Vulnerable People (CSR)

Debate between Chris Leslie and Julian Smith

Tuesday 9th November 2010 Westminster Hall

[Chris Leslie]

As I said, the hon. Gentleman is being more than fair—perhaps a little too fair—in his analysis of the Government’s intentions. I hope that I am wrong in saying that a measure of deliberate choice is involved. However, the weekends at Chequers during which the Deputy Prime Minister and the Prime Minister pored over the political stratagems that they could devise, having linked some of the measures in the spending review together, suggest that a balancing act was going on in the Government to think about who they could hit and get away with it, rather than the human consequences. That is a difference of opinion that we will have to accept.

[Julian Smith]

rose—

[Chris Leslie]

I would like to make progress on the issue of housing benefit, but I happily give way to the hon. Gentleman.

[Julian Smith]

The comments that the hon. Gentleman made just now and at the beginning of his speech are insulting to Ministers and, certainly, to Back-Bench coalition Members.

[Chris Leslie]

I am sorry if I have hurt the hon. Gentleman’s feelings; that would be a dreadful thing to do. However, it is far worse to hit the poorest and most vulnerable people in society through the measures that he will support by walking through the Lobby. The warm words that he espouses are all very well, although so far he has not said much about vulnerability and the impact of the reforms. He is doing his job and wants to progress through his party—I wish him luck with that—but the measures that he will be supporting will be harmful, and I am sorry if he feels that that is insulting.

Let us look at some of the changes to housing benefit. As I said, housing benefit needs to be reformed, but not necessarily at the pace and with the harshness espoused by the Minister. Some of the combined, compounding changes will come in quickly, with some starting on 1 October next year. According to the Government’s own figures, the reduction from the median 50th percentile to the 30th percentile for housing benefit will affect 642,000 people. Many hon. Members, including the Minister, will be getting letters from their constituents about that. Those reforms will leave some people £39 worse off per calendar month. Some landlords might be happy to say, “That’s all right; we will bear the loss”, but others will say, “Sorry, that is unacceptable. Out you go.” What will be the consequences for homelessness? What will the pressures be on the indebtedness of individuals who are already stretched with credit card debts and so on? Will we see even greater pain at that level?

The National Housing Federation said in the newspapers today that the reforms were “brutal cutbacks.” Those are not my words, so if the hon. Member for Skipton and Ripon (Julian Smith) feels that such words are insulting, he should speak to the National Housing Federation. It said that the reforms risk the prospect of people

“falling into debt or hardship or being forced to move out of their home and away from their local community.”

That sudden drop in income and the rushed nature of reform are what the Labour party fundamentally disagrees with. Of course we accept that the deficit needs to be tackled, but we take a different view of how to do that.

Banking in Scotland

Debate between Chris Leslie and Julian Smith

Thursday 14th October 2010 Westminster Hall

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

I declare an interest as a trustee of the Consumer Credit Counselling Service in Scotland. I act in a voluntary capacity, with no remuneration. The CCCS is a debt advice charity, which has been greatly active on many of the matters raised by my hon. Friends and others during this welcome debate.

The debate is about a most welcome report. As my hon. Friend the Member for Glasgow South West (Mr Davidson) said, the report, which was thorough and worth while, was published at the end of the previous Parliament. It was incredibly important, given the estimated one in 10 jobs in Scotland that are linked to the long-standing financial services industry. Jobs, of course, have subsequently been lost in Scotland, as they have elsewhere, bank branches have closed, and the whole economy has been affected by the credit crunch.

On this, my fourth day in my new role as shadow Financial Secretary, I anticipate having many debates on financial services and their impact on consumers in all corners of the country. Although I spoke far too much and at great length in my previous guise as a Back Bencher, I will take this opportunity to reiterate my default position on many of these matters and, in particular, on the three clear questions that I believe are fundamental to my new portfolio.

First, what reforms are necessary to minimise the systemic risk to a well functioning economy and society following the experience of the credit crunch? Secondly, how can we create a thriving and healthy financial services industry in the United Kingdom, including in Scotland, rebuilding it with a reputation for sustainability, solidity and trust? Thirdly, how can we ensure greater fairness for the consumers of financial services products, so that the industry operates on the basis of common sense and fair play?

