Economic Growth: South-west
Debate between Gary Streeter and Jake Berry(5 years, 9 months ago)
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Sir Gary Streeter
I certainly agree with my hon. Friend. That is one of the areas of development for our region that makes it very exciting indeed, and I am very happy to add my support to her excellent support for that project and opportunity.
I will just go back to Thales briefly. It recently opened a Maritime Autonomy Centre at Turnchapel Wharf in my constituency, which I know the hon. Member for Plymouth, Sutton and Devonport (Luke Pollard) has visited. That work includes capital investment of over £1 million, which represents the company’s commitment to its future in the south-west as a place where it can invest in digitally transformative maritime technologies—not a phrase to say after a glass or two of wine. This facility will act as the key maritime integration, test and evaluation centre for the combined United Kingdom and French maritime mine countermeasures programme. It is very impressive.
Our region therefore has substantial companies operating throughout it and is not just a place for people to come for their cream tea, although of course, Mr Owen, you would be very welcome to come down next summer and enjoy one.
Our universities are also doing well—
The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Jake Berry)
As I am from the north of England, like the hon. Member for Newcastle upon Tyne Central (Chi Onwurah), who is the spokesperson for the Opposition, I wonder whether my hon. Friend could just clarify an issue, because I think it is interesting. Can he clarify whether someone should have jam or cream on a scone and, if it is both, in what order they should be put on? [Laughter.]
Sir Gary Streeter
The Minister will be interested to know that there are colleagues here from Devon and Cornwall, so he will get two different answers. I will continue something that I have made a pastime of in my 26-year career to date, which is to sit firmly on the fence.
Oral Answers to Questions
Debate between Gary Streeter and Jake Berry
Mr Gary Streeter (South West Devon) (Con)
T6. What is the current status of the Devon and Somerset devolution bid? Do they still need to have a directly elected mayor to get the full devolution package, and will the Minister please meet the leaders of Devon and Somerset councils and me this autumn to discuss the way forward?
The Parliamentary Under-Secretary of State for Communities and Local Government (Jake Berry)
Our manifesto makes it clear that there will be no requirement for mayors in rural counties. Devon and Somerset have not to date submitted any combined authority proposals, but I look forward to meeting my hon. Friend and his council leader in due course.
Interest Rate Swap Products
Debate between Gary Streeter and Jake Berry(12 years, 5 months ago)
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Mr Streeter
My hon. Friend makes an important point. Thousands of people in this country, dozens of whom are in the Gallery, are looking to the FSA to put right some of the terrible wrongs that have been done in the past few years.
It turned out that the company of which I speak had been persuaded to enter into a swap arrangement for 10 years at a fixed rate of 6.4%. Although it had been told that the deal contained a break clause after three years, it transpired that that enabled only the bank to withdraw and not the customer. The company later learned that breaking the swap arrangement would incur a penalty that seemed to fluctuate on a daily basis but would total millions of pounds. This was not known to it at the time of signing the agreement. The way in which the swap was sold patently breached the terms of the financial regulations surrounding such transactions, as other hon. Members have said.
Interest rates subsequently plummeted in a way that nobody had forecast. We all know that if companies enter into a bad bargain, that is something they have to accept, but this was not just a bad bargain: the company was mis-sold the hedging product to further the interests of the bank, not the customer, and the detailed and complex terms were never fully explained to or understood by the directors of the company.
Jake Berry (Rossendale and Darwen) (Con)
The case that my hon. Friend describes is extremely similar to one that I am involved in, which also involves RBS. The company concerned has now gone into administration and the directors have exited. Does he agree that the long-term implication of a company becoming impaired when the bank has taken a haircut, as it were, is that when those involved try to set up businesses subsequently they are unable to borrow from the banks, with or without an interest rate swap, so there is a generational effect on business?
Mr Streeter
I completely agree that the effects of this mis-selling scandal will ripple down through the generations.
Interestingly, on several occasions London and Westcountry tried to ascertain how much profit the treasury branch of RBS made on entering into the swap arrangement, but that has never been disclosed. Once the recession began to bite and values of commercial properties plummeted, companies such as London and Westcountry began to struggle. A significant variation in the company’s loan-to-value calculation meant that it was in technical default of its loan agreement. It was worse placed than many companies because its interest rate was pegged at 6.4%. When the borrowing facilities fell to be renewed in 2011, RBS insisted that the interest rate would rise still further to 7.5%—a figure that it knew to be unsustainable. Sadly, the story does not end there.
In 2011, I became involved in trying to negotiate with RBS to find a solution to the difficulties. Not once throughout that time did the company default on any interest payments to the bank. Indeed, the company got its act together, reduced its overheads and increased its profitability. However, because of the loan-to-value challenges and because the RBS board had made a strategic decision to withdraw from commercial property, the London and Westcountry loan was bundled up with other troubled loans and sold by RBS to a new company, Isobel Assetco Ltd, 25% of which is owned by Blackstone, the US venture capital company, and 75% by RBS. That removed the potential bad debt from the RBS balance sheet. However, that £1.36 billion deal was done at a 30% discount, meaning that it was funded to the amount of £550 million by RBS or, indeed, by the taxpayer.
It seemed to us that RBS was dragging its feet in trying to resolve matters with London and Westcountry, while we were negotiating in good faith. The company was seeking to refinance its business with another bank, but RBS insisted on full repayment of the loans, plus the swap penalty of about £13 million. It simply would not budge. We subsequently found out why: that debt had been earmarked for the Blackstone transaction, and RBS had no interest in resolving it sensibly with London and Westcountry. RBS would not give London and Westcountry any discount, but it gave Blackstone a 30% discount. For a bank that is owned by the taxpayer, that is an utter disgrace.
It was like going from the frying pan into the fire. The hard-nosed American venture capitalists were not remotely interested in the company’s welfare, nor in its strategic importance to the south-west. They were interested only in making as much money as possible from the deal. Within weeks, despite my protestations and those of other Members of Parliament from the region, London and Westcountry was placed into a completely unnecessary administration. Its business parks are now being flogged off one by one at a fraction of their true worth.
We have a credit crisis triggered by the corporate greed of our investment banks; we have inappropriate swap arrangements sold to companies simply to make a fat bonus for bankers; and, in the case of London and Westcountry, we have an off-balance sheet sale to a US loan shark, funded by the taxpayer, resulting in the almost immediate administration of a successful company and asset stripping on a breathtaking scale.
I think that swap mis-selling will become as big a scandal as the mis-selling of payment protection insurance. We all know that banks must make a profit, but this was not about profit; it was about greed, pure and simple. I hope that the family behind London and Westcountry will successfully sue RBS for many millions of pounds. I will do all that I can to help them. As a taxpayer, I hope that we will be able to sell RBS one day, but the bank should certainly be making provision on its balance sheet for many millions of pounds in future claims for swap mis-selling.
I hope that the FSA investigation concludes that in the mis-selling of swaps, our banks have once again behaved disgracefully, and that they should compensate all their victims. That is the important thing. I hope that the individual bankers—and in the case of London and Westcountry, senior members of Blackstone—feel thoroughly ashamed of their disgraceful conduct and unbridled greed. I also hope that Ministers will hold the directors of state-owned banks to account and recognise that although the Government are keen to sell the banks, issues of justice and compensation must be dealt with first.