European Union (Withdrawal) Bill

Alex Cunningham Excerpts

Committee: 2nd sitting: House of Commons
Wednesday 15th November 2017 Commons Chamber

[Tom Brake]

I remember that clearly. The right hon. Gentleman and I—and, I am sure, Labour Members—can confirm that there are regulations, such as those relating to the British Government’s role in running the railways in India, that it would be appropriate to get rid of, because frankly they are no longer relevant. I suspect that there are quite a lot of other examples.

I want to focus briefly on the EEA. At the start of the referendum campaign, those involved in the leave campaign advocated the Norway model. As it became clearer to them that that was not what they wanted, they moved on to the Switzerland model, with its 150 or so different agreements. Once they realised that that was quite complex, Peru emerged as the model they wanted to emulate, before they eventually settled on the idea of a bespoke deal. As we heard earlier, no one anywhere is willing to identify how such a bespoke deal would work or, indeed, whether it is even possible to put one together.

As other Members have said, it is clear that membership of the EEA does not in any way, shape or form match the benefits we get from being members of the European Union. It might provide an alternative—a step down from our current position, but without the consequences of our leaving completely—to the no-deal scenario. It is a poor substitute, but it is better than no deal. It would keep us in the single market but out of the customs union, and—this major sticking point was, I think, the reason why the leave campaign moved away from the Norway model—it would probably require a financial contribution. It would allow trade deals to be struck, so there are some advantages to it, which is why we will support new clause 22 if it is pressed to a vote.

I want to finish by focusing on the question of whether leaving the European Union automatically means that we also cut our links with the EEA. Articles 126 and 127 of the EEA agreement have already been mentioned. I have been involved in an interesting exchange of parliamentary written questions and answers about the EEA. When I asked what was required to formally withdraw from the EEA agreement, the parliamentary answer stated:

“As the Secretary of State for Exiting the European Union said when he addressed the House on 7th September, there is agreement that when we leave the EU, the European Economic Area Agreement will no longer operate in respect of the UK.”

I followed that up by seeking to identify who that agreement was with and why that would happen. The response stated:

“It is Government policy that we will not be a member”,

so it seems as though the Government have reached an agreement with themselves that we will automatically be out of the EEA. I would suggest that that is not a particularly high bar. Although article 126 makes it clear that we will leave the EEA, article 127 requires us to give notice in order to do so.

As an aside, if we are leaving the EEA, it would probably be courteous for the UK Government to at least talk to its other members, particularly EFTA members, just so that they are aware that that is what we are doing. As of last week, no contact had been made with at least one of the EFTA members. It might be appropriate for the Government to inform them as a matter of courtesy.

New clause 22 is very good, as it would provide us with an opportunity to keep some of the benefits of our EU membership without crashing out of the EU completely, and without seeking the mythical bespoke deal that I do not think anyone believes can be delivered in the timescales that the Government have to work towards. I look forward to the vote on that new clause.

[Alex Cunningham (Stockton North) (Lab)]

I want to speak to new clause 58 and to cover the key issue of EU pension directives, specifically versions one and two of the institutions for occupational retirement provision directive.

Both versions set out the broad framework for pension fund operation in the EU, concentrating on structures and procedures such as the separation of the fund from the employer, giving strong protection for scheme members, and the establishment of a regulator in each member state. My concerns relate to the effect of IORP II on the running of pension schemes and the Government’s approach to the requirement for legal separation of a pensions institution from the sponsoring employer under article 8 of the directive, and to investment regulations under article 19 that require assets to be invested prudently in the best interest of scheme members, and for any potential conflict of interest to be resolved in the member’s favour.

Principally, I seek an assurance that the Government will introduce legislation for the transposition of IORP II and that they will not seek to opt out of any of the relevant articles but implement them in full. That is particularly important for members of the local government pension scheme, as there remains some confusion in the public domain over whether IORP I was ever applied to it in full.

