Small and Medium-sized Enterprises: Mistreatment

Lord Davies of Oldham Excerpts

Thursday 27th June 2019 Lords Chamber

[Lord Davies of Oldham (Lab)]

My Lords, I too congratulate the noble Baroness, Lady Bowles, on securing this debate and on the forensic quality of her speech. We needed to add very little once she had completed the charge sheet, but nevertheless other noble Lords have contributed to the testimony of just what a scandal we are considering. Yet the result of the scandal, as identified in this debate, is that the Royal Bank of Scotland offered an apology. The Financial Conduct Authority, which supposedly had a clear role as a regulator, states that it has no powers to make clear what happened, and therefore expresses regret.

It is contended that the Treasury hopes for an extended role for the Financial Ombudsman Service in some aspects of disciplining malpractice in banks but we have seen no clear position yet. As the noble Lord, Lord Sharkey, indicated, there do not seem to be any consequences from this scandal because of the continuation of a large number—30 out of 32—of the senior administrators with the bank.

There has been an explosion at the other end of the Palace of Westminster. Many Members of Parliament, having been made fully aware in their constituencies of the devastating effect on small companies, have demanded action. As they have made their contributions and carried out their analyses—particularly the chair of the Treasury Select Committee, who is in a privileged position to be able to do that and has done so brilliantly—they have exposed just what the scandal represented.

There have been apologies, shrugging of shoulders, an attitude of “can’t do anything about it” and no question of knowing how we are meant to see fair settlements made, but the Government have not yet produced an obvious response to this position. This cannot be. The other place is clearly advocating more trenchant reforms and everyone who has spoken in this debate has identified that the present system is incapable of coping with issues of this importance. A large number of SMEs, an important part of the economy, have been bulldozed out of existence by the crass operations carried out by the global restructuring group of the bank.

The Government need to take seriously some of the proposals now being put forward. There is the suggestion from the other end that a tribunal system be set up to deal with disputes between SMEs and the big banks. It is clear that individual small companies do not have the resources to engage with the major banks in legal and financial struggles and that they will be beaten into the ground, as they have been through this experience.

Most of all, it is clear that the concept of self-regulation is being rejected. It has failed on this occasion in a most lamentable way. We all know the Government’s reservations about additional regulation but they have to appreciate that the report of their regulator—the Financial Conduct Authority—has sunk like a stone and has caused dismay. I trust that the Minister will give additional information on the possible responses to this position in his wind-up speech.

I emphasise that from this development my party has learned the lesson—there have been others, which have also been greatly worrying—that we must have a regulatory architecture involving a business commission to replace the existing network of regulations, which have clearly failed. It is inconceivable that a person running a small company should be told that the regulator, unfortunately, does not have the powers to make any form of restitution.

We are also committed to a national investment bank, with a network of regional banks and a post bank focused on relationship lending, and we mean to keep RBS in public ownership. RBS owes a great deal to the community—for the bailout and the ultimate responsibility for this scandal—and it is important that it is kept under a high degree of public scrutiny. We intend to have banks that serve the public interest and guarantee that the banking industry will support infrastructure, the SMEs and the broader issues of public goals. We cannot afford another scandal like this one, and the Government cannot afford to ignore the necessity for drastic action.