Whistleblowing

Kevin Hollinrake Excerpts

Wednesday 3rd July 2019 Commons Chamber

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

It is a pleasure and an honour to follow the right hon. Member for North Norfolk (Norman Lamb), who has done such incredible work in this area and on the all-party parliamentary group on fair business banking, on which most of my remarks will focus. Many points in his speech resonated with me, particularly when he mentioned a whistleblower who said, “If I knew then what I know now, I never would have spoken out.” Every single whistleblower I have been in contact with has said exactly that. If that is the case, we have got this drastically wrong.

There is so much good work going on. The all-party group is doing tremendous work, and many of those people are in the Public Gallery today. Whistleblowers are so valuable to us in so many ways, as the right hon. Gentleman described. The principle underpinning the work that is happening is that they should be encouraged, their contribution should be valued and, of course—more than anything—they should be protected. From my experience within the financial services sector, that is the opposite of what happens; I will allude to a number of cases during my speech.

[Mr Mitchell]

May I take my hon. Friend back to the last comment made by the right hon. Member for North Norfolk (Norman Lamb)? He talked about the importance of an office for the whistleblower and addressed the critical problem of the lack of effective high-level co-ordinating leadership, and in my view a national office for the whistleblower would be the answer. Does my hon. Friend agree that the creation of a national office for the whistleblower—to protect, advise and support whistleblowers by overseeing, co-ordinating, setting standards and holding to account the regulators and employers—is the right way to proceed? The vital point is that it would not investigate cases of whistleblowing; it would ensure that cases are properly investigated by existing bodies, identify failings and successes, and propose systemic improvements that would help to get us out of this very difficult situation.

[Kevin Hollinrake]

I support that principle and many other recommendations mentioned by the right hon. Member for North Norfolk. I will be interested to hear from my hon. Friend the Member for Stirling (Stephen Kerr), who chairs the all-party parliamentary group on whistleblowing, when he speaks about his group’s recommendations.

I just know that this is something that we have got to get right that we have got wrong at the moment, because the people who step forward to take these risks can lose everything—their careers, their jobs and their livelihoods. It is devastating when they tell their loved ones that this is what they are doing. In addition, their colleagues, friends at work and self-esteem are put at risk. From the cases I deal with, it seems that that is all put at risk for no benefit, as people do not even achieve what they set out to by highlighting the issue, and they suffer devastating consequences as a result.

[Dr Julian Lewis (New Forest East) (Con)]

I have not put in to speak because the issue that concerns me is still pending, but does my hon. Friend accept that even being a senior consultant is no protection against what can happen to someone who blows the whistle? I have a case of a senior consultant in an eye unit who became concerned about financial irregularity and, even worse, substandard treatment that was causing eyesight to be lost. The effect of his complaining was that he was the one who was suspended and who faced a General Medical Council examination. The Royal College of Ophthalmologists was simply shown the results of an internal inquiry, not the source material. The Care Quality Commission did nothing, and the GMC is only now beginning to look into his claims—now that it has dismissed the false allegations that were made against him. Is that not a disgrace?

[Kevin Hollinrake]

I could not agree more. My right hon. Friend highlights the importance of some of these cases. We have to ask why an organisation would not want to know about this. My role before coming to this place four years ago was as managing director of my own business. We were quite a large business at that point. I dealt with all the complaints in the organisation because I wanted to know what was going on there, and that is the best way to find out. These people are our eyes and ears. We were an ethical business and we ran it well, but if anything was going off track, we would want to know about it. However, it seems that when these people step forward, the people around them—their superiors, I guess—too often feel that the situation is too risky and look to close down the complaints.

From the fair business banking perspective, we know that one third of all serious economic crimes are brought to light because of the actions of whistleblowers. It is very rarely the regulator that is going in there and identifying the problem and then dealing with it—in fact, quite the opposite. It is therefore absolutely fundamental that these people will step forward. All the whistleblowers we deal with say, “I would never do that again.” Other people in the sector hear about that and are then deterred from stepping forward. That is an absolutely intolerable situation. What these people do should be welcomed.

The right hon. Member for North Norfolk talked about the case of Mark Wright. In my experience, this not just about the organisations themselves but also about the regulator. The regulator could take a much firmer stance. Whistleblowing is part of its processes. It has responsibilities under protected disclosure to deal with whistleblowers, but that is not what happens. It pays lip service to the issue of whistleblowing. It says, “Yes, okay, we’re dealing with that,” but the cases that I will highlight illustrate that that is not what has happened. The FCA has got a terrible reputation in this area.

[Norman Lamb]

Does the hon. Gentleman agree that the sense one gets from the FCA is that it regards these people as irritants—troublemakers? The people who investigate the allegations of whistleblowers are often people who have been through the revolving door, in and out of banks and the regulator, and so are too close to the people they are supposed to be regulating.

[Kevin Hollinrake]

Yes. I ask myself all the time, “Why is it like this?” and that is one of the reasons—the revolving door. Those people are part of a wider group or club—the old boys’ tie kind of stuff. This cannot be allowed to be the case.