When IORP I is succeeded by IORP II, the Government could disapply any requirement for separation, as well as any requirement for investment in accordance with a “prudent person” rule. What lies at stake here are the statutory rights of more than 5 million citizens who participate in the UK local government pension scheme. They should not be undermined by virtue of past decisions, or indeed as a result of our leaving the EU. This is made even more important by the proximity of the deadline for IORP II to the date of exit from the EU. I hope that Ministers will confirm that the Government will ensure the necessary measures—articles 8 and 19—are enshrined in UK law.

I now turn to the state pension. As a result of our EU membership, the UK is part of a system to co-ordinate the social security entitlements of people moving within the EU. That system enables periods of insurance to be aggregated, meaning that an individual who has worked in other member states can make one application to the relevant agency in the country of residence. In the UK, that is the International Pension Centre. That relevant agency then notifies details of the claim to all countries in which the person has been insured, and each member state calculates its pro-rata contribution and puts that amount into payment.

The UK state pension is payable overseas, but it is uprated only if the pensioner is in an EEA country, or one with which the UK has a reciprocal agreement for uprating. In September, the Government suggested that reciprocal arrangements would be protected following exit from the European Union, and that is also included in the joint paper on citizen’s rights. Will Ministers confirm that that will continue to be the case, and that the Government will not be seeking to enter individual reciprocal arrangements after our exit from the European Union, but will instead continue to work on the basis of current arrangements?

[Stephen Kinnock]

I would like to speak in favour of new clause 2 and new clause 58, which have been tabled by those on the Labour Front Bench.

There is an idea that we should be giving the Government the benefit of the doubt on these issues. There have, however, been so many statements and acts from those on the Government Benches to undermine employment rights, from the Trade Union Act 2016 to many other measures, that we need to ensure we anchor the rights of our workforce in the Bill.

The Exiting the European Union Committee met Mr Barnier in Brussels last week. One point he made very clearly is that as we move towards a future relationship, the so-called deep and comprehensive free trade agreement will need to be ratified by the Parliaments of the member states, plus a number of regional Parliaments. They will not accept anything that he described as “social dumping”—they will not accept undercutting and they will not accept unfair regulatory practice—so if the Government are serious about getting a deep and comprehensive free trade agreement with the EU they will have to recognise that regulatory equivalence will have to be a critical part of it. This is about not only securing rights in this country, but the economic interests of the country if we are serious about having that future relationship.

Oral Answers to Questions

Alex Cunningham Excerpts

Thursday 29th June 2017 Commons Chamber

[Karen Bradley]

I share my hon. Friend’s enthusiasm for the women’s hockey team, having been honoured to be at the semi-final in Rio, where we had that glorious victory, and to meet the team afterwards. The initiative that she talks about sounds very exciting.

[Alex Cunningham (Stockton North) (Lab)]

T7. The Stockton international riverside festival, which will be held from 3 until 6 August, attracts thousands of visitors, and has grown into one of the country’s greatest street arts events. This year it celebrates its 30th anniversary. Will the Secretary of State join me in congratulating Stockton Borough Council on its vision in setting up the festival, and congratulating the Arts Council on recognising it for the tremendous success that it has become?

[The Parliamentary Under-Secretary of State for Culture, Media and Sport (John Glen)]

It gives me great pleasure to congratulate Stockton Borough Council on the wisdom of its investment. It provides a good example for many other local authorities, demonstrating that when they invest in the arts, they will get a very good return.

Serious Fraud Office: Bryan Evans

Alex Cunningham Excerpts

Wednesday 3rd February 2016 Westminster Hall

[The Solicitor General]

I am grateful to my hon. Friend for that intervention, and I listened with interest to his earlier intervention and that of the hon. Member for Ogmore (Huw Irranca-Davies). I know the point he is making, and the straight answer is that the SFO keeps the matter very much under review. If there is indeed a cumulative effect and a clear modus operandi that suggests widespread and similar frauds of this nature, the circumstances will clearly change.

To answer directly the question that the hon. Member for Ogmore asked, I do not quite think we are there yet, but let me explain further—I know he is very familiar with this issue, because he has asked written questions, to which he will get very swift answers, I promise. However, he gives me the opportunity to outline the statement of principle.

