RBS Global Restructuring Group and SMEs

Jo Stevens Excerpts

Thursday 18th January 2018 Commons Chamber

[Jo Stevens (Cardiff Central) (Lab)]

I congratulate my hon. Friend the Member for Norwich South (Clive Lewis) on securing the debate. It is also a real pleasure to follow the right hon. Member for Loughborough (Nicky Morgan).

For me, the most alarming aspect of the whole issue of the banking sector’s treatment of SMEs is the conspiracy of denial that has existed between banks and their professional advisers. That has been reinforced by the very institutions that are supposed to regulate the financial sector. My constituent Mr Kash Shabir is a victim of what is at the very least grossly unethical practice—it is much more likely to be criminal fraud—at the hands of Lloyds bank, the same bank that was behind the HBOS Reading fraud. His case is a lead case, having formed the backbone of an inquiry by the then Business, Innovation and Skills Committee in March 2015, under the chairmanship of my hon. Friend the Member for West Bromwich West (Mr Bailey), and of two Westminster Hall debates that I led, on 16 September 2015 and 18 April last year.

When lending to Mr Shabir was no longer attractive to Lloyds after the financial crash, it reneged on its lending commitment, relying on an alleged breach of the loan to value covenant. That breach was then justified by a down-valuation of his property portfolio, which was worth in excess of £10 million. The valuation was provided by Alder King LLP, a firm of chartered surveyors whose employees were embedded in Lloyds bank and then rewarded with lucrative LPA—Law of Property Act 1925—work. The substantial evidence that I have considered over the past three years leads me to conclude that criminal acts have taken place, followed by a cover-up by the parties concerned.

The senior management of Lloyds, Alder King and the Royal Institution of Chartered Surveyors have all refused to meet me and Mr Shabir to discuss his case. None of them has the guts to sit in a room with me and my constituent to listen to his legitimate complaint. The approach taken—primarily by Lloyds, but also by Alder King—has been to use the gross power imbalance that exists between SMEs and the big banks to bully and belittle SME victims to the point at which at least one victim has taken his own life. The big banks hold all the power. They have an army of expensive lawyers. They obfuscate and delay, knowing that if they keep batting away their victims’ complaints and concerns, those individuals will eventually capitulate because they have no other choice.

[Jeremy Quin]

The hon. Lady is making a powerful speech. She and the hon. Member for Norwich South (Clive Lewis) have both referred to the HBOS Reading case, in which guilty verdicts were delivered on 30 January last year. Does she share my concern, and that of my constituents who have been affected by this, that there has still been no settlement with Lloyds bank a year after those verdicts were delivered? This reinforces what the hon. Lady is saying.

[Jo Stevens]

I absolutely agree with the hon. Gentleman.

Statutory limitation periods are run down through deliberate delays by the banks. They know that they hold all the financial cards. How can any of their victims afford to litigate to seek proper redress when they have already lost their businesses and homes as a consequence of the banks’ actions?

[Melanie Onn]

That is absolutely correct. Earlier I mentioned the case of a constituent who has spent at least £45,000 trying to tackle an injustice of which she is so undeservingly the victim. That has used up all her husband’s firefighter pension.

[Jo Stevens]

My hon. Friend provides a powerful example of that gross imbalance of power. Legal expenses insurance is also extortionate and therefore out of the question. My constituent was quoted a premium of more than £1 million for insurance cover for his litigation against Lloyds. These are deliberate tactics by the banks to prevent their victims from getting redress, and they absolutely stink.

All the time this is happening, Lloyds senior executives present a public face of claiming to know nothing of what has gone on. I have copies of letters written by Members of this House in 2014 to the Lloyds chief executive and the regulators, formally alerting them—if they did not already know—to the irregularities in that bank. Lloyds itself commissioned an internal report in September 2013—the HBOS and Lord Turnbull report—which highlights many acts of criminality, as well as confirming that the bank knew about the HBOS fraud as far back as 2008. The chairman and the chief executive of Lloyds have both maintained that they had no knowledge, but I do not believe those assertions to be accurate. This prompts the question that if the bank had knowledge of the fraud in 2008 and the HBOS convictions took place in 2017, why did the bank pursue personal guarantees on those fraud victims for nine years until the case went to trial? There can be only two answers to that question: either the bank is entirely incompetent; or those running it have not been honest. I am calling today on the Lloyds chair and the board to publish that report in its entirety.

Following the conviction of the six HBOS individuals who are now serving a combined prison sentence of 48 years, why has there been such a failure by Lloyds to compensate its victims? Similar practices have been shown to have been prevalent in the Bristol offices of Lloyds, but as yet no police force has carried out a proper forensic investigation. Anthony Stansfeld, the police and crime commissioner behind the successful HBOS convictions, is determined to see a full and proper investigation into Lloyds Bristol and has passed evidence to Avon and Somerset police. I am calling today on its chief constable to expedite an investigation.

