Independent Banking Commission Report

Debate between George Osborne and Chuka Umunna

Monday 12th September 2011 Commons Chamber

[Mr Osborne]

As I have said, the 2019 back-stop is the considered view of John Vickers and his commission. They have spent an enormous amount of time thinking about this, about trying to get the balance right between getting the rules in place, getting the rules right, and ensuring that they do not damage credit supply in the short term, about which many Members have asked. The report contains other milestones—some of the changes that he wants to see put into place by 2013, for example. John Vickers has done a good piece of work, and given a lot of thought to the issues, and I do not want to second-guess them just hours after he has published his report. We will produce a full, detailed response to the report by the end of the year.

[Mr Chuka Umunna (Streatham) (Lab)]

The Chancellor has referred to Project Merlin, which is generally regarded as a fairly ineffectual agreement, not least because, according to Bank of England figures, net lending to small and medium-sized enterprises has contracted month on month. Across the House, we can agree that it would be undesirable for politicians to seek directly to run the banks in which we have a public stake, but surely that should not preclude the Chancellor asking United Kingdom Financial Investments Ltd to ensure that the banks change the culture that they exercise towards SMEs. When was the Chancellor’s last discussion with UKFI about that?

[Mr Osborne]

I talk to UKFI all the time, and one of the things I talk about is ensuring that the banks in which we have a public ownership of shares are meeting their Merlin lending targets. I congratulate Lloyds, which has changed its operations and advertising campaigns and has tried to encourage small business lending. The hon. Gentleman talks about targets, but again there is complete amnesia about the fact that Labour were in government about 18 months ago. The Labour Government introduced net lending targets, which he wants us to introduce, abandoned them after 12 months, after those targets were completely missed, and then said in the House of Commons that they would introduce gross lending targets for two banks, RBS and Lloyds. We have not just stuck with the methodology that they developed, but have extended it to the entire banking system. Before they criticise those trying to clear up the mess, Labour should remember what they did in office.

Oral Answers to Questions

Debate between George Osborne and Chuka Umunna

Tuesday 21st June 2011 Commons Chamber

[Mr Chuka Umunna (Streatham) (Lab)]

Several figures have been cited about the number of jobs created over the past 12 months. What percentage of those jobs were created before the spending review and are arguably attributable to the last Government, and what percentage have been created since?

[Mr Osborne]

I am happy to provide the hon. Gentleman with an exact breakdown based around the date of the spending review. What is clear, however, is that we said that we wanted the private sector to lead the recovery and that that was absolutely essential. That is the view of virtually every credible economist and business organisation in the country. He should be celebrating the fact that over 500,000 net new jobs have been created by the private sector in the past year.

Oral Answers to Questions

Debate between George Osborne and Chuka Umunna

Tuesday 10th May 2011 Commons Chamber

[Mr Osborne]

It is incredibly important to try to increase the number of women who set up their own businesses. The Government have undertaken a number of specific initiatives, driven from No. 10 Downing street, and I will ensure that my hon. Friend is closely involved in them.

[Mr Chuka Umunna (Streatham) (Lab)]

Yesterday, in a welcome move, the British banking industry abandoned its legal fight with the Financial Services Authority over the mis-selling of payment protection insurance. Does the Chancellor agree that this scandal, as a result of which millions of people in this country were fleeced by the banking sector on a large scale, was an absolute disgrace and that the banks involved should settle the claims that arise, immediately and without further delay?

Oral Answers to Questions

Debate between George Osborne and Chuka Umunna

Tuesday 22nd March 2011 Commons Chamber

[Mr Osborne]

Of course, the Governor of the Bank of England is one of many people who have pointed out that there was no credible plan when we came into office and that we have put a credible plan into place.

[Mr Chuka Umunna (Streatham) (Lab)]

The Chancellor and other Ministers have cited investor confidence as the reason why they cannot revise their original plan for fiscal consolidation, but Jonathan Portes, the immediate former chief economist at the Cabinet Office, said:

“This is not a justification, economic or otherwise, for”

not changing policy. He said that

“it relies on an odd view of market psychology, one that says markets have more confidence in governments that never adjust policy, even when it is sensible, from an economic perspective, to change course.”

Why is he wrong?

[Mr Osborne]

Our country’s credit rating was on negative watch when we came to office and as a country we did not have a credible plan to reduce the budget deficit. Since that plan has been put in place we have been able to see the effects because our market interest rates and our spreads over bunds have come down. We have interest rates that are closer to Germany’s despite, as I have said, having a budget deficit left to us that was higher than either Greece’s or Portugal’s.

Oral Answers to Questions

Debate between George Osborne and Chuka Umunna

Tuesday 8th February 2011 Commons Chamber

[Mr Chuka Umunna (Streatham) (Lab)]

It is extremely important that the Government are seen to act on the recommendations of the Independent Banking Commission, when they come out, in the national interest rather than in the interest of any particular sector. Does the Chancellor think that it is wise for the Minister, the noble Lord Green, an immediate former chair of the British Bankers Association, to sit on the Cabinet Committee that makes decisions on such matters? He joined that Committee last month, just two months after leaving the chairmanship of HSBC, a bank for which he worked for more than 25 years and which will be profoundly affected by the decisions that the Committee makes.

[Mr Osborne]

First, I am glad that the hon. Gentleman welcomes the creation of the Independent Banking Commission. I hope that all hon. Members have an open mind about the recommendations that it will make, and that they agree that we should not close off any options until we have heard from John Vickers. He is doing an excellent job, and we await his final report later this year. The hon. Gentleman is ungenerous in his remarks about Lord Green, who brings enormous experience to the job of Trade Minister. I would just point out that he has replaced Lord Davies, who was appointed by the Labour Government at a time when he was chief executive of Standard Chartered, so it is not as though bringing top bank chiefs into the Government is an innovation.

Bank Bonuses

Debate between George Osborne and Chuka Umunna

Tuesday 11th January 2011 Commons Chamber

[Mr Osborne]

It is explicitly those sorts of practices that are part of the discussions we are having with the banks. We want to ensure that they treat customers, including small businesses and households, more fairly, to look at the overcharging issue and to make sure that families and business are given good advance warning of the need to renegotiate terms. That is all part of what we seek to renegotiate. As I have said, we have heard absolutely no positive proposals from anyone in opposition. That says a great deal.

[Mr Chuka Umunna (Streatham) (Lab)]

The Chancellor has given the impression that the new bonus restrictions have been implemented at his instigation, whereas, of course, they have been introduced to ensure compliance with EU rules, particularly those of the capital requirements directive and the Committee of European Banking Supervisors. The directive was opposed by Conservative MEPs. As for disclosure, Stephen Hester has indicated that the industry is quite relaxed about the implementation of a unilateral disclosure scheme. In the light of his comments, will the Chancellor reconsider the implementation of such a scheme, so we can at least know what is paid in the sector?

[Mr Osborne]

As I said, we are looking for greater disclosure. We are also seeking agreement at European level, because this is an international industry. These are perfectly sensible steps to take, and we have introduced in this country the toughest financial code on bonuses of any financial centre of any size anywhere in the world.

Oral Answers to Questions

Debate between George Osborne and Chuka Umunna

Tuesday 21st December 2010 Commons Chamber

[Mr Chuka Umunna (Streatham) (Lab)]

I would like to get some clarity on the taxation of the banking sector. The Business Secretary made it clear over the weekend that if the financial services sector did not exercise restraint in bonus payouts during the current round of bonuses, which goes on until April next year, the Government would consider imposing further taxes above and beyond existing taxation arrangements and the banking levy. Will the Chancellor, who adopted quite a different tone in New York, please confirm whether the Government are considering imposing extra taxation, over and above the existing arrangements and the banking levy, on the banks if they do not exercise restraint?

[Mr Osborne]

We said in the Budget that we were looking at the case for a financial activities tax, which is one of the two taxes that the International Monetary Fund—[Interruption.] The hon. Member for Wallasey (Ms Eagle) says it has nothing to do with bonuses. I suggest that she goes and considers what a financial activities tax is. The IMF has set out some of the principles behind it, but we have followed the principles behind the other IMF proposal, which is the bank levy. In the past couple of weeks, we have demonstrated that we are prepared to increase the rate of the bank levy to sustain the revenue.

