Finance Ministers’ Meeting (Ireland)
Ian Davidson Excerpts(14 years ago)
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Mr Hoban
My hon. Friend is absolutely right. It is noteworthy that Opposition Members have made yet another call for us to put off making difficult decisions. We see in Ireland what will happen if we do not make difficult decisions now and sovereign debt ratings come under pressure.
Mr Ian Davidson (Glasgow South West) (Lab/Co-op)
Does the Minister agree that we should thank goodness that Scotland is part of the United Kingdom? Scottish banks were bailed out by the UK as a whole rather than being left to float loose as those in Ireland have been? Does he agree that if, when they are making cuts, the Government can find billions of pounds to bail out Ireland, they could better use that money to ameliorate the effect of the cuts in the UK?
Banking in Scotland
Ian Davidson Excerpts(14 years, 1 month ago)
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Mr Ian Davidson (Glasgow South West) (Lab/Co-op)
It is a pleasure to serve under your chairmanship, Mr Rosindell. Before the sitting, you set me the task of seeing whether I could mention Bermuda at some point in my speech. I am not sure how I shall manage that, but no doubt some opportunity will come up.
The debate is somewhat unusual in as much as it refers to a report produced in the previous Parliament that has been responded to by the Government in a new Parliament. Relatively few members of the Select Committee on Scottish Affairs have survived from the previous Parliament, but two, at least, are here. The new members wanted to make it clear that the report was not necessarily something they were involved with—just in case there was any blame to be distributed, and in case there was a Whip here who might in some way take offence at anything that might have been said. They are still at an age when they are in awe of the Government whipping process. I hope that they feel thoroughly cleared by that caveat.
I want to start by referring to the final recommendation from the Committee, which called on the successor Committee to continue to take the matter forward, and keep it under review and supervision. I am glad that we have today’s debate as the first step in doing that, and that the Committee has already agreed to seek further information from the banks. Once we have studied that, I hope that we shall go on to seek further information from several other organisations that we discussed previously, to see how matters have progressed since the report was produced.
This is a quite fast-moving situation. What we said in February drew on hearings that had taken place in December 2009 and in January. We reported in February and there was a Government report in July, and things are not necessarily the same now. Because of the importance of the banking industry to economic life in Scotland, we want to keep the matter under review. I understand that the Minister’s reputation does not put him among the worst of the Conservative Ministers—[Laughter.] I notice that he disputes that. I hope he will be prepared to work with us on an ongoing iterative relationship to keep the banks under review.
One of the generic problems, I suppose, of the Scottish Affairs Committee is that as a territorial Committee it is not our role to stray into general areas that are properly the remit of other Committees. Just as, in the work that we did on the forthcoming measures on the alternative vote and the changing of boundaries, we restricted ourselves to seeking advice and information from people on the aspects of the matter affecting Scotland alone, so, in the present case, we have sought not to duplicate the work of the Treasury Committee, but to restrict ourselves to considering those aspects that impinge on Scotland. We have looked, therefore, at the impact on Scotland in the context of the banking crisis.
I want to start by setting the report in the context of the banking crisis, a year or so ago. We would all, I think, accept that many of our economic difficulties now flow from the banking crisis. I remember Alex Salmond, as First Minister in Scotland, condemning the “spivs and speculators” who at that time were bringing down the Royal Bank of Scotland; unfortunately, he was not prepared to concede that the spivs and speculators involved were working for the bank at the time. I think that he was looking at the crisis that engulfed the Scottish banks as being of external origin, rather than having been to a great extent home-grown in those banks.
Those who brought down the Scottish banks were in them, working for them, gambling for them and mismanaging their money. We now have the responsibility of moving forward from that. The banks brought a crisis on themselves, but they brought it on the rest of us as well. The impact of the spending review next week will be very much influenced by that—indeed, more by that than by any other single factor.
It is undoubtedly a source of some shame to me as a Scot, and, I am sure, to many others of my Scottish colleagues, that a situation that developed at the Royal Bank of Scotland and the Bank of Scotland resulted in the need for a bail-out—a rescue—by the Bank of England. The Bank of England should perhaps more properly be referred to as the Bank of Britain in this context. It was of course founded by a Scot, and therefore we do not need to feel quite the same guilt that we might have felt had we been bailed out by an external body. Of course, the way in which the Bank of England, acting on behalf of the British Government, was able to ride to the defence and support of the Scottish banks in crisis, demonstrates yet again the strength of the Union and the importance of Scotland’s remaining in it.
