Exiting the European Union (Financial Services)

Kevin Hollinrake Excerpts

Monday 18th February 2019 Commons Chamber

[Kevin Hollinrake (Thirsk and Malton) (Con)]

It is a pleasure to be called in this important debate. I must say that I am at a bit of a loss as to why the hon. Member for Oxford East (Anneliese Dodds) has such an issue with these statutory instruments. They are simply about bringing current legislation from the European Union into domestic law; there are no significant policy changes. I was also a little mystified as to why she thought this was an appropriate time to take no deal off the table, particularly when this is such a sensitive time in our negotiations.

I would like to raise a couple of points and to take this opportunity, as we bring this legislation back from the European Union, to press for some sensible changes in regulation, principally to make our regulation more effective. Obviously, some of this legislation gives more power to our regulator—the Financial Conduct Authority. As my hon. Friend the Minister will probably recognise, the FCA has had some shortcomings in terms of its regulatory capability. I would like us to move towards having less of an expectation that the regulator will be responsible for all regulation and more towards giving individuals more power to hold our financial institutions to account.

The FCA will always be a watchdog at best, and not a bloodhound—it cannot be in all places at all times. What I have seen in my role as the co-chair of the all-party parliamentary group on fair business banking and finance—a role my hon. Friend the Minister is very familiar with, because we have talked about these issues many times—is the abuses of small and medium-sized enterprises, particularly over the last 10 years. Some 16,000 businesses got very poor treatment from the Royal Bank of Scotland, in particular. At Lloyds HBOS, a number of senior managers ended up going to jail, with a collective sentence of 47 years. Other banks were involved—the CYBG and others—in swaps, interest rate hedging products and payment protection insurance on the consumer side of things.

It was not the regulator that brought those matters to light. Incredibly, 3,500 people work at the FCA and its predecessor, the Financial Services Authority, but it was not those bodies that found out what was going on in the banks; it was determined and committed individuals. A guy called Lawrence Tomlinson, who worked for the Business Secretary at the time, first established what was happening in those financial services organisations and banks, and how they were treating our small businesses. Even when these matters were brought to the attention of the FCA, action was not taken for some years. At HBOS, it was Nikki and Paul Turner who established what was happening. The bank tried to repossess the Turners 22 times, but the regulator did not step in to protect them, even though the evidence that they had produced was later verified and crucial in the investigation and subsequent prosecution. Similarly, at Lloyds HBOS the whistleblower Sally Masterton was disgracefully treated when she brought these matters to the attention of the FCA and the bank. Action was not taken to support her.

We have to try to move away from simply thinking that regulation and regulators can solve all the problems, because they patently do not always do so, and move to a situation in which we give individuals tools to hold the institutions to account. The Minister has done a fine job in persuading the banks to bring forward mechanisms to do that in the historical cases review that will hopefully be brought forward in the not too distant future. UK Finance has come forward with a voluntary scheme—it needs to be voluntary, because many of the cases are outside the statute of limitations. As business banking is not regulated, it also had to use a fair and reasonable test that would not apply in a court of law today. That is welcome progress, although we have some distance to go before we get this right. I thank the Minister for his excellent efforts in persuading UK Finance to come to the table.

The Minister knows that I think that we need to make sure that robust measures are in place alongside the regulator—we are not scrapping the regulator—to allow individual voices to be heard. That is why the all-party group thinks that we should have a financial services tribunal. That proposal has support across the House, and I know that the Minister will continue to look at this. We do not want a huge amount of regulation of commercial lending, because we want to make sure that banks are still confident to lend, but it is reasonable that banks treat their customers fairly and reasonably, and that those principles are actionable if things go wrong. That is not the case at the moment, as he knows, but we want to see that simple change to regulation and a tribunal that works similarly to employment tribunals—if employees are mistreated by an employer, they know they have an affordable mechanism for justice that means they can hold the employer to account. Most employers would do a good job anyway, but they are careful to ensure that they adhere to employment law, because they know that if they do not they could end up at a tribunal. It is pretty easy for an employee to take a case.

We do not need armies of regulators to regulate employment law. In my business, we do not have an employment regulator coming in to inspect our files. We do not need that: we know that we will be held to account if we get it wrong. The same principle should apply in the business banking world, where there is a huge imbalance of power between banks and businesses. If people have the mechanism to be able to hold the bank to account if things go wrong, we will not need armies of regulators. We simply need a simple process. That is far more important than a regulator.

If I had to choose between the FCA—even though some very fine people work there—and a financial services tribunal, I would take the tribunal every time, and I say that as a business person. Many people I speak to who have lost out through the actions of banks feel the same.

I just sound a note of caution, as we bring this legislation back into domestic law, that we should see this as an opportunity to make banks and other financial organisations more accountable, without being over-burdensome in terms of regulation. That would have a profound effect on confidence between businesses and banks and, therefore, UK plc.