Banking

Debate between Alison McGovern and David Mowat

Wednesday 15th January 2014 Commons Chamber

[Alison McGovern (Wirral South) (Lab)]

I am sorry that the hon. Member for Spelthorne (Kwasi Kwarteng) appears to be leaving his place, as I want briefly to say that I am worried about what he said. He seems not to have heard the message from the public that they are still dissatisfied with our banking industry. I do not think that our financial services industry should be about wealth accumulation; it is there as a supporting act to this country’s industry for wealth creation. I hope that he might consider his remarks in that light. I thank him for pausing to hear what I have said.

I want to speak about two matters—first, about co-operation versus competition in regulation, and secondly, about rebalancing our economy. I thought that those would be cross-party matters, but having heard what some Government Members have said so far, I am no longer sure.

On global co-operation in the regulation of financial services, we in this House must recognise that we are part of an international global marketplace. That has been pointed out by British citizens since Adam Smith sat on the promenade at Kirkcaldy and watched ships going in and out of the port. As a Merseyside Member of Parliament who sees very large ships coming in and out along our River Mersey, I am also acutely aware of that point.

Fundamentally, in the face of a global international marketplace—financial services are undoubtedly such a marketplace—we have two choices. We can either work with our partners to regulate the industry, given the risk that it might pose to all our economies, or we can take part in a global race to the bottom and allow global corporations to play one Government off against another. The bank bonus cap introduced by the EU is a classic example of that dilemma.

I argue that there are strong moral reasons to be internationalist, but there are clearly economic reasons too. This is a classic economic prisoner’s dilemma: we either work together and everybody benefits, or we work against others and in the end we work against our own interest. The G20 resolved in 2009 to introduce new global rules on supervision. Since then, the UK has acted unilaterally and has blocked global co-operation. If we do not co-operate, we are doomed to compete against our own interests in the long term.

I do not think that the British people are supportive of a Chancellor who has rushed to defend bankers bonuses that can be several times the size of an annual salary. The high level of variability in remuneration is leading us into the kind of cycle that we were in before. I am worried that we are dooming ourselves to make the mistakes of the past. I therefore ask the Minister to say what intention the UK has to work with its partners across the world to realise the promises that were made in 2009.

[David Mowat (Warrington South) (Con)]

I agree completely on the need for global co-operation, as do the Government. That is why the Basel agreements are being implemented in the UK, with everything that that involves. However, there is a distinction between global co-operation and European co-operation. Why does the hon. Lady think that we should not follow global rules on bankers bonuses, which the Government would be much happier to do if they existed, rather than European rules?

[Alison McGovern]

We seem to be hearing that argument more and more from the Tory party. I am sorry to hear it from the hon. Gentleman, who has previously spoken sensibly about working with our European partners. It is as if Europe is the great problem and that Britain can be part of a world that does not involve Europe. However, Europe is one of the world’s biggest trading blocs, along with the United States, so if we are not influencing Europe, where should we be influencing?

The second question that Ministers need to answer is where is their plan for rebalancing the economy. Given the way in which they have acted in relation to the City, coupled with the way in which they have acted in relation to the housing market, I suspect that we are getting the same old story from the Tory party. I would happily have debated the points that were made by the hon. Member for Spelthorne about 1986 and the influence that that moment had on our economy. However, I ask the Minister what the Government’s plan is for the City. Do they just want to reflate it all over again? Are we back to Tory economics as usual—the so-called FIRE economy of finance, insurance and real estate—leaving us open to the same worries that we faced in the past? Let the City of London rip and never mind the risk to the rest of the country!

The way to deal with the risks that we face is to consider proposals for proper regulation, such as establishing a full reserve power to split banks into retail and investment arms if necessary. We need to keep our eye on the ring fence, as was suggested by the Independent Commission on Banking. There should be a review of the ring fence to check that it is working and, if it is not, we should use the full reserve power for splitting the banks.

