Access to Redress Schemes

Alistair Carmichael Excerpts

Thursday 18th April 2024 Commons Chamber

[Richard Foord]

The hon. Member is exactly right to draw a thread between several of these scandals. That is partly because when a new scandal emerges, the organisation responsible is often the organisation charged with redress. Andrew Bailey, while chief executive of the Financial Conduct Authority, said in 2017 that

“it just does not seem to be sensible that, every time one of these things happens, we have to set up something new.”

Beyond the Post Office schemes, we have heard criticism both here and in the press on the infected blood inquiry, as the hon. Member mentioned, and Windrush. That criticism has pointed to intolerable delays or the problematic features that often let the offending firm or institution off the hook.

[Mr Alistair Carmichael (Orkney and Shetland) (LD)]

I am interested to develop my hon. Friend’s thought about the Financial Conduct Authority. If I am able, I will speak at greater length about it later in the debate. It administers the Financial Services Compensation Scheme, which is a fund set up by levies on financial services companies themselves. It is the maladministration of the FCA or a lack of proper regulation that often leads to these claims being brought. Essentially, the people paying for the scheme have to do so because of the incompetence of the FCA.

[Richard Foord]

My right hon. Friend is exactly right. The FCA is not directly accountable to Parliament, but is accountable to Parliament through the Treasury. I, too, have had constituents finding themselves in a David and Goliath scenario, trying to tackle issues of unfairness with the FCA.

Likewise, in finance, we have seen the mis-selling of interest rate hedging products and widespread financial misconduct against small and medium-sized enterprises by the Royal Bank of Scotland, for example. Last year, the all-party parliamentary group on fair business banking conducted the first systematic review of compensation schemes in the UK and found flaws common to several of them. Schemes are frequently blighted by unnecessary complexity, delays and a huge emotional and legal burden on victims. Often schemes are shrouded in secrecy and lack proper independence.

--- Later in debate ---

[Mr Alistair Carmichael (Orkney and Shetland) (LD)]

It is a pleasure to follow the right hon. Member for North Durham (Mr Jones). I do so with a small measure of trepidation, as a recovering lawyer; it is 23 years since I left legal practice, so it gives me a certain perspective. He is right to say that we are talking about the imbalance of power between the big corporates, Government bodies and public bodies, and the individual private citizen. Beyond that, the real problem is about culture, because nothing in nature or law says that a big corporate, public regulator or public body has to treat people badly; that is the choice of the people who make up those bodies.

That problem is not new. As I have been listening to this debate, I have been reflecting on the fact that not long after I was first elected to this House in 2001, one of the first pieces of casework in which I became involved related to 36 residents in the south end of Shetland whose asbestos roofs had all failed following the grounding of the Braer, off the south end of Shetland, some 10 years earlier. The casual observer might think it common sense that those roofs had worked perfectly functionally for decades and then suddenly, after a tanker full of Gullfaks crude was dumped on top of them, things started to go wrong. The problem was that they did not go wrong immediately; it took time for their failure to become apparent. As a consequence, those people were at the tail end of those who were claiming from the International Oil Pollution Compensation Funds. Everybody believed before the Braer that the sum put into the IOPC fund could never be reached, but of course the Braer maxed out the fund.

By the time the asbestos roof claimants came along, there was no money left to pay the compensation. However, money was left to defend a court action, which is what happened when my constituents raised one. I have never understood the judgment in the case, but my constituents lost and, as a consequence, were left having to carry their own losses. I am certain that had there been more money in that fund at the start, their losses would have been met. So, yes, this is about the imbalance of power, but it is also about the culture of the organisation concerned. An understanding is required on the part of these bodies, be they corporate or public, of the purpose for which they are there. That is what I wish to draw the House’s attention to today.