We must draw a number of lessons from bank failures and the bad behaviour of banks. The main one that the Committee drew at the time in question was that banks and bankers cannot be trusted to do the right thing unless they are under constant supervision. Where the previous Government went wrong was in the fact that new Labour, who in my view were unduly keen to suck up to big money, accepted the consensus, prevalent at the time, that regulation was in principle a bad thing that should be minimised.
I make that criticism of the Government whom I supported, as a valuable lesson, I hope, to new members of the Committee, so that they will understand that it is possible to be a member of a Select Committee and on occasion to be critical of the Government. I hope that that lesson will be supported by the Minister. If Committees are to work properly, there must be occasions when even the mildest criticism of the party to which one belongs is allowed. I hope that I shall be allowed that latitude here today.
Light-touch regulation became the mantra. New Labour was pressed all around by the then Opposition—now the leading party in the Government—the Scottish National party, the CBI and the City; all of them called for less and lighter regulation, and new Labour went along with that. The bankers ran wild, the system collapsed and we are now in a situation where ordinary people are left to bear the burden. The main lesson that we should draw—I hope the Minister agrees—is that we need to move away from an emphasis on minimising the examination of banks’ conduct and on a lack of intervention when they behave in a way that is not conducive to the development of the economy and the relationships we would want within it.
External influence, and the way it needs to be controlled, is beyond the purview of the Scottish Affairs Committee. Therefore we imposed a self-denying ordinance that we would not make recommendations on those matters. I intend to stick with that approach today, although some of my colleagues who have more flexibility in the debate may want to comment.
Julian Smith (Skipton and Ripon) (Con)
Does the hon. Gentleman accept that the coalition Government have made some excellent steps in firming up regulation, particularly with the proposals to put the Bank of England absolutely at the centre of the new regulatory regime? I am pleased that he seems to think that a good idea.
Mr Davidson
Yes, I agree with the general thrust of those remarks by my colleague, who is a new member of the Scottish Affairs Committee. I am sure that the Whips Office will have noted that he is keen to draw attention to something that has been done by the Government and with which I generally agree.
The new Government have followed on from the changed policy of the previous Government, who moved away from being quite slack in terms of focusing on the work of the banks, to being much more rigorous and controlling. The new Government are continuing that process. I welcome that; there is no point trying to identify disagreements that do not exist. There are enough disagreements that do exist without suggesting that we disagree on everything. There is substantial agreement in this area and I hope that we can build on it.
During our investigations, we held 10 hearings over seven days and received 16 written reports, all of which were helpful. We also visited the Republic of Ireland. For the younger hon. Members, I should say that was in the days when there was a fashionable concept, of which little is heard now, called the arc of prosperity, which was very much discussed in Scotland.
The general idea of the arc of prosperity was that if Scotland became independent it would become like Ireland and Iceland. For some reason that I do not entirely understand, that is no longer raised by Scottish National party Members of Parliament as much as it used to be. [Interruption.] We have just been joined by a SNP Member. Let me tell the hon. Member for Na h-Eileanan an Iar (Mr MacNeil) that the arc of prosperity is no longer raised as much as it once was, largely because it is no longer there.
Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
Would the hon. Gentleman care to inform hon. Members about unemployment in Norway, Iceland and Ireland relative to the United Kingdom and about the gross domestic product per capita in those countries? If he cannot provide an answer, I will.
Mr MacNeil
Unemployment in Norway and Iceland is lower than in the UK and unemployment in Ireland is higher, so on unemployment the arc of prosperity beats the UK 2-1. GDP per capita in Norway, Ireland and Iceland is higher than in the UK, so on GDP the arc of prosperity beats the UK 3-0.
Mr Davidson
That is presumably why the SNP no longer mentioned it at all. Ever since Iceland’s economy became so bad that part of the island exploded, we have heard little about the arc of prosperity from the SNP.
We went across to Ireland because, like Scotland, it was—[Interruption.]
Andrew Rosindell (in the Chair)
Order. The hon. Member for Na h-Eileanan an Iar (Mr MacNeil) will have a chance to contribute to the debate later. Perhaps Mr Davidson would like to continue.
Mr Davidson
If people just mention the arc of prosperity the nationalists tend to become somewhat overexcited. I understand that and accept that it was my responsibility. I will try not to say anything else that might prove unduly provocative.
Visiting Ireland was interesting because—
Jim McGovern
I will try not to be.
Charges of €50 to visit a general practitioner, €85 per month prescription charges, 25% VAT, 50% income tax and £8 for a pint of beer, which is hard for some people to swallow, are all characteristics of small European countries regularly used as examples by the separatists who want to take Scotland out of the UK.
Mr Davidson
Indeed, all that is true. However, I am in danger of becoming diverted. Far be it from me to allow that to happen. I look forward to hearing exchanges on such matters later.
Our visit to Ireland was helpful and constructive. I want to put on the record that we were pleased that all those whom we met were prepared to be perfectly open with us and that they put everything that we asked for in front of us. That made the trip more interesting, enjoyable and educational than it might otherwise have been.
It is clear that in Ireland there was a sort of crony capitalism, where everybody not only knew each other, but lent each other money. The housing prices in particular rocketed upwards to such an extent that when the crash came the central bank was not able to bail out those who found themselves in difficulty in quite the same way that we in the UK were able to. Scotland had the great advantage of being part of the Union and therefore the Bank of England was able to bail out the Bank of Scotland and the Royal Bank of Scotland.
Mr MacNeil
Did the hon. Gentleman meet many people in Ireland who wanted to return to being part of the UK or did they feel that being a low-growth area of the UK would mean not being as successful as being an independent country?
Mr Davidson
It is unrealistic to expect that many in Ireland would want to return to being part of the UK, because people there felt that they wanted independence for Ireland even if it impoverished them. Many people we met recognised that, in many ways, they were becoming more of a colony of the UK now than they had been, because high streets in Ireland were run by Tesco and WH Smith, for example.
A relatively small number of Irish businesses seemed to have a presence and they no longer had influence on the UK. People there were unhappy that they no longer had control over their own currency, because, like the SNP, they wanted to—and did—join the euro, which meant that they were unable to devalue competitively in a way that might have produced a boost for their economy. There was much weeping, wailing and gnashing of teeth, as perhaps the Irish are prone to do, about that issue.
There is no doubt that the difficulties faced by the Irish Government and people were exacerbated by Ireland’s being a stand-alone economy without control over its own currency. The Irish Government have been making huge cuts in public services—cuts in wages, pensions and services—all of which were going through when we visited. Some of those might come about now, but seeing all that was helpful and constructive.
Julian Smith
The hon. Gentleman seems to be talking about the past. One conclusion of this report is that there is confidence in respect of financial services in Scotland, despite what happened. I believe that this debate and discussions on this topic should focus on how we can use the financial services sector, which has had huge success in Scotland, to create more jobs and private sector investment in this sector from overseas and from Scotland. I am sure that the hon. Gentleman will come on to that later.
Mr Davidson
I am sure that I will. However, the debate is not about the future economic development of Scotland; it is about the Committee’s report, which we produced some time ago. My role as Chair is to discuss what we covered at that time and ensure that it is all seen in context.
Mr MacNeil
Given that the hon. Gentleman apparently did not meet anybody who wanted to rejoin the UK, does he feel that Ireland should rejoin the UK?
Mr Davidson
It is a matter for the Irish people, not for us. In the same way, it is for Scottish and Welsh people to decide whether they wish to remain in the UK—and it would be for the people of the Falklands to decide whether they wanted to join the UK and for the people of Gibraltar to decide whether they wanted to join Spain. All these things are matters for the people involved.
Mr Davidson
It is up to them. That is my opinion. Argyll, I believe, should remain part of Scotland.
Mr Davidson
I thank the hon. Gentleman for giving me the opportunity to mention that. Whether Bermuda should join the UK or cease to be an overseas territory is a matter for the people of Bermuda.
Andrew Rosindell (in the Chair)
Order. I think a debate on the overseas territories would be very useful, but this is not such a debate. Perhaps we can get back to the subject.
Mr Davidson
Indeed, Mr Rosindell, I was led astray by bad boys.
I was asked about conclusion 3. The Committee stated in its report:
“We welcome the optimism of those working in the financial services sector who believe that the reputation of that sector in Scotland has not been permanently damaged by the difficulties experienced by two of Scotland’s, and the UK’s, largest banks. We are reassured that the quality of the location, the lower costs and the depth and diversity of its labour pool remain attractive to global corporations.”
That is particularly welcome in view of one of the Committee’s anxieties. We asked everyone we saw whether they believed at that time—the hearings took place in December 2009 and January 2010—that the financial crisis that had arisen from the activities of those working for the Bank of Scotland and the Royal Bank of Scotland would have a long-term impact on the finance industry in Scotland. It was reassuring and supportive of what we were seeking to do to have a clear view from virtually everyone we spoke to that there was no doubt about that. A few people had some doubts, but we subsequently spoke to some of them informally and were reassured that they believed that the waters had calmed and that the Scottish finance industry, although shaken, had not been brought tumbling to the ground. I am glad to see the Government’s response to that conclusion, which is:
“The Government will continue to work with the Scottish Government to ensure that the financial services and banking sectors remain strong in the future.”
I hope that they are also prepared to continue working with the Scottish Affairs Committee, as well, to ensure that, as we monitor, we try to pull things together as far as possible.
Jim McGovern
Unfortunately, I must leave shortly, but I wonder whether my hon. Friend and other hon. Members have had the same experience as I have had. I was elected in 2005, and hold a surgery every week. Generally, the people coming to my surgeries had problems with tax, pensions, immigration, visas and so on, but in the past year or so, more and more members of the local business community have come to my surgeries complaining about how they are treated by the banks. Is that a common experience?
Mr Davidson
I have certainly had more people coming to my surgeries to talk about how they are being treated by the banks. I am also aware from money advice centres, Citizens Advice and other advice centres in my area that since the banking crisis the number of people complaining about how the banks have dealt with them has risen considerably. One is never entirely sure whether that is because the issues have been given more publicity—what we hear in our surgeries is not necessarily an objective assessment—but it is noticeable that the numbers have risen substantially, and I understand that that is a common experience.
Julian Smith
Does the hon. Gentleman agree that it is worth making a distinction between the bash-a-banker rhetoric, which probably many of us hear in relation to the problems that our constituents are having, and the success that Scotland has had in attracting back-office roles? Those roles have nothing to do with investment banking or lending, but are based on traditional Scottish accounting talents. Thousands of jobs have been attracted from a wide range of international companies to Scotland—to Edinburgh, Dundee and Stirling—and we must pay tribute for that. We must continue to try to attract such jobs to ensure that financial services play a role in making the private sector stronger in Scotland and lessening public sector predominance.
Mr Davidson
I am sure that those points have been noted by all concerned, including the Minister and the relevant Whip. I want to deal with the report, however, and while such matters are fascinating, the report does not deal with them. I look forward to hearing the hon. Gentleman’s contribution to the debate, which will no doubt cover anything that anyone misses out.
Let me make it clear that the Committee believes that it is of key importance to continue the supervision of banks in Scotland, because the banks’ behaviour and their success will be essential to the growth and development of the Scottish economy. We cannot build up a small or large business sector without having banks in Scotland that are able and willing to lend, understand their markets, and behave constructively and positively. I hope that that covers the point that the hon. Gentleman was making.
We wanted to identify the extent to which lending in Scotland had declined during the economic crisis. Our report contains a series of figures and statements indicating that there was a period when lending was far too loose—the banks had been intent on shovelling money out of the door, almost irrespective of whether the business propositions were viable. We were critical of the way in which bankers often seemed to be incentivised to make loans without due regard to their viability, whether they were for property or to businesses or individuals. The report states that the pendulum then swung too far in the other direction. For a period, banks were unduly restrictive. They were prepared to lend on almost nothing and found excuses to raise charges and interest rates to make it as difficult as possible for money to go out. We have now seen a swing back and there is a degree of equilibrium, but subsequent discussions that the Committee has had have not convinced me that the banks have got it right yet.
Recently, the Committee met representatives from the computer gaming industry in Dundee, the construction and road haulage industries in Edinburgh, and the local chamber of commerce in Dundee. In every case, the story we heard was the same—the banks do not understand us. No one in the construction, road haulage or computer games industries spoke up for the banks collectively. That was interesting, and not a little worrying. Everyone who expressed a view on such matters said that they did not believe that the banks had taken adequate account of the prevailing situation, and did not have a feel for their industry at the moment. They needed loans, floating capital and so on, but the banks were not willing to play along, except at exorbitant rates.
The banks have said that they are making more money available and that part of the difficulty is that lending is going down because companies are choosing to repay debt instead of taking out new debt; but it seems to me that, to some extent, the rates that the banks charge and the conditions that they seek to apply are still inhibiting meaningful lending. The Government and the Committee should give ongoing consideration to that. We have had some responses and updates from the banks involved that seem to paint a picture that is rosier than recently, but we are still receiving feedback from those who want to borrow that the banks are not being as helpful and constructive as they might be. I hope that the Minister and the Committee will be able to work together with the Scottish Parliament to ensure that we develop a mutually advantageous liaison and relationship.
Ian Murray (Edinburgh South) (Lab)
Will my hon. Friend comment on the experience that I have witnessed and have been told about since the report was published? A major lending bank in Edinburgh told me that it has more money than it has ever had to lend, but that people are not coming forward to borrow it. I suspect that that might be due to the expectation of those who would like to borrow that they are being priced out of the market, or would not be granted loans.
Another major mismatch in the banking sector is between front-line staff, who have a relationship with industries, and the underwriters in the background. There is anecdotal evidence to suggest that when people seek to borrow money, the front-line staff with whom they have a relationship believe that the criteria have been met, but the underwriters subsequently use different criteria. Has the Committee come across those issues since the report was published?
