Lloyds, HBOS and the Cranston Review

Jonathan Reynolds Excerpts

Tuesday 4th February 2020 Westminster Hall

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

I am grateful, Mr Hollobone, for giving me the chance to respond to this debate. I thank the hon. Member for Thirsk and Malton (Kevin Hollinrake) for securing this debate and the all-party parliamentary group on fair business banking for all its efforts to secure justice for victims of banking fraud and misconduct.

The hon. Gentleman has made clear the significance of the Cranston review in reconsidering the process by which banks compensate business customers where there has been historical misconduct. I add my voice to his. Strangely, this is now a positive story: we finally have the review we all wanted, although the journey to get here has been fairly tortuous.

Everyone here has been involved in these issues for some time. In my time as the shadow City Minister I have had to become familiar with and speak about an appalling litany of complaints about how business customers have been treated, not multinational businesses, but the small businesses that we would all recognise as the backbone of our constituencies and this country. The stories have been of livelihoods and relationships destroyed, and of entrepreneurs and companies losing family businesses they have spent years building.

We are here to discuss Lloyds. The HBOS Reading issues were clearly an issue of criminal liability in that bank. In the wider sector we have discussed a whole range of unacceptable conduct: the mis-selling of interest rates and hedging products, the mistreatment of companies in distress by pushing them into restructuring, and the unscrupulous sales of loan books to vulture funds. That is why the question of how redress happens has become so important.

Research shows that a frighteningly small number of small businesses in this country believe that their bank will do the right thing by them. Given the reports detailing the historical conduct we have discussed, we cannot blame them. We must all improve on that. Whether we are politicians, banks or businesses, this lack of confidence is not in our interest. We need to be able to tell our constituents that there is a level playing field when they find themselves in conflict with their bank, and that there is a path to fairness, justice and proper redress.

Too often, in recent years, the response from banks to us has been, “Systems are in place and we believe they are fair. All the historical issues have been sufficiently dealt with.” This report has shown unequivocally that not to be the case, vindicating those of us who have campaigned in this area for years, particularly the hon. Member for Thirsk and Malton.

It is not acceptable for industry to equivocate on this any longer and, to use the hon. Gentleman’s phrase, to mark its own homework. Key problems identified in the Cranston review include the lack of independence in assessing complaints and the benchmark for compensation being so high that no customer could hope to meet it. It is important that we, as parliamentarians, learn the lessons from these observations and embed those principles in any new schemes. I look forward to the Minister’s response to the review.

There are other avenues we must continue to consider, to get to the root of this problem. I believe we should consider a full public inquiry into business banking scandals. This review is about the shortcomings of one bank compensation scheme, but it emphasises the importance of investigating all areas of misconduct, not just to ensure that victims get fair compensation—that is the minimum—but to identify systemic problems at the root of these scandals, to prevent them happening again. That could be challenging to us as parliamentarians.

I always worry that the model of banking in this country, whether for customers or small businesses, effectively relies on upselling products, so we do not really pay for the cost of our banking services, and therefore we have business models where products must be sold on to banking customers. Perhaps we need to look at that. We must continue to work towards the success of the business banking resolution scheme, to assess how successful it is in addressing these problems.

[Kevin Hollinrake]

The hon. Gentleman makes a good point about products and services being sold to consumers and businesses. The royal commission in Australia determined that one of the biggest drivers of mistreatment of businesses and consumers was the incentives paid to people at the sharp end to sell those products. The hon. Gentleman is absolutely right. A public inquiry might well identify where this is going so badly wrong.

[Jonathan Reynolds]

I am grateful to the hon. Gentleman for his intervention. We must look at the issue that he raises. In some ways, we have already addressed some of the things that the Australians had not yet got round to, as the scope was different, but that must be part of the conversation, because we can go back, decade after decade, and find historical problems in the sector. Clearly, something is happening, whether it involves the incentives for staff or the structure of the sector, that we might want to change.

I mentioned the business banking resolution scheme. Historically, I have always supported an independent tribunal system and I still believe that that proposal has merit, but perhaps we need to revisit regularly the BBRS’s work to ensure that it is getting the results that it requires in the timeframe.

My final point is on whistleblowers. Sally Masterton was mentioned. She was treated disgracefully. Other countries have much stronger protection for whistleblowers. I think we could look at that issue. If I were, as I have always wanted to be, in the Minister’s place, responding to the debate, I would want us to take that forward, to ensure that we really had an appropriate system that addressed all the needs.