Last night, I was fortunate to host a showing upstairs of a BBC documentary entitled “King of the Swindlers”, and the parallels with the Post Office Horizon scheme and its victims are there for all to see. There were only a couple of hundred victims of the “King of the Swindlers”, whereas, as we know, thousands of sub-postmasters were affected by Horizon. The “King of the Swindlers” concerned a Ponzi scheme perpetrated by a financial adviser in the north-east of Scotland, Alistair Greig. He was eventually convicted of fraud and sentenced to 14 years’ imprisonment, which was later reduced to 10 on appeal. The victims came from everywhere from Shetland in the north, down through Orkney, along the highland east coast and the Moray coast, through Aberdeen and down into Angus. They were all people who had lived and worked as builders, tradesmen or shopkeepers, saving a bit here and there. They put their money into this Ponzi scheme and lost out. The constituent who first brought this to my attention lost out to the tune of £130,000, and his mother lost £37,000.

Alistair Greig was responsible for his fraud, but he was able to carry it out as a consequence of the serial ineptitude and incompetence of the Financial Services Authority, later the Financial Conduct Authority. A journalist, Dale Haslam of Aberdeen’s Evening Express, who has done tremendous work exposing what went on, pointed out to me last night that if the FSA had got it right the first time Greig’s wrongdoing was brought to its attention, he would have been stopped after only one victim. However, it missed the opportunity not once, not twice, but three times to stop what he was doing. As a consequence, the number of victims ran to hundreds.

Those who lost out were all small business people who had worked hard, saving £100 here and £1,000 or £1,500 there. They put all that money together and trusted it to Alistair Greig, usually on the recommendation of friends, family and others, because that is how business is often done in such communities. These people did not make that money by flipping properties or coming up with a great wheeze in the City; it was all hard won. Eventually, in desperation, they raised a legal action against Sense Network Ltd, the company that stood above Greig in the financial food chain, but they lost twice: in the first instance, and at appeal.

The legal action pursued by the 95 victims who had the determination, courage and stubbornness to pursue it did serve a purpose: eventually all the victims were allowed compensation from the Financial Services Compensation Scheme. That of course comes with an £85,000 cap, so my constituent who had lost £130,000 was immediately £45,000 down. However, those 95 victims of Alistair Greig who supported the legal action and made the compensation for everybody possible are left with a legal fees bill of £1.9 million; they are having to pay some £30,000 each, although the exact number varies. So my constituent started with £130,000, came down to £85,000, and is left with something in the region of £50,000. Let us not lose sight of the fact that Alistair Greig was able to do what he did only because the Financial Services Authority and the Financial Compensation Authority were poor at doing the job that this House charged them to do.

I invited various people to the screening of “King of the Swindlers” last night. I invited the legal team, including the solicitor who acted for the victims. I will be happy to introduce her to the right hon. Member for North Durham, because she is a sterling example of what good people in the legal profession can do, as a member of what I would still regard as a caring profession.

[Mr Kevan Jones]

I hate to think that I have given the impression that I am down on all lawyers; some of my best friends are lawyers. If the system is implemented fairly, people can get proper legal advice without it costing a fortune.

[Mr Carmichael]

I do not disagree with that. I saw enough of that in my time in practice. The right hon. Gentleman knows of my experience with the historical shortfall scheme, and of going into hand-to-hand combat with the lawyers who were instructed by the Post Office. In that case, we were able to make progress for my constituent. A local solicitor, Anne Robertson, a sole practitioner operating in Orkney, took on one of the three biggest firms in London and left them running for cover.

The victims were left with a £1.9 million legal fee because the inadequacy of the regulators left them with no option but to do what they did. We invited the regulators to the showing last night. I invited them in the middle of March; they replied last week in a letter, saying, “No, sorry. We have nothing to add. We are not going to come.” Foolishly, the FCA gave me time to reply, and I had a telephone conversation on Friday night, as I left Shetland on a ferry to go to Orkney, with Chris Wilford, the head of public affairs, and Mark Francis, the director of enforcement and market oversight. Apparently, that is a proper job title; I thought it was some sort of ironic term, but that is what is in his contract. The response was, “Of course we are accountable, but we don’t like being accountable to you. This was an informal process.” All I was asking was for them to come along, sit in room and watch a documentary, along with the people who had lost their life savings to this man, and explain the decision that they had taken. That was all they had to do. They could walk out of the room at the end of the night, and I would be able to ask no more of them, but they were not even prepared to do that. I thought I would be up against some really slick types, but I have rarely come across two more nervous-sounding individuals.

