Banking Reform

Debate between Chris Evans and Andrew Bridgen

Monday 29th November 2010 Commons Chamber

[Chris Evans (Islwyn) (Lab/Co-op)]

I congratulate my right hon. Friend the Member for Oldham West and Royton (Mr Meacher) on introducing this debate. I do not know whether he remembers it, but five years ago he spoke in Gloucester about the economy—I was the Labour party candidate in Cheltenham—and warned that the banks were out of control. A lot of people looked on that uncharitably, but, sadly, he was proved right, which is why we are having this debate.

The debate is important because there is great anger out there about bankers. No matter what Government Members say, people blame bankers. When I first came to the House, BBC Wales ran a profile of me, the last sentence of which was:

“Since leaving university he’s worked in bookmaking and in banking, which contrary to widespread belief are different professions.”

Yes, there is a difference. I come from a family of bookmakers —my father and my mother were both bookmakers—and the one thing that was drummed into me as I was growing up was risk. As bookmakers, we understood risks, which is why we had odds. We always knew what would happen if we could not cover our losses.

When I joined the bank, naively I thought that I was joining an institution that I could be proud of and that set standards to which other industries could aspire. Unfortunately, I discovered that it was completely and utterly different from that. I was told to lend to whomever I could. I still do not understand the logic of saying to somebody who cannot afford to pay their bills every month, “Mr Customer, you need a £10,000 loan to get you through.”

I got a warning for refusing to lend someone £25,000 in an unsecured loan, because—I was told—I was not thinking about the shareholders. That is the major problem. When I said to my manager, “This can’t go on. This is madness—we’re just writing people off,” he replied, “Son, it’s a sign of the times. You wouldn’t go into a shoe shop and expect not to buy shoes.” However, there is a difference. A person who goes into a shoe shop and buys the wrong shoes will get blisters; a person who goes into the bank and buys the wrong loan loses their house. The people at the bank did not understand that we were dealing with people’s lives. They were arrogant and blasé—“We can’t fail; we’re great banking institutions”—regardless of the Barings bank failure in 1991. I well remember the chief executive of Barings at the time saying, “It isn’t terribly difficult to make money in the City, old boy,” but the bankers ought to have learned that it is terribly difficult for builders and plumbers to earn money.

The essential truth is that banking is simple—a bank lends money to someone and makes money through the agreed interest rate—but the banks made it complicated. In the debate this afternoon, I have heard about derivatives and arbitrage, but the average person who walks into their bank will think, “What relevance do derivatives and arbitrage have in my life?” The banks made lending into mathematical equations—someone mentioned a biology graduate—and sold debt on, so the money came from several different sources. Eventually, that massive tower block collapsed when the person at the bottom failed. I have been reading Ha Joon-Chang’s “23 Things They Don’t Tell You About Capitalism”, in which he argues that we should ban complex financial instruments. That is an outrageous thing to say, but if bankers and economists do not understand such instruments, how can anybody else be expected to do so?

Before I finish, I want to return to the anger that people feel. In an article in The Sun today headlined, “Bank chiefs grab £15 million bonus”, I read that Stephen Hester of RBS will receive £2.4 million, that Eric Daniels of Lloyds Banking Group will receive £2.3 million, that John Varley of Barclays will receive £3 million and that Peter Sands of Standard Chartered will receive £3.2 million. What message does that send to people? That money is absolutely obscene, including to people who work for those banks. I go back to my experience of working in a high street bank. We were kept on deliberately low wages. The only thing that kept us going was the promise of a bonus. They would say, “We want you to bring in so many leads so stay till 7 o’clock at night. Forget about your family. You’ve got to earn money and put some bread on the table boy.”

That is still going on. Someone came to my surgery the other day and said, “I have to work till 8 o’clock every night because I’ve got to speak to the people I did not speak to in the day. I’ve got to get leads.” No amount of Government legislation or regulation will change that.

[Andrew Bridgen]

Does the hon. Gentleman not agree, however, that it is

“the hope of reward that sweetens labour”

for us all?

[Chris Evans]

For people earning £12,000 a year and struggling to pay the bills, the pressure is on to stay after work and phone up leads to earn a quarterly bonus just to get through. That is not right. They should be paid a living, decent wage, which is what the Opposition support. I hope that everyone else will eventually do likewise.

Finally, as I said, no amount of Government regulation or legislation will change that culture. We need to say to the bankers, who were to blame for the economic crisis, “Either you change your culture, or the crisis will happen all over again.” We had better start opening our eyes to that.