As I said, the right hon. Gentleman highlighted a case that was heavily reported where the FCA told RBS who the whistleblower was. That seems absolutely unthinkable, and it was criticised by the Complaints Commissioner. When the FCA dealt with the case of the chief exec of Barclays, Jes Staley, who had tried to find out the identity of a whistleblower, which is totally against protocol, he was fined a modest sum that was probably a few weeks’ wages for him. Where is the deterrent there for not treating whistleblowers in the wrong way?

In my own experience, Joanne Rossouw contacted me about fraud at Barclays relating to payment protection insurance claims under the Consumer Credit Act 1974. She felt that there was a total lack of protection and support from the FCA and that its communications were simply unacceptable. The case of Paul Carlier was heavily reported. He whistleblew on foreign exchange dealers at Lloyds and was then unfairly dismissed. The FCA had promised to support his case and to provide an opinion to the tribunal he went to when he was unfairly dismissed, but did not do so, despite Andrew Brodie at the FCA calling the Lloyds process for the treatment of whistleblowers a whitewash and a joke. That was not the only case—there were others that he dealt with. Yet these people are not sanctioned. Why is that?

Paul Moore, my constituent, was the first person to raise the issues at HBOS. In 2004, he described a toxic culture at HBOS, with pressured sales targets and people taking unacceptable risks in lending money. Of course, HBOS collapsed in 2008. He was unfairly dismissed. He was treated disgracefully by the Financial Services Authority, as it was then. As the right hon. Member for North Norfolk said, if we had taken a robust approach when whistleblowers came forward, it may have stopped the financial crash happening in the first place, which cost our taxpayers £1.8 trillion.

[Stephen Kerr (Stirling) (Con)]

My hon. Friend is underlining the point that the regulators are stricken with lethargy when it comes to responding to whistleblowers. Does he agree that whistleblowers need the protection of an independent office to advocate for them with these bodies, which are sometimes very forbidding in the way they respond to the approach of whistleblowers?

[Kevin Hollinrake]

My hon. Friend is absolutely right. We need to improve how we deal with whistleblowers and the legislation around them. We must also insist that regulators, which already have access to sanctions, deal with these issues robustly. There is a cultural problem in the FCA in dealing with this. That must be addressed, and it can only be dealt with by the leadership of the FCA.

The most egregious case I have dealt with over two years as co-chair of the all-party parliamentary group on fair business banking is that of Sally Masterton. She was a senior risk manager at Lloyds. In 2013 she wrote a report called “Project Lord Turnbull”, which highlighted the fraud that was concealed at HBOS before the takeover by Lloyds. She identified a billion-pound fraud—these are not small numbers or small issues, which is perhaps why they are swept under the carpet. She was asked to set out her findings. She produced the report and gave it to her superiors. This was happening at the same time as a police inquiry into the low-level fraud that was happening at HBOS. She was then suspended and prevented from working with the police, despite the fact that the police had said in an email that she was vital to the investigation. She was later constructively dismissed.

She was then discredited. Lloyds wrote to the FCA to discredit her, effectively saying, “This person is a rogue employee. They are not a cogent witness.” The FCA accepted that without any investigation. That was in 2013. Five years later, Lloyds apologised to Sally Masterton, saying that she had been disgracefully treated for five years and admitting that it had tried to discredit her all the way through that process—imagine what those five years of her life were like. The FCA told Lloyds to intervene because she felt she had been terribly mistreated. Andrew Bailey himself had met Sally Masterton and determined that she had been disgracefully mistreated. Lloyds apologised to her and came to a financial settlement with her, but the FCA did not sanction anybody in Lloyds for that mistreatment. That is incredible.

All the FCA keeps telling me is that there is another investigation going on—Linda Dobbs’s investigation of Lloyds’s reporting of information before and after the HBOS takeover—but that is unacceptable. The FCA has already established the mistreatment, yet it will not move forward to sanction the people responsible. Under the senior managers regime, these people, including the chief exec, could be sanctioned, fined or banned. That is exactly what should happen.

[Luke Graham (Ochil and South Perthshire) (Con)]

My hon. Friend is making a very relevant point, and it applies to my constituent who suffered reputational damage following his whistleblowing about the High Speed 2 project. I am sure my hon. Friend will come on to talk about what either the FCA or another body can do to provide protection for whistleblowers and restore their reputation.

[Kevin Hollinrake]

My hon. Friend is right. The FCA has a huge opportunity. It should regulate without fear or favour, but that is not where we are. It constantly looks over its shoulder at the banks and seeks to defend their reputation by concealing the truth, rather than robustly investigating these issues.

I asked Andrew Bailey four times a simple question in connection with this issue: did he follow the processes set out on the FCA website for how it deals with whistleblowers? Sally Masterton’s case was supposed to be referred to his team within five days and then go through the proper process. Did he do that? He has not responded to that question four times. It is totally unacceptable.

Sally Masterton says in her protected disclosure to Andrew Bailey:

“This is the tenth time that whistleblowing issues have been raised with you and ignored”,

over a period of five years. That is despite the fact that the FCA itself, in communication within the FCA, has admitted her report was well drafted and presented, and one FCA person said to another:

“I see a couple of potential risks…We may get challenged as to what we”—

the FCA—

“did about this report when received or LBG’s treatment of Mrs Masterton”.