Mr Davidson
The first is certainly true. We have been told that money is available but is not being taken up, and money is being paid back faster than it is going out. We have not adequately explored the point at which decisions are made, not made, or knocked between front office and back office, and my hon. Friend gives us a valuable pointer. Having met representatives from three industries that are significant and important to the welfare of the Scottish economy, and having heard the same story from them all, it seems that something is still not right in the relationship between banking and its customers in Scotland.
When we met the CBI representatives, we did not quiz them as directly as we might have done because it was an informal meeting, but the same sort of message was coming back. I know from meeting various development groups in my local area, including construction companies, that people are concerned about the lack of co-operation that they receive from the banks. That is one area of the report where further work is required, and I hope that the Minister will be suitably co-operative on that.
I will now look at how banks deal with individual customers. We all deal with the public and we are aware from our activities and surgeries that there is a fair number of rascals, chancers, villains and incompetents in most constituencies, except my own. The banks are not necessarily dealing with paragons of virtue on every occasion and there are people who borrow irresponsibly. However, the volume of complaints present at the time of our report seemed far greater than could reasonably be expected. The stories that we have heard since from Citizens Advice, and the experiences in my surgery and those mentioned by my hon. Friend the Member for Dundee West (Jim McGovern), suggest that the banks continue to be less than completely understanding and helpful when dealing with customers in financial difficulty.
A number of examples of bad practice are quoted in the report, and it is perhaps appropriate to mention them so that they are on the record. In its evidence to us, Citizens Advice highlighted:
“Unfair overdraft charges; banks being more aggressive in their behaviour towards debtors; banks encouraging debtors to take out more products as part of their repayment; banks demanding higher repayments from clients in order to repay debt quicker;.”
Banks are also using the “right of set off” to transfer cash around people’s accounts. None of those are examples of particularly good practice. Many of us were worried by the way that banks were utilising call centres to a far greater extent than we believed was justifiable. In many cases, call centres were ringing up customers several times a day, and they often seemed to be in complete ignorance of arrangements that had been made with another section of the bank. Those call centres were often based abroad and perhaps there were difficulties in communication. The people who rang up and talked to the customer seemed to have no flexibility or power to negotiate or discuss matters, but simply reiterated that they wanted money back. Hon. Members will understand how stressful that was to people who, in many cases, were already highly stressed because of their financial position.
To some extent, the assurances that we had from the banks reminded me of Bart Simpson, who, when he was accused of anything, would say, “It wasn’t me, nobody saw me and you can’t prove it.” The banks tended to say, “We never did that, it wasn’t as bad as you say and we don’t do it now.” Clearly, the banks are now at some pains to distance themselves from some practices that have been going on, but I do not think that they have abandoned them entirely. We have been told that banks now show greater forbearance before taking people through the repossession process, and feedback I have received suggests that that is true. The Government are probably in a better position to clarify the figures. That is certainly a matter that we want to pursue.
We continue to receive feedback from Citizens Advice and other organisations suggesting that cases continue where one arm of a bank strikes a deal with a customer who is in financial difficulties, but another section continues to pursue the customer, irrespective of the deal done; and irrespective of the bank having been notified that somebody wants to use Citizens Advice or another intermediary as a representative, it continues to pursue the customer directly in order to harass them into making additional payments. There must be a degree of responsibility on the part of the banks. We understand that the banks need to try to recover their money, and, particularly when many of them are state-owned and state-financed to a great extent, we do not want to put them in a position where people can escape their obligations, but a balance must be struck. Paragraph 113 of the report states:
“We conclude that banks continue to use aggressive tactics towards customers who have fallen into debt.”,
We should all be concerned about that. We have been told by a number of bank staff that some of the processes and procedures that I have described continue. That is concerning.
Mary Macleod (Brentford and Isleworth) (Con)
Let me state for the record that the Royal Bank of Scotland used to be a client of mine.
I suggest to the hon. Gentleman that if customers and constituents are having problems with lending or other general banking issues, they should be encouraged to bring their problems to us as Members of Parliament, so that we can raise concerns directly with the banks. We could give the banks specific examples of where their processes and procedures are going wrong, so that they can deal with them directly.
Mr Davidson
The hon. Lady is in a good position if she can say that the Royal Bank of Scotland was a client of hers. I used to be a client of the Royal Bank of Scotland. Not many of us have it the other way round. She is right—people should feel able to come to their MPs and ask them to raise issues on their behalf, but I fear that in some locations, the Members involved would run the risk of being swamped.