[Mr Jones]

It is your reputation—it preceded you.

[Mr Carmichael]

That could be right, but I doubt it. My reputation is as a friendly and approachable character. We went through the process and eventually I said, “If these people had not taken that court action, how much would any victim of Alistair Greig have got back?” The silence was absolutely deafening. I let it run for as long as I could, and eventually I said, “Well, I think I understand now why you are so reluctant to come to the House of Commons next Wednesday.” The call did not go on much after that, but I did say that I thought that the matter required escalation, and asked them to call back on Monday with arrangements for me to speak to the chief executive. I did not get a call, but I did get an email on Monday saying that they had nothing further to add.

The chief executive of the Financial Conduct Authority is Nikhil Rathi. Interestingly, a couple of years ago that job commanded a salary of £455,000 per annum. I calculated that the Prime Minister’s salary is about 37% of what we pay the chief executive of the FCA. For jobs like that, it often feels that the more you pay, the less you get. I contrast the lack of moral courage of people like that, who will not sit in a room with the people whose lives have been affected by the decisions they have taken, to that of some of the people who were in the room last night, including the solicitors Philippa Hann and Robert Morfee. At first, the judge in the Sense Network case was not going to turn up, but he was there in the room. We expect judges to plead the independence of the judiciary, and rightly so, but out of respect for what these people had been though, he was prepared to turn up, watch the documentary and share the space with them. That spoke well to his strength of character.

Another person who was in the room was Judy Greig, the ex-wife of Alistair Greig, who was responsible for the scheme. She divorced him after his crimes came to light. He made himself bankrupt, but she refused to do that, so she has ended up carrying some of his debt. She is now 72 years old. She is working in a supermarket and still supporting the victims of her husband’s criminality. Her remarkable strength of character is in contrast to that of people like the chief executive of the FCA who, despite the very well-funded taxpayer salary that they get, simply lack the decency and moral courage to sit down in a room with their victims.

That is why I think that the question of culture is at the root of the issue. Since I became interested in the last few days in the detail of what was going on in the FCA, I have found very little to offer me comfort. Apparently, the FCA said that 60 of its staff were earning salaries below the £29,500 per year set by the Joseph Rowntree Foundation as the minimum amount that people need to earn to reach an acceptable standard of living. It is a possibility that the FCA will establish its own hardship fund in 2024, if there is enough demand among staff. This is an organisation where the chief executive is paid £455,000 a year.

Some of the commentary on the culture in the FCA is pretty damning. In one anonymous online report, a former colleague described the CEO as

“a very high IQ, but not as much EQ”—

emotional quotient. As we know, culture comes from the top of an organisation downwards. Unite, the union that represents many FCA workers, talks about the “toxic” environment for staff representatives, who have been given “minimal information” by their bosses. Again, this comes down to culture. How the FCA treats its staff reads across to how it treats people like my constituents, who find themselves in need of its services.

We set up the FCA for a reason, and the FSCS for another reason. The FSCS was only supposed to be there in case the FCA failed in any way. It is paid for by companies in the financial services sector, which are regulated, so they pay for the regulation, and for the failure of that regulation. This is something that the Government seriously need to look at soon. In the meantime, if the FCA wants to do anything to persuade me or anybody else in this House that I am wrong about the culture within that organisation, it can put the final sum of £1.9 million in a cheque to the 95 claimants who were the victims of Alistair Greig and Midas Financial Solutions.

[Madam Deputy Speaker (Dame Rosie Winterton)]

I call the SNP spokesperson.