[Stephen Kerr]

We should also mention the fact that there was whistleblowing to the Financial Reporting Council on the audits done at HBOS about the amounts of money set aside against expected liabilities. The head of the FRC, Stephen Haddrill, appeared before the Business, Energy and Industrial Strategy Committee, of which I am a member, and said some really interesting things about ongoing inquiries with other regulators in relation to whistleblowing, but nothing further has been said.

[Kevin Hollinrake]

I think this is about KPMG’s audit of HBOS in 2008, which was signed off a few months before HBOS went bust, despite the fact that the risks to that business were clear. The FRC then gave KPMG a clean bill of health. There was the revolving door between the FRC and the auditors as well. It is a very big concern, which I know my hon. Friend has raised in his Select Committee work.

[Ann Clwyd]

I am sure everybody would like to join me in paying tribute to Julie Bailey, who was one of the best whistleblowers in the NHS. She triggered the Mid Staffs inquiry and the Francis report, as well as raising many other issues. She is now living in Wales. The way that Julie Bailey was treated after she became a very well-known whistleblower is an absolute disgrace. It is an example of what happens to whistleblowers, and it does not matter how well known they are.

[Kevin Hollinrake]

The right hon. Lady pays a very important tribute and makes a very important point about how we can persuade more people to come forward. It has to be about how they are protected and looked after. Looking at other regimes internationally and how they deal with this will be an important first step in reforming our whistleblowing procedures.

The big thing I would say about all the issues I deal with is that they go right to the top of these organisations. These are not at low level, they go right to the top. They must be dealt with—yes, by whistleblower reform, and, yes, by a regulator that is far more robust and regulates without fear or favour. I believe we need other measures, including a public inquiry into some of these situations and into the circumstances of the disgraceful treatment of many businesses, particularly by Lloyds and Royal Bank of Scotland.

I endorse many of the recommendations made by the right hon. Member for North Norfolk. I think we need a much more robust Financial Conduct Authority regulator. Culturally, the biggest issues in the regulator need fixing. We should look at whether we should provide financial incentives for whistleblowers of the right nature. We do need to make sure that our regulator goes in robustly when we see these mistreatments or improper practices, together with our law enforcement agencies. That is what happens in the States in these situations. It is a case of saying, “Either you deal with us and you deal with these issues, or we really will take further steps, including potential criminal sanctions.”

The situation is not where we want it to be, but I conclude by thanking the whistleblowers who do come forward. They are so important, and we would not be where we are today in understanding what has happened in the banking sector without the incredible contribution of many of the whistleblowers I deal with.

--- Later in debate ---

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Kelly Tolhurst)]

I thank the right hon. Member for North Norfolk (Norman Lamb) and my hon. Friend the Member for Stirling (Stephen Kerr) for securing today’s important debate. I should also like to congratulate the right hon. Sir Norman Lamb on his knighthood, in recognition of his commitment to public service. I thank all hon. Members for their contributions today, and for the passion that they have expressed in voicing the concerns and putting their arguments on UK whistleblowing policy.

The Government recognise how valuable it is that whistleblowers are prepared to shine a light on wrongdoing. That is important at an organisational level but also, more broadly, for society, so that issues such as abuse of power are brought to light. This afternoon, stories have been shared in the House of people who, having acted as whistleblowers, have been disadvantaged and experienced severe detriment.

Effective whistleblowing policies enable workers to speak up, to prevent wrongdoing and fraud. That helps to protect employers from financial loss and reputational damage, and builds their trust with customers. Those who blow the whistle should be able to do so without fear of recriminations. Employment protection enables workers who have blown the whistle to seek redress if they are dismissed or suffer detriment at the hands of the employer because they have made what is called a “protected disclosure” about wrongdoing that they have witnessed at work.

I can assure hon. Members that over recent years the Government have taken steps to support a cultural change in relation to whistleblowing in all sectors. A number of statutory and non-statutory improvements have been made. Those include the publication of guidance for whistleblowers on what they need to do to make disclosures while preserving their employment protections; and guidance for employers, including a non-statutory code of practice.

My hon. Friend the Member for Stirling and the hon. Member for Oxford East (Anneliese Dodds) mentioned guidance. The hon. Lady spoke about the extent to which MPs have clarity in dealing with people who come to them for advice. I would like to go away and see whether there is any kind of guidance that we might publish, particularly for MPs, to improve our ability to help our constituents.

[Kevin Hollinrake]

The Minister heard some of my comments about the Financial Conduct Authority and its, at best, quite tepid approach to whistleblowers. What are we to do when, effectively, an agency that is commissioned by the Government does not follow through on its whistleblower obligations?

[Kelly Tolhurst]

I thank my hon. Friend. I was preparing to come on to that, but he is absolutely right—the FCA falls under the control of Her Majesty’s Treasury. I shall go into greater detail later, but I want to meet HMT to raise with it some of the concerns that have been voiced today in the House about the FCA and whistleblowing policy.