Whistleblowing

Debate between Kevin Hollinrake and Stephen Kerr

Wednesday 3rd July 2019 Commons Chamber

[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.

[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.

Mortgage Prisoners

Debate between Kevin Hollinrake and Stephen Kerr

Thursday 6th June 2019 Commons Chamber

[Kevin Hollinrake]

indicated assent.

[Stephen Kerr (Stirling) (Con)]

indicated assent.

Finance (No. 3) Bill

Debate between Kevin Hollinrake and Stephen Kerr

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

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

It is a pleasure to follow the hon. Member for Enfield, Southgate (Bambos Charalambous). Although I do not agree with all his views, I thought that the way he put them across was clear and impassioned, and I congratulate him on that.

I must draw the House’s attention to my entry in the Register of Members’ Financial Interests, because I want to focus most of my remarks on business and I was in business for most of my life before entering Parliament, but I will begin by touching on other elements.

As the co-chair of the all-party parliamentary group on poverty, I particularly welcome the measures relating to the personal allowance and the increase in the national living wage. When combined, those measures mean that people who are in full employment and earning the minimum wage will be £3,955 a year better off in cash terms than they were in 2010, which will transform many lives. We simply could not continue with a situation in which the Government were supporting business through tax concessions and tax credits; it is right for business to stand on its own two feet. I hope that the national living wage will increase at some point, as it must if we are to reach a real living wage. The gap is narrowing, but our aspiration should be to ensure that, in a prosperous society, everyone prospers.

I also welcome the extra measures for universal credit, which were called for by many Conservative Members. The extra £2 billion a year will make a big difference to a system that is already working well in many ways. It is not without its faults, and we need to focus on the areas in which it is not right as well as those in which it is, but it, too, will make a huge difference. It was introduced in Ryedale, in my constituency, early in 2017. There were initial problems with some of the payments, but following measures that the Government introduced at the end of that year, most of them have been alleviated.

The 33% rate reduction for many businesses is welcome, as is the fund for investment in our high streets. However, the main issue affecting the retail environment is not the level of business rates, but the migration of consumers from shopping in retail premises to shopping online. We cannot simply cut business rates to deal with that problem. The Chancellor’s contribution is welcome, but we need other measures, too. At some point, we will need a structural review of the business rates system for retail premises. There is no doubt that online retailers pay a much smaller proportion of their turnover in business rates than retail high street premises—about four times less.

Local authorities also need to do their bit. Too often, they are giving permission for out-of-town shopping centres. Consent has been given to four in York, all of which will offer free parking. The city centre car parks run by the local authority are charging £2.50 an hour, which is massively disadvantaging businesses in the city centre. Businesses were telling the local authority that this was going to happen many years ago, and it has had a devastating effect on many high street businesses.

I am most pleased with the Government continuing their corporation tax reductions; it is absolutely the right thing to do. I am also pleased that they are continuing provisions such as entrepreneurs’ relief, the seed enterprise investment scheme and the new enterprise incentive scheme. The Opposition think, “We can simply increase corporation tax. It’s a victimless crime. We’ll collect all this extra money and then the corporations will pay.” That is not how it is. When the Opposition speak on these issues, whether about requisitioning parts of businesses or taxing companies more, they remind me of the Churchill quotation—that some people look at private enterprise as a tiger to be shot or a cow to be milked, when it is actually

“the strong horse that pulls the whole cart.”

And that is the reality.

The Opposition simply want to raise corporation tax, and they think that corporations will just pay and that will be it. Of course they will pay extra tax, but the consequence in a competitive market is that prices will go up. At the end of the day, all consumers pay all taxes. The reality is that excess returns in a competitive marketplace get competed away right down to the cost of capital. Therefore, if we put up corporation tax, the pre-tax profit has to rise to ensure the same return on a post-tax basis. All that will happen in a competitive market—most of our markets—is that prices will go up and the consumer will pay. That is the reality, so I welcome the reduction in corporation tax because it encourages inward investment in this country.

Not all our markets are competitive and not all our enterprise is in competitive markets, so I welcome the fact that we have brought forward a digital services tax for one market that is not competitive—the huge technology giants that are dominating the landscape and not paying their fair share of taxes. It cannot be right. Those companies benefit from the fact we have a well-funded education system, hospitals, welfare system, social care system and pensions system. They cannot just trade in this country, switch the profits to a foreign jurisdiction and avoid tax. It is absolutely right, historic and brave that the Chancellor has acted on this, outside an agreement with the OECD. It would clearly be better if we worked internationally, but it is right to take this first step.

