Rebalancing the UK Economy

Debate between Anne Marie Morris and Mark Field

Wednesday 3rd November 2010 Westminster Hall

[Mr Field]

I would not disagree with my hon. Friend in any way. It is the rhetoric, I think, of some policy makers, both in the present, but particularly in the past, that could have applied something of a barrier to that very ideal goal.

Rather than openly confronting some of those issues post-crisis, the implicit and perhaps all too easy assumption has been that, had the banking sector not collapsed through the profligacy and greed of some its employees and key players, we might have continued as we had before. There is also an assumption that to solve our current problems we need simply to return to what used to be the strength of a couple of generations ago—rebalancing the economy towards making things. The intensity of the rhetoric that has built up around the role of banks in the economy is such that politicians and even bankers themselves have often been unwilling to stand up for the sector.

Alas, that rhetoric has not subsided as time has passed. In fact, it is likely to intensify in the months ahead as the cuts bite and questions are asked about how and why Government money can be found to prop up the banks and pay out what I suspect will be another bumper round of bonuses this year while public sector jobs and services, as well as benefits, face the axe.

In response, Governments approach the financial services sector as something to be outwardly chastened, while they privately recognise its importance to the wider economy and rely on the continued income and jobs that it provides. In public, banks are told to lend to inherently risky start-ups—small businesses and first-time buyers. They are berated for trying to take the collateral that small business owners will often have tied up in their own property. At the same time, however, banks are told—indeed, they are required—to meet stringent new capital requirements. The new £2 billion bank levy is announced with a fanfare and the 50% income tax rate remains in place, yet the Treasury quietly acknowledges that it cannot put further pressure on balance sheets while storms are still gathering in the eurozone, which I think will be one of the big stories in the months ahead.

[Anne Marie Morris (Newton Abbot) (Con)]

This is a very interesting and timely debate about financial services. I declare an interest as a former City lawyer. I note with interest that you say financial services include lawyers, accountants and so on. Given that your concern is about publicity, do you agree that sometimes it is what some of the professional services have done themselves that has given rise to those problems? Furthermore, do you agree that, although it is not so much a City phenomenon as one related to smaller firms, the “no win, no fee” approach that law firms have adopted—as I say, it is usually adopted by smaller firms—has not really helped the cause of financial services?

[Mr Field]

As someone who is also from the “former lawyer” fraternity—I worked for a City law firm and I know that my hon. Friend worked for another City law firm over the years—I agree. There are elements of the ethics of business that concern me; I have never been a wide-eyed supporter of everything that has been done in the context of the City. Equally, it is important to recognise the City’s importance if this country is to get off its knees.

We witness, to an extent, the public baying for more blood after the banks have posted healthy profits, due, of course, to a combination of low interest rates, a lack of competition and a cut in corporation tax, yet the public are bemused when Government restrictions lead to increased bank charges for consumers.