Autumn Forecast

Debate between George Osborne and Chuka Umunna

Monday 29th November 2010 Commons Chamber

[Mr Osborne]

I assure my hon. Friend that I will not tire of reminding the Opposition of that. Of course, if they come forward with a new economic policy we can examine it, but at the moment there is not a new economic policy to examine, so there we have it.

[Mr Chuka Umunna (Streatham) (Lab)]

The Chancellor has said that he sees private sector growth being driven by business investment and by exports. In its report today, the OBR has revised down its forecast for business investment in four of the years between 2010 and 2015. Of course, we have seen the dramatic uncertainties in the eurozone, which is our main export market. If exports and business investment do not turn out to be what he expects, where does he see private sector growth coming from?

[Mr Osborne]

One of the primary tasks of the OBR is to assess whether we will hit the fiscal mandate. The very fact that the fiscal forecasts are not a matter of controversy in the House today shows what we have done to get the British public finances under control. The OBR assessed specifically the scenario that the hon. Gentleman volunteers and said that the fiscal mandate will be met under those conditions. In fact, rather perversely, that helps the fiscal forecasts because of the tax base being more focused towards consumption.

Proposed Public Expenditure Cuts

Debate between George Osborne and Chuka Umunna

Monday 13th September 2010 Commons Chamber

[Mr Osborne]

I do not think that strike action would help anyone at this point in time. Again, the people who suffer most when countries lose control of their public finances are often those working in the public sector, so I would hope that the trade unions, like everyone else in our society, will work together to sort out this national problem—and do so in the national interest.

[Mr Chuka Umunna (Streatham) (Lab)]

The Chancellor’s emergency Budget was criticised for adversely impacting on certain groups, not least women—indeed, it is subject to litigation in the courts at the moment by the Fawcett Society. With particular regard to the extra £4 billion of cuts announced by the Chancellor to the BBC last week, has he carried out an equality impact assessment of the effects of that measure?

[Mr Osborne]

Of course, as we prepare the comprehensive spending review, we will comply with the legislation on the statute book.

Financial Services Regulation

Debate between George Osborne and Chuka Umunna

Wednesday 16th June 2010 Commons Chamber

[Mr Osborne]

Suddenly, the hon. Gentleman is interested in the regulation of Lehman Brothers, but there we go.

The risks were pretty clear. No arrangements were in place for winding up a large and complex financial firm. That was one concern. No arrangement was in place that would allow a global firm to avoid dying nationally in the way that it did. It was heavily exposed to, for example, the derivatives markets and other things. That had not been spotted either by the British regulator or, of course, the American regulator, which was in the lead. We need to investigate precisely that kind of issue, not just here in Britain, but across the world. That is being done in the international councils on which we sit. But surely, whether with Lehman Brothers, the Royal Bank of Scotland, HBOS or Northern Rock, we must learn the lesson of what went wrong. Again, I find it breathtaking that, at the beginning of the Parliament, the Labour party has set itself against changing the system of regulation. [Hon. Members: “No we haven’t.”] Labour Members may say that, but that is exactly what the shadow Chancellor did about 53 minutes ago.

[Mr Chuka Umunna (Streatham) (Lab)]

My understanding is that the credit rating agencies are not subject to any proper UK regulation at the moment and that some action is being taken at EU level in that regard. Does the Chancellor see any place in the new arrangements for UK regulation of the credit rating agencies, which, of course, bear a large responsibility for what happened in the sub-prime crisis?

[Mr Osborne]

The hon. Gentleman is right to draw attention to the role of the credit rating agencies. Of course, all sorts of organisations and products received triple A ratings that they should never have received. That triple A wrapper basically made them immune to investigation by the firms that were buying those products. Certainly, we need to improve the regulation in the domestic sense—here in Britain—but that is also the subject of decision at a European level, and the la Rosière proposals on European supervisory agencies will consider in particular the role and regulation of credit rating agencies.