Banking

Chris Williamson Excerpts

Wednesday 15th January 2014 Commons Chamber

[Chris Leslie]

This is why this Government’s narrative is beginning to crumble around the edges. Most people realise that the banking sector was totally dysfunctional and causing great difficulties. Of course we need better policing throughout the international community and by the regulators, but if we are to rehabilitate the banking sector, we cannot shy away from the tough decisions needed to change its structures and behaviour. There are still too many areas in which the Government have left banking reform unfinished.

[Chris Williamson (Derby North) (Lab)]

Returning to the point about complacency, did my hon. Friend see the briefing note from the British Bankers Association prior to this debate? It says that

“no other industry is subject to such influential pay supervision”.

I have never heard anything so ridiculous in my life. Does he agree that this “influential pay supervision” is patently failing in its job?

[Chris Leslie]

We have to feel sorry for senior bankers facing a bonus of merely the same amount as their basic take-home pay, as 200% bonuses are obviously vital for their survival—for the record, this is sarcasm. It is complete nonsense, of course.

--- Later in debate ---

[Sajid Javid]

Part of the answer might be that manufacturing was decimated under the last Government. Its share of the economy fell from about 17% to the 10% to which the hon. Gentleman referred, and, of course, lending fell with it. If the hon. Gentleman were honest and recognised the damage that his party did to the manufacturing sector, perhaps what he says would be taken more seriously.

We need a more stable, resilient, efficient banking sector, and it is on that requirement that we have focused our reforms. As Members will know, back in June 2010 my right hon. Friend the Chancellor announced the establishment of an Independent Commission on Banking, chaired by Sir John Vickers, to explore how the sector should be reformed in the wake of the financial crisis. Last year the House passed the Financial Services (Banking Reform) Act 2013, which has enabled us to implement the commission’s recommendations. The changes will mean that banks must ring-fence the deposits of individuals and small businesses, so that everyday banking can be separated from volatile investment banking.

As all Members, and, indeed. all members of the public will know, the financial crisis saw taxpayers bailing out the banks that got into trouble, but we have taken steps to ensure that that will not be repeated. Our banking reform Act introduces a bail-in tool, as a result of which shareholders and creditors, not taxpayers, will be first in line to bear the costs of future bank failures.

[Chris Williamson]

I think that the Minister should admit that the Government have watered down the Vickers commission. Will he now come clean with the House, and tell us that that is what they have done?

[Sajid Javid]

That is exactly what we have not done. We have accepted the central recommendations of the Vickers commission.

We have not just been working to prevent a repeat of the crisis. Many Members on both sides of the House have been rightly appalled by the revelations of poor behaviour on the part of some in the industry, such as payment protection insurance, interest rate swap mis-selling, and LIBOR manipulation. Those practices were going on right under the noses of Labour Treasury Ministers, including the current shadow Chancellor, who did nothing at all to stop it.

--- Later in debate ---

[Sajid Javid]

That is exactly what I was coming on to next. It is important for taxpayers that any proposals by RBS are considered fully and properly. The Government have not yet received a proposal from RBS on bonuses; once we do, we shall be in a position to judge whether it represents value for taxpayers.

The Government do not support the EU cap on bonuses. The Government have fought against it and we are currently challenging it in court. The bonus cap creates perverse incentives by removing the link to performance. It is damaging to financial stability; it is opposed by the PRA and the Bank of England; and, indeed, the cross-party Parliamentary Commission on Banking Standards rejected crude bonus caps as unworkable.

Let me turn finally to the bank levy.

[Chris Williamson]

Will the Minister give way?

[Andrew Gwynne]

Will the Minister give way?