As evidence of abuse by the banks and of conspiracy with their advisers grows by the day, the banks cannot say at the highest level that they were unaware of what was happening and somehow insulated from the abuses that were taking place. The chief executive of Lloyds, Mr Horta-Osório, has made many public statements—that to the Evening Standard on 17 May last year is just one example—saying that he was unaware of the victims’ complaints before the Reading fraud trial. However, I understand that the Turnbull report confirms both his and the Lloyds board’s knowledge of HBOS criminality. I also have a letter dated 22 May 2014 from the right hon. Member for Twickenham (Sir Vince Cable), written when he was Secretary of State for Business, Innovation and Skills, confirming that he met Mr Horta-Osório to discuss my constituent’s case, and that Mr Horta-Osório had assured him that

“he had looked into the case personally”.

It appears that Mr Horta-Osório is not as remote from these victims’ cases as he claims.

It is imperative that we have a full inquiry into the actions of Lloyds and the other banks we have heard about today, and that should include a consideration of individuals’ culpability. It should also compel full recompense to those who have been affected by the abuse. Such full recompense should be the subject of genuine independent third-party administration, not the charade that has developed around Lloyds’ handling of the victims of the HBOS Reading abuse. That is why I support the establishment of an independent tribunal system and the motion before the House.

--- Later in debate ---

[John Glen]

I think the FCA understands, in the light of today’s debate, where the pressure is leading to and what action we will need to take if its response is not effective.

The key issue for the debate today, which I discussed with all-party group members yesterday afternoon, is that we must remember that there are already multiple avenues for resolution. I understand the frustrations Members have expressed about their effectiveness, but our smallest businesses have redress via the Financial Ombudsman Service for quick and informal resolution of disputes, the FCA has the power to take action to address issues that require resolution, and there is also the usual legal recourse available for businesses.

[Jo Stevens]

Will the Minister give way?

[John Glen]

No, I am going to make some more progress, but I might give way later.

The motion calls for an independent inquiry into the treatment of SMEs by financial institutions, reflecting the frustration addressed by Members across the House today in respect of the experience of their constituents. A number of contributions have also focused on the proposed new tribunal system to deal with financial disputes between banks and SMEs.

As the industry, the FCA and the Treasury progress discussions on this issue, all avenues will be considered. The FCA is undertaking a review, and it launched a discussion paper on SMEs in November 2015. I feel that that is a very long time ago, so I am reassured to be able to report to the House that it will be making a statement on Monday 22 January on its 2015 SME paper and on its consultation on widening SME eligibility for the Financial Ombudsman Service. I shall look carefully at what it comes up with. The FCA has promised to consult on widening the remit of the FOS for small businesses—the detail of that will be known—and to take a view on SMEs’ access to redress more broadly. I hope and believe that we will see significant steps forward.

I have thanked the hon. Member for Norwich South and the right hon. Member for North Norfolk for raising this issue. I also want to mention the hon. Member for Sefton Central (Bill Esterson), who mentioned Lloyds’ support for SMEs in the Carillion supply chain. I am pleased to report that it has been announced since we have been in the Chamber that Lloyds is taking the required steps to help those facing short-term problems as a result of the Carillion group going into liquidation by providing £50 million to support the SMEs affected. It is essential that the small businesses exposed to the Carillion insolvency should be given the support they need by their lenders. I was with the Business Secretary yesterday when we met representatives of the banks to explain that to them. It is in the UK’s interest that our businesses continue to prosper and thrive. That will mean allowing them ready access to finance at a serviceable cost. This is about getting the balance right, and that is what the Government are helping them to do.

I thank all hon. Members who have contributed to the debate, and I will try succinctly to summarise the Government’s position. We certainly note the many intensely painful experiences and issues raised in the motion and by hon. Members in the debate. On GRG, it is right that we should wait for the conclusion of the FCA’s investigation of the matters arising from its skilled persons report before determining what further action needs to be taken. On the broader issue of dispute resolution, I remind the House of the existing avenues that are open to businesses, but the FCA is undertaking work to look at the relationship between SMEs and financial services providers. It is also right that we await the next steps in that area. However, I assure the House that this Government will continue to support businesses large and small when addressing these challenges.

Let my final words be these: small businesses and their continued success are critical to the continued growth and improvements in productivity of our economy, and SMEs’ improved confidence in the mechanisms to achieve redress from banks is crucial. In my role in this Government, I will be doing everything I can to ensure that the injustices that have been discussed today are addressed.