It is heartening that many of the contributors to this debate not only focused on what might sometimes seem to be ethereal issues between the players in the industry, but considered matters very much from the consumer perspective, speaking of people’s encounters with issues that are central to their lives.

The report contains an excellent collection of evidence, taken over a long period, going back to November and December 2009. I am glad that my hon. Friend referred to the visits to Ireland and to evidence heard elsewhere, successfully bringing in the arc of prosperity and making important points on the changing circumstances and the erroneous arguments made by members of the Scottish National party.

Many interesting lessons on the housing market, on public sector deficit reduction and its impact on growth, on the regulation of credit rating agencies and so forth, are all brought out in the report. Perhaps most notable is the impact of the credit crunch on Scotland in respect of changes to the Royal Bank of Scotland and Halifax Bank of Scotland—HBOS—and we should not forget the difficulties that affected Dunfermline building society. The report is an eloquent exposition or post-mortem of the lessons that need to be learned from that period, and it is worth reiterating them.

[Julian Smith]

The report was eloquent. Did it make the hon. Gentleman reflect on the Labour Government’s role in what went wrong, and the lax regulatory regime that had been allowed to develop, which was the source of many of the problems for the financial services industry in Scotland?

[Chris Leslie]

Certainly we all have lessons to learn from the credit crunch. Countries across the world, including the UK, did not frame correctly the regulatory environment in which financial services operated. That is absolutely clear. However, it reminds me that we do not state often enough that it was the previous Labour Administration who saved our economy from falling over the cliff edge and into the abyss. Although the current Administration sometimes give the impression that they would not have committed the resources necessary to achieve that, I believe that any Administration of any colour would have had to take those steps. I am proud that my party did so, even though that may be the root cause of some of the deficit questions that have subsequently arisen.

Key lessons need to be learned. Too few people had proper cognisance of the true liabilities on the books of our major banks, either because of the complexity of the various products involved or because of the poor risk assessment of those financial instruments. Banks were over-reliant on the wholesale capital markets to finance their investments and lending, which created excessively leveraged positions and left the banks incapable of coping with the freezing up of the wholesale markets. In addition, the underlying market sentiment, which, like the banking practices, had existed for a long time, implied an assumption of continuous expansion, creating expectations of never-ending profitability with high-scale rewards and bonuses, which clouded the judgment of too many practitioners in the sector.

[Julian Smith]

Would the shadow Minister say that the banks were merely reflecting the zeitgeist and the leadership of the Government of the time by over-extending themselves, living beyond their means and paying far too much for their work force?

[Chris Leslie]

Much as we in politics might like to think that everything done in the political game shapes society at large, my view is that the economy and society around us—not only in this country but in the world at large—suffered from too much exuberance when it came to the allure and attraction of profitability in that sector. We should have taken a far more hard-headed approach all round. Much as I congratulate the hon. Gentleman on trying to make a party political point about the root cause of the global credit crunch, it would not be fair to pin it on one or two politicians in one or two countries. The problem was systemic and we must all learn the lessons from it; otherwise it will be repeated—and that will affect Scotland as well as the rest of the world.

HBOS was merged with Lloyds TSB to form Lloyds Banking Group, and subsequently took advantage of Government capitalisation, which led to 43% public ownership. RBS received public funds resulting in 63% public ownership, rising to about 84% with subsequent injections of new capital. Special liquidity support and a number of other instruments created circumstances where the Government were very much foisted into the driving seat of our financial services industry.

The Government set a number of conditions, and I am glad that the present Administration have maintained a number of them. They include urging the banks to maintain competitive lending to retail and business customers at 2007 levels and encouraging the banks to deal with several of the failings that they experienced, including issues of remuneration, restricting dividend payments, helping people struggling with mortgage payments and so on. Of course, experience tells us that we still need to hold the feet of the banks to the commitments drawn out of them in exchange for the resources that were given to save their very existence. We should certainly ask the Government and the Minister to what extent they are succeeding.