Banking (Responsibility and Reform)

George Mudie Excerpts

Tuesday 7th February 2012 Commons Chamber

[Mr Hoban]

The hon. Gentleman should tell the businesses in his constituency to use the appeals mechanism that was introduced to enable businesses to challenge decisions by banks and ensure that they are reviewed. Since the introduction of that scheme, 40% of bank managers’ decisions have been overturned through the appeals process.

[Mr George Mudie (Leeds East) (Lab)]

When the Governor of the Bank of England appeared before the Treasury Select Committee, he deplored the banks’ refusal to meet the Merlin targets. Furthermore, he said that the Government had chosen the wrong targets, which allowed the banks to hide the fact that they were not lending properly to small businesses. Was he misleading the Committee?

[Mr Hoban]

I gave the hon. Gentleman the figures earlier. As I said, by the third quarter of last year banks had exceeded their Merlin targets for lending to businesses as a whole, and were about 10% ahead of their lending to SMEs in comparison with the same point last year.

Let me say a little more about the credit-easing measures that we are introducing. There will be a £1 billion business finance partnership to co-invest in funds that can lend directly to middle-sized businesses and further stimulate non-bank lending channels for SMEs. Those schemes capitalise on the Government’s commitment to tackling the deficit that the last Government left behind. Unlike the Opposition, we are determined to safeguard our economic stability and protect our credibility in the world market—credibility which has secured our triple A rating and kept our interest rates at record low levels, and which allows us to pursue innovative credit-easing measures to reduce costs for businesses and ensure that more money goes where it is needed.

--- Later in debate ---

[Mr Hoban]

My hon. Friend raises an important point. The reforms outlined by my right hon. Friend the Business Secretary ensure that shareholders have the information they need to act. We are also giving them the power to vote and their votes will have a binding impact on future pay plans. The pervading culture today and the sense of concern in the wider economy mean that institutional shareholders need to play their part by looking after the interests of the people who invest in their funds—the people whose pensions are dependent on good returns from their investments. Those shareholders owe an obligation to their customers to exercise their rights to determine the pay policies of boards. We need to focus on that in coming years. My predecessor, Lord Myners, talked about it a great deal. Our reforms have provided the tools and we must ensure that we use them to hold institutional shareholders to account.

[Mr Mudie]

The problem for the public is that the Minister can lecture private shareholders in private banks to use their power to limit bonuses in their banks, but Ministers, who are the owners of RBS, have not intervened and used shareholder power to get good behaviour in the bank they own. Why?

[Mr Hoban]

We have been very clear as shareholders that we expect RBS to act as the back marker on bonuses. We have been keen to ensure that it restricts cash payments to only £2,000 a year. It is not just the Government who agree with that view. In an article about RBS, the right hon. Member for Edinburgh South West (Mr Darling) pointed out that the Government should not run RBS; they should not get involved in the day-to-day business of banks but should run them at arm’s length. That was a structure set up by the previous Government and I understand that the Leader of the Opposition supported it. [Interruption.] The shadow Business Secretary says that we should change it, but he should speak to his leader. The right hon. Member for Doncaster North (Edward Miliband) clearly endorses the structures set up by the previous Government. They should sort out their internal differences—it is not as though they are brothers.

I have spoken for quite some time and others want to speak, so I shall conclude. This Government have secured the stability of our economy by tackling the dreadful deficit left behind by our predecessors. This Government have secured the stability of our financial sector with tough regulatory reforms. This Government are supporting our entrepreneurs in rebalancing our economy, away from the unsustainable and wasteful spending under the previous Government. We are securing stable interest rates through our commitment to tackle the deficit. We are reducing the bureaucratic burden on businesses by slashing red tape and overhauling planning. We are unleashing private sector ambitions by cutting corporation tax to the lowest rate in the G7 and the fifth lowest rate in the G20. We are ensuring that our most ambitious and dynamic businesses have the finance they need to lead recovery in every part of our economy and our country.