Commercial Financial Dispute Resolution Platform
Debate between George Kerevan and Philip Boswell(8 years ago)
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Philip Boswell
I wholeheartedly agree with that excellent point.
As mentioned in today’s motion, the Financial Conduct Authority has set up several ad hoc schemes to address systemic misconduct by financial institutions. The schemes have been widely criticised, and, as others have mentioned, even Andrew Bailey, the new chief executive of the FCA, has said that they have left those affected by bank misconduct feeling unfairly treated. The recent review of the mis-selling of interest rate hedging products demonstrates the shortfall of the ad-hoc compensation schemes and their inability to reach fair outcomes for customers.
Last year, just before Christmas, I was approached by a constituent who had been mis-sold an interest rate hedging product. In 2001, my constituent and several co-investors used their retirement savings to create a small business that would purchase commercial property in Glasgow. However, they had insufficient capital to purchase their first property outright and therefore sought a loan from a bank. Despite the banks involved with the mis-selling claiming that customers were under no pressure to purchase the product, my constituent informed me that he could not find a single bank that would lend the money without including the interest rate hedging product. My constituent was told that this was to protect the customer in the event of interest rates continuing to rise. Having no other choice, my constituent’s business took out a 25-year loan that included the aforementioned product.
Many in the Chamber will be aware that interest rates fell during the financial crisis. The inclusion of the product in the loan resulted in my constituent’s business—set up on pension scheme earnings—owing £30,000 per quarter in interest alone during the biggest financial crisis in modern history. When it became apparent to my constituent that his business had been mis-sold the product, he began the complaints process in the hope of receiving some sort of compensation. However, the bank with which he took out the loan continually refused to provide him with the relevant paperwork for the loan, making it difficult for my constituent to continue the process.
George Kerevan
Does my hon. Friend agree that a fundamental problem with the current ad hoc redress system is that it does not allow the complainant access to the information they need? A tribunal system would put the complainant and the bank on an equal footing and allow that information to be made available.
Philip Boswell
I entirely agree. Such a practice is entirely undesirable and not befitting of any bank, particularly one in public ownership, as has been mentioned before.
The delay and avoidance tactics used by the bank, combined with the FCA’s own recommendation that claimants should not take legal action, meant that my constituent's case surpassed the six-year time limit on taking court action. His business did not receive any compensation from the bank as a result of the ad hoc scheme overseen by the FCA. Unfortunately, my constituent’s experience is far from rare, as many Members have shown. The compensation scheme for the mis-selling of interest rate hedging products was bank-centric and lacked sufficient FCA oversight. The review was set up in conjunction with the banks and allowed them to make redress offers that did not reflect an objectively fair outcome. The case of my constituent and the experiences of others who have been treated unfairly by banks clearly demonstrate the wide scope of financial disputes, particularly those between small businesses and financial institutions.
After hearing about the experiences of constituents from across the UK shared by Members today, it is apparent the ad hoc schemes set up by the FCA have lacked sufficient clarity and that the creation of a commercial financial dispute resolution platform is necessary. I am happy to support the motion presented by my hon. Friend, and I welcome the support that has been expressed in the House today.
Hinkley Point C Reactor
Debate between George Kerevan and Philip Boswell
George Kerevan
I think the hon. Gentleman has summed up the incredible state we have got ourselves into. Somehow, it will be all right on the night. Somehow, the French Government are going to bail out the United Kingdom’s energy policy. I can assure Conservative Members that that is not going to happen. What is going to happen is the following: at some point, I suspect with pressure from the British Government, what is left of EDF’s board and senior management will override the resistance of the minority on the board and green light construction. They will green light construction at a point where EDF cannot guarantee it has the funds to complete building the reactor. At some point, there will be a crisis and who is going to pick up the pieces? I can assure the House that it will be the United Kingdom taxpayer, not the French taxpayer.
Philip Boswell (Coatbridge, Chryston and Bellshill) (SNP)
Having previously worked in the industry, like the hon. Member for Warrington South (David Mowat), in contracts management, I looked at Hinkley C online. While forms of agreement have been agreed as far back as October 2015, they are just a vehicle for project delivery. The design phase determines the project. As we appear to be about to enter the detailed design phase, this stage gate requires a more robust estimate to assuage investor concerns. Clearly, that has not happened. Does my hon. Friend agree that, given the very public challenges the project faces if it ever starts, the forecast practical completion date of somewhere between 2023 and 2025 is highly unlikely?
George Kerevan
I could not agree more with my hon. Friend. Originally, the two Hinkley C reactors were designed to be off-the-shelf copies of the reactor being built by EDF in Normandy. That has not happened. There have been significant changes. In fact, the way the EPR reactor has to be built—on site, piece by piece; it will be unique—leaves massive margins of error for cost overrun. Who is underwriting any cost overruns? The Chancellor of the Exchequer has given a partial capital guarantee that if there is any problem in the construction phase, the British taxpayer will start to pick up the bill.
George Kerevan
Yes, that is entirely true. That is the point. If we look at who is actually responsible for having got us into this financial hole, do I detect yet again that it is the Chancellor of the Exchequer? We are here not out of an energy policy issue, but because the Chancellor wanted to keep the construction costs of £25 billion and rising off the national book. He wanted to keep it off the debt. For the first time ever in the UK, we are trying to build a new reactor with a new reactor design by putting all the risk on to the private sector. This project is too large and the technology is too unproven for that to work. The Chancellor is digging himself a big hole to protect his rickety plan to keep down the deficit and pay down the national debt, but it will not work. At some point in the next 10 years, we will be back here discussing a bail-out.
That is what I am trying to get across. A significant number of EDF board members know that the project cannot be financed through private capital. Even if EDF could raise the £12 billion or £18 billion—its share for building the Hinkley C reactor—it would need four, five or six times that to complete its programme of reactor life extensions in France. The sum total is colossal for a company already dripping with debt. Unless the French taxpayer is prepared to underwrite all of that, which is highly unlikely, something will have to give, and let me assure the House that it will be not EDF’s reactors in France but this project. It will disappear into the wide blue yonder.
The problem is that by 2025, when the two reactors are not on-stream, we will have closed down the 10 coal- fired stations that the Government announced would be closed last November, just before the Paris climate change conference, and suddenly we will have a huge gap in the 2020s—even worse than now—in our capacity to generate electricity. That will all be because we have mortgaged ourselves to an outdated approach to energy, which is to build gargantuan nuclear reactors that cost the earth—literally and financially—and which cannot be underwritten by the private sector because of the risk. The Government have manifestly been trying to pretend otherwise, and that is ultimately why they are refusing to come back regularly to the House to explain what is going on. They are hoping for the best.
I want the Minister to tell us what discussions have been going on with the board, when we might see the decision to go ahead with construction and what will happen if we do not get a timely agreement to go ahead. What happens if the board delays and delays until 2019? Is there a plan B?
Philip Boswell
Will my hon. Friend also ask the Minister whether, given the current constraints and pressures in the industry, she foresees the current negotiated strike price of £92.50 being renegotiated—the only way being up?
George Kerevan
Of course, the strike price is subject to certain qualifications. Were EDF to build the reactors and make a vast profit—the strike price is more than twice the current cost of electricity and there is an increment for inflation—there would be a clawback. If it makes a profit beyond what was originally envisaged, some of the money would come back to the British taxpayer. The clawback was insisted upon and enlarged by the European Commission, so it was interesting listening to the Minister this morning on the radio, given her position on the UK leaving the EU. It was in fact the Commission that tried to stand up for the British consumer. That is one reason I will be voting to stay in the EU.
I have made the basic point, so I shall draw to a close.