Banking (Responsibility and Reform)

Marcus Jones Excerpts

Tuesday 7th February 2012 Commons Chamber

[Mr Umunna]

I agree with my hon. Friend and thank him for correcting my pronunciation of the constituency of my right hon. Friend the Member for Kirkcaldy and Cowdenbeath.

It is worth taking our minds back to the months leading up to April 2009, when the former Prime Minister went around the world galvanising support and encouraging people to attend the summit. It is worth noting that President Obama of the United States was not planning to attend the G20 conference in London, but in the end many people came here and the conference achieved great things and helped to secure the system. That was, indeed, leadership.

[Mr Marcus Jones (Nuneaton) (Con)]

The hon. Gentleman is telling the House about the record of the previous Prime Minister, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown). Does he think the previous Prime Minister showed good leadership by recommending Fred Goodwin for a knighthood and giving him a £700,000 pension?

[Mr Umunna]

We have said that, if we had known then what we know now, we would not have knighted Fred Goodwin. However, I say to the hon. Gentleman that the future of the banking sector is bigger than the individuals who have featured in the headlines of late. It is important that we debate what happens in the sector as a whole rather than focusing on Fred Goodwin and other individuals, important though it is to make points about them.

--- Later in debate ---

[Mr Marcus Jones (Nuneaton) (Con)]

I welcome the debate and want to discuss a number of issues that arise from the motion, but, having explored it, I think it contains a strong hint of political expediency and opportunism. To a degree, the Opposition seem to be ignoring part of the history of the UK Government between 1997 and 2010. That said, this is an extremely important and topical issue and the motion therefore deserves proper consideration and scrutiny.

My starting point would be to reflect on where we are today with some of the issues at hand and on what we are trying to achieve.

[Mary Macleod (Brentford and Isleworth) (Con)]

Although the reform of banking is important, does my hon. Friend agree that we have not heard today about the importance of the financial services sector and banking as a whole? The sector employs 1.1 million people and contributes 12% of the total tax take and 10% of UK GDP. We should be talking about how to create a strong and vibrant sector that helps to grow the UK economy.

[Mr Jones]

My hon. Friend makes a very important point and I hope that some of my comments later will enthuse her about my stance on that issue.

Not many people would disagree that we need to move from irresponsible banking practice to responsible but successful banking, from poor Government regulation to effective regulation, from bailing out the banks to getting taxpayers’ money back, from the state ownership of banks to putting them back into private ownership, and from the state guaranteeing banks to ensuring that they stand on their own two feet and are not too big to fail. We need to draw some important distinctions when we consider such matters. There is a distinction between taxpayer-owned banks and private banks and we also need to take into account the taxpayer guarantee. When we consider irresponsible bankers—who now seem to be epitomised by Fred Goodwin, who should not be singled out but seems to be taking the brunt of the blame for all the irresponsibility in the banking industry—there should be a distinction between their type of banking and the more responsible banking that many are trying to promote.

One person who was brought in to try to promote more responsible banking and to get RBS back on its feet was Stephen Hester. He came in and took on a job, and although we might all agree or disagree with the definition of the success that he was tasked with bringing about, the fact is that he was given that definition—I think by the Labour party, when it was in government—and now Labour seems to want to move the goalposts and change the definition of success or failure within his remit.

[Margot James]

Despite the fact that the opening speech from the Opposition spokesman was couched in such reasonable terms, did my hon. Friend see the shadow Chief Secretary to the Treasury on “Newsnight”, remarking that Stephen Hester’s bonus was a reward for failure? Does my hon. Friend not agree that that is a gross distortion of the reality? He will agree, I have no doubt, that Stephen Hester has brought many more benefits to RBS.

[Mr Jones]

I concur absolutely with my hon. Friend’s comments. Had it not been for the fact that Stephen Hester decided not to take his bonus, I suspect that tonight’s motion would have vilified him—

[Rachel Reeves (Leeds West) (Lab)]

Will the hon. Gentleman give way?

[Mr Jones]

I will not, because other Members want to speak. I think the motion would, in such circumstances, have been completely anti-business. We need to be careful—

[Rachel Reeves]

rose—

[Mr Jones]

I will not give way. We need to be careful that we do not vilify people whom we entrust with such positions—we should not vilify wealth creators, because they are the very people we need to get UK plc back on to its feet.

That brings me on to regulation. The tripartite system given to us by Labour clearly failed; we had banks that were thought too big to fail, with no proper checks or balances on their activity. I am pleased to say that the Financial Services Bill, which had its Second Reading yesterday unopposed, will change that situation of ring-fencing banking, so that we no longer have banks that are considered too big to fail.

That leads me on to other issues, particularly the bailing out of the banks, state ownership of banks and state guarantees for banks. They are all probably undesirable for the taxpayer and it is important that we work to try to reverse the unsustainable position that the taxpayer has been put in. We need to consider carefully how we facilitate our banking and finance industry to ensure that we can try to right the wrongs. One way of doing that is through the regulatory framework, which we are dealing with, but we can also do it through competition. We must be well aware of global competition.

I did not take part in last night’s debate on the Financial Services Bill, but spent some time listening to speech after speech from Opposition Members saying that regulation of our banking system needed to take into account the global situation that our banking industry found itself in. I totally agree, but they must therefore acknowledge in tonight’s debate that our banks must be competitive within that global market. Vilifying our banking and business sectors with an unbalanced argument and approach and putting excessive taxes on those sectors will move us away from having banks that are competitive in that global environment.

That brings me, quite neatly, to the bankers’ bonus tax, which is mentioned by the Opposition time after time. They seem very keen on that tax, which they mentioned before the Government put in place the bank levy, which raises £2.5 billion a year, rather than the £2 billion that the bankers’ bonus tax would have raised. The goalposts seem to have moved again and the Opposition seem now to be advocating that it should be an additional tax for the banks to pay.

[Jake Berry (Rossendale and Darwen) (Con)]

Will my hon. Friend give way?

[Mr Jones]

I shall give way to my hon. Friend in a moment.

[Rachel Reeves]

Will the hon. Gentleman give way to me, then?

[Mr Jones]

The Opposition’s position is interesting, as we are now trying to encourage our banking sector to lend, particularly to small businesses, to put their balance sheets in good order and to keep bank branches open—we expect them to do an awful lot of things as well as pay additional taxes. We need to be careful about how we approach this matter.

[Jake Berry]

My hon. Friend makes an important and powerful argument. On the specific point of the Opposition’s proposals for the banker bonus tax, is he aware that it is a tax that keeps on giving, because—

--- Later in debate ---

[Mr Jones]

I thank my hon. Friend for his intervention; I apologise for the effect that time is short.

Lending to small business is extremely pertinent, and it is important that it is in the motion, but we should not forget that we need to encourage our banks to lend to small businesses rather than curtailing lending. One of the most important areas in which we need to do that—it has been mentioned by Opposition Members—is manufacturing industry, but they forget to mention that the reason we are in our present position is that the economy was completely unbalanced and we lost 1.7 million manufacturing jobs under their party.

To conclude, although the motion might be populist bordering on opportunist, it does little to solve the problem of irresponsible bankers and poor regulation. It takes no account of the importