Tomlinson Report

Guto Bebb Excerpts

Tuesday 17th December 2013 Westminster Hall

[Guto Bebb (Aberconwy) (Con)]

It is a pleasure to serve under your chairmanship this morning, Sir Roger.

I am pleased to have secured this debate on the Tomlinson report prior to the Christmas recess, because it is important and touches on a lot of my work on interest rate swap mis-selling. The report’s scope is wider than just the interest rate swap mis-selling scandal, and it looks at how a certain part of the Royal Bank of Scotland, namely the global restructuring group, has been operating in relation to small businesses. It is important to place on the record that Lawrence Tomlinson’s findings reflect what I have seen both as a constituency MP and in my work on interest rate swap mis-selling.

Prior to the report’s publication, Lawrence Tomlinson spoke to the all-party parliamentary group on interest rate swap mis-selling, and it is fair to say that many Members in that meeting were shocked by what they heard about banks’ behaviour. What should concern us more than the fact that Members were shocked by Mr Tomlinson’s comments is that many of them were not surprised. When some of the report’s findings were highlighted, it was concerning to see that such activity was recognised by Members from their constituency casework. If MPs are not surprised by allegations of behaviour that verges on the criminal, there is cause for significant concern about banks’ behaviour.

Since the publication of the report and its findings, there has been a certain degree of blow-back. Elements of the press have suggested that Mr Tomlinson might have a personal agenda or vendetta against RBS. I therefore want to place on the record that I have never banked or had any banking facilities with RBS, and have no vendetta whatever against it. My concern lies with the numerous constituents who have been treated in a manner that I find unacceptable. It is important to highlight what the report found and how it resonates with those of us who have dealt with businesses that have been badly treated by their banks.

The report was met with a significant degree of sympathy when originally published, but concerns have been highlighted since then. I want to examine three key issues of concern today; other Members may have different issues to discuss. First, I want to concentrate on the report’s findings in relation to whether the bank deliberately attempted to engineer situations in which businesses defaulted or breached their banking covenants. One of the report’s key claims is that businesses often found themselves in difficulties due to the bank’s deliberate efforts to ensure that that happened, including through revaluations. Once banking covenants were breached, businesses were placed in the so-called supporting hands of the global restructuring group.

The second question that deserves consideration is about the nature of the support that businesses receive once subjected to the support structure of the GRG. Is it really trying to get businesses back on track, or—as in many cases that I have seen, and in many cases highlighted by Lawrence Tomlinson—are businesses subject to unfair and penal rates of interest and charges, and often asked to pay for reports and valuations that are almost never in the businesses’ interests?

The third question is about the impartiality of the whole insolvency process. The report asks significant questions about whether the process and all the professionals involved actually operate in an independent manner. I have seen a number of cases of valuations changing dramatically because valuers have been instructed to undertake a second valuation by the bank. That raises significant concerns about the independence of those valuations. Consultants, solicitors and accountants have been asked to undertake work, paid for by the business, on the instruction of the banks. Time and again, that work has been less than helpful to the survival of the business.

When I conclude my remarks, I will touch on the selection of Clifford Chance to conduct an internal review of RBS. I have no doubt that Clifford Chance is a reputable firm of solicitors, but I have concerns about whether it will pass the smell test of being impartial enough to undertake such a review, given its links to RBS.

Have RBS and the global restructuring group been guilty of engineering a default or a breach of covenant? There are examples. A constituent of mine had a quarry with landfill rights that was valued at £9.5 million. The bank decided to enforce a revaluation of the asset, which came back at £2.5 million. As one can imagine, the impact of a £7 million reduction in value was an immediate breach of the banking covenant. After long and hard-fought efforts by the company, there was a final agreed valuation of £4.5 million. The company agreed to that simply because it was desperate and wanted to try to keep trading. How can a £7 million reduction in value occur when the company undertaking the revaluation was the same one that made the original valuation only a few months previously? That question needs to be answered. Also, why did the company have to pay £14,000 for a valuation that it successfully disputed?

