(12 years, 6 months ago)
Commons ChamberUltimately, the taxpayer had to put about £1.2 trillion into the system to support it. Juxtaposing that with the amount paid in tax by the sector, I am not sure that it comes to the same sum. I get the point that the hon. Gentleman is making. I do not deny that the financial services sector has contributed in tax receipts, but that is not outweighed by what we have had to pay out to save it from itself.
The status quo will not do. Change is essential. In November last year, Bob Diamond, chief executive of Barclays, said in his BBC “Today” business lecture that
“the single most important thing for banks and for businesses now is to focus on helping to create jobs and economic growth; and being able to do that requires us—banks in particular—to rebuild the trust that has been decimated by events of the past three years; and that rebuilding trust requires banks to be better citizens.”
I agree with Mr Diamond, but actions matter far more than words to people and businesses.
At the Business Secretary’s instigation, the Government established the Independent Commission on Banking, for which he deserves credit. If its recommendations are implemented, they will help to deliver a banking system that supports our economy’s interests in the long term. However, a number of things must happen to address the issues in the short term, not least of which is the matter of remuneration, which can be corrosive of public trust in our banks.
First, greater transparency on pay in the banking sector is needed. A good place to start would be immediate implementation of the Walker review. In 2009, Sir David Walker recommended new rules on the disclosure of bankers’ remuneration within pay bands above £1 million. In government, we legislated for that fairly modest scheme to be put in place so that irresponsible remuneration practices could be identified and rooted out. So modest were the proposals that the now Business Secretary told the House at the time that Sir David had produced
“an embarrassing mouse of a report”.—[Official Report, 30 November 2009; Vol. 501, c. 900.]
In the June 2010 Budget, the Business Secretary and his coalition partners pledged to take forward these modest proposals, but in November 2010 the Chancellor suddenly declared that he would not countenance implementation unless he could secure international agreement for the measures. In giving evidence to the Treasury Select Committee in December 2010, however, RBS’s Stephen Hester indicated that unilateral adoption of the Walker review proposals would not put the UK financial services sector at a significant disadvantage. Given the modesty of the Walker review proposals, why on earth will the Government not implement them?
Secondly, to increase accountability, we have said that an ordinary worker should be placed on the company remuneration committees setting pay. I do not understand why the Government have been so resistant to this idea. The Business Secretary has said that he is very sympathetic to the idea but has raised practical objections on the basis that there are many FTSE companies whose employees are predominantly overseas. These practical obstacles can be overcome, however, not least through technologies such as telephone and video conferencing, which in this day and age are a common feature of board meetings.
Having a worker on the board is not just about accountability. Would it not also address the fact that remuneration committees tend to comprise people much like the people whose salaries and bonuses they are assessing? It is not surprising, therefore, that they decide in favour of higher bonuses and salaries. That is another reason a different voice is needed on the committees.
I agree with my hon. Friend. First, an employee understands what is going on in the business—perhaps, in some respects, better than a non-executive director—and, secondly, employees have a stake in the business, and if the business fails, they ultimately pay the price, as thousands of RBS employees going through the redundancy process are now realising.
I will move on, so that I can finish and others can get in.
What else needs to happen? The banks are accountable to their shareholders, and the Government have told shareholders to be more active. A starting point should be for the Government to practise what they preach in relation to their shareholdings in the publicly owned banks, particularly in the setting of pay and bonuses. It seems that their default position at the moment is that they do not want to get involved unless forced to do so. That has to change. More responsibility is needed. The public rightly expect the culture of excessive bonuses to stop. That means that bank executive remuneration that is described as performance-related should be just that: related to performance. Very large bonuses should be paid only to reflect genuinely exceptional performance, if trust in the system is to be maintained. The public expect the same of other organisations enjoying taxpayer subsidies. Network Rail—part of an industry backed by a £4 billion taxpayer subsidy—is a good example. It was planning to push through a new bonus scheme under which senior managers were due to receive 60% of their salaries as a bonus every year, and a further 500% at the end of each five-year funding period. That kind of bonus culture is unacceptable to people and difficult to fathom. Again, the Government did little to stop that, but in the end the Network Rail board saw sense.
My hon. Friend is being generous in giving way. When bonuses are paid for performance, is it not also important that they should be paid for performance that is related to the activities of the people receiving them? They should not be bonuses that could depend on factors that have nothing to do with the activities of the directors concerned, as would have been the case with Network Rail.
(12 years, 9 months ago)
Commons ChamberWhen businesses get in touch to tell me about the problems they are suffering from, none of them tells me about problems with employment law. They tell me about the lack of public procurement and problems with VAT and financing from the banks. Those are the concerns that need to be tackled, rather than the side issues that Government Members are pursuing.
I agree with my hon. Friend. We all know what is holding back business in taking on workers: the forecast economic projections for this country. That is the real problem. What has been the centrepiece of the Business Secretary’s alternative offer? How will he turn things around? The answer is the regional growth fund. The aim of the fund is to unlock private sector investment, support areas that are dependent on the public sector and help them become more balanced economies. Good. We take no issue with those objectives. We want that money to get to business and to create the jobs that will support growth, yet the scheme has been managed shambolically. It has been an utter fiasco. The fund is a third of the size of the moneys distributed through the regional development agencies, which have been scrapped without effective replacement, so it has been hugely over-subscribed, which demonstrates businesses’ craving for capital. Of the 956 bids received, only 50 were successful in the first round and 119 in the second round. There have been many more losers than winners. It is difficult for the losers, but what of the winners?
Of course, due diligence is needed to ensure the proper use of public funds. The permanent secretary at the Department for Business, Innovation and Skills told the Business, Innovation and Skills Committee that due diligence on successful bids tends to take between two and six weeks, and that until it is complete the successful bidder is not given its money. Yet, clearly, very few successful bidders have received what was promised, because it has taken so long for due diligence to be completed.
I have written to the Secretary of State and tabled parliamentary questions, and in fact the Minister of State, the hon. Member for Hertford and Stortford, who has continually chuntered from a sedentary position today, provided the answers. I tabled those questions to get the answers, to get the facts and to get to the bottom of the delays and mess.
On Monday I received answers to those parliamentary questions, indicating that 30 weeks—30 weeks—after the original announcement just nine of the 50 first-round winners have completed due diligence. When I asked why due diligence has taken so long, I was told:
“It is for successful bidders to initiate due diligence upon receipt of a conditional offer letter from the Department.”—[Official Report, 21 November 2011; Vol. 536, c. 154W.]
Usually, the Government blame us for all the mistakes; now, it seems that they are seeking to pass on blame to the very businesses that they claim to want to help—and the bidder has to pay for the due diligence cost, too.
As it happens, I met—[Interruption.] Ministers shake their heads—