The decision by the director of the SFO on whether to launch an investigation has to be made on the facts and circumstances of each case. Being overly prescriptive would not be appropriate, bearing in mind the unique circumstances of every case. Many factors are taken into account, but for guidance, the statement of principle sets out that when considering cases for investigation, the director will consider the following: first, whether the apparent criminality undermines UK plc commercial or financial interests in general and in the City of London in particular, causing reputational damage to the country; secondly, whether the actual or potential financial loss involved is high; thirdly, whether actual or potential economic harm is significant; fourthly, whether there is a significant public interest element; and finally, whether there is a new species of fraud.

“That is not a tick-box exercise where, if every one of a set of measures is met then the SFO will open an investigation. That would inevitably lead to cases being taken on by the SFO which did not require its unique model of investigators, prosecutors and other professionals working together in one organisation or its set of powers.”

I will quote from the “Protocol between the Attorney General and the Prosecuting Departments”, which sets out that the decision for the SFO to investigate and prosecute is

“a quasi-judicial function which requires the evaluation of the strength of the evidence and also a judgment about whether an investigation and/or prosecution is needed in the public interest.”

That will not always be an easy decision, but for the vast majority of financial crimes, the traditional model of a police investigation and a Crown Prosecution Service prosecution is the best model. That is because the police, as my hon. Friend the Member for Gower knows, rightly have primary responsibility for investigating crime in this country, and Action Fraud has been established as the national reporting centre to which reports of alleged fraud should be referred in the first instance.

I repeat that the SFO’s role is limited to investigating and prosecuting cases of serious or complex fraud, so it cannot and should not take on every case referred to it. To give that some context, the SFO takes on between 10 and 20 cases each year. It receives nearly 3,000 reports of fraud directly from the public each and every year, so the vast majority of referrals are not about matters that it can properly investigate. Complainants are then advised that the complaints will be referred on to Action Fraud for dissemination to the relevant police force where appropriate.

The SFO retains the material and uses it for intelligence purposes, and that is the point that hon. Members have made. That intelligence material is part of the SFO’s work in building an intelligence picture, and through that information and material it can properly identify the top-tier cases that are appropriate for it to investigate. In other words, debates such as this are invaluable in bringing into the public arena information that can then be collated and properly reviewed. I said that to the hon. Member for Ogmore in September and I repeat that assurance today.

[Alex Cunningham (Stockton North) (Lab)]

My constituent, Michael Fields, who has suffered, is part of a large network of people—I know he has been touch with the Minister personally. The Minister talks about not being quite there yet. Do we know how far off we are? Are we halfway up the hill? Have we much further to go? That network is working hard to identify other people who are similarly affected, to try to build the critical mass that may well lead to consideration of the matter by the SFO.

[The Solicitor General]

I know that the hon. Gentleman raised that point in an intervention in the September debate, so he has consistently advocated on behalf of his constituent. It would be wrong of me to start prejudging or second-guessing what the independent prosecutorial authority should do—that would be inappropriate—but I can tell him that the co-ordinated work that he, his constituent and other similarly affected people do, of course, improves the intelligence picture. It cannot do anything but assist the authorities in understanding the true extent of frauds of this nature, so I am grateful to him.

Alun Richards and Kashif Shabir: SFO

Alex Cunningham Excerpts

Wednesday 16th September 2015 Westminster Hall

[Jo Stevens (Cardiff Central) (Lab)]

I beg to move,

That this House has considered the Serious Fraud Office, and the cases of Alun Richards and Kash Shabir.

This debate concerns allegations of fraudulent misrepresentation and collusion involving Lloyds bank and receivers used by that bank. My hon. Friend the Member for Ogmore (Huw Irranca-Davies) and I both have constituents who, as customers of Lloyds bank, underwent the same ordeal: having their hitherto successful businesses revalued downwards, forced into receivership and then sold. The allegations concentrate on but are not confined to Lloyds’ operations in Wales. The facts of the cases resemble the malpractice at Royal Bank of Scotland identified by the Tomlinson report, which was published on 25 November 2013.

I bring this matter to the House today so that Mr Kash Shabir, my Cardiff Central constituent, may have his account of events put on the parliamentary record. I anticipate that my hon. Friend will do the same in respect of his constituent, Mr Alun Richards.

