Financial Services (Banking Reform) Bill

Debate between Jim McGovern and Andrea Leadsom

Monday 11th March 2013 Commons Chamber

[Andrea Leadsom (South Northamptonshire) (Con)]

I am delighted to speak almost last in this debate.

I agree with the hon. Member for Hayes and Harlington (John McDonnell) when he says that many people have suffered terribly as a result of the financial crisis, and when he speaks of the greed and the complete lack of regulation and control over banking over the past decade.

The British people are still furious about the behaviour of bankers, and they have every right to feel that way. Banks were already seen as greedy and arrogant. They have now reached the depths of humiliation in the wake of the LIBOR manipulation, PPI mis-selling and bank swaps mis-selling. Individual bankers are rightly being investigated by the police. I and all colleagues in the Chamber hope that if criminality is proven, they will go to jail and bear the same brunt of punishment as any other criminal.

Nevertheless, we must recognise the vital importance of the financial services sector to the UK economy. It is a huge employer. If all financial services are included, more than 1 million people have jobs in the sector. The vast majority of those people do an honest day’s work for a fairly modest salary and do not receive a large bonus.

We must also remember that we are talking about a globally mobile business. In the investment banking business, someone can pick up the phone in London on a Friday morning, put it down on Friday night and carry on doing the same deal on a Monday morning in Singapore. While reforming the industry to make it safer for people in this country, we must be careful to preserve it so that we can take advantage of the enormous opportunities that it provides, such as the sale of mortgages and health and life insurance policies in developing markets such as China, Brazil and South Korea that do not have developed, simple, basic banking packages. We can make profits for Britain at the same time as helping those developing economies. It is important that we remember to protect this industry at the same time as reforming it.

The Bill offers the opportunity to put right many of the wrongs of the previous Government’s approach to financial services in the UK. It will help to bring back to UK banking what used to be called the balance of fear and greed. For many years, there has been enormous greed with no fear of consequences. We have allowed a small group of vast institutions to grow by consolidations, mergers and takeovers. The culture has been one of, “Heads, I win; tails, the taxpayer loses.” That has proven to be true.

The Bill will address Labour’s failed tripartite system of regulation. It will put accountability for the supervision of the banks and for systemic risk back into the hands of the Bank of England. In 1995 when Barings went bust, before Labour had had the chance to mess up the regulatory system, I was a small cog in the wheel trying to prevent a run on the banks. I remember supporting the then Governor, Eddie George, to ring the various international banks to ensure that there was not a run on the banks on Monday morning. Why did he do that over that fateful weekend? It was because he knew that the buck stopped with him and that it was entirely down to him to ensure that there was not a run on the banks. How different it was under Labour’s tripartite system. When people were queuing down the streets to take their money out of Northern Rock, the Treasury was looking at the Bank of England, which was looking at the FSA, and nobody took any action. That was utterly shameful, and the Bill will ensure that it cannot happen again.

[Jim McGovern (Dundee West) (Lab)]

The hon. Lady said that she was a small cog in the wheel and that Sir Eddie George was the big wheel. Does she think that that was working at that time?

[Andrea Leadsom]

I always think that the proof of the pudding is in the eating, and the fact is that Barings was culpable for a potential massive run on the banks, because of rogue trading. It did not happen, and why? It was because one individual took responsibility, surrounded himself with people who could prevent it and ensured that it did not happen. We do not need to look any further to see that it was working.

There is one area in which the Bill is a lost opportunity. It offers us the chance to address the big elephant in the room, which is the lack of competition in the banking sector. We have the chance to go well above and beyond what John Vickers proposed. Retail banking in this country should be truly competitive. As we all know, one of the biggest problems in our economy right now is the lack of finance for small and medium-sized enterprises, which are the lifeblood of our economy.