We must also not take our eye off the issue of remuneration. The regulator needs more powers to reform the rules if it is necessary. The British public are not comfortable with bank bonuses running away at two times people’s annual salaries. I would invite any Member of the House to talk to my constituents about how they feel about the incomes that are earned by people in the City of London. They do not feel that it is in the best interests of this country to have such a concentration of high earners. That creates risks for which they pay the price. The cuts that we have seen to local authorities have hurt communities up and down this country, but they were brought about by the actions of a very few people in the City of London.

If Ministers do not take rebalancing seriously, people in this country, and certainly those in Wirral and Merseyside, will not forgive them. If they are serious about rebalancing, I simply ask them to say what steps they will take to regulate the City properly. Will they explain to this House—I am not sure that they will, but I would like them to do so—how they think an ever-expanding City of London that imports ever more risk into this country is helpful to the ordinary businesses and companies that I represent in the Wirral?

Finance (No. 4) Bill

Debate between Alison McGovern and David Mowat

Thursday 19th April 2012 Commons Chamber

[David Mowat]

The hon. Lady is making a powerful point about the cumulative impact of policies on particular regions of the country. Her constituency is close to mine. Will she concede that in the last year of the previous Government the north-south divide, measured in terms of gross value added per head, reached its maximum level in the past 20 years? That is something we have to fix in this Parliament, not continue.

[Alison McGovern]

I am so pleased that the hon. Gentleman chose to mention the north-south divide, because it gives me the opportunity to discuss a concept that trips off the tongue so easily but is actually extremely unhelpful in tackling the kind of local economic development that I am asking Treasury Ministers to consider when making decisions. He will know as well as I do that although the north-west, which we both represent, has significant deprivation, it also has some pretty wealthy areas—the Chancellor himself has the honour of representing one such area. The north-south divide, as a concept, masks a whole lot of other inequalities. Again, I mention the inequalities in London. It cannot be said that there is a simple, straightforward north-south divide in this country affecting every locality in the same way; we should have a much more fine-grained analysis. There are places in the north that are extremely successful and places in the south that really need help.

Before I try the patience of the Chair any further, I will return to the importance of age-related allowances.

Finance (No. 3) Bill

Debate between Alison McGovern and David Mowat

Tuesday 5th July 2011 Commons Chamber

[David Mowat]

Indeed. Does she think that higher salaries in all those professions should be taxed more? If that is the case, the most logical option would be to have higher income tax.

[Alison McGovern]

As I said earlier, I think we all agree that inequality is a problem. We have tabled an amendment that deals with a specific problem. Do not we all agree that inequality in this country is a problem that needs to be tackled? I thought that that was politically pretty uncontroversial these days.

[David Mowat]

Will the hon. Lady give way again?

[Alison McGovern]

Many people wish to speak, so perhaps it would be better if I did not take any more interventions. I am assuming that the hon. Gentleman was not about to tell me that inequality is not a problem.

I want to outline what we could do with the extra income that could be generated if our amendment were accepted. I also want to build on the remarks made by my right hon. Friend the Member for East Ham (Stephen Timms). His analysis of the future jobs fund was thorough and it accords with my research on that subject. I pay tribute to him as one of the House’s experts on youth unemployment. His constituency is in the London borough of Newham, which has done extensive research into that issue and probably knows more than many places in this country about what can best be done to tackle it.

I want to make a further point. In January, I asked the Minister for Employment whether he could provide business planning projections of how much the Department for Work and Pensions expected to have to pay for 16 to 24-year-olds on jobseeker’s allowance for each year of this Parliament’s life. I was told that by the end of this Parliament the Department expected to pay jobseeker’s allowance to 279,000 16 to 24-year-olds. It thought that just under 280,000 young people would be on the dole. To check what had happened as a result of the Government’s economic policies coming into force, I asked that self same question in June, when the Minister for Employment was forced to tell me that his Department projected having to pay 303,000 such young people on the dole. The DWP has had to up by 24,000 its own forecast of the number of young people on the dole by the end of this Parliament. Nobody can say that this problem does not need to be dealt with. The Government know from their own DWP projections that this problem has to be dealt with—and it has got worse, not better, over the last six months.

