Finance (No. 3) Bill

Debate between Kevin Hollinrake and Jonathan Reynolds

Committee: 1st sitting: House of Commons
Monday 19th November 2018 Commons Chamber

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

It is lovely to see you in the Chair, Dame Rosie, and thank you for calling me to speak for the Opposition on our second grouping, which includes clause 89. As the Minister has helpfully explained, this group deals with the operation of tax law in the UK after our withdrawal from the EU, with a consequential set of Brexit-related amendments. This week, we have all seen the complete chaos the Government have unleashed on the country with their disastrous handling of the Brexit negotiations. We are just months away from the UK’s exit, and it seems the Conservative party remains as divided as ever over what to do next. As the Leader of the Opposition explained in his address to the CBI earlier today, this proposed Brexit deal offers no certainty at all and in many ways is the worst of all worlds, offending remain and leave voters in equal measure. So after two years of negotiations, we are teetering dangerously close to a no-deal Brexit, which should simply never have been an option. It would be bad for individuals, for businesses and for the economy, and Labour will do all we can to prevent it.

As we have said repeatedly, Labour wants the Government to negotiate a comprehensive and permanent customs union that gives the UK a say in future trade deals and ensures that there will be no hard border in Northern Ireland. We would protect workers’ rights, block any race to the bottom and negotiate a strong single-market relationship that gives businesses continued access to European markets for goods and services.

I would like to think that we are heading for a more stable time, but that seems unlikely. I was appalled to read press reports at the weekend that Downing Street’s alleged strategy is to encourage a crash in the financial markets should the deal fail to pass through Parliament, to pressure MPs into voting for it a second time. I can only hope that those reports were false. We should never forget that the markets reflect people’s savings, investments and pensions. They should not be used as a political device by the Conservative party.

It is also worrying that the Government are steadfastly using Brexit to substantially transfer powers from Parliament to the Executive. The Opposition have warned about this repeatedly, throughout the passage of each piece of legislation connected to the UK’s withdrawal from the EU. We should be deeply worried about this unprecedented transfer of powers.

We see another example in this Bill. In clause 89, which is rather innocently named “Minor amendments in consequence of EU withdrawal”, Ministers give themselves the power to make amendments to tax law outside the normal due process. Good checks and balances make for good government, which is why the Opposition have tabled a series of amendments that would help to address the democratic deficit that the provisions in the Bill would create, if passed unchecked. We do not believe it is possible to make a democratic case for the transfer to the Treasury of powers to make changes to tax law in perpetuity, which is why Labour’s amendment 2 proposes a sunset clause to the Brexit powers that the Bill will confer on the Treasury. It would ensure that those powers can only be used within two years of the passage of the Bill. Surely that offers sufficient time for the Government to use them as is required.

As the Minister outlined, the Government’s case is that during our withdrawal from the EU there may be a situation in which some elements of tax law need changing urgently or at short notice. However, we do not believe that there is a case for the powers, unless the UK crashes out of the EU with no deal. The agreement of a deal, with an attached transition period, should provide room for preparation, without the need to furnish the Executive with powers to make changes to the law unilaterally.

The number of Treasury-related statutory instruments that are currently being passed to create a new financial regulatory regime proves the point. Although it has been far from ideal for Ministers and their shadows, the use of secondary legislation is an improvement on the taking of such decisions behind closed doors in the Treasury.

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

The hon. Gentleman said earlier that in his relationship with the European Union he would expect to have a say in trade deals by being part of a customs union, but even when we were full members of the European Union and it agreed the Comprehensive Economic and Trade Agreement with Canada, his party refused to vote for that deal in this House. How on earth does he think that that will work on a completely third-party, third-nation basis?

[Jonathan Reynolds]

I am happy to take that point, which although a little outside the remit of the Bill is none the less interesting. For us, the relationship that we would seek with the EU would be based quite simply on a solid cost-benefit analysis of what is in the UK’s best interests. If we look at the various options on offer, given that half the world is already in a regional trading bloc or a customs union of some sort, it is absolutely clear that what we would risk losing by losing frictionless trade with the European Union would never be gained by external trade deals with the rest of the world. A customs union is therefore the right way to go forward. Were the UK to enter one, we clearly could not have a situation in which we were unilaterally exposed to the deals that the EU did with other countries without having a say, so it is a pretty logical position. That does not mean that those deals would always receive the backing of all parts of this House. Elements of those deals might be unacceptable.

The point about sovereignty, which comes from Brexiteers in the main, is so important, because people say, for instance, “Let’s not do a customs union, let’s do a deal with Donald Trump’s America,” but would our constituents really accept unilateral access to the NHS for American healthcare providers? Of course they would not. Would our constituents accept hormone-treated beef in the supermarkets? Personally, I do not think they would. The question is always about the balance between what is in the proposed economic relationship and the political oversight that should go with it. That position is fairly logical and straightforward.

--- Later in debate ---

[Jonathan Reynolds]

That is what we are proposing that we would negotiate. That is the entire basis of the proposal. I have no doubt that such an arrangement was on offer and may still be on offer from the European Union. The hon. Gentleman is well-informed and I always look forward to his contributions in these debates. I am sure that he has contacts as we do in other European Parliaments or perhaps in the Commission itself. If he does some investigations, he will see that that was always a preferred option for many people and it is, without question, the right way of going forward for the national interest of this country.

[Kevin Hollinrake]

rose—

[Jonathan Reynolds]

We will try one more intervention

[Kevin Hollinrake]

The hon. Gentleman mentioned earlier in his remarks that a certain deal might be a betrayal of the leave voters. There were plenty of myths flying about during the referendum campaign, but one area that probably was quite plausible was that if we left the European Union, we would be able to do independent trade deals—not through the European Union, but independent bilateral trade deals. Does he not see that his customs union would effectively mean that we could not do independent trade deals and that would be a real betrayal of leave voters who expect to be able to do exactly that?

[Jonathan Reynolds]

I think quite the reverse. What leave voters were promised was that the economic relationship would not leave anyone worse off and, in effect, would not be ruptured at all. That was the promise made in explicit terms by leading leave campaigners. Where there were concerns that motivated that leave vote, they were heavily about sovereignty and also about immigration. I do not think that the specific trading relationships that this country has with other parts of the world were a particularly paramount issue in the campaign. I know that it is a sensitive issue for leave campaigners to talk about the fact that immigration was a big part of that campaign, but, without question, it was in my constituency. In terms of that future trading relationship, it is by far the best thing to focus on what is simply in the best economic interests of the country once we leave the political side of the European Union with all of the objections that leave voters had to it. I do not think that leaving in such a way that preserves the best of our economy, minimises the disruption and honours our commitments under the Good Friday agreement is a betrayal at all. Many people want to see that economic relationship continue, even if they were of a position and a viewpoint that we are leaving the political side of the European Union with all that entails.

I will now get back to amendment 15, Dame Eleanor, before we are all rightly admonished for straying from the Finance Bill. The measure lays out a stipulation to provide clarity around which powers in relevant tax legislation have been transferred to the Treasury since June 2016 in connection with the UK’s exit. It also covers the powers that the Treasury expects to acquire, and, most importantly, it requires Ministers to set out a timeline for when these powers are to be returned to Parliament—I think the Minister missed off that last point in his speech.

Finance (No. 3) Bill

Debate between Kevin Hollinrake and Jonathan Reynolds

2nd reading: House of Commons & Programme motion: House of Commons
Monday 12th November 2018 Commons Chamber

[Kevin Hollinrake]

My hon. Friend is right. Capitalism depends on a fair and level playing field, and that is not where we are at the moment. As well as the expansion of the Financial Ombudsman Service, which we fully support, our all-party group proposes the introduction of a financial services tribunal that works in pretty much the same way as an employment tribunal. A company could take a bank to court without standing the costs of that bank, with full powers of disclosure, and justice could be seen to be done, which is critical.

[Jonathan Reynolds]

The hon. Gentleman knows that I share his view on this issue, and I commend his work as chair of the all-party group. There is considerable agreement on both sides of the House that this needs to be resolved, and it is not a satisfactory position. As we have the Chancellor in the Chamber—or we did; he has disappeared—may I ask the hon. Gentleman whether he agrees that the will of the House on this issue should not be underestimated?

Banking Misconduct and the FCA

Debate between Kevin Hollinrake and Jonathan Reynolds

Thursday 10th May 2018 Commons Chamber

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

It has been a sobering experience to listen to this debate. We have heard so many stories and so much advocacy from hon. Members on behalf of constituents. I commend everyone who has spoken today. I thank my hon. Friend the Member for East Lothian (Martin Whitfield) and the all-party parliamentary group on fair business banking for securing this debate on a topic that continues to be of such critical importance.

In my remarks I want to restate the Opposition’s support for a full public inquiry; talk a little about the current inadequacy of the regulator and the section 166 procedure; state why an independent mechanism of redress for business is clearly required; and say why this is in the best interests not just of customers and the country, but of the banks themselves.

This debate shows that the issues around the relationship between banks and their business customers are not fading, diminishing or going away. Rather, in recent weeks we have continued to hear yet more appalling revelations about the way in which RBS’s Global Restructuring Group treated its customers and stories of how that had spread to other financial institutions, too. Following the efforts of my hon. Friend the Member for Norwich South (Clive Lewis), we can now read the full section 166 report on the conduct of the GRG unit. The extent of the inexcusable behaviour revealed in that report is truly shocking. The purchase of the assets of distressed businesses, in some cases by RBS staff themselves, illustrates just how deeply the conflicts ran within GRG. Clearly, certain bank employees felt that they could act with total impunity towards their customers, and that cannot be acceptable.

We are all aware that the complaints process is ongoing between RBS and its former business customers who were the victims of GRG. However, I echo the call made by my hon. Friends the Members for Norwich South and for Sefton Central (Bill Esterson) in the debate that took place earlier this year in saying that this issue demands a full, independent public inquiry. Given the revelations exposed in the section 166 report, there must be a comprehensive examination of whether criminal liability has occurred, and those responsible must be held to account. In addition, given that certain individuals involved in GRG’s management continue to work in senior positions within British banking, surely an objective assessment should be made as to whether those people are fit to do so.

I am afraid that the Government’s response on this has so far fallen short—for instance, in the Treasury’s repeated cut-and-paste responses to the numerous parliamentary questions tabled by my hon. Friend the Member for Sefton Central since December 2017. The Treasury has simply deferred the issue time and again, saying that it is impossible to comment while the Financial Conduct Authority’s investigation is ongoing. Will the Minister please acknowledge today the strength of feeling in all parts of the House?

Another key issue is the effectiveness of the existing system—in particular, the use of section 116 reports and whether that is entirely appropriate to deal with these cases. A section 116 report, or skilled person’s report, is conducted by a third party appointed by the Financial Conduct Authority. The cost is met by the subject of the investigation, and it can range from hundreds of thousands of pounds to millions of pounds, but the reports remain entirely confidential. This lack of transparency is not good enough.

[Kevin Hollinrake]

The hon. Gentleman mentioned executives from RBS who are still earning large amounts of money within the financial services sector. Is he aware that Nathan Bostock, a senior director within GRG, currently earns £1.6 million as chief executive of Santander and £1.8 million a year from RBS as part of his payoff?

[Jonathan Reynolds]

I am grateful to the hon. Gentleman. These are the questions that need answering. People have told me that they worked for RBS and left because they were unhappy with the conduct of the bank. Surely they should also be allowed to put their case in a proper way.

Returning to the confidentiality of section 166 reports, I have to put on record the disquiet, certainly among Opposition Members, about the discrepancy between the FCA’s summary of the investigation into GRG and the actual report in terms of the former’s heavily sanitised nature. Now that the report has finally been made public, we can fully witness the extent to which relationships with business customers were abused. Under normal conditions, however, the report would have remained confidential. That cannot be appropriate, because it furthers the perception that the odds are stacked against businesses. We need processes that are transparent and fair, and command the confidence of everybody. We also need to look at who is asked to undertake these reports and any conflicts of interest that they might have.

As many Members have pointed out, small businesses are the backbone of our economy. If they cannot trust the financial institutions that are meant to serve them, we are all going to pay the price for that. Statistics show that up to half of all SMEs are non-borrowers, although we do not know whether that is because they do not feel they can trust their banks or simply feel too anxious to expand by taking on credit. As a country, we all acknowledge that we need to offer those businesses the right incentives and support to grow. We need to solve this crisis of trust in business banking. An independent arbiter who can fill the gap between the Financial Ombudsman Service and the full legal route for redress is a minimum sensible starting point for consideration. We await with interest the outcome of UK Finance’s independent review, chaired by Mr Simon Walker, of complaints handling and alternative dispute resolution for SMEs, which could provide a steer.

However, I do not believe that this industry can be allowed to self-regulate, and that is why an independent platform must be considered. Like many Members who have spoken today, I believe that the restoration of trust in business banking is essential, but it will not come without the Government taking decisive action. A public inquiry, redress for victims, accountability for those responsible and a new independent system of redress are surely the right places to begin.