Financial Services and Markets Bill

John McDonnell Excerpts

2nd reading
Wednesday 7th September 2022 Commons Chamber

[John McDonnell (Hayes and Harlington) (Lab)]

I hope there will be plenty of time to discuss the detail of the Bill both in Committee and on Report, so I wish to make some general comments on my worries about where it is situated. When J. K. Galbraith wrote about the 1929 crash, his advice for the future was that people could set up all the institutions they needed to try to prevent it from ever happening again, but the greatest protection would come from memory. I therefore want to go back in time to some of the lessons that we perhaps should have learned but did not.

I wrote about the big bang in the 1980s and I can remember the concerns we expressed about a wave of enthusiasm for deregulation similar to what we see today. That enthusiasm resulted, in effect, in a casino economy. The City of London and the finance sector are the most successful lobbyists in the history of politics in this country and they are incredibly powerful. Sometimes, that results in corporate capture, not just of Governments but even of Oppositions at times. That period of enthusiasm for deregulation resulted in a casino economy that eventually resulted in a series of crashes—we endured not just 2007-08 but other crises.

I was in this House in 2007-08 and was the first Member to raise the issue of Northern Rock. I remember that in the debate after Northern Rock, the Treasury itself spoke about the “excessive concern for competitiveness” that brought about elements of that crash. I worry that we are re-inserting into legislation an emphasis on competitiveness that could override so many other issues of concern.

Here we go again. We are introducing legislation and placing in it a reliance on the structures that we established after the 2007-08 crash, particularly the FCA. I believe the FCA has been a catastrophic failure. My constituents have gone through London Capital & Finance, Woodford and Blackmore Bond. We saw the FCA’s failure to address HBOS and RBS properly, and we are supposedly still waiting for the independent review of Lloyds that was established in 2017, yet the FCA has moved not one inch to take further enforcement actions. As I have made clear on the Floor of the House, I was concerned that the FCA chief executive at the time was accused—rightfully, I believe—of being asleep at the wheel. Before we even had the report on London Capital & Finance and so on, we appointed him as Governor of the Bank of England.

[Bim Afolami (Hitchin and Harpenden) (Con)]

The right hon. Gentleman is making an important and interesting speech. On that point about the FCA, will he explain to the House whether he supports changing the regulatory structure and having one super-regulator, or something of a similar description?

[John McDonnell]

The hon. Gentleman knows where my mind is going. We instituted a regulatory review a couple of years ago, and Prem Sikka, a professor of accountancy, and a team of corporate specialists and finance specialists introduced an excellent report. He is now in the Lords and I warn Members that he will shred this legislation when it goes up there. He outlined that 40 bodies are regulating our finance sector in some way and that there is a need for consolidation and to learn the lessons of the experiences of some of these bodies so far. That job is still to be done. I was hoping that the bringing forward of this legislation would coincide with the Government’s clear recommendations on where we go on that structure and, in particular, the role of the FCA.

I am also concerned about the fact that, although we are having the debate about this legislation, we are not debating potential future threats. I am anxious that in this legislation we are not addressing shadow banking, where we have already seen elements of individual firm collapses, particularly in respect of equity firms, that could create a domino effect and then produce a significant collapse.

I am also anxious about the move away from MiFID II. That issue has been raised and was derided by some in the House. We have recently seen the evidence with regard to speculation on both energy and food prices. Of course the cost of living crisis has been caused by a combination of the breakdown of supply chains, covid and the war in Ukraine, but there is significant evidence now that these increases in energy costs and food costs have been exacerbated by speculation in the markets. This is speculation where the paper markets are distinct from the reality of commodity supply. It is not just me expressing that; it has been expressed elsewhere, particularly in the States, but also by a number of global institutions. I regret that we have not addressed that issue in this legislation. We need to hold to the MiFID II, particularly the constraints on asset holding with regard to food commodities, as I am anxious about price speculation forcing prices up.

I was critical of Gordon Brown on some of his response to the banking crash in 2007-08, but one thing he did successfully was bring the world together, and there were international meetings where we looked at a global response to these problems. I believe that we now need to look at a global response to the food and energy speculation that is taking place, which is exacerbating the cost of living crisis that our constituents are facing. In that way, the Government’s approach is lacking. We will have the discussion tomorrow about their response to the energy prices increase and the cost of living crisis. I am hoping that from that, and as we move forward, we will recognise that there is an international role to be played by this Government in bringing people together, in the same way as Gordon Brown did.

I am particularly concerned about the issue of food. The UN special rapporteur Olivier De Schutter has said that what is happening now is that people are betting on people’s hunger. That cannot be right. Anything that we do that undermines in any way our own national legislation, which is against speculation in essential products such as that, is dangerous, but if we fail to ensure that we take up our international responsibilities, we will regret that for the future, as our people increasingly confront the problems of hunger and starvation.