I was contacted by a business yesterday with a large portfolio of flats, one of which was valued by the GRG at £100,000. A sale price of £145,000 was achieved yesterday, but the bank is still unwilling to make any compromise on the valuation of the entire portfolio. When one flat is sold for £45,000 in excess of the bank’s valuation, one must question why the whole portfolio is not re-examined from a banking perspective. The business is paying penal rates of interests on the basis that it breached its loan-to-value covenant, yet the one sale that has been achieved shows that the asset’s value was much higher than the value that the bank placed on it.

Another example, of a hotel in north Yorkshire, landed on my desk because the business has also been affected by interest rate swaps. The hotel was independently valued by Matthews & Goodman at £3.4 million, but the bank was clearly unhappy with that valuation, which gave the business a healthy loan-to-value position, so it instructed the business to get a second valuation within two months. The business was charged £3,500 for the privilege, and the second valuation came back at £1.65 million. The result was that the business was in breach of its banking covenants. It is unsurprising that the business feels hard done by: an independent valuation suggested a value of £3.4 million, but less than three months later, another valuation, done on the instructions of the bank but paid for by the business, was less than half that.

[Glyn Davies (Montgomeryshire) (Con)]

I thank my hon. Friend for allowing me to intervene. There is a similar example from my constituency. Does he agree that it is often the time scale in which the bank demands a response that kills a business completely? A business in my constituency was given 24 hours to resolve a position that was not a difficulty. The business was bankrupted and its principal has gone to work in the far east, where they have created many jobs and much good business. That has been taken away from mid-Wales.

[Guto Bebb]

That is a fair point about timing. Another of my constituents was told that his bank charges would be increased to a weekly fee of £4,000. The letter informing him of that arrived on 21 December, just before his business closed for Christmas, which I am sure was enjoyable because of that letter. There was nothing to be done until the new year, because the business was closed. There is an issue there. To go back to the hotel I was talking about, as a result of the lower valuation, the business can show on paper that its bank charges over the following six months were £250,000 higher than they had been in the previous six months.

[Tessa Munt (Wells) (LD)]

I applaud the hon. Gentleman’s work in this area, and it is a joy to work with him. I want to mention a similar case involving a constituent who had a long-term arrangement with a bank. His business, which owns housing, has been told by the bank that it wants to finish his loan on 31 March, so he is required to sell the housing on 1 April. How can that be fair?

[Guto Bebb]

That is an issue on which the bank would have to respond, because my view is that clearly it is not fair.

I have a fourth and final example of businesses finding themselves in difficulty due to decisions taken by the bank. A company that contacted me recently had net profit of £272,000 on turnover of £3.5 million in 2008, net profit of £281,000 on turnover of £4.4 million in 2009, and net profit of £268,000 on turnover of £3.9 million in 2010. Those are all healthy figures. The company employed about 40 members of staff. In late 2010, however, an agreed overdraft facility with the bank was withdrawn, because a loan agreement under the EFG—enterprise finance guarantee—system was declined. The company was therefore put into GRG support, and the group proceeded to disallow a payment of £14,000 in corporation tax, on which basis the company found itself in difficulties and ended up going into administration. The final set of management accounts for the nine months before the company went into administration showed a net profit of £190,000. The company would argue that its difficulties were caused by the bank refusing the corporation tax payment, even though the final accounts showed a profit.

Such businesses feel extremely hard done by as a result of the way that the GRG and RBS have behaved towards them. My evidence could be described as anecdotal—I am more than happy to accept that—but it is important to emphasise that the cases highlighted in the Tomlinson report are the tip of the iceberg; they are not representative of an issue created by Lawrence Tomlinson himself. I have seen these issues in my constituency, and other Members have seen them in theirs.

Once businesses are in the GRG, the concern is that its attitude and behaviour is less than helpful. RBS argues that the whole purpose of the group is to put businesses back into health, but it is difficult to see how a business allegedly subject to cash-flow problems is helped by having an additional £250,000 in fees in a six-month period. Time and again, I have seen the fees charged by the bank go up when businesses go into the GRG, and they apparently bear no relation to the amount of work done in support of the business.

So-called independent reviews are forced on businesses by the bank, whether through a valuation, accountancy work or solicitors. Professional fees are charged to the business, but the instructions come from the bank and, often, the reports go to the bank first. We have to be concerned about that. Furthermore, the businesses often have no say whatever in who the reviewers will be. There is a question about the conflict of interest faced by those professionals: if they are being paid by a business, but instructed by the bank, surely they are conflicted in their work.

The other thing that I have seen time and again is payments by suppliers not being prioritised. There is almost never a case in which a payment to suppliers would be allowed if that took the business beyond the terms of its overdraft or facilities, and yet I have never seen a case in which charges due to the GRG have not been taken because they will take the business over its overdraft limit. That is a fair point to make, because if a business can go over its agreed limit in order to pay the bank charges, why on earth will the bank not allow a payment to a supplier if that supplier is crucial to the continuation of the business in question?

I have already mentioned a constituent of mine struck with a £4,000 weekly fee for the continuation of his banking facilities. To return to him, after three months of negotiation, the GRG agreed that it would accept £2,000 per week. There was no explanation as to why the fee was initially £4,000, or why £2,000 was now acceptable. I get the impression that the reason why it was £4,000 to start was that the bank thought that it could get away with it; the fee was subsequently £2,000, because the business put up a fight—its accountants and solicitors argued the case, as did the MP.

[Mr Russell Brown (Dumfries and Galloway) (Lab)]

Given all that, does the hon. Gentleman agree that removing the cash flow that assists in running the business when it is under pressure simply creates additional problems?

[Guto Bebb]

Absolutely. When a business is taken into the GRG in order to help with cash flow, it is difficult to envisage why there is therefore justification in imposing a £4,000 or even £2,000 per week charge for support. There is no indication of what that support entails, but it certainly does not support the cash flow—let us put it that way.

The company I mentioned was also expected to produce new accounts. It had monthly management accounts produced by its accountants, but that was not good enough for the bank, which had to have KPMG to do the work. Again, it was not good enough for the bank for the company to use its solicitors to value assets that were subsequently sold; it had to use solicitors chosen by the bank. That is oppressive behaviour by the GRG towards businesses that it is allegedly meant to be supporting.

It is important to bear in mind that when we highlight such cases, the concern is that we have examples from throughout the country, which makes the case that there is an issue here that needs to be looked at. I am pleased that the regulatory authorities are taking a look at the Tomlinson report, but I hope that they also take on board the comments made today by me and other Members on our experiences of businesses not included in the Tomlinson report. This is happening throughout the country and it needs to be highlighted.

I also want to highlight an interview with Derek Sach, the founder of the GRG, by Debtwire in October 2012, which is rather chilling to someone who is of the view that the bank ought to be there to support small businesses. He describes the steady flow of “new distressed businesses” into the GRG as an opportunity. That is a key point. If the head of the GRG considers that distressed businesses coming into his organisation are “opportunities”, his view is that the group is there not to support businesses, but to gain commercial advantage on the back of those businesses. Furthermore, if any Members present represent a shipping business, they should be concerned, because Mr Sach also emphasised that he sees significant “opportunities” in that sector, because shipping is going through a difficult period—in other words, the GRG vultures are hovering, waiting for a further supply of distressed businesses of which to take advantage.

Throughout the process, I have also seen numerous examples of instructions by the GRG not to prioritise the Crown on VAT, corporation tax or pay-as-you-earn payments. That is concerning from any high street bank, but to see such an instruction to businesses coming from a bank that was supported and saved by the taxpayer should cause serious concern to Government. I hope that the Minister will respond to that specific point.

I have a final point to make before my brief comment on Clifford Chance. The whole insolvency process is a concern. When an insolvency practitioner or administrators go into a business, the poor old creditors will often receive little in return, because the fees will take the vast majority of what is available. Hon. Members need not take my word for that, because in a recent article, James Nicholls of Nicholls & Co, an insolvency lawyer based in Birmingham, highlighted the fact that the insolvency business is complicit in what is, in my view, an abuse of small businesses. He made the point that

“we in the insolvency industry have been complicit, collaborative and have completely failed in what our true roles should be. Almost everyone in our industry has effectively been ‘bought off’ by the Banks—accountants, IPs”—

that is, insolvency practitioners—“lawyers, surveyors—everyone.” That is not my comment but a comment from somebody involved in the insolvency industry. His argument is that the industry has turned a blind eye to the behaviour of the GRG and other turnaround companies: it has been bought off by the fees and affected by the culture that has existed in the past decade.