In my early days as an MP I was involved in establishing a money advice centre and a citizens advice bureau, simply because my office could not cope with the volume of complaints it received. We do not necessarily need to meet those involved in such cases directly in order to get information about them. I regularly get information from advice and information centres, which aggregate. There is always a problem for individual MPs when dealing with casework in this and a number of other areas, because one is never certain of the extent to which the problem presented is typical and shared by a lot of people, or whether it is due to a persistent constituent who wants to pursue the matter as far as their MP. Although I accept that it would be immensely helpful if MPs had more information, seeing people individually is not the sole way of getting it. However, I congratulate the hon. Lady on having had the Royal Bank of Scotland as a client. I hope that she treated it better than some of its clients have been treated by that bank.
I have spoken enough about Citizens Advice; in the accompanying papers, people can read an update from that organisation which indicates that not everything is flowing as well as it might. I conclude on this aspect by pointing out that there are always two elements to a relationship between a group such as Citizens Advice and an organisation such as a bank. First, it is important that the banks are willing to listen, and I think that they are getting better at that. However, they are not necessarily better at the second element, which is acting on what they have heard. Citizens Advice tells us that it has greater access to the banks, and the banks tell us that they have more meetings, but it is not entirely clear that the banks act on the information they receive in the way that we would want.
I want to make two other points. The first relates to the work force. It is important to stress that the vast majority of people working for the banks are not on megabucks—they are not enormously well paid or taking huge risks with other people’s money. The Committee had figures indicating that bank employees’ average pay was about £28,000 at Lloyds bank and £30,500 at the Royal Bank of Scotland, with the UK average being about £25,000. It would therefore be unfair and unreasonable to say that everyone working for a bank should be the subject of the same opprobrium and be held responsible for the activities of those at the very top. We want to make sure that bank employees at the lower levels are not held responsible or accountable and do not suffer the pain as a result of lay-offs and the like. We welcome the fact that the dialogue between the banks and the trade unions on a number of these issues has improved recently. As we take this matter forward, however, we will want to hear from the trade unions about what happens subsequently.
I also want to touch on the question of bonuses, which is related to the issue of staff but not properly part of the Committee’s remit, so I will allude to it only in passing. It was clear from the evidence that we took that the offence caused to many of those affected by the economic crisis by the paying of enormous bank bonuses was disproportionate. The issue was very high up the list of people’s priorities, even though people were not necessarily affected by it and notwithstanding the fact that those bonuses might not come to a lot if they were spread across all the bank’s clients. People simply saw the bonuses as immensely offensive and unfair, and the Committee’s view when the report was drawn up was that if we are all in this together, the Government—whichever Government—should be involved in ensuring that bonuses are curbed as much as possible. I very much welcome the fact that the previous Government dealt with that by introducing a levy and that the present Government have indicated that they intend to do something similar. We look forward to seeing the details.
As I said at the beginning, I hope that the report and this debate are not the end of the process. Given the significance of the banks to economic life in Scotland, I hope that the Committee will continue to keep these matters under review and that the Government will continue to work with the Scottish Government and others to ensure that there is an appropriate and constructive regulatory environment. So much economic development in Scotland depends on our getting our banking right. I hope that Committee members who are here today will be able to add to the points that I have made. I also hope that the Government will endorse the report and its conclusions, as they have already, and agree that most of the conclusions should be taken forward actively.
Mr Davidson
I express my gratitude to all those who have contributed, not only to the debate, but to the report. That includes our witnesses and those who provided written evidence. Some of the contributions have been excellent. I hope that the Government Whips have taken note of the expressions of undying loyalty that were made by some of the newer Members. Nevertheless, I am sure that they will develop out of that in due course. I also thank the staff of the Scottish Affairs Committee for all their work in preparing for the debate and the report.
When I was much younger, there used to be various cartoon characters who could rub a brass lamp and say, “Abracadabra”, so that a genie appeared. Earlier, I mentioned the arc of prosperity and a nationalist appeared. In some mysterious way, he disappeared thereafter. I have mentioned the arc of prosperity again, so I am waiting to see whether he will pop in again.
The wider matters to which the Minister referred—I understand entirely why he did so—are more the responsibility of the Treasury Committee than of our Committee. We have tended—rightly, I believe—to restrict ourselves to those aspects that impact on Scotland. However, I was heartened by what he said about encouraging the mutual sector. Several of my colleagues, particularly my hon. Friend the Member for Kilmarnock and Loudoun (Cathy Jamieson), will be looking at ways in which we can have a discussion about the mutual sector in Scotland. I hope that in due course we will have some dialogue with the Minister on that. As we have done elsewhere, we hope to have some informal sessions with witnesses before moving to formal hearings and visits, which will be helpful.
We are likely to support some of the changes that the Minister outlined that seem to be moving in the right direction, but there are areas on which we would like ongoing dialogue and input from his staff when we prepare documents. It is not immediately clear, for example, how overdraft charges will be handled. It seems to me that there is a need for ongoing discussion on how those proposals will be implemented and what their impact will be.
