Royal Bank of Scotland

Chris Leslie Excerpts

Thursday 13th June 2013 Commons Chamber

[Chris Leslie (Nottingham East) (Lab/Co-op)]

The Opposition are very surprised that the Chancellor of the Exchequer has not come to the House of Commons today to respond to growing speculation that he has already decided the fate of the Royal Bank of Scotland. The Government’s handling of this matter has already caused widespread concern. Stephen Hester did an important job starting the process of turning RBS around, but clearly there is a long way still to go, as he has said himself, so I want to ask the Minister about the four key points on which we need urgent clarification.

First, on the departure of the chief executive, did Stephen Hester go voluntarily or was he pushed? What role did the Chancellor have in prompting his departure? When did the Chancellor set out to the chairman and the board his desire that Stephen Hester should go and is there now any role for United Kingdom Financial Investments, or has it been circumvented in the discussion on the chief executive’s role? Can the Minister explain why they got rid of the current chief executive before finding a successor? Was that really a sensible thing to do? Why have they left such uncertainty? Is the 6% fall in RBS’s share price this morning, wiping off nearly £2 billion from the value of the taxpayers’ stake, a reflection of this confusion? Can the Minister clarify reports this morning that the chairman of RBS has indicated that he will also leave if and when a new chief executive is found?

Secondly, did the chairman, Sir Philip Hampton, let the cat out of the bag when he admitted to journalists last night that the Chancellor wants a sale by the end of 2014? Sir Philip said:

“The acceleration of considering succession for a CEO role arises largely from the Treasury’s determination...where it can be returned to the private sector by the end of 2014”.

Will the Minister tell us now what the Chancellor told the chairman and the board? Is it just a coincidence that the end of 2014 would fit neatly into the Chancellor’s pre-election political timetable? Should the time scales not be driven by the best interests of the taxpayer and the British economy instead?

Thirdly, are the public wrong to suspect that this generous severance payment for Stephen Hester is just a foretaste of the wider loss that will be made for the taxpayer if they rush headlong into a pre-election fire sale? Given that Stephen Hester said yesterday that he was confident that RBS was capable of being worth more than the £45 billion the taxpayer originally paid, why is the Chancellor rushing to prove him wrong? Stephen Hester told the BBC last night that RBS was capable of being worth more than what the Government paid for the shares. Does the Minister agree? If not, why not?

Fourthly, can the Minister explain why it is sensible to intervene in the executive management of RBS rather than have an orderly process of repairing the bank and thoroughly considering the full range of future options for this institution—a process that has incredible ramifications for our whole economy? We look forward to the report from the cross-party Parliamentary Commission on Banking Standards and any views it might have on this, but rather than this shambolic and uncertain approach, surely we need a clear, methodical process and a detailed exploration of how the shape and structure of RBS can best serve our economy in the longer term.

Finally, why has the Chancellor not come to Parliament to set out what is obviously a change of policy? No disrespect to the Minister, but it is his boss we need to hear from today. Should not the Chancellor set out his plans first to this House and not to the Mansion House?

[Sajid Javid]

I thank the hon. Gentleman for his comments. I will start with his final question, if I may. He asked why the Chancellor is not here. That is because I am here; I thought the hon. Gentleman would be pleased to see me. I could well ask him where his boss, the shadow Chancellor, is. If this is such an important issue for the Opposition, the shadow Chancellor might have turned up.

I was also hoping that I might get an apology from the hon. Gentleman and some recognition that the only reason we are here discussing this topic today is the previous Government’s failure to regulate our banking system, which led to more than £45 billion of taxpayers’ money being injected into bailing out a bank—the world’s largest banking bail-out.

Let me turn to the hon. Gentleman’s four questions. First, he asked about the sequence or the terms of Stephen Hester’s departure. I am pleased to confirm to him that the Chancellor has not been directly involved in meeting with Stephen Hester prior to the announcement —[Interruption.] He has not met with Stephen Hester prior to the announcement of his departure on this issue. This is a decision for RBS and its board. They have made the decision jointly with Stephen Hester and come to a voluntary agreement. The chairman of RBS, Sir Philip Hampton, asked to meet the Chancellor last week—at Philip Hampton’s request—to inform the Chancellor of the board’s decision, and that is what I would expect, given that the shareholder is the majority owner of the bank.

The hon. Gentleman also referred to the succession plans and asked whether it would have been better to find a successor in the first place. If he has looked carefully at the plans, he will note that Stephen Hester has agreed to stay on until a successor has been found or, at the very latest, until the end of this year. RBS has already begun its search process. I am confident that it will find a successor in time, but it is reassuring, as I said in my statement, that Stephen Hester is staying on in the meantime to help to smooth the process of finding his successor.

The hon. Gentleman also referred to the share price of RBS this morning. He will note that—I think I am right in saying—almost every major bank’s share price is down this morning. The stock market is down in general this morning. I suggest that the change in the RBS share price might also be a reflection of global stock markets, particularly Asian stock markets and markets in Tokyo, which, as it happens, also fell by 6% overnight.

Next the hon. Gentleman asked about the eventual sale of the bank and RBS’s comments about preparing the bank for its future return to the private sector. There should be nothing surprising about RBS having an ambition that the bank should be returned to the private sector. That is perfectly reasonable and perfectly normal. As for the Government’s plans, we have always made it absolutely clear that we have no target price when we are thinking about the return of RBS. We have no fixed timetable, and that includes the general election. Our major concern is to ensure, as the hon. Gentleman said himself, that when RBS is returned to the private sector, that is done with due regard to getting the best value possible for the taxpayer.

The hon. Gentleman also asked whether the value of the shares had been destroyed. I thought that was a bit rich, coming from him. He forces me to remind the House that when the previous Government carried out their bail-out following their failed policies and paid more than £45 billion for a stake in RBS, they overpaid by £12 billion above the share price. That amount was written off by the taxpayer at that moment, but that is something else for which we have not had an apology.

If I understood the hon. Gentleman’s last question correctly, he asked whether the Government had intervened in the decision-making process of the executive management. As I have said, those decisions are rightly made by RBS’s board. The Government’s shareholding is held through UKFI on an arm’s length basis. UKFI represents the interests of the taxpayer on RBS’s board. I remind the House that that arm’s length arrangement was deliberately set up by the previous Government; we have rightly kept it in place. UKFI reports periodically to the Treasury and provides advice, and we always take that into account when making our own decisions.