults living in a household without access to a current, basic or savings account reduced from 4% in 2002-03 to 2% in 2008-09. The corresponding figures for Scotland show a fall from 6% to 3% over the same period.

The unbanked remain largely concentrated in the most deprived areas, and among certain groups: the retired, those who are of working age but in poor health and lone parents. Fairly significantly, in terms of access routes, 54% of the unbanked were council or housing association tenants. Only 16% of those with bank accounts fall into that category. I mention that partly because I think that that is a way in which some of the access routes could be enabled.

That still leaves a substantial number of unbanked adults. The CAS survey showed that two thirds of those who did not have access to a bank account had tried to open one. It is sometimes argued that the remaining unbanked do not want bank accounts.

[Chris Evans (Islwyn) (Lab/Co-op)]

I have listened to my hon. Friend. From my experience working in a bank—I worked for a bank 10 years ago, when the basic bank account was introduced—I have to say that the attitude of some bank workers was appalling. The basic bank account does not credit score, so they could not sell products, and they treated many people with basic bank accounts as second-class citizens. Does she agree that that is an absolute scandal in this day and age?

[Sheila Gilmore]

I certainly agree. I shall speak later about how we can move this forward, and one way is by improving the practices of some banks in that regard.

There are several main reasons why people cannot access basic bank accounts, of which that may well be one. Another is having a poor credit history or, indeed, no credit history. I shall quote one example from the CAS survey:

“I had a full driving licence but never had a bill in my name as I live with my mum and dad. I am 28 years old and can’t get a bank account.”

There are people who have not taken any credit in the past and do not have a record.

--- Later in debate ---

[Chris Evans]

Before the Minister moves on, what does he believe that banks can do to manage people who are currently running their basic bank accounts very well on to mainstream banking, so that they can have credit facilities? What action can move people on to mainstream banking?

[Mr Hoban]

That is an important point. Banks should see the opportunity to encourage and enable people to get greater access to mainstream services, moving them from a basic bank account to a more fully functioning current account.

I will touch on the issue later, but we need to go with the grain of how people want to live their lives. Many people are comfortable with access to a bank account without an overdraft facility, for example. A challenge for policy makers is that we think of things that we might like as a function, even though sections of the community might not want such functionality in their accounts. We need to think carefully about that, although we should be clear that moving to a fully functioning current account ought to be open to those with basic bank accounts. Banks need to look at credit histories and how people manage their accounts as part of that process.

At the request of the financial inclusion taskforce, eight of the major retail bank account providers have collaborated to provide management data on their basic bank accounts. That allows us to look at levels of take-up in different local authority areas and wards across the country. At local level, there are financial inclusion champions, such as the group in Scotland funded by the Department for Work and Pensions. They are looking at how best to work in deprived areas to raise awareness and encourage more people to open bank accounts. We can continue to make effective use of up-to-date regional data to help tackle the issue in areas of financial exclusion.

The hon. Lady referred to the financial inclusion taskforce report that was published in December. That is a timely piece of work that gives us the opportunity to take stock of where we are. It raises a number of issues referred to by the hon. Lady and her colleagues, and I encourage hon. Members to read the report on the Treasury website.

The taskforce found that the experience of banking services for poorer households has been mixed. Many households have made savings on services and retail purchases, but some have lost money through bank charges. The taskforce found that the remaining unbanked are generally the poorest and most deprived people, and it recommended a number of minor changes to existing basic bank accounts to make them more accessible and easier for poorer households to use. It also highlighted the scale of the challenge of extending bank accounts to those who currently do not have them.

The research found significant indicators of relative disadvantage among the unbanked: eight out of 10 of the unbanked are in receipt of income-related benefits; more than a third have major health conditions; and a quarter have numeracy or literacy problems. As more people open bank accounts, we see the unbanked becoming concentrated in hard-to-reach, more deprived groups. We must think carefully about how to work closely with those groups to get people to open bank accounts and access the benefits that they bring.

Interestingly, we should not assume that those who do not have a bank account have not previously held one. Six out of 10 unbanked people have previously held a bank account. The research does not give reasons why those people do not currently have a bank account, but some may have had issues with managing their account and decided not to keep it open, or the account may have been closed. We are not necessarily talking about people with no experience of bank accounts. Some people may have opted not to have an account for a particular reason.

Let me reiterate the point about going with the grain of how people run their lives. Many unbanked consumers express a preference for managing their finances in cash. Some low-income households employ a number of strategies to ensure that money is available for essential living expenses, which include not withdrawing all their benefit payments at once, leaving a small amount of money as a buffer, or perhaps putting cash towards a particular purpose. We are well aware of the number of people who join holiday clubs or Christmas clubs to try to keep money in a defined account that is kept for a specific purpose, and a lot of people on low incomes find that to be a more effective way of having control over their money. They want direct control over their spending and feel that a bank account takes that away from them. Unbanked people are more concentrated in particular groups, but not having a bank account could be a conscious decision as much as a matter of exclusion, and we must therefore have a more flexible approach.

