Banks: Closures and Shared Banking Hubs

Lord Herbert of South Downs Excerpts

Thursday 27th April 2023 Lords Chamber

[Baroness Penn (Con)]

My Lords, a process has been put in place to allow communities to make the case through LINK for where they need access to further services, and there is a commitment that if something is deemed necessary, it will be implemented. The noble Lord is right that it is essential that the interests of consumers are properly considered in all areas of financial services. There is the new consumer duty, which is due to be implemented later this year and will take forward some of his suggestions.

[Lord Herbert of South Downs (Con)]

My Lords, in contrast to my noble friend Lord Cormack, I do not know what a cheque is; I thought it was something one received in a restaurant in the United States. I do not carry cash and, in common with millions of people, I pay using contactless technology. Of course, some still need cash, including small businesses, but, as my noble friend says, is not the Post Office network a ready-made, available network for cash, which almost every business can use and is guaranteed in terms of proximity?

[Baroness Penn (Con)]

My noble friend is right about the breadth of the Post Office network, and I have talked about the high percentages of people who can access their everyday banking services through it. It is also geographically widespread; 93% of the UK’s population live within one mile of a post office and 99.7% within three miles of their nearest post office. There are other services that people need to be able to access, which is why it is important that we encourage banks to continue to innovate so that people can access the services in the way that is most appropriate for them.

Five-year Land Supply

Lord Herbert of South Downs Excerpts

Wednesday 4th July 2018 Westminster Hall

[Nick Herbert (Arundel and South Downs) (Con)]

The last time I was in this Chamber, I had cause to warn the rail Minister, my hon. Friend the Member for Orpington (Joseph Johnson), that in Sussex we have a habit of burning an effigy of people who have particularly irritated us. At the moment, those who run Govia Thameslink Railway are at the top of that list, but running a very close second are those responsible for undermining the neighbourhood planning policy, which should be heralded as such a great success for this Government. It was the policy by which power was to be returned to local people, who were to have control over where development went. Decisions taken in neighbourhood plans are entered into by the whole community, having been drawn up by volunteers and then voted on by that community in local referendums. Just as we are now debating nationally the importance of honouring a referendum result, so it gravely undermines democracy locally when decisions taken by local communities can be so easily overridden. I am afraid that is exactly what is happening.

I very much welcome my hon. Friend the Minister to his place. I hope that he will take this message back to his Department. This is like groundhog day: we have had this debate endlessly in this Chamber and on the Floor of the House, and we are constantly told, “Yes, the Government understand the problem and will do something about it.” Indeed, in December 2016 Gavin Barwell, then the excellent Housing Minister and now the Prime Minister’s excellent chief of staff, introduced helpful new guidance precisely designed to deal with the problem, ensuring that neighbourhood plans would be respected and that speculative developers could not win in the way my hon. Friend the Member for South Suffolk (James Cartlidge) has ably described. The problem with that guidance is that it can apply only to neighbourhood plans made up to two years before the date of that guidance, and if local authorities did not have a three-year land supply it did not work at all.

Subsequent to the introduction of those new measures, I have had at least two decisions taken right up to the Planning Inspectorate or the Secretary of State and then lost on appeal because that guidance could not be used. It offered no protection to the local community on those technicalities and the speculative developers won. It is important to underline my hon. Friend’s point: that is not the way to increase house building in this country. We stand united in our desire to increase housing supply, which is a political, economic and social imperative. Everybody gets that, but the whole point is that neighbourhood plans delivered significantly more housing than was anticipated and, best of all, they did it with local consent.

Local communities were brought together and told that they would be given power. They were asked to accept responsibility and they did so, taking difficult decisions, sometimes in the face of strong local opposition, and agreed that development should go in certain places while other places should be protected. Those communities worked on the assumption that what they had been told was true, so those areas were to be protected for the 15-year life of the plan. However, almost within months they see that meant absolutely nothing; the developers could simply charge in.

