Bankers’ Bonuses and the Banking Industry Debate
Full Debate: Read Full DebateCharlie Elphicke
Main Page: Charlie Elphicke (Independent - Dover)Department Debates - View all Charlie Elphicke's debates with the HM Treasury
(9 years, 6 months ago)
Commons ChamberHaving sat on the Bill Committee for that piece of legislation, I remember well the considerable discussion that there was. If the hon. Gentleman has read our paper on banking reform, he will know that we support the reference to the Competition and Markets Authority to ensure that we get new challenger banks in the system. That will be an important feature of our reforms in government.
Our programme of reform, as stated in our recent paper on banking, is designed to undo the reputational damage that has been inflicted by the financial crisis and the subsequent scandals. Our approach will help to restore the trust and confidence of savers, businesses and investors, and to ensure that fair dealing, integrity, prudence and probity are once again the pillars on which Britain’s banks are founded. In a global industry, an international reputation for good practice can only be a competitive advantage.
Does the hon. Lady believe that the tripartite system, which was brought in by the previous Prime Minister and the shadow Chancellor, was one reason why our banking system was left so much more vulnerable in the difficult time that we had? Does she accept that the Labour party should take responsibility for that?
As the hon. Gentleman knows, we did have a global financial crisis. The Labour party has accepted that perhaps the regulation could and should have been tighter; we have said that on numerous occasions. I was not in this place at the time of the financial crisis, but I do not recall many on the Conservative Benches making the case for tougher regulation. Indeed, the opposite is true; they were actually looking for light-touch regulation. I hear what the hon. Gentleman is saying, but perhaps he should look at his own party’s record on this matter as well.
I thank the hon. Lady for her comments. The shadow Chancellor is not here, but neither is the Chancellor, so I am not sure what point she was trying to make in that regard. I recognise that a significant amount of money has gone to support valuable organisations such as the one she mentioned, but I hope that she was in no way suggesting that the banks should not be paying attention to their current ways of operating. We must ensure that we never again have a situation in which those fines are necessary, so hopefully things will change.
Will the hon. Lady confirm that the forex and LIBOR scandals took place before this Government were elected, and that it is this Government’s regulatory regime that has taken action to deal with them? Does she also agree that bonuses tripled in four years under her Government, and that under this Government they are a fifth of what they were? Much progress has been made, and she ought to give the Government credit for the work they have done.
I will always give credit where it is due, but we also have to look at what has happened on this Government’s watch. As the hon. Gentleman knows, what we have seen with HSBC over the past few weeks shows that it can take a considerable time for some of those issues to come to light and be dealt with. The important point is to have a regulatory environment in place that allows those issues to be dealt with quickly, rather than just put to one side. We also need a change in culture to ensure that those things do not happen again.
No, I want to finish this point.
As I said, it seemed that the scenario proposed was still fairly generous, but it was obviously not generous enough for the Chancellor, who decided to take legal action. The quest ended in failure after he meekly admitted defeat at the hands of the EU’s lawyers, but not before he had wasted thousands of pounds of taxpayers’ money in legal fees. Let us remember that this Chancellor will not devote himself to ensuring that tax avoiders and evaders are brought to book, when the first thing that he does is to challenge something of that sort, but he will devote himself to defending the right of bankers to receive high bonuses, while spending taxpayers’ money as he does so.
The Chancellor has been a diligent defender of bankers on the home front, too. Last year he had to be pressurised by Labour and others into refusing to give taxpayer-owned RBS the shareholder permission it needed to breach the cap and to pay bonuses of 200% of salary, and he still has serious questions to answer on HSBC. Over recent weeks, he has done his best not to answer them and has sent his Treasury Ministers out to do the talking for him. On Monday, he finally put in an appearance, yet he did not have any answers at all, so we need to keep asking the same questions. Did he discuss allegations of tax evasion at HSBC with Lord Green before Lord Green was made a Tory Minister; why has only one person been prosecuted out of 1,100 names; and why has he signed a deal with Switzerland that could prevent HMRC from getting its hands on similar information in future? He has been Chancellor for nearly five years and this is his responsibility. He needs to start taking his responsibilities seriously. If he does not, people are going to draw their own conclusions.
Let me move on to Labour’s reforms. It has been clear since this Government took office that they do not have the stomach for the serious reforms that we need. As our motion explains, a Labour Government will do things very differently. Our starting point, as I outlined, will be trust and fairness. We believe that banks should serve the needs of their customers and the economy, and that bonuses should be a reward for exceptional performance, not a compensation for failure.
Will the Minister give way?
Does my hon. Friend not think that the last intervention is reminiscent of arsonists throwing rocks at the firefighters who have worked so hard to put out the fire the arsonists started?
My hon. Friend is quite right. It is extraordinary that Labour Members have the cheek to come to the House and suggest that Conservative Members are somehow responsible.
I want to draw to the House’s attention the very prescient quote from the former Prime Minister when, representing the previous Government, he addressed the City in his Mansion House speech in 2002:
“What you as the City of London have done for financial services, we as a Government aim to do for the economy as a whole.”
And didn’t they just? It is absolutely extraordinary that under the “intensely relaxed” Labour Administration, bankers were rewarded for taking excessive risk, and if they failed, were allowed to get away with it—heads they win, tails the taxpayer loses.
