Financial Conduct Authority Redress Scheme

Debate between Guto Bebb and Russell Brown

Thursday 4th December 2014 Commons Chamber

[Mr Brown]

We all believe in the role that banks have in our day-to-day lives, whether as individuals, households or businesses. We need to think there is an element of trust. What we have discovered, however, is that there has been far too much mistrust. In addition, some senior people had no idea what their banks were doing. They allowed their managers to carry on selling products, while having no idea of their complexity. One person who worked for Barclays and sold some of these products came to meet me. He was in the Penrith area and decided to come and speak to me about my constituent. He told me that on being introduced to the products, which he was about to sell to customers, he asked his seniors, “What if this or that question is asked?” He was told just to move on, because there were no answers.

The long and short of this tale is that the banks eventually moved in with a team of administrators. I approached the administrators to tell them that I thought what was going on was wrong and that if my constituent went to court he would win his case. The administrators made out that they had to carry on with the business they had been pulled in to conduct, and they went ahead with it. My constituent owed the bank £1.2 million, of which £900,000 was bank charges—an absolute disgrace. As I said to the hon. Member for Hexham (Guy Opperman), my constituent went to court and he won the case. But that matters for nothing. Gone is more than 20 years of a family working together to build a business that was going reasonably well but went badly wrong when they were encouraged to take out products that they did not really understand, and which those selling the products did not really understand either.

I want briefly to mention another, more recent, case relating to another constituent in the far west of my constituency, down in Stranraer. This is a really tragic case. People and businesses do not just have problems with the banks. There are other issues lying in hiding too and some relate to Her Majesty’s Revenue and Customs. This gentleman told me:

“For the last 6 years I have been a victim of the mis-selling of an IRHP SWAP Termed Business Loan.”

The last three years, in particular, had been very difficult. He had been fighting off the bank that had been battling with him because it would not accept that it had mis-sold him a product. I could tell from the number of occasions I met him over the last three years that this was really getting him down. It got to the stage where he had to sell off his mother’s family home of some 44 years. He had remortgaged his own home, incurred legal costs of over £8,000 and had put the family business of over 54 years standing in real jeopardy.

My constituent was eventually on the receiving end of a phone call from the bank to say that it was about to make him an offer within a two-month period, which it has now done. However, that offer of some £76,000 goes nowhere near to meeting the cost to him as a family man who had done nothing else but work morning, noon and night for such a sustained period of time that he missed his family growing up. The offer put him under real pressure. On the second last occasion he came to see me, he was seeking advice but knew in himself that he was being forced to “take it or leave it”, as I mentioned before. The advice from the bank was that this was a “full and final” offer, with no recourse to consequential losses.

Had my constituent not got involved in this loan, he would have been building up his business, but it actually suffered. He wanted to develop the business and the properties he had available for rent. All that was put on hold, however, because he was struggling to meet the bank’s regular demands. My constituent has had to go to Revenue and Customs to strike a deal, agreeing that he would pay the bulk of the VAT he owed and that between now and the end of February everything would be cleared.

[Guto Bebb]

I hope I am not being greedy in intervening, but I think it should be placed on record that the “time to pay” arrangements of HMRC have been very positive on this issue, but the consequences of the redress scheme are not as positive as expected. The “time to pay” agreements have been taken away in many cases, so there is a need for the continued support of the banks while we try to resolve the situation.

[Mr Brown]

The hon. Gentleman is absolutely right. HMRC needs to be a little more patient with our constituents and with all of us here who are trying to do what is right in standing by our constituents and making the case for them. They have come through a traumatic time and they are not out of the woods yet, so they continue to need our help. That is why I wrote to HMRC on behalf of my constituent—to offer support, saying that I was quite confident and absolutely convinced that the issue would be resolved if it would just be patient.

In conclusion, we need an appeal mechanism. Further consideration needs to be given to bringing those who were sold embedded swaps who seem to have been excluded, at least up until now, back into the system. If there is any means of acquiring someone or a small organisation that is independent of what is going on with the FCA in response to this issue, I would like to see it happen. It is right for people to get their just deserts; that is what justice means.