[Alex Cunningham (Stockton North) (Lab)]

I would like to put on the record the case of one of my constituents, which relates to this matter. Michael Field bought some land and borrowed from Lloyds bank to finance a project to build several houses. He maintained his payments without fail, was a good customer and fulfilled all the terms and conditions of the loan agreement, but Lloyds seized his assets and foreclosed on him. He then discovered that his assets were actually traded inside the bank, which was a great concern. Does my hon. Friend agree that the Government need to intervene and change things to protect customers such as Michael Field?

[Jo Stevens]

My hon. Friend makes a very interesting and valuable point about the fact that this bank is part-owned by the taxpayer. The Government should look into its internal practices.

Both Mr Shabir and Mr Richards say that they have suffered significant financial and emotional harm as a result of the actions that are alleged. Mr Shabir built his business from scratch. He was a successful entrepreneur and property developer, with a portfolio valued at around £10 million. He enjoyed an excellent credit rating and reputation among banks and building societies. In 2006, Lloyds bank competed against Barclays bank to win a large portion of his business lending. Lending was secured by Mr Shabir with Lloyds at 1% above the base rate, because of his excellent track record. So far, so good, people might say.

As the House knows, however, the 2007-08 financial crash brought Lloyds to the brink of collapse. At the peak of the financial crisis, Lloyds requested emergency funding from the UK taxpayer. The Government set up a division within the Treasury—UK Financial Investments —to manage the bail-out of Lloyds, the Royal Bank of Scotland and Northern Rock.

For Lloyds to secure and receive that bail-out, it was essential for it to quantify and declare to the Government the amount of money required to save it from collapse. So it conducted an overall assessment of its investments and assets. This appears to have prompted Lloyds to take the opportunity to reassess its relationships with customers who were borrowing large sums on what are called fine margins. Customers on fine margins are good customers allowed to borrow at low rates. Due to the lack of liquidity, however, the cost of money in the money markets had risen significantly—more importantly, it had risen to a point above the contractual levels at which it was being borrowed.

Almost overnight, those businesses on fine margins, which Lloyds had regarded as its best customers, became highly vulnerable since the bank could no longer make profits from those arrangements. As Lloyds sought to improve its own position, the fine margin customers were targeted first, to eliminate them from the bank’s portfolio. That was particularly true of small and medium-sized enterprises, which did not have the resources to defend themselves.

Banks almost always lend money that is secured against assets, by way of a loan agreement. The parameters of that agreement, such as the loan to value ratio, are set out in writing at the outset. Provided that a customer’s assets do not fall below the agreed level, the customer is, in broad terms, described as safe.

During the financial crisis, it is alleged that Lloyds and other banks adopted a mechanism known as down-valuation, to engineer a shortfall. Again, that practice has been recognised in the Tomlinson report, and it has two consequences in this case. First, Lloyds was able to secure a larger bail-out from the taxpayer. Secondly, individual customers were held to be in breach of their loan conditions. That enabled Lloyds either to renegotiate more favourable terms for itself or to eliminate its customers altogether, by triggering receivership proceedings and then the sale of those businesses. It was that second engineered consequence—of being in breach of loan conditions—that brought about the unjustified failure of many successful companies and individuals, including Mr Shabir.

I will explain to the House in a little more detail the mechanism of the alleged collusion applied to engineer a down-valuation in respect of Mr Shabir’s portfolio. Lloyds bank utilised Alder King LLP, commercial property consultants and Law of Property Act receivers, for the majority of the valuations that it carried out in Wales. Alder King was the approved professional company for all receiverships in south Wales. What is of particular concern is that Lloyds engaged as a manager for its Wales operations an equity partner of Alder King, Mr Jonathan Miles, who worked within the bank’s recoveries department—the very department responsible for making receivership appointments. In this position, it is alleged that Mr Miles worked with the valuers and receivers from his own firm of Alder King, and was able to manipulate Mr Shabir’s business into failure.