I applaud the Government’s approach to apprenticeships and many other things, but the fact is that we had a programme and a set of policies that were working well for young people. The future jobs fund will be much debated and there is more research to come on the subject, yet the DWP’s own research provides evidence of how that particular scheme worked. The best way to get a job is to have a job; we demonstrated that basic fact through the future jobs fund.

Policy for Growth

Debate between Alison McGovern and David Mowat

Thursday 11th November 2010 Commons Chamber

[David Mowat (Warrington South) (Con)]

One of the great pleasures of speaking in this place is occasionally hearing Members of the Opposition saying something that I agree with. I agree with both the hon. Member for Copeland (Mr Reed) and the right hon. Member for Wolverhampton South East (Mr McFadden) that we must ensure that growth is spread evenly across the country as the economy grows. Perhaps they should pause for thought, however, and consider the legacy that we have been left. The gross value added per person for the English regions that we have inherited is about half that for London and 20% less than that in the south-east. The fact that GVA in the regions is half that for the capital is staggering, and it is a situation that does not exist in any other OECD economy. We must fix that, and it behoves the Government to put into effect the policies that will stop that happening again.

I shall say it again: we have inherited a situation in which London has double the GVA per employee of the English regions, and that is not sustainable. The hon. Member for Copeland is right: it is a moral issue. Why has that happened? First, it has not happened simply because London is the capital. If that were the case, the same would happen in other countries, but it does not happen in the United States, in Germany or in Italy. In France, where Paris is dominant in the same way as London is dominant here, the disparity is not the same; it is not double. One small cause of the gap in the past few years has been the boom in financial services, which was unrestrained and went on for a couple of years. I should add that the widening of the gap accelerated during the last few years of the Labour Government.

That all happened here because we have a country that is very London and south-east focused. I spent 30 years in business constantly fighting initiatives to move functions to London, and fighting the idea, “This is important; we’ll have to do it in London.” That is a very tough thing to have to do, and it is like pushing water uphill all the time. Worse still, that attitude also exists in our civil service, in which London tends to be seen as the centre of everything. Another statistic that Opposition Members might like to consider is that capital spend per head under their Government was 50% higher in London than in the north-west. That is a terrible statistic, because capital spending at that level creates private sector jobs and all the good stuff that we need, and thereby creates affluence and prosperity.

We need growth in the regions, and as I have not heard a great deal from the Opposition about how to create that growth, other than by spending money on the regional development agencies, I shall make a number of suggestions. First, infrastructure matters more in the regions than in the south-east.

[Alison McGovern (Wirral South) (Lab)]

Like the hon. Gentleman, I am finding a lot of cross-party agreement and I agree with much of what he says. Will he pause to congratulate the Labour Government on driving forward the west coast main line upgrade, and will he back the rail infrastructure campaign for the north-west that could do so much to build the infrastructure that he says we need?

[David Mowat]

I am about to address infrastructure. We need High Speed 2 to link the north-west as quickly as possible, as we need our rail infrastructure to be linked through to the channel. Yes, I will give credit to the Labour Government for getting the west coast main line done. While I am at it, I shall give them credit for getting the BBC to move outside the M25 and up to the north-west, but that has not been enough, because of the massive disparity in value added per employee that is their legacy.

Like infrastructure, energy matters. I have not heard it mentioned in the debate yet, but energy is a very important component of growth. Broadly speaking, a unit of gross domestic product generated in an English region is more energy-intensive than a unit of GDP generated in London or the south-east, because we have more manufacturing and industry that uses energy. It is therefore very important to our prosperity in the regions for energy to remain competitive. A particular problem that we have inherited is the price of our electricity, which is 30% more expensive than in France. That is a tough issue to start with, but I am concerned that some of the initiatives we are taking will make the problem worse. We need to build more nuclear power more quickly.