The hon. Gentleman cites figures that demonstrate that in the last month—[Interruption.] Well, I will give him figures from the Office for National Statistics. In the past month, unemployment in my constituency rose by nearly 50 people. He does not cite the International Labour Organisation figures. If he genuinely believes that unemployment of 2,500 people in my constituency should be tolerated by any Government, he misjudges not just the attitude of my constituents, but the good sense of the British people.
Does the hon. Gentleman agree that welfare reforms, the long-term economic plan, and the jobs revolution that we have seen have been great at getting people back into work so that they can fulfil and achieve their potential? Does he not welcome that?
It is a pleasure to follow the hon. Member for Bishop Auckland (Helen Goodman), as I did last week. I hope that there will also be sufficient time to allow my hon. Friend the Member for Warrington South (David Mowat) to follow me. I shall therefore try to ensure that my remarks are more to the point than they might otherwise have been.
I have always been a strong believer in having diversity and competition in the banking system, and I share the concern expressed by many that we have an oligopoly in our system. That is not healthy; there is not enough choice or competition. We need more competition, and I personally would be quite radical and ensure that the banks were separated up to a greater extent than they are today. It is also a concern that the establishment of the banking system in this country has meant that the banks are too big to fail. We could cure that by having depositor preference, because it would then be a matter for the bondholders, who would be much more interested in ensuring that the banks behaved and did not overpay bonuses.
What will not work is Members of this House pontificating about bonuses and what the bonus levels should be; waving a magic wand and saying that they should be this, that and the other; and trying to micro-manage banking business from afar. What makes it even worse is the way the previous Government carried on and the shameless hypocrisy of the Labour party that we have heard today. Let us not forget that the forex and LIBOR scandals happened under the previous Labour Government. Our Government have sorted out the regulatory system and have been cleaning up the mess. Under the previous Government bonuses tripled in four years and £66 billion of bonuses were paid out. The Labour party wishes to forget that. Fred Goodwin became Sir Frederick Goodwin then, and honours, baubles, bonuses and bag slaps were scattered around happily in those days. Labour now wishes to forget that. Under our Government bonuses are now a fifth of what they were then.
Does the hon. Gentleman think the Conservative party is being wise after the event? Was it not the Conservative leader, the current Prime Minister, who argued in 2007 for less red tape and less regulation for the banking industry?
The issue is not the extent of regulation, but the format of regulation and the fact that the previous Government took the Bank of England out of the picture. The one organisation that understands the prudential nature of risk management was pushed to one side. That, together with the failure to police risk, was at the heart of what went wrong with our banking system, so I completely reject the hon. Gentleman’s point.
The Opposition say, “Let’s have a bankers’ bonus tax, so we can raise some money.” Yet again, we have heard that the Opposition want to spend it, this time on
“a guaranteed paid starter job for young people who have been out of work for over a year”.
That is what they say today but that is the 12th time over that they have spent it; I hate to correct my hon. Friend the Member for Redcar (Ian Swales), who thought it was only the 10th time and had lost count. That is understandable, because previously the Opposition have spent this on: the youth jobs guarantee; reversing the VAT increase; more capital spending; reversing the child benefit savings; reversing tax credit savings; more money for the regional growth fund; cutting the deficit; turning empty shops into community centres; spending more on public services; building 25,000 new houses; and free child care. Now it is being spent on starter jobs for young people, but perhaps next week it might be spent on houses again—who knows? It just depends on the thing of the moment, does it not? That underlines the ludicrousness of the Opposition’s position: they simply cannot add up and cannot spend their various banking bonus tax ideas in any competent way at all.
Leaving that aside, the permanent bank levy introduced by this Government is expected to raise £2.9 billion in 2015-16 and then £2.8 billion each year thereafter. That is more than was raised by the one-off bonus tax introduced by the previous Government. I suspect what will happen is that the Labour party will end up with its madcap plans raising less money and the party then being in a quandary as to where to spend it, because it has committed it on multiple occasions. That goes to the heart of the massive contradictions of Labour policy making.
The one thing I want to touch on is the idea that we should have the European Union decide on the levels of pay, bonuses or indeed anything in this country. Let me gently remind the Opposition of a couple of things. First, we are an independent nation. Secondly, we have an independent currency—we are not part of the eurozone. I do not understand why the Opposition think it is a good idea to have the European Union tell us how to manage our banking system. We are competent enough as a country—goodness knows, we have run our own affairs for the past 1,000 years—to decide how we should organise our banking system, and pay, bonuses and bonus taxes in our banking system, without needing help from the European Union.
I do not think every last detail of the running of these things should be handed over to the European Union, as the hon. Gentleman describes it, but the fact is that all the time we hear from the bankers that they will whizz off to Geneva—some of them do seem to be whizzing off there—to Paris or to Frankfurt. The purpose of having a European-wide approach on bonuses is to avoid exactly that kind of behaviour.
I hear what the hon. Lady is saying, but we are not in the euro. The only time that we would need some measure of control from the European Union is if we were in the euro. I simply do not accept the argument. Our objection to the European Union trying to tell us how to run our banking system and our bank bonuses is that we do not want to see pay rise and rocket in the banking system, which is what would happen—permanent fixed pay would rise. That is what we are most concerned about and why we have put up such resistance. There is also the principle that we can manage our own affairs in the City of London and in the financial services market, and we do not need any assistance from Brussels. I say shame on the Labour party for thinking that it is better to accept diktat from Brussels than decisions made in this Chamber.