In the long term, the taskforce believes that the introduction of new models and channels for the delivery of financial services may be necessary to address the difficulties that poorer households can experience with banking. It has called on the Government to engage further with banks, e-money service providers, bill payment organisations, retailers and post offices to pursue new ways to improve the opportunities for low-income households to make the most of their money. We are in danger of getting stuck by thinking about a model of banking based around bank accounts. Increasingly, people are turning to prepayment cards or e-money as a way of controlling their finances or paying bills online.

Banking Reform

Chris Evans Excerpts

Monday 29th November 2010 Commons Chamber

[Chris Evans (Islwyn) (Lab/Co-op)]

I congratulate my right hon. Friend the Member for Oldham West and Royton (Mr Meacher) on introducing this debate. I do not know whether he remembers it, but five years ago he spoke in Gloucester about the economy—I was the Labour party candidate in Cheltenham—and warned that the banks were out of control. A lot of people looked on that uncharitably, but, sadly, he was proved right, which is why we are having this debate.

The debate is important because there is great anger out there about bankers. No matter what Government Members say, people blame bankers. When I first came to the House, BBC Wales ran a profile of me, the last sentence of which was:

“Since leaving university he’s worked in bookmaking and in banking, which contrary to widespread belief are different professions.”

Yes, there is a difference. I come from a family of bookmakers —my father and my mother were both bookmakers—and the one thing that was drummed into me as I was growing up was risk. As bookmakers, we understood risks, which is why we had odds. We always knew what would happen if we could not cover our losses.

When I joined the bank, naively I thought that I was joining an institution that I could be proud of and that set standards to which other industries could aspire. Unfortunately, I discovered that it was completely and utterly different from that. I was told to lend to whomever I could. I still do not understand the logic of saying to somebody who cannot afford to pay their bills every month, “Mr Customer, you need a £10,000 loan to get you through.”

I got a warning for refusing to lend someone £25,000 in an unsecured loan, because—I was told—I was not thinking about the shareholders. That is the major problem. When I said to my manager, “This can’t go on. This is madness—we’re just writing people off,” he replied, “Son, it’s a sign of the times. You wouldn’t go into a shoe shop and expect not to buy shoes.” However, there is a difference. A person who goes into a shoe shop and buys the wrong shoes will get blisters; a person who goes into the bank and buys the wrong loan loses their house. The people at the bank did not understand that we were dealing with people’s lives. They were arrogant and blasé—“We can’t fail; we’re great banking institutions”—regardless of the Barings bank failure in 1991. I well remember the chief executive of Barings at the time saying, “It isn’t terribly difficult to make money in the City, old boy,” but the bankers ought to have learned that it is terribly difficult for builders and plumbers to earn money.

The essential truth is that banking is simple—a bank lends money to someone and makes money through the agreed interest rate—but the banks made it complicated. In the debate this afternoon, I have heard about derivatives and arbitrage, but the average person who walks into their bank will think, “What relevance do derivatives and arbitrage have in my life?” The banks made lending into mathematical equations—someone mentioned a biology graduate—and sold debt on, so the money came from several different sources. Eventually, that massive tower block collapsed when the person at the bottom failed. I have been reading Ha Joon-Chang’s “23 Things They Don’t Tell You About Capitalism”, in which he argues that we should ban complex financial instruments. That is an outrageous thing to say, but if bankers and economists do not understand such instruments, how can anybody else be expected to do so?

Before I finish, I want to return to the anger that people feel. In an article in The Sun today headlined, “Bank chiefs grab £15 million bonus”, I read that Stephen Hester of RBS will receive £2.4 million, that Eric Daniels of Lloyds Banking Group will receive £2.3 million, that John Varley of Barclays will receive £3 million and that Peter Sands of Standard Chartered will receive £3.2 million. What message does that send to people? That money is absolutely obscene, including to people who work for those banks. I go back to my experience of working in a high street bank. We were kept on deliberately low wages. The only thing that kept us going was the promise of a bonus. They would say, “We want you to bring in so many leads so stay till 7 o’clock at night. Forget about your family. You’ve got to earn money and put some bread on the table boy.”

That is still going on. Someone came to my surgery the other day and said, “I have to work till 8 o’clock every night because I’ve got to speak to the people I did not speak to in the day. I’ve got to get leads.” No amount of Government legislation or regulation will change that.

[Andrew Bridgen]

Does the hon. Gentleman not agree, however, that it is

“the hope of reward that sweetens labour”

for us all?

[Chris Evans]

For people earning £12,000 a year and struggling to pay the bills, the pressure is on to stay after work and phone up leads to earn a quarterly bonus just to get through. That is not right. They should be paid a living, decent wage, which is what the Opposition support. I hope that everyone else will eventually do likewise.

Finally, as I said, no amount of Government regulation or legislation will change that culture. We need to say to the bankers, who were to blame for the economic crisis, “Either you change your culture, or the crisis will happen all over again.” We had better start opening our eyes to that.