Finance (No. 2) Bill
Debate between Frank Dobson and Jonathan Edwards(11 years, 8 months ago)
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Frank Dobson
It certainly should. I am astonished that no one in this country has yet been prosecuted for the fraud involved in the LIBOR rate-rigging, including the British Bankers Association, which was, after all, running the LIBOR system. People were defrauded, so why has no one been prosecuted? I do not know, but someone should be.
Another excuse for not sorting out the problems in our banking industry is that we must not go it alone because that would put the industry at a disadvantage compared with others. We are told, for instance, that we cannot possibly be the first country to introduce a financial transaction tax—a Tobin tax, a Robin Hood tax—because to do so would put our banks at a disadvantage. However, Germany and France have now proposed an EU-wide financial transaction tax, yet our Government still say no. What are they frightened of? The rate of tax proposed on derivatives transactions that the 11 countries led by Germany are establishing in Europe is 0.01%. Apparently, our financial services industry is so pathetic that it would be driven to ruin by a transaction tax rate of 0.01%.
In fact, we already have a transaction tax in this country: it is called VAT. Nearly every other business in this country is paying a transaction tax of 20%. If everyone else is deemed capable of paying 20%, why should the financial services industry be deemed incapable of paying 0.01% on its transactions, 85% of which are carried out within the industry, between its various constituent parts, rather than with anyone else. That is pathetic, and it is about time that we recognised that a substantial amount of money could be raised for the taxpayer in this country, even at a rate of 0.01%.
Jonathan Edwards (Carmarthen East and Dinefwr) (PC)
Will the right hon. Gentleman remind the House what the Labour party’s policy is on the so-called Robin Hood tax? My understanding is that the shadow Chancellor is opposed to introducing one.
Financial Services (Banking Reform) Bill
Debate between Frank Dobson and Jonathan Edwards(11 years, 9 months ago)
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Frank Dobson (Holborn and St Pancras) (Lab)
I think everyone in the House would welcome a step forward in trying to gain some control over the excesses of the banking industry, but most Members—at least those who have spoken—seem to be dubious about whether the Bill goes far enough. Following on from the speech by my hon. Friend the Member for Bassetlaw (John Mann), I tend to be what might be described as a “Bassetlaw-ist”. I think we need to go much further than most people are proposing.
We need to start by recognising that the British banking industry is a failure—it was a failure and it remains a failure. Let me remind the House that, of the big four, HSBC lost $27 billion in the crash, while RBS lost $14 billion, Barclays lost $8 billion and Lloyds lost $5 billion. Between them, these masters of the universe lost $54 billion in the crash. It did them harm, but it did a lot more harm to the rest of us. In the recession that has followed their lunacy—matched all round the world by the rest of the world banking industry—British production has lost £700 billion, as a result of the reduction in goods and services that we have produced.
That is what the banks dropped us in. They did it through all sorts of fancy schemes, in an effort to get rich quick, and for quite a long time they did get rich quick. Everybody was told, “You can’t stop us. We know what we’re doing; it’s the market.” Then the market crashed. Under normal rules, if the market crashes, those who crash stay crashed, but that does not happen with banking. That is why we need to change the rules. The banks demanded taxpayers’ money, either to bail them out or offer them guarantees. They said, “You’ve got to do it, otherwise we will bring the temple down and we’ll bring you all down with us.” In other words, “Heads we win, tails you lose” has been the motto of the banking industry.
That is not all that the banks were doing wrong, we now discover. They were also rigging LIBOR—the London interbank offered rate. Individuals in banks were fiddling, and apparently not a single boss knew what was going on. LIBOR was run by the British Bankers Association, which apparently did not know that any fiddles were going on, so obviously “Ignorance is strength”—this year is the centenary of George Orwell’s birth—was the motto of the British banking industry. People have been prosecuted or threatened with prosecution—they have settled to avoid it—in the United States for LIBOR fiddles, but nobody has been prosecuted here. Why is that?
There have been several repeated conspiracies—in fact, dozens and dozens of them—to gain financial advantage by deception, which is a common-law crime, so we do not need an Act of Parliament, but we now know that LIBOR rigging was not the banks’ only wrongdoing. Instead of “The world’s local bank”, HSBC’s motto turns out to be “The world’s local money launderer —helping Mexican drug barons, fighting the United States’ anti-terrorism sanctions”. Lloyds—motto: “Banking worth talking about”—was involved in money laundering to help sanctions-busters. Barclays—“It’s our business to know your business”—was involved in dodgy transactions and busting sanctions against Iran, Libya and Burma. Most of us would think that sanctions against Iran, Gaddafi’s Libya and Burma were quite appropriate.
The banks have also been spending a great deal of time promoting tax dodging. The big four have 1,649 subsidiary companies. For Barclays, HSBC and the Royal Bank of Scotland, a third of those companies are in—where would you guess?—the places where tax is fiddled. They are in tax avoidance places—Lloyds is a bit better, with only 20%.
Up to now, most criticism, both here and in the newspapers and so on, has been of the investment bankers speculating—“It’s a casino. Separate it out; ring fence it; break it up”—on the grounds, apparently, that retail banking has been a really big success, when actually it has an appalling record. It was the retail arms of the big four that did all the PPI fiddles and the IRSA—interest rate swap arrangements—swindles. Indeed, the big four sold 34 million payment protection insurance polices. Between them, they are now having to set aside £14 billion to repay people who were swindled. That is what the money is for—simple stuff: it is a swindle. Between them, the big four are employing 10,000 people to administer the system of repaying the money they swindled. It is almost a banking job creation scheme.
Then there are the retail banks’ interest rate swap arrangements. Some 40,000 agreements with small and medium firms are now being reviewed. The idea was sold by the British Bankers Association to
“help insulate business customers against fluctuations in interest rates,”
as the BBA put it, but that is exactly what interest rate swap arrangements did not do. A sample survey shows that 90% of the agreements being reviewed break existing banking regulations, yet small firms were bullied into accepting their terms in order to get a new loan or extend an existing one—if they did not agree, they would not get it.
Jonathan Edwards
Does the right hon. Gentleman agree that some instances of products being mis-sold by the retail elements of banks were driven by the investment arms of those entities? Ring-fencing will not go far enough. If we are to stop such abuses by the retail elements of the universal banks, we have to have full separation of investment and retail banking.
Frank Dobson
Yes, but if we are to get the changes we need, we also need to change the culture in both sectors.
The banks have never competed with one another, or at least not in trying to get customers. Rather, they have tended to compete by copying one another. When one bank comes up with a wheeze that swindles money, the bosses of the other banks say, “Why are they getting all this money in through this swindle? Can’t we do the swindle as well?” That is presumably how PPI started off at one bank and then went to all the others. Interest rate swap agreements certainly started at one bank and were then taken up by the others, because people in those banks felt they had to compete with the other swindlers down the road.
These people—this collection of money launderers, gun runners, drug money launderers, people who swindle small businesses and people who lose billions in their normal day-to-day business—are still paying themselves huge amounts of money. I know that the Prime Minister has a difficulty with facts, but I did not realise that he had a problem with adjectives, because when the Royal Bank of Scotland announced that it was paying £600 million in bonuses this year, he commended it—this bank of losers —for its restraint. That is not my definition of restraint. “Excess” is probably a better word in the circumstances. Restraint involves cutting the benefits of poor people and the pensions of the police, the nurses and the teachers. Restraint involves capping the pay of public employees. They have certainly been losing out. In 2009, I said that the two banks that were being semi-nationalised should have the normal public sector pay policies applied to them, and I think most people in this country would agree with that.