Banking (Responsibility and Reform)

Debate between David Mowat and Michael McCann

Tuesday 7th February 2012 Commons Chamber

[Mr Michael McCann (East Kilbride, Strathaven and Lesmahagow) (Lab)]

I rise to support the motion. I will begin with the obvious point, which my hon. Friend the Member for Streatham (Mr Umunna) also made, that however poorly some of our banks behaved, they are an essential part of our infrastructure and will be an essential driver of ensuring that our economy improves. The question, however, is whether we relied on them too much, which has to be answered with a resounding yes. When the crash came, we not only had to bail out some of the banks that had become too large to fail but lost a huge percentage of our revenue.

A wry smile comes across my face when I see Government Members’ crocodile tears for manufacturing industries, because I remember the period from 1979 to 1997, when I was a young man, when a lot of them were responsible for the demise of manufacturing. That ensured that my late father lost his job in heavy engineering and never got back into it.

Although RBS has become a byword for profligacy, we have to recognise that other banks, such as Barclays, did not request or need a bail-out. We know that we live in difficult times, but today the National Australia bank announced a review of its Clydesdale bank and Yorkshire bank. Combined, they employ 8,500 people in this country and have two UK networks, and the NAB is to re-evaluate its UK wing. Cameron Clyne, the NAB’s chief executive, said in his statement:

“It is clear that the UK economy is likely to experience a much longer period of subdued growth with the ongoing sovereign debt crisis in the Euro-zone and the continuing austerity program by the UK government.”

Perhaps the Minister of State, Department for Business, Innovation and Skills, the hon. Member for Hertford and Stortford (Mr Prisk), can respond to that point later.

Government Members take great glee in complaining about what they describe as the mess that was left behind, despite the fact that we are nearly two years into their time in government and even though the urgent action that we in the UK took led the world. However, they should remember the saying, “What goes around comes around.” The chief executive of the NAB was actually saying that their economic policies are contributing to the problems that it is facing, because the Government are concentrating on austerity measures, not the growth of the economy. I hope that the Minister will respond to that point instead of jumping over it as the Minister did.

Although I recognise that the banks make a significant contribution to our economy, their reward structure and behaviour have been brought into sharp focus in the past four years. Based on the experience of businesses in my constituency, banks went from a Viv Nicholson “Spend, spend, spend” policy on lending to a Steptoe and Son penny-pinching policy. The businesses in my constituency with which I have been involved tell me that RBS wants to charge them exorbitant interest rates for safe, copper-bottomed business deals and has put itself first instead of looking after small and medium-sized enterprises.

Most outrageously—Ministers should take note of this—RBS stands accused of deliberately putting in place conditions to put businesses out of business, so that it can reclaim their assets at the cheapest price possible. That is an outrageous way for a bank to do business when the economy is in such difficulty. We need to ensure that we keep people in employment so that they can contribute to the wider good.

The remuneration situation is even more bizarre. When my colleagues were speaking earlier, I heard some chuntering among Government Members about the fact that business people who get large bonuses pay their taxes. There are many millions of our constituents who also pay their taxes, and I bet they wish they were getting the remuneration packages that are being given out in RBS.

As a former trade union official, I have negotiated more pay deals than I care to remember. In the civil service, in the early days of performance-related pay, the reward structure was changed from plain salary to salary plus a performance-related element. Irrespective of which bargaining unit I was dealing with, I always asked how performance would be defined and what an individual would have to do to get that additional payment. In 26 years as a lay and then full-time trade union officer, I never got a straight answer to that question. A job is a job, and someone is paid a salary to do it, but in response to that question I was given platitudes such as “We’ll give it to someone who puts in an effort above and beyond the norm”, and “We’ll reward exceptional performance.” However, when we tried to dig a little deeper into what those words meant, answer came there none.

We have to remind ourselves that the salary package that people such as Stephen Hester get is pretty significant in the first place. We therefore need to know the definition of exceptional work that brings a bonus. That needs to be clearly outlined and transparent.

[David Mowat]

I am a little bit puzzled by the hon. Gentleman’s argument and that of the Labour Front Benchers on bankers’ bonuses and salaries. Are they against bankers’ salaries only, or all very high salaries? He mentioned Stephen Hester, but Carlos Tevez earns five times as much. Why is the Labour party not honest enough to say that it wants higher taxes instead of just focusing on bankers?

[Mr McCann]

The crucial point that has come through in this debate is that RBS is owned by the public. Up until last week, when Stephen Hester did the right thing and announced that he was not going to accept the bonus, Government Members remained silent. Ministers said that it was up to him, if my memory serves me correctly—if the Minister wants to intervene, I will be happy to allow him to do so. The Prime Minister said that it was up to Stephen Hester. In relation to Carlos Tevez, I am not a Manchester City fan, so I will leave that issue alone. I have enough problems with Glasgow Celtic football club without worrying about Manchester City.

--- Later in debate ---

[David Mowat]

The hon. Gentleman seems to make a distinction between entities that are state-owned and those that are not. Is he therefore saying that if Hester worked for a non-state-owned entity, the hon. Gentleman would be quite happy with his bonus package? That seems to be the implication of his answer.

[Mr McCann]

There must be responsibility across every business, whether it is private or public. I am not a communist—the hon. Gentleman will be delighted to know that. I do not suggest that we move to the Cuban model and are all paid the same for doing different jobs, as I recognise that people have different contributions to make and should be paid different salaries for doing so. Often, examples that go to the extreme, such as those about footballers, and that go into other systems of capitalism in the country in which they work do not take the debate much further forward. My analogy is between the civil service and the Royal Bank of Scotland, as the civil service is in the public sector as is the Royal Bank of Scotland, because we own the largest share in it. The difficulty we had in defining performance-related pay in the civil service reads across, it strikes me, to the difficulty we have in defining performance-related pay in the Royal Bank of Scotland.