Worse, those communities were given promises by their local Member of Parliament that everything would be made better by the new guidance, from December 2016, which the Campaign to Protect Rural England, I and hon. Friends who worked on it all said would help. No doubt it has helped in some circumstances, but by no means all, as I indicated. What happens then is support for neighbourhood plans collapses. In West Sussex, I now find it difficult to persuade communities that have not done neighbourhood plans to enter into them. They say, “Look at what happened in the neighbouring village. They went through this process, which costs a lot of money and costs the volunteers a lot of grief. Is it really worth it? The developers come in and simply overrode the plans anyway.”

[George Freeman]

My right hon. Friend is putting a powerful point to the Minister about the undermining of trust in the system. Does he agree that something else is going on? Where, in my case, the district council agreed to put housing in the right place, down by the main road—the A11 in this case—the developers are banking those permissions for later, because they know that they will get them, and using the five-year land supply to force the wrong development in the wrong places. Not only is trust in the system undermined, but we are getting the wrong development in the wrong places, which is deeply undermining people’s ability to say yes to new housing. It is compounding the problem.

[Nick Herbert]

My hon. Friend puts it incredibly well, and I strongly agree. That is why this is so cynical. We have to understand that developers are not just taking advantage of a loophole but gaming the system. As a consequence, I believe we are building fewer houses than we could if developers had to do what policy should require and deliver. I know that my right hon. Friend the Member for West Dorset (Sir Oliver Letwin) has been charged with looking at this, and that is important, but there are changes we could make in the meantime, as my hon. Friend the Member for South Suffolk has suggested.

I will make two final points to the Minister. First, the Government are incorporating the guidance they issued in December 2016 into the new national policy framework. Could they look again at the threshold for the three-year land supply and the longevity of the test? Under both those things, the suitability of this as a remedy is being lost. It is not as effective as it should be. Could the Government also look at the wording they are using to incorporate it? It defines “recently brought into force” neighbourhood plans as meaning

“a neighbourhood plan which was passed at referendum two years or less before the date on which the decision is made.”

That is leading some to believe that neighbourhood plans simply fall after two years, which I am sure is not what the Government mean. It would be helpful to clarify that they do not mean that.

Secondly, and more important, our policy needs to change and we need to move away from five-year land supplies to delivery as the test. That is the fundamental change that needs to be made if we want to build houses and we wish to do so with public consent. I suggest that is the better way to do it.

Banking Misconduct and the FCA

Lord Herbert of South Downs Excerpts

Thursday 10th May 2018 Commons Chamber

[Martin Whitfield]

Again, I am really grateful for that insightful interjection. There clearly is a concern about transparency. Beyond the single events—tragic as many of these are—the overall story and picture that people are taking away about our banking industry is its being heavily influenced by hidden-door decisions, by delayed reports and by people, frankly, trying to protect themselves rather than shining a light on what has been happening to try to make the system better for the future.

Here we are again, talking about past misconduct. However, this is the catch, and it was mentioned early on: for business owners across the country who have lost their livelihoods, their homes, their marriages and, quite often, their health, this is not an issue of past misconduct; it greets them every single day when they wake up and haunts them at night when they go to sleep.

The impact of this scandal has been so profoundly damaging that people have taken the appalling decision to end their lives because they cannot face things any more. It is the responsibility of this House and of the financial services—it is genuinely the responsibility of everyone—to ensure that there are answers to these questions so that, hopefully, and at last, some people and some families can find some peace.

[Nick Herbert (Arundel and South Downs) (Con)]

The hon. Gentleman rightly draws attention to the appalling stress that has been placed on individuals. That has happened in my constituency due to RBS and the Britannia building society acting entirely unfairly towards my constituents. Apart from the behaviour of the banks, is there not an issue about the ability of such individuals to obtain redress, and the failure of our institutions—such as the FCA and the ombudsman—to be able to offer satisfactory relief to individuals so badly affected?

[Martin Whitfield]

Again, that is an excellent intervention. It is almost as if planned, because I am about to turn to the question of dispute resolution.

The FCA’s recent consultation into extending the Financial Ombudsman Service clearly sets out the complex landscape of commercial disputes, but it also identifies what it can and cannot do as a regulator to bridge this gap. The all-party group is very clear that it cannot possibly support the proposed extension of the Financial Ombudsman Service as a stand-alone solution to problems that have beset the business community for so long. Even with extended powers, it will not be sufficient to cover complex cases or those that sit outside the regulatory perimeters. The FCA’s consultation makes it very clear that it has limited powers and that a complete solution must include action by the Government and this Parliament. It is not an either/or; we need both.