I welcome the fact, which the report made clear, that Scotland remains a good place to do financial services business. The question now is how the Committee adds value to that whole exercise. In our discussions, we have identified several areas where the system seems to be breaking down. [Interruption.] I thought that that was a nationalist returning, having mentioned the arc of prosperity, but it is not.
The construction, road haulage and video games industries—the three industrial groups that we met—all said that the banks did not understand them properly. We ought to turn our attention to various steps that we can take to improve those relationships.
Fiona O'Donnell (East Lothian) (Lab)
Perhaps I could provide more recent information than the Minister did. The Bank of England’s Agents’ summary of business conditions in September reported:
“Smaller businesses, and those operating in the construction and property sectors, continued to report difficulty in accessing affordable finance. For these businesses, fees and spreads remained significantly higher than pre-crisis levels”.
Does my hon. Friend agree that there is further work to be done in those areas?
Mr Davidson
That is a helpful contribution—there clearly is further work to be done in those areas—which runs along the lines of not only our report but, to be fair, the Minister’s contribution. The Government recognise that more work needs to be done.
We need to continue to focus on the two elements of lending—mortgage lending and lending to businesses—and also on how the banking industry deals with its customers. The Minister has advanced general principles and rules, but the question is whether they will be implemented in practice, and we will want to follow through on that.
The interventions by the Government in several areas are very much to be welcomed, and I have no hesitation in welcoming something that is said by the Government. New Members will no doubt recognise that no thunderbolt has arrived and, therefore, that it is entirely possible for people from one party to recognise that something done by a different party is good. I hope that the new Members who are here will undertake to pass that on to colleagues who have left the Chamber.
In conclusion, this has been an excellent exercise. We have heard witnesses, drawn up the report, held this debate today and come to a general consensus on the importance of the banking industry to Scotland and the need to go forward working together to improve the economy of Scotland. I hope that we continue to work together for the next couple of years or so.
Question put and agreed to.
Draft EU Budget 2011
Ian Davidson Excerpts(14 years, 1 month ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Ian Davidson (Glasgow South West) (Lab/Co-op)
I rise to support a reduction in the EU budget. As some Members may be aware, I have advocated that any such cut would more than meet the costs of providing a second aircraft carrier for the Royal Navy.
Who would have thought that less than six months after the election we would be having a debate where a Conservative-led Government would be denounced by many of their Back Benchers for being soft on Europe? I was surprised to hear my right hon. Friend the Member for Rotherham (Mr MacShane) say—I think that he is correct—that, as far as he can tell, there has been almost complete continuity of policy from the previous Government to this Government in terms of their relationship with the EU. I have noticed that many commentators are similarly remarking that there seems to have been very little change in policy towards the EU. I hope that that is simply a question of settling in, and that when the Government find their feet they will be much more prepared to stand up for British interests.
There is another possibility. Yesterday, we heard that the alternative vote referendum was being brought forward simply as a concession to the Liberal Democrats—the Liberal tail wagging the Conservative dog. I hope that the Government’s softness on the European Union is not another case of the Liberals having received undue concessions from the Conservatives. I point out to Conservative Members that it is not possible to buy Liberal Democrats—they can only be rented for short periods, and one can never rely on their remaining rented. If the Conservatives are counting on the Liberal Democrats to support them all the way, they are likely to be sadly mistaken.
Unless I am very much mistaken, it is noticeable that there are no Liberal Democrats here at the moment, unless Members who are sitting on the second Bench back have joined them.
Mr Davidson
Are they all in it together? Yet again, I suspect that the Liberals are leaving the Conservatives to do the dirty work for them and put the budget through. I imagine that if the Conservatives carry on their course of action and we have an AV voting system next time around, the UK Independence party will do far better in the first ballot than it might have done in the past. I find it a great cause for regret that the Conservatives seem to have gone soft on Europe in such a short period.
Mr Davidson
That is a very fair point. Not many times were the Benches behind a Minister full of Members denouncing the Government for being too soft on Europe. There were a number of us doing so, but not nearly as many as there are tonight. I am grateful to the hon. Gentleman for making that point.
Some of my colleagues who spoke earlier touched on the iniquities of the EU budget. As someone who was a member of the Public Accounts Committee for a number of years, I am in complete sympathy with everything that has been said about how the auditors have qualified the accounts. The whole matter is a complete and utter disgrace. The audited accounts only tell part of the story, of course, because they do not cover the fact that EU income and the income of individual countries is enormously depressed by the extent of fraud, underpayment, under-collection of VAT and so on, which is reflected in the EU budget. [Interruption.] Can I have a lack of heckling from my hon. Friends in front of me, who support most of my arguments?