If we are serious about supporting small businesses and supporting the growth of our economy through their development, we have to ask ourselves whether that sort of attitude towards them—seeing them as opportunities to make money rather than as businesses to be supported—is the right way forward.

[Jason McCartney (Colne Valley) (Con)]

Everything my hon. Friend is saying is familiar to me. I have been supporting a decent-sized manufacturing business in my constituency. The bank concerned is not RBS but another major bank; I want the Minister to be aware of that fact, and I might speak with him afterwards. When a business needs support and is feeling a bit vulnerable, perhaps because it has just lost a contract or is restructuring, instead of getting support from its bank it gets a hike in interest rates and has extra costs imposed on it—for example, an extra £10,000 a month in accountancy costs—and there is no pathway for returning to regular lending.

The circumstances my hon. Friend has described are ones I am seeing with a business in my constituency; instead of getting the support it needs, the bank’s behaviour is creating worry and concern. I am supporting that business as best as I can. This debate is a timely one.

[Guto Bebb]

I appreciate my hon. Friend’s intervention, as it highlights the fact that this is not only an issue for those businesses highlighted in the Tomlinson report but something that we are seeing in our own constituencies.

James Nicholls concludes the article I mentioned by saying that the insolvency industry—by that he means accountants, solicitors, insolvency practitioners and so forth—needs

“to stop defending practices that on close and moral scrutiny just do not stand up to the ‘smell test’.”

I say, “Hear, hear,” to that.

I will conclude my comments by discussing Clifford Chance. I have no doubt, as I said in my opening remarks, that it is a reputable firm of solicitors, and make no comment about its behaviour, which I am sure is of the highest standard. However, by choosing Clifford Chance to undertake an internal review of the allegations made against the GRG, RBS is doing itself a disservice and is not creating any confidence in that review process.

Let us think of the relationship between Clifford Chance and RBS over the past couple of years. Clifford Chance worked on the sale of £80 billion of toxic UK commercial real estate by RBS, which was called Project Isobel internally; it acted on behalf of RBS on the sale of RBS Aviation Capital; it was instructed by RBS to deal with the recent IT outage suffered by RBS and NatWest; and it advised RBS on the LIBOR scandal.

I have no doubt that Clifford Chance feels that it could act impartially on the review, but businesses up and down the country genuinely feel that they have been treated badly by the GRG and RBS and they need to feel confident that the bank is taking their concerns seriously. I would argue that the impression given of a conflict of interests between Clifford Chance and RBS is enough of a reason for RBS to think again and appoint another firm to undertake the review. I welcome the fact that RBS is willing to undertake an internal review, and it has argued that it is creating an independent internal review; but that independence must be beyond reproach. Given the commercial relationship that I have highlighted between Clifford Chance and RBS, it is difficult to make the case that the review will be truly independent and will be able to gain the confidence of the business community. I ask the Minister to convey my concerns on that matter to RBS.

Thank you, Sir Roger, for allowing me to speak for so long on this issue, as I am aware that other Members wish to contribute. My concerns are simple. I believe that the issues highlighted in the Tomlinson report are worthy of consideration, and that it is good that the regulatory authorities are investigating on the basis of the report. But it is also important that Members of this House from all parts of the country highlight their experiences with the global restructuring group. RBS is not, in my view, the only bank to have behaved badly, but RBS and the GRG are the focus of the current report.

[Toby Perkins (Chesterfield) (Lab)]

I am grateful to the hon. Gentleman for giving way just as he is concluding his remarks, which have been very thoughtful. He is right to say that the GRG might not be the only perpetrator of this kind of behaviour, but it is the focus of the report. Does he think that the evidence that he has heard from colleagues and has read in the report is enough to say not just that there might have been bad practice but that, as Tomlinson appears to allege, systematic fraud is being perpetrated by RBS—is that the case that he is making?

[Guto Bebb]

I would be extremely wary of using the word fraud. In my view, there has undoubtedly been systematic bad behaviour and I could speak at some length about West Register, which is part of RBS, and the way in which assets have been taken from businesses by the GRG and West Register—there is a conflict there. However, even with the privilege afforded by being in the House, I would be careful about using the word fraud.

[Tessa Munt]

Does the hon. Gentleman agree that we could summarise the matter in this way? Customers have trusted their banks over so many years and that trust has been built up through generations. People still think that they should trust their banks, but there is now a complete imbalance in that relationship, as a practice has grown up in which highly commercially minded organisations are managing personal money and business money. People are now not qualified to understand what they are being offered by their so-called friends, the business or relationship manager and their bank.

[Guto Bebb]

Undoubtedly. That imbalance is something I have highlighted time and again in relation to the issue of interest rate swaps. I do not think it is reasonable to assume that we are talking about two equal parties when one is a banking organisation that has the ability to pull someone’s livelihood away from them at the stroke of a pen.

To conclude, the attention focused today on the GRG and RBS reflects the fact that RBS was bailed out by the taxpayer to such a great extent. With that taxpayer support comes added scrutiny. We should not take our eye off the behaviour of other banks and there are issues within those banks, but the key point is that the bank that we are talking about today is supported by the taxpayer and so has an obligation to justify its behaviour, over and above what is expected of other banks.

--- Later in debate ---

[Toby Perkins]

I think that many important points have been raised during the debate and that is certainly one of them.

We share the disappointment at the continued excesses in bank bonuses and the failure of the Government’s bank bonus levy to yield the returns that it promised. After all, we are having this debate just a day after publication of a survey showing that managing directors at banks in London are expecting a 44% rise in bonuses for 2013.

I turn now to some of the contributions made by hon. Members to the debate. Unsurprisingly, the hon. Member for Aberconwy made a series of significant contributions to the debate that he initiated. It was interesting that he reflected on the fact that Tomlinson had spoken to the all-party group on interest rate swaps. I was surprised to discover that during this process, Tomlinson never spoke to RBS and never gave it an opportunity to put the allegations that he was making in an alternative light.

The hon. Gentleman refused to take the bait that I generously offered him to say that the behaviour highlighted in the Tomlinson report would have verged on the illegal. I think that he understates the case. Tomlinson is fairly unequivocal. He is clearly alleging systematic fraud on the part of Britain’s largest bank—in effect, it is feathering its own nest by bringing down businesses that without the intervention of the bank would have survived and thrived.

[Guto Bebb]

It is fair to say that the allegations in the report are extremely serious. That is why, in my initial remarks, I welcomed the fact that the Government have referred the report to the relevant regulatory authorities—because I think that it is important that those allegations are looked at very carefully. However, the purpose of this debate was to highlight the significant effort in the media to portray Mr Tomlinson as a gentleman with a vendetta against RBS. The opportunity today was to highlight the fact that constituency MPs have seen behaviour by RBS and the GRG that is identical to that highlighted in the report.

[Toby Perkins]

There is no question about it: we have heard a lot of evidence of that sort. I agree, of course. I welcome the fact that the Government have referred the report on, but it is hard to see how they could have done anything else, on the basis of the strength of the report. The way in which the situation has been handled poses questions about judgment in terms of the seriousness of the allegations being made.

The matter will now be looked at by the Financial Conduct Authority. We are talking not about an external report to which the Government have to respond, but about a report written by someone at the heart of Government, which is apparently based on anecdotal evidence and which does not give RBS much of a right of reply. That is why I have questions.

The hon. Member for Aberconwy raised a legitimate question about the impact of the charges levied by banks on businesses that are already struggling with cash flow, and the powerlessness that businesses feel when they enter the restructuring process. In some cases, a business enters the process knowing that it is in trouble and feels as though the process is making the situation worse. I also recognise that Tomlinson highlights, as my hon. Friend the Member for Dumfries and Galloway (Mr Brown) has said, the fact that some businesses did not consider themselves to be in crisis until the moment they entered the process. The report raises many questions and we need to hear the Government’s response. It is important that we continue to put pressure on the banks, and indeed it is hard to see how that pressure will be alleviated.