Community Bank Closures

Lord Herbert of South Downs Excerpts

Thursday 8th February 2018 Commons Chamber

[Nick Herbert (Arundel and South Downs) (Con)]

I congratulate the hon. Member for Stoke-on-Trent North (Ruth Smeeth) on securing this debate. I am grateful to the Backbench Business Committee for granting it. This is an important issue, particularly in rural constituencies such as my own. My constituency of some 250 square miles in West Sussex consists only of small market towns and villages—there are no large towns. If one of those villages, which have high streets with a few important shops and stores, loses its banking facilities, that will immediately have a knock-on effect on the businesses in the village or small market town and the neighbours. It is of little use to those businesses and indeed it is very inconvenient to be told that they have to travel to a settlement that is some miles away.

Very often, following such closures, there has not been an alternative retail high street banking facility in the same village or small market town. Therefore, I think we start off with a collective agreement that it is important that we maintain banking facilities in these areas. We do not yet have a cashless society. Small businesses still need cash facilities. Local charities, many of which are still wedded to collecting cash and cheques, also need these facilities. That said, there are two important points to consider.

First, we have to acknowledge the march of technology and the huge growth in the number of customers who are now using online banking services. This has entirely changed the shape of retail banking. The number of people visiting some of the high street banks that face closure in my constituency has fallen to an unsustainably low level.

It is analogous to the situation that existed for police stations in some areas. Police forces were confronted with the reality that often only a handful of people a week were visiting police stations, many at the instigation of the police themselves, who required reporting to take place at the stations. Some forces recognised that maintaining an underused building was not actually the best way for the police to maintain a footprint in their community, and that there were more innovative ways to maintain a presence in their local communities, including the use of shared facilities, setting up pop-up shops in places where lots of people were such as supermarkets and developing their online presence.

There has been a change in the nature of the business and shape of policing, and in how it has to respond to today’s needs. But police forces also recognised that they could not simply withdraw. There has to be accessibility and a policing presence in communities, although that presence may now take a different form.

We have the opportunity to ensure that local banking services can be provided in communities on an ongoing basis, by post offices. As my hon. Friend the Member for Hazel Grove (Mr Wragg) said, following the new deal that the Post Office has done with Lloyds, the coverage that post offices can provide for basic banking services is now very high. As he said, there will be 99% coverage for individual private customers and 95% for businesses.

I suspect that there is relatively low awareness that post offices can provide these services. I therefore agree with the hon. Members who said that it is important that there is a proper information campaign to explain to local businesses which services their local post office can provide when high street banks are lost. It is not good enough just to put out a news release and write a letter to customers to say that the bank is closing. The banks have a responsibility and they should exercise it.

Secondly, it is important to maintain the post office network, especially if post offices are to become local banking hubs as well as providing their other services. This is a great opportunity for the post offices. It is a useful way to maximise the asset and to ensure that the investment in the post office network can be realised.

[Jamie Stone]

I entirely take on board what the right hon. Gentleman is saying about post offices. But I have just outlined the case of a post office that is using a retail premises that is entirely unsuitable. It must therefore be up to the Post Office to negotiate premises that are suitable for the service he is talking about.

[Nick Herbert]

The hon. Gentleman has anticipated exactly what I was going to say. If the post office premises become the location of the only banking services in a village or small market town, we must ensure that they are suitable, and the Post Office needs to ensure that that is the case when it identifies premises. It must also ensure that the banking services can be provided. The online systems have been down in the post office in Arundel over the past few days and as a result there have been no banking services.

As suitable premises can often not be found, suitable post office sub-postmasters cannot be found in various villages and small market towns in my constituency. This means that there is sometimes a suspension of post office services for a period of months, even though the Post Office’s policy is that there will be a post office outlet in these communities. That cannot happen if the post offices become increasingly important owing to the fact that they are providing banking facilities as well as all the other important facilities that they provide for the local community.