Fairness and Inequality

Debate between Guto Bebb and Russell Brown

Tuesday 11th February 2014 Commons Chamber

[Guto Bebb]

I will try to make a bit of progress.

The key point to remember is that those who now claim that the economic recovery has been too slow in coming are the exact same people who claimed that unemployment would increase dramatically because of the decisions taken in 2010. They are often the same voices who argued that there could be no growth without public spending, yet in Wales and in the whole of the UK we are seeing a vast increase in private sector employment. We have 1.5 million new private sector jobs, a ratio of almost 4:1 in comparison with the loss of jobs in the public sector. Wales is not an exception. Time and again when this is debated in the Welsh media, we hear people saying that the economic recovery is happening in London and the south-east. That is simply not reflected in the facts. In Wales, unemployment is falling and employment rates are increasing.

Anyone who is genuine about the opportunities necessary to reduce inequality would welcome the jobs that are being created. What we often hear from the parties on the Opposition Benches, however, is a complaint about the type of jobs being created: that they are not proper jobs and not the type of jobs we should be proud of. That is such a demeaning comment to make to people going out of their way to try to earn their living. I wonder how someone working in a Tesco or an Asda in my constituency feels when they hear a member of the Labour party demeaning a job as nothing more than shelf stacking. Such comments from a party that claims to represent labour are utterly disgraceful. I have made this point to the House previously and I will make it again.

One of the most moving things I have done as an MP was to visit a Tesco partnership store in Toxteth, in Liverpool. I can tell Members that a visit from a Conservative MP from north Wales is not something that happens very often at any store in Liverpool. The Tesco store in Toxteth was the largest inward investment into Toxteth since the riots in 1982. It was Tesco that undertook that investment. Half the staff employed at that store had been unemployed long term—for more than 18 months. The retention rate was more than 94% and the pride they showed in the fact that they were now working for a living was moving—there is no other way of describing it. I met one lady who ran the bakery section and asked whether she would ever want to move on. Her response was, “I’d have to be taken out of here in a box. It has given me my life back.”

[Mr Russell Brown]

I apologise to the hon. Gentleman—perhaps I am not in the Chamber as often as I should be—but I have yet to hear any of my colleagues condemn anyone in the retail sector. Those are valued jobs and, as the hon. Gentleman, I and many other colleagues know, working in retail is about much more than serving customers and stacking shelves.

[Guto Bebb]

I welcome that intervention from the hon. Gentleman, who clearly understands the importance of the retail sector. I was talking about comments made on radio and television by members of the Labour party. When I hear those comments I get annoyed as they refuse to acknowledge the fact that the sector provides the individuals in Tesco in Toxteth, or in various businesses in my constituency, with the opportunity to start a career, learn a skill and move on—and I would argue that people need a job to be able to move on to another job. It makes such a difference and those opportunities should not be dismissed by those who earn far too much to appreciate how important it is to earn a living, perhaps for the first time, and, in some cases, to be the first member of a family for a generation to take a job.

We need to be aware of the fact that the success we are seeing across the UK is being replicated in Wales. In a Welsh economy with relatively low levels of pay, it is even more important that we reduce the tax burden on those individuals. I have heard Opposition Members complain that although it is all very well to reduce people’s tax bills, by increasing the personal allowance tax credits have been reduced. That is not about what is right for the individuals; it represents the significant difference between the Government and Opposition. Government Members want to allow people to keep as much of their earnings as possible, because if a person goes out there and works we should tax them as little as possible. The Opposition were quite happy to tax people earning as little as £6,000 a year and recycle the money through an expensive, well-paid bureaucracy before paying it back to buy a client state. That was the dishonesty of the tax credit policy.

Tomlinson Report

Debate between Guto Bebb and Russell Brown

Tuesday 17th December 2013 Westminster Hall

[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.