The EU budget is about not only the net and gross amounts of money flowing back and forward, but how that money is spent. Were it given by the EU to the British Government to spend, we would not be spending it in the way that we are. We have created a dependency culture among farmers. I know a number of farmers—admittedly not many of them are in my constituency—who concede that what they mostly farm now are subsidies. The whole pattern of their growing and activity is determined by the subsidies that are available from the EU, irrespective of the agricultural, financial or economic rationale. That is not rational or right, and such decisions ought to be repatriated to this country as quickly as possibly.
The hon. Member for Hertsmere (Mr Clappison) asked what the actions of Labour MEPs were likely to be, but I think that there is little doubt. We should remember that virtually all Labour MEPs were selected under the new Labour system of allowing only those in favour of ever-closer union to progress. I can remember when a number of Scotland Labour MEPs were Eurosceptic, but when the new system of proportional representation was introduced, Labour put them all out. Ever since, only those in favour of ever-closer union have come forward. I would be astonished if any Labour MEP does anything against those interests and the interests of the greater growth and development of the EU.
Mr Desmond Swayne (New Forest West) (Con)
I acknowledge the hon. Gentleman’s honourable record on this matter, but will he acknowledge that the description that he just gave admirably suits the Quisling-in-chief now occupying the position of Opposition Front-Bench spokesman, who always urged the previous Labour Government on from the Back Benches?
Mr Davidson
Now that the hon. Gentleman has withdrawn his remark, I shall not respond to it.
The point about the External Action Service has already been made, but I was astonished at the time of its creation that so many otherwise sensible people believed that it would result in no net growth in expenditure. Of course it was going to, and it was always intended that it would do so. It is interesting that those who wish to be deceived are deceived, including by promises from the European Union to moderate or reduce expenditure. That is simply a fig leaf. Those who accept such promises choose to do so, and then pretend to be astonished when it turns out that the situation is different. The idea that the Lisbon treaty is not the constitution is simply laughable, and only those who wish to be deceived by that twisting of words are so deceived.
Mr Cash
Does the hon. Gentleman agree that the root of the problem is not only the EU budget, but EU functions, which were greatly increased by the Lisbon treaty? The ESC agreed this afternoon that we will examine fully the question of parliamentary sovereignty as against European functions. Does he also agree that a precondition of reducing EU functions is asserting UK sovereignty, and requiring the judiciary to give effect to Westminster legislation and to override European legislation as and when necessary?
Mr Davidson
I accept that. It is enormously helpful that the ESC, of which the hon. Gentleman is Chair, will pursue that course of action. I only hope that the Committee does not take too long.
Mr Davidson
That is very welcome indeed. Pursuing that sooner rather than later is welcome.
The point about the External Action Service is not only that it costs more money, but that it is invidious. The desire of the EU is that it should be a state and that the EAS should be an embassy. I note that the EU has just taken over enormous premises in central London. Those will be nothing other than a centre for pro-EU propaganda and an attempt to intervene directly in British politics and British political affairs in a way that we would not tolerate from any country—I almost said “any other country.” We would not allow the Austrians, the Australians, the Canadians or anybody else to have a propaganda outfit in this country that spent enormous amounts to intervene directly in British politics, yet we are prepared to allow the EU to do so. In my view, its wings ought to be clipped.
The hon. Member for Daventry (Chris Heaton-Harris), who I believe has left the Chamber, commented on the extent to which we reflect our constituents’ anxiety about EU spending. I think that he was wrong, because we do not accurately reflect those. The balance of this debate is clearly in favour of constraints on EU spending, and that reflects the balance of opinion among the public, but I fear that the vote will not reflect that because vast numbers of Conservative MPs will be driven like sheep into the Lobby to support the Government and oppose any proposal to restrict the expenditure of the EU.
I hope that we will be able to return to the discussion of a referendum. It is correct for Conservative Members to point to the Labour Government’s failure to honour their commitment to a referendum on the constitution, but I point to the Conservatives’ failure to do the same. Given that next year Europe intends to re-examine its budget and the common agricultural policy, we should start by saying that that major revision should be put to the British people in a referendum, to determine whether they are prepared to accept the new financial arrangement, which will represent—I hope—a considerable break with what has happened in the past. Of course, it may not break with the past, but it would strengthen the Government’s hand enormously if we made it clear that they were prepared to take any new financial settlement with Europe, achieved after a long period of debate, to the country for resolution.
In the meantime, I support the proposals that urge a reduction in the EU’s expenditure, and I hope that we will not discover that a majority of Conservative Members oppose those proposals.