We need some more creative thinking. We cannot just allow the banks to step away and absent themselves from their responsibilities to ensure better services in this regard. To that extent, I agree with the hon. Member for Stoke-on-Trent North. The Government do have a role to play, by stepping in where the market is not working properly. The market is not working because there is insufficient demand in some areas for banking services in their traditional form, but those services are still important to local communities.

We must remember that local high streets are already under great stress. High streets in rural areas have really been suffering from the impact of globalisation and competition from online retail services. It is very difficult for small businesses to keep their heads above water as it is, so banking services are very important for them. If the Government’s objective is to maintain the vibrancy of these high streets—and I think it is—we need some active measures to ensure that post offices are promoting the best banking services and that these services are well publicised. We need banks to step up to the plate and contribute to ensure that the banking services can be universal and just as good as the services that were provided before. All those things can be done.

I recently had a useful meeting to discuss the issues with the Post Office’s senior management and the Minister’s predecessor, who acknowledged all these points. I know that the Government are concerned to ensure that banking services are provided. We must look forward to what can be created using the existing post office network and ensure that services are provided properly. It does not help to look backwards and think that we can somehow set a retail banking model in aspic, when it is actually failing because it does not provide the services necessary for the wider community and only supplies a very small number of customers. We need banking services in these areas, and they could be provided more creatively and innovatively. The situation needs a bit of Government help, but we also need the banks to play their part.

[Madam Deputy Speaker (Mrs Eleanor Laing)]

Just before I call the next hon. Member to speak, I ought to point out, for the sake of clarity, that we are in very unusual circumstances today because the timing of this business has changed and changed and changed again. I appreciate that this is the last day before a recess, and that Members—especially those with long distances to travel—are in some difficulty. I have therefore allowed far more leniency than is usual, first in the timing of people arriving for the beginning of the debate and, secondly, in the timing of their departure, either before or after the wind-ups. I would like to make it clear to the House that this does not create a precedent—absolutely not. We have a combination of circumstances today, which is highly unusual and is why I have allowed leniency. That will not be the case on other occasions.

VAT Evasion: Internet Retailers

Lord Herbert of South Downs Excerpts

Thursday 14th January 2016 Westminster Hall

[Nick Herbert (Arundel and South Downs) (Con)]

Thank you very much for calling me, Mr Hanson. It is a pleasure to follow my hon. Friend the Member for Daventry (Chris Heaton-Harris). I congratulate him on securing the debate and on the excellent way in which he explained the problem. He gave a thorough introduction, so there is little need for me to repeat his explanation of how this fraud is happening.

My interest in the topic dates from last year, when my constituent, Mr Neven Juretic, came to see me at one of my surgeries to explain what had happened to his business. I believe the Minister has met Mr Juretic—I am sure he will tell us more about that—who in 2010 set up an online retail business that grew very fast. He had a turnover of several hundred thousand pounds and employed quite a few people locally. It was all going well for the business, which was one of the top five sellers in its market on eBay, when suddenly, in 2014, it underwent a catastrophic loss of revenue, such that sales are now only about 5% of their previous level. That forced him to lay off a large number of his staff. He lost significant assets and now fears that his business faces bankruptcy.

Mr Juretic wondered what had suddenly caused the sharp loss of sales. He became aware that it was not because his competitors were selling better goods at better prices by running more efficiently and doing a better job than him, but because they were able to undercut his prices by about 20%. When he further researched the matter, he found that they were able to do that because, as my hon. Friend set out, they were evading VAT on their sales, which placed him at an immediate disadvantage. He teamed up with other retailers in the same position, and they have done an enormous amount of work. He set up vatfraud.org, to which my hon. Friend referred, which details the scale of the problem and sets out their concerns about the relative inaction in dealing with it.

There seem to be three sets of losers. First, there has been a change in retail practice as ordinary high streets have been affected by the growth of online marketing. The global trend is that people increasingly prefer to buy from online retailers. There is nothing wrong with that, but it has had an impact on our high streets. That is fine, provided that those online retailers sell fairly.

Secondly, there has been an impact on online retailers themselves, and small businesses are going under. Those small retail businesses were at least contributing to the economy and substituting for the high street businesses that were affected by the change in the way the market operates. The change is in consumers’ interest, no doubt, but those small businesses, such as the one in my constituency, were growing and employing local people, resulting in a change in employment patterns. They were successful UK businesses, and they are being clobbered.

