Banking

Debate between Tobias Ellwood and Sammy Wilson

Wednesday 15th January 2014 Commons Chamber

[Sammy Wilson (East Antrim) (DUP)]

It is a joy to follow the hon. Member for Northampton South (Mr Binley), who has hit on a very important element of the debate: the role of banks in oiling the wheels of the economy to ensure that it is healthy and grows. Today’s debate is important, because despite the changes that the Government have made, the banks in the whole United Kingdom are clearly not fulfilling that function. Indeed, if anything, initiatives like funding for lending and the disappointment there, the return to the bonus culture and the inability of the banks to lend to small businesses all show that there is still a problem with the banking system.

I want to deal with two aspects. First, the hon. Member for Northampton South said that he was disappointed with some of the comments about bonuses, and the Minister has tried to dismiss them by saying that they are only headline chasing nonsense. In an age of austerity, and given the political context in which we are debating the issue, this is not headline chasing nonsense and should not be lightly dismissed as such.

The vast majority of people cannot understand why a Government who are pursuing rigorously—and, I believe, with some justification—a pay policy that restricts public sector pay are at the same time giving priority to challenging an EU ruling on bankers’ pay. I do not mind EU rulings being challenged; I can think of many other EU rulings that I would like the Government to challenge. But let us face it: we are talking about a public sector organisation, so the Government are in effect challenging their own pay policy for some of the most well-off people in society through the courts. This is not headline-chasing nonsense, and it is difficult for the public to understand.

[Mr Ellwood]

I will keep my intervention short; I am conscious of Madam Deputy Speaker’s guidance. The concern is that if we introduce the EU rules, many organisations will choose to leave the EU and base themselves in Singapore, Hong Kong and other parts of the world. Although the spirit of the proposal makes sense, the real consequences are that it could damage financial investment in the EU.

[Sammy Wilson]

I could believe the hon. Gentleman if there was some evidence of that. Ministers have boasted today that they have cut bonuses by 60%, or whatever it is, over the last few years, but we have not seen a flight of capital from the UK or a flight of banking business to Singapore or elsewhere. They cannot argue that they are restricting the ability of banks to pay bonuses while claiming that if we do that the banks will leave the country. There has been no evidence that banks cannot recruit or retain people or get the best people, despite the fact that the Government have said that they have restricted bonuses. The question is often asked: what is an appropriate level of bonus? We have not had an answer.

We are talking about a state-run bank and we are not even considering senior executive posts. Cases cited today concern an individual with an increase on his basic salary of £1.7 million to £4.8 million, an increase of 133%. Is that enough? Another individual has a basic salary of £700,000, which after bonuses is £2.1 million, a 300% increase. Is that enough? Another individual has an increase from £775,000 to £3.3 million, an increase of 450%. Is that enough? The increases go right up to 600%. When do we stop? Surely the Government must have some view on this, but we have not heard it. That is why this debate on bonuses is important. We cannot have a state-run bank where bonuses of up to 600% are being given but the Government seem to have no view on it, whereas they do hold the view that public sector workers on £14,000 a year should not get a 1% increase. That is why it is important. It is not headline-chasing nonsense.

The second issue that I want to deal with is competition, which is particularly pertinent to Northern Ireland. As we are sitting here today, the Northern Ireland Affairs Committee is considering the banking structure in Northern Ireland where we have a particular problem because 67% of the market is served by banks such as Ulster bank, which is part of RBS, the Bank of Ireland and the First Trust bank, both of which had to be bailed out by the Irish Government. All those banks find that their lending ability is hugely impaired by the bad loans and the bad decisions that were made during the property boom in Northern Ireland, and now they are trying to consolidate their balance sheets. Lack of competition is one reason why from 2010 until now lending to businesses in Northern Ireland has fallen by 12.5%. During the last year, it fell by 5%, even at a time of growth when one would expect businesses to need to obtain further finance.

The Tomlinson report did not really cover Northern Ireland, but the excesses that it identified are to be found to an even greater degree there. Constituents regularly come to me about property loans and the first question I ask is whether they stopped paying the loans, but they were servicing their loans and paying the interest, and in some instances they were even paying down the capital, but their bank deliberately changed the rules and withdrew the facility, sometimes on a technicality, and sometimes on a technicality contrived by the banks. The loans were called in, and when the properties could not be sold, Ulster bank rode to the rescue and offered to put them on the West Register and buy them at a deflated price, even though there was an income stream and, had it waited long enough, the property market would have picked up some of the difference. The result is that many viable businesses have been sent to the wall by the actions of the banks seeking to repair their balance sheet at the expense of the real economy. The businesses then had to put people out of work because they were declared bankrupt. That is why there is a need to restructure the banking system.

If there is a need to restructure the banking system in Great Britain, there is an even greater need for competition in Northern Ireland. I look forward to hearing what the Minister and the Opposition spokesman have to say about what can be done in such cases, whether it is the kind of localism referred to by the hon. Member for Wrexham (Ian Lucas) or the introduction of a big new player that is not contaminated by the property loans of the past, splitting up some of the existing banks to ensure that that will happen. If we continue with the present banking structure, we will not find a way out of the current recession. That is why the need for increased competition referred to in the motion is as important as the need to restrict bonuses.