My hon. Friend the Member for North East Derbyshire (Natascha Engel) highlighted suspect practices by RBS that were experienced by a business in her constituency. She repeated Tomlinson’s claim that systematic fraud was taking place. Interestingly, she asked the Minister to explain why he was certain that such practices were not occurring. Given that the report has come from the heart of Government, I imagine that he must be pretty clear that such fraud existed. I do not want to prejudge his comments, but I would be interested to hear what he has to say on that. My hon. Friend also made a significant point about the imbalance and unfairness of the relationship between banks and firms that are battling to stay afloat and do not have the resources to take on a major bank.

My hon. Friend the Member for Dumfries and Galloway raised an example from Barclays that it made it clear that such practices are not confined to RBS, although the Tomlinson report was entirely about RBS. My hon. Friend focused on businesses being driven into distress. He said that RBS was 80% state controlled. Although RBS is state owned, it has become clear under successive Governments that the bank is not state controlled; it is run in its own way. Perhaps we need to consider the fact that an organisation owned by Government is not always working in the best interest of British businesses and UK plc.

As I have said, we share many of Mr Tomlinson’s concerns and conclusions, and I now turn to the areas on which we agree. The Tomlinson report recognises the fundamental faults of the lack of competition in the British banking system, on which the Opposition wholeheartedly agree. Some 89% of small businesses are locked into the big five banks. The report also speaks of the need to change banking culture so that banks see small businesses as partners rather than merely cash cows, and so that the two can grow locally together. Such a model would not only be good for small businesses but lead to a stronger and more durable overall economy. That is why Labour proposes a new generation of local banks based on the Sparkassen model to add genuine competition on the high street. That would create a major new player that would not operate according to the same lending models as all the other banks, and would boost local decision making.

Although net lending has fallen every year during the crisis, our biggest European competitor, Germany, has seen an increase in lending over the same time. After the crash in 2008, a crisis occurred in bank lending, and far from being improved in the years since, it has continued to constrict. Tomlinson is right to say that we need greater competition. Alongside the new local entrants to the banking market, we are calling for greater bank account portability to ease the path into the market. Even a huge bank such as Santander found it exceptionally difficult and expensive to gain a foothold in the UK market.

We also agree that the culture of selling additional products and services alarmingly supersedes that of best serving customers’ needs, as was demonstrated by the interest rate swap scandal. Britain is currently facing a mutual crisis of confidence in small business lending, and in the relationship between banks and businesses more widely. A survey of members of the Federation of Small Businesses found that more than half of small businesses believe that banks do not care about small businesses, and, similarly, banks fear lending money to businesses. Such mutual distrust is one of the reasons why we have had the slowest recovery for 100 years. The Tomlinson report will, indisputably, further damage the confidence between banks and businesses. The Government have a grave responsibility to ensure that, when such damaging criticisms are made, every possible step has been taken to verify and scrutinise those criticisms before the Government endorse them.

In that context, we have significant reservations about a report that contains such serious allegations of systematic and widespread corporate fraud. There are concerns that, at best, the Tomlinson report will not be seen as being truly impartial. We have reservations about the Government’s endorsement of the report when its evidence base has not been subject to any public or, as far as we are aware, departmental scrutiny. The Secretary of State for Business, Innovation and Skills told the House during recent Business, Innovation and Skills questions that Tomlinson’s

“accusations are echoed in the report published by Sir Andrew Large, who was appointed by RBS.”—[Official Report, 5 December 2013; Vol. 571, c. 1080.]

However, the Tomlinson report states that businesses rarely survive the global restructuring group process, and that they never come out again. Tomlinson highlights the fact that

“a whistleblowing ex-RBS banker confirmed that they could not think of any occasion in which a business entered RBS’ Global Restructuring Group and came back into local management.”

The report by Sir Andrew Large showed that 50% of businesses traded out of the GRG, and that only about 10% became insolvent, so it is difficult to see how the Secretary of State could use the Large report as a justification for the publication of the Tomlinson report.