Thirdly, there is a potentially significant loss of revenue to the Exchequer. I am sure the Minister will be the first to tell us that he wants to ensure that more revenue flows to the Exchequer, and that he wants to prevent a haemorrhaging of funds at a time when resources are in short supply. The fraud we are discussing has multiple effects, and it appears to be taking place on a substantial scale that justifies more effective action to tackle it.

Mr Juretic and his colleagues say that they have made some progress with trading standards, which is willing to investigate the issue, but they say that there has been inadequate co-operation between trading standards and Her Majesty’s Revenue and Customs. Their complaint is that they do not think HMRC is addressing the issue sufficiently seriously. As my hon. Friend said, it is possible to do research oneself and identify companies that are not properly VAT-registered, yet are selling stock that is clearly warehoused in the UK. That is the essence of the fraud. Mr Juretic and his colleagues identified 500 such companies—why is it not possible for agencies to go after those people? I ask the Minister in the spirit of openness, why has that not happened? It is clearly in the interest of the Exchequer and our national interest to ensure that businesses are not defrauded. Why is it not possible to go after those companies? After all, there is an audit trail, so it should be possible to identify companies that are not properly VAT-registered. They are meant to have a number, so they should be susceptible to that kind of compliance.

The situation is infuriating not only to the businesses that are affected but to the literally millions of law-abiding, tax-paying, VAT-paying small businesses that regularly find themselves at the sharp end of the tough VAT enforcement that we have in this country. HMRC never treats small businesses with kid gloves when it comes to paying their VAT. The hard workers, the strivers and those who employ a lot of people all pay their VAT and are absolutely slammed if they do not, so when they see that overseas companies are able to commit this kind of fraud, they get very angry about it. I feel angry on behalf of my constituent, given what happened to him.

Can there not be a more effective compliance mechanism? Is there a reason why it is so difficult? Perhaps there is, but it is important to communicate that to Mr Juretic and his colleagues, because at the moment they feel that there is just inertia. They have had a lot of meetings with HMRC and others, but they do not feel that they are getting anywhere. Their suggestion, which we should consider seriously, is that we should set up a special unit to focus on online retail businesses, given that that new sector is a huge growth area. It would be able to demand VAT numbers and pursue non-compliant companies.

What is the proper responsibility of the fulfilment houses? My hon. Friend the Member for Daventry was not willing to let them off the hook. At the moment, companies such as Amazon and eBay say, “We don’t have responsibility for this. If you bring us evidence that there are companies that have evaded VAT, of course we will take them off our websites and won’t allow them to advertise, but it’s not our job to police them.” I think that raises a big public policy question. Given that those businesses, which are often international businesses, make large sums of money that do not find their way to the Exchequer as tax revenue, what responsibility do they have to ensure that people who sell in their marketplaces are selling properly? At the very least they should comply with efforts to track down companies that appear to be defrauding the Exchequer and the taxpayer, but perhaps they have a bigger responsibility to undertake proper checks themselves.

How hard would it be to insist that those companies require businesses to have a verified VAT number before they are allowed to advertise? It should not be hard. Amazon, eBay or anyone else could make a simple request. If somebody who is clearly a business rather than an individual—in the case of eBay, they come through that side of the website—wants to advertise, they should have to provide a VAT number, which is checked, and they should be allowed to advertise only when it is found to be valid.

If HMRC were to make a concerted effort and the authorities were to go after those companies, it would be possible to tighten up compliance quickly. At the moment, my constituent and his colleagues feel that a concerted effort is not being made, that the authorities are not co-operating sufficiently with each other and that the fulfilment houses are passing the buck by saying, “We don’t have any responsibility for this.”

We need to take the issue seriously, for the reasons I have set out. If there are real obstacles, of course I will listen to the Minister and relay his comments to my constituents. They have asked perfectly fair questions, as I am sure they did when they met him. If we do not take tougher action on this issue, it will be a growing scandal and an embarrassment to HMRC and the Government. It is in the interests of all of us to clamp down on it, and I hope the Minister will tell us that he plans to do that.

