Banking (Responsibility and Reform)

James Morris Excerpts

Tuesday 7th February 2012 Commons Chamber

[James Morris (Halesowen and Rowley Regis) (Con)]

Before I was elected to this House, I spent a 15-year career in small business in IT and software, during which I experienced the ups and downs that are typical of start-up businesses. I also experienced the ups and downs of dealing with banks, including the Royal Bank of Scotland.

Entrepreneurs such as me and my colleagues felt that there was a gap between the risks that we were taking as entrepreneurs and the attitude of the banks, with their demands for personal guarantees and other security, and their occasional unwillingness to negotiate credit terms. When I have talked to small businesses in my constituency over recent months, I have heard similar stories about the attitudes of the banks. I hear about foreclosures on viable businesses, sudden unannounced changes to credit terms, and people who have worked hard to build a business being forced to face impossible choices. I welcome the action that the Government have taken to unblock credit and, as the Financial Secretary described, to improve the appeals process when companies feel that they have been badly treated by their banks.

A big gap opened between the banking culture and the entrepreneur and the small business man, and that gap has grown into a chasm. As other hon. Members have mentioned, our banking culture grew up during the boom and the banking industry became disconnected from the needs of the real economy. It became a self-reinforcing culture in which bonuses and rewards simply got out of control. We then had a spectacular bust that took many viable small businesses down with the banking industry.

This debate is important because Britain’s future depends on our building a viable, dynamic, entrepreneurial culture. Jobs growth will come only from a viable culture of small and medium-sized enterprises. Britain’s future depends on our fostering a culture of entrepreneurship, in which people are prepared to take risks to create new businesses. We need a banking sector that is designed to support that vital endeavour. We also need the banking sector to play a central role in rebalancing the British economy. It must help to create the businesses and infrastructure that we need in places such as the black country, part of which I represent. That is why I welcome the Government’s introduction of the banking levy, which will help to funnel investment into areas such as the black country.

The banks also have a wider moral duty to rebuild the British economy after the follies of the boom years. It is therefore right that we take steps to control the bonus culture in British banks and seek to reform the banking sector. That is why I welcome the Government’s acceptance of the recommendations of the Independent Commission on Banking.

However, we must not allow ourselves the indulgence of engaging in anti-business rhetoric or appearing to be anti-business. It is perfectly viable for us to be against the bonus culture that built up but also very pro-business, and it is important that we are. We need to celebrate the success of entrepreneurs, wealth creators and small businesses. As I have said, they represent the future of the British economy and create the jobs and skills that we need for the future.

As I learned in my 15 years as an entrepreneur, business is about profits and cash. However, there is also a moral dimension to business and the capitalist system. One of the proudest moments of my entrepreneurial career was receiving a commendation from Investors in People for how my business managed people. My motivation as an entrepreneur was about both profits and people. In the capitalist system, it is vital that people who take risks are rewarded, but also that they recognise the moral dimension of the capitalist system. We need banks to play a role in building a culture of what we might call “responsible capitalism”, which can promote the entrepreneurial culture that Britain desperately needs to secure its future.