The Parliamentary Private Secretary to the Secretary of State for Business, Innovation and Skills appeared to be supportive of what the hon. Member for Aberconwy said, so I do not know whether his contribution has the Secretary of State’s implicit support. The hon. Members for Aberconwy and for Wells (Tessa Munt) certainly appeared to be working collaboratively. The allegations in the Tomlinson report are incredibly serious, and they clearly carry the stamp of Government.

If Labour had been in office when the issue came to prominence, we would not have been as quick as the Secretary of State has been to rush out this departmental report, about which there are many questions to answer. I am told that if Tomlinson had chosen to speak to RBS, he could have been referred to companies such as Samsonite, Fairline, Independent Slitters Ltd and many others, which would have told him that the GRG process was positive for them. He chose not to do so, and as a result the report represents serious concerns but does not reflect all points of view in a balanced way.

Had Labour been in office, we would have ensured that the FCA, which is the appropriate body to investigate such grave allegations, was immediately commissioned to conduct a full and proper inquiry before the trust between banks and businesses could be damaged by a sensational report such as the Tomlinson report. I do not suggest that bad practices do not exist or that we have not been pushing the banks to identify where they have failed their business customers, but we consider that the anecdotes in the report provide a pretty tenuous basis for such serious allegations to be made with the stamp of Government approval.

With that in mind, I ask the Minister to address the following questions. Was the Secretary of State aware of Mr Tomlinson’s ongoing dispute with RBS when he was commissioned to produce the report? If so, what assessment did the Secretary of State make of any potential conflict of interest before giving it the departmental stamp of approval? Why did the Secretary of State trumpet the report as independent when it was produced in his Department by someone with a close interest in both the party and the issues under discussion? Why were earlier references to malpractice at Lloyds removed from the final version of the report so that it focused purely on RBS, the bank with which Mr Tomlinson is in dispute, and why was RBS not shown the final report, nor given a chance to submit evidence to it?

The report is sadly lacking in detailed referencing and evidence. Given that the basis of the report seems to be that many of the businesses will have collapsed—presumably, that is on the public record—will the Department be publishing detailed citations for where the allegations have come from? Is the Minister personally satisfied that due diligence was carried out by his Department before it promoted the report? Does he agree that if the report’s claim that RBS was systematically involved in deliberately distressing businesses that would, without its intervention, have thrived, that would be a matter of corporate fraud on a huge scale, and such an allegation should be thoroughly investigated before being produced in a Government-backed report? Does he think that the appropriate level of scrutiny was given to the report prior to publication?

Finally, as we head towards a general election, I suspect we will hear from Ministers why they think the way in which the Secretary of State operated was not the way things would have been done under a Conservative Government. If we had a purely Conservative Government, would they have handled the report in the same way? If not, in what way would it have been different?

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[Sajid Javid]

I say again for the record—I hope that I have made it clear to the hon. Gentleman—that this is a personal report by the entrepreneur in residence at BIS. That has always been the Government’s position, and neither BIS Ministers, Treasury Ministers or any other Ministers have ever said anything different. Nevertheless, it is an important report. He will know that the entrepreneurs in residence initiative was started by this coalition Government in order to allow further analysis of what can be done to help the SME sector.

In that vein, we welcome the Tomlinson report, which is why we take its allegations seriously and why we are pleased that the FCA has acted quickly so far to consider them. This debate has shown how much parliamentary interest there is in the issue on behalf of our constituents, due to the number of small businesses in our constituencies that have come to us with similar concerns.

[Guto Bebb]

The hon. Member for Chesterfield (Toby Perkins) highlighted concerns about the fact that there was no advance consultation with RBS, but in his comments, Sir Andrew Large said that managers at RBS had very little understanding or scrutiny of the global restructuring group. In view of the fact that the report highlights concerns about the GRG, is it really a huge loss that consultation did not take place with a group of managers who did not know what was going on within the GRG, according to Sir Andrew Large?

[Sajid Javid]

My hon. Friend raises an important point. I hope that all that will be considered in the independent inquiries taking place.

I congratulate my hon. Friend once again on securing this important debate on issues about which he and many other Members feel strongly. Those issues will be seriously considered by the FCA, and further as required. It is important at this stage, though, to allow the FCA, as the conduct authority, to investigate the claims made in the Tomlinson report.