Banking

Debate between Mark Garnier and Andrew Gwynne

Wednesday 15th January 2014 Commons Chamber

[Andrew Gwynne (Denton and Reddish) (Lab)]

I am grateful to be called in this debate, Madam Deputy Speaker, and to follow the hon. Member for West Worcestershire (Harriett Baldwin). I do not necessarily share her views or her assessment, but she made an illuminating contribution. Given today’s news about RBS, this is a pertinent and timely debate for the Opposition Front-Bench team to have called, and we must take the opportunity to debunk some myths that have been allowed to penetrate into the debate so far.

First, we must point out the fact that the banking crisis was global. The Minister gave a history lecture, but perhaps conveniently the chapter he missed was the one on Lehman Brothers’ collapse in New York in September 2008, which triggered a tidal wave of chaos across most major western economies. I would argue that the action taken by the previous Labour Government was necessary; we all remember the queues outside Northern Rock and the chaos that was created, and default would have been a disaster, for not only the British economy, but for the wider global economy. Confidence would have completely collapsed in the banking sector and we would have seen a run on all major high street banks. The alternatives to Labour’s action would have been disastrous and it is not worth contemplating them. The action was costly to the public purse, but nobody—none of my constituents or those of the hon. Member for West Worcestershire—lost their savings. That is an important fact to remember, as it shows precisely why the banks that think it is back to business as usual just do not get it.

It was not only this bonuses-as-usual mentality from the banks but some of the other structural weaknesses that remain within our banking system that allowed the LIBOR and Euribor rigging attempts for which RBS, Lloyds, Barclays and Deutsche bank were fined by the regulators, to take place. It is also the mis-selling of interest rate swaps and of payment protection insurance—

[Mark Garnier]

rose—

[Andrew Gwynne]

I will not give way because many hon. Members wish to contribute. Clearly, those structural weaknesses remain in the banking sector and the Government should be doing more to address them, both in the UK and globally. I would like the British Government to take a lead on addressing banking reform, not just in this country, but across Europe and across the globe.

The banks also have a social obligation to taxpayers. I said that the Labour Government’s action was costly to the public purse and important to secure people’s savings, but I do not believe, unlike the hon. Lady, that we perverted the course of capitalism, because the alternatives would have been disastrous. However, banks should be doing more to help the Government meet their social needs and the wider social needs of society—those for whom it does not feel as if the recession is yet over. That is why the proposal from my hon. Friend the Member for Nottingham East (Chris Leslie) to have the bankers bonus tax to fund a compulsory jobs guarantee is absolutely right and why I think he gets it. It is also right that the bank levy should also be increased, specifically to fund the expansion of free child care for three-year-olds and four-year-olds from 15 hours a week to 25. The Government try to make out that this is the same pot of money. We are talking about two very different socially responsible measures that will ensure that the banks start to repay what they owe to society

Finally, bank lending and access to bank services are important if the banks are to take on socially responsible roles in securing the recovery and helping local communities. Let me turn first to lending to small and medium-sized enterprises. I despair when companies come to see me as their Member of Parliament and set out perfectly viable business propositions to which, before the banking crisis, banks would have fallen over themselves to lend money, and yet they cannot even get a foot through the door. We must ensure that the Government’s attempts to get banks lending start to work, because it is just not happening at the moment. Indeed, the most recent data show a huge drop-off in bank lending to small businesses, which should cause some concern to the Treasury.

There are still too many communities without good access to banking services, and branches continue to close. That is a huge problem not just in rural communities, but in some of the most deprived urban communities. It is very much a social justice issue. People should have good access to banking services within their community. Perhaps there is a greater role in that regard for the Post Office. One scheme under the previous Labour Government was to increase the number of free cashpoints in our most deprived communities. It was outrageous that people in some of the poorest areas were charged to get cash out of machines. The previous Government were absolutely right to install 600 free cashpoints in such communities. However, some of those measures have stalled under this Government, and there is a lot more that we should be doing to ensure that the most deprived communities have proper access not just to free cashpoints but to a full range of banking services.

In conclusion, we need a vibrant and socially responsible banking sector, and to ensure that bad practices are ended. The Government must recognise that banks have an important role in our communities, offering services and lending to businesses, and they must face greater competition. The Government and the banks must recognise that it is far from business as usual. It is time for proper banking reform.