There is one area where the market is not competitive and which I am heavily involved in as the co-chair of the all-party parliamentary group on fair business banking and finance—that is, the relationship between business and banks. Some 90% of business lending is dominated by the four biggest banks—Royal Bank of Scotland, Lloyds, Barclays and HSBC—but when something goes wrong, there is no way on earth a small business can compete with a bank when trying to resolve disputes. It simply cannot be right that these banks can use their financial power in order not to be held accountable when something goes wrong with their own customers. We have seen many cases and have talked about this issue before in Parliament. I know that this is not part of the Finance Bill, although I would very much have liked it to be.

The Chancellor has said that he will support the recommendations of the Financial Conduct Authority to expand the Financial Ombudsman Service from its current jurisdiction of £150,000 compensation limit to £350,000, but most cases we deal with in the all-party group are in the millions of pounds. I am delighted that the Chancellor has just walked in while I am talking about this issue. There is a very good example in an article by Jonathan Ford in today’s Financial Times. The bank sold Arthur Holgate & Son—a company turning over £2 million—an unsuitable interest rate hedging product, sending it under; it went into administration. How on earth is Arthur Holgate & Son supposed to deal with that and take Barclays to court? The company was offered £311,000 in compensation, but it eventually managed to insure the legal fees for the court action and got a settlement off Barclays of £10 million. Most companies that have gone through this process simply do not have the funds to take a bank to court. That cannot be right.

[Stephen Kerr]

I pay tribute to my hon. Friend for the work he does in the APPG on fair business banking. Many thousands of small and medium-sized businesses were mistreated by the banks during the period that we often discuss in the Chamber. Does he agree that it is vital for capitalism in this country and the enterprise economy that justice is done and seen to be done for them?

[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.

Banking Sector Failures

Debate between Kevin Hollinrake and Stephen Kerr

Thursday 12th July 2018 Westminster Hall

[Stephen Kerr]

The hon. Gentleman speaks well to that subject. Banks should exist to provide the capital that businesses need to scale up and become bigger, albeit for their own commercial interest, but I am sorry to have to say that is not how it works in this country.

The impact of the events on John Roseman was far more than just commercial. They had a devastating effect on him, his health—as I witnessed when I met him—and family, and his employees and their families. John’s business was stolen from him, and I make no apology for using that word.

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

My hon. Friend is making a brilliant speech. Does he agree that the common factor in a lot of these businesses was that they had assets or that the people had personal assets? The bank chose them deliberately, but then denied year after year that GRG was a profit centre, despite the fact that the skilled persons report determined that in 2011, GRG made £1.1 billion in profit on a turnover of £1.3 billion.

[Stephen Kerr]

There can be no doubt about the nature of GRG’s operations. To say anything other would be a deceit about the part played by GRG. I apologise for having to use such unparliamentary language to describe the operations of a business, but that is the case too often in the examples that so many Members have had brought to us.

There was no failure in John’s business or model—they were a success. His business’s products and services were in demand. His customers certainly had not deserted him. But the Royal Bank of Scotland brought him down for its own purposes. He has still to get anything like an appropriate settlement in compensation for the way he was treated. John is cut from rock and the Royal Bank of Scotland should be warned that it can try to close his case, as it has told him, but he will not give up and will not go away. He wants justice and recompense, and he should be treated with more respect than he has been so far. As his Member of Parliament, I will support him as best I can.

John’s case is only an example; there are so many others. He suffered severe trauma. His health has been affected through stress and anxiety. He has suffered heart problems; he had heart surgery the week before his daughter was married. His marriage and his friendships have suffered. He said to me:

“My wife found it especially hard having to deal with the day to day situation and our marriage suffered seriously and was lucky to survive the constant pain, anger and aggression I was going through watching our family business and assets being stolen from us.”

That is the human cost, along with the human cost to his employees, his team and their families.

I repeat that, at the stroke of a pen, directors and shareholders suddenly have no voice and no right of reply, even if they never missed a payment but honoured their obligations. It is that easy. The customer gets no warning and has no ability to appeal. That can happen whether or not the valuation on which the supposed contract breach is based is correct.

Who determines that a property’s value has fallen? It is usually a surveyor from one of the bank’s panel of firms, which depend on banks for their business. They are hardly independent. Hypothetically, if a bank had a liquidity problem and needed to raise funds quickly, all it would have to do is engineer a bogus breach of contract—the rest would be history. Sadly, many banks are commonly accused of having done exactly that in the aftermath of the financial crisis.

As we can see, it is not just the bank involved—surveyors, LPA receivers and administrators all play their part. It is therefore imperative that those practitioners and their regulators are held to account for the roles they played—and continue to play—in the destruction of British businesses.