Equitable Life

Lord Herbert of South Downs Excerpts

Thursday 26th February 2015 Commons Chamber

[Nick Herbert (Arundel and South Downs) (Con)]

I congratulate my hon. Friend the Member for Harrow East (Bob Blackman) on securing this debate. I was pleased to support his application for a debate in Back-Bench time because of the importance of this issue to a large number of my constituents who, as Equitable Life policyholders, have suffered loss. They remain gravely concerned that, although in many cases they have been partially compensated for their loss, they have not been fully compensated or compensated at a level that they believe to be just. It is important to restate, as many hon. Members have done, that these are responsible individuals who invested and saved in good faith and with a reasonable expectation of a fair return. They have not in any sense behaved irresponsibly, and did not seek to make investment decisions that had an expectation of an element of risk. They found themselves suffering significant losses, many of which have resulted in hardship, through no fault of their own.

I wish to raise two points in addition to the excellent points raised by my hon. Friend and others. First is the issue of accountability. Regulatory failure was identified in the ombudsman’s report, and that single fact informs us all in this debate that there was maladministration. How is that regulatory failure to be dealt with, and how will future regulatory failure be prevented, if those who are responsible for that failure—ultimately in this case, the Government of the day—can evade liability for that failure? This is, of course, a matter of justice, as my hon. Friend the Member for Richmond Park (Zac Goldsmith) said, but it is also a matter of good governance and accountability, because when institutions for which the Government are responsible fail, the Government must accept responsibility.

The Government were, of course, obliged to step in when bailing out other financial institutions, because a risk to the economy would have arisen had they not done so. Nevertheless, for individual policyholders of Equitable Life there seems to be an unfairness, because while those who may have been depositors or shareholders in banks will receive compensation and redress, those who have saved in good faith but relied on the effective regulation of the vehicle in which they were investing are not receiving full compensation, and that cannot be right.

My second point is about reasonable expectation. It is not as if these policyholders have been told that they do not have a case; it is not as if we are coming to the House to plead, once again, on the issue of principle. The issue of principle has been addressed and settled. The ombudsman has said that there was maladministration, and the Government have accepted the issue of principle because of the level of compensation they provided.

We have the ombudsman’s report and the Conservative party manifesto that pledged compensation. I recognise that this Government set up the compensation scheme, and that they had to address the fiscal environment responsibly. Nevertheless, it remains a continuing source of concern that such a small proportion of many of my constituents’ losses have been addressed, and that they have complete uncertainty about whether there will be further compensation in future. Nobody turns around to my constituents and says, “We will not do this any more”, and they are left with the uncomfortable sense that it would be very convenient if they simply went away or, in many cases, actually died. Thousands of policyholders have died in the wait for compensation, and we have no finality to the situation. Given the reasonable expectation that was set up, the manifesto promise and the ombudsman’s report, it is entirely reasonable to ask on behalf of our constituents whether we can have a timetabled scheme to say, “We will bring closure to this matter.”

I am happy to stand up and say that that closure may not be for 100% of the losses accrued. Many of my constituents might disagree with that, but we must have regard to the fact that there is a continuing deficit and will be for the next three years, and that there are other spending priorities. Nevertheless, it seems that compensation of only 22%, and the ongoing uncertainty of whether there will be any further compensation at all, is deeply unsatisfactory.

[Mrs Gillan]

Does my right hon. Friend agree with my constituent who e-mailed me and stated:

“If we were to receive this money it would not be lost. I am sure it would soon find its way into the economy at large and would not languish in savings accounts because we’ve done the saving already!”?

[Nick Herbert]

My right hon. Friend’s constituent makes a good point and it is true that the compensation that the banks have had to pay, for example in relation to mis-selling payment protection insurance, has had a beneficial effect on the economy by putting cash into people’s hands, but that is by the bye. As many have said, this is a matter of justice, but also of accountability and good governance. We cannot allow a situation where the regulation of an institution such as Equitable Life fails and no one will step up to the plate and say, “We accept responsibility for that failure” even though thousands of people have been hurt by it. That is the long and short of the story. The Government have a duty. They had to balance the interests of taxpayers fairly, but there is a strong feeling in the House, and among many of my constituents, that more must be done.