I am told that Mr Miles never disclosed his own identity as an Alder King partner and misrepresented his position to Mr Shabir as being an employee of Lloyds bank and a long-time Lloyds bank manager. Mr Miles had a Lloyds email address, Lloyds-headed stationery and a Lloyds business card, all of which he used daily. I am also told by Mr Shabir that Mr Miles appointed another Alder King receiver, his Alder King partner Mr Julian Smith, as the receiver in Mr Shabir’s case. Mr Smith wrote to Mr Miles thanking him for making the appointment. Mr Smith was also given a Lloyds email address, together with Lloyds stationery. He had full access to confidential customer data and communicated directly with Lloyds customers, misrepresenting himself as a Lloyds employee, it is alleged.

During Mr Miles’s secondment to Lloyds, he had 2,400 live cases, each worth in excess of £1 million, within his recoveries department. Those were 2,400 live cases in respect of which, if he wished to, he could appoint receivers from his own firm, Alder King. Alder King received substantial professional fees for its services as appointed receivers. These figures illustrate the size and scale of the obvious conflict of interest and the potential for financial abuse. The role played by Mr Miles within Lloyds, with the bank’s knowledge and consent, created an immediate and significant conflict of interest.

Mr Shabir accepts that banks will utilise the services of third-party specialists, such as surveyors, in their day-to-day business, but in engaging such third parties it is the bank’s responsibility to ensure that conflicts of interest do not arise. In Mr Shabir’s case, his Lloyds portfolio was down-valued by Alder King by more than 50% from its original valuation, placed into receivership and sold. Mr Shabir has four valuations from the same period by other Lloyds panel valuers, all reflecting nearly double the valuation of Alder King at the point of placement into receivership.

Once the portfolio of properties was placed into receivership, the receivers failed to transfer all associated bills to themselves, and Mr Shabir has since become the recipient of approximately 30 county court judgments for claims against properties that had been removed by the receiverships from his control. His credit rating is now completely destroyed. This young, successful entrepreneur, who grew up in a small terraced house in Cardiff and built a business worth £10 million, has been financially destroyed. With a young family who are dependent on him, he has lost his entire investment portfolio, with only his family home remaining—on which Lloyds has a second charge.

Mr Shabir alleges that he was forced by Lloyds to take out an interest rate hedging product as a condition of his lending facility with Lloyds in November 2006. When his portfolio was transferred to the recoveries department of Lloyds, it unilaterally cancelled the hedge and levied termination fees of almost half a million pounds against Mr Shabir. It is alleged, and now confirmed by Lloyds, that the hedge was mis-sold. The sales process was non-compliant in seven respects that the Financial Conduct Authority suggests are mandatory for a compliance sale.

I turn to the regulatory framework. In March 2015, the Business, Innovation and Skills Committee, under the chairmanship of my hon. Friend the Member for West Bromwich West (Mr Bailey), conducted an inquiry into the insolvency regime. At the inquiry on 4 March 2015, evidence was heard about the practice of seconding insolvency practitioners and surveyors within lenders’ restructuring divisions. Mr Graham Horne, deputy chief executive of the Government’s Insolvency Service, said that receivers should never work as active insolvency practitioners within a bank. Mr Julian Healey, head of the Association of Property and Fixed Charge Receivers, expressed concern about the impression the practice gave and concluded that if receivers on secondment also worked on the same bank’s administration, there was “clearly” a conflict of interest.

Mr Shabir made a formal complaint to the Royal Institution of Chartered Surveyors about Alder King’s conduct. In its response, RICS specifically confirmed that Mr Julian Smith of Alder King was on secondment to Lloyds at the time of the valuation of Mr Shabir’s portfolio, when he personally acted as the valuer, but also when he was appointed by Mr Jonathan Miles as the receiver. During the same period, Mr Jonathan Miles, as head of receiverships for Alder King, was embedded in Lloyds bank as Mr Shabir’s allocated bank manager.

Despite the evidence that Mr Horne and Mr Healey gave to the Select Committee, RICS somewhat astonishingly claimed to see nothing wrong with Alder King’s practice. It responded as such to Mr Shabir shortly after the Select Committee hearing at which the chair of the RICS regulatory board, Eve Salomon, gave evidence. Although the alleged collusion and fraudulent misrepresentation were first identified and raised with Lloyds by Mr Shabir in 2010, responses have amounted to no more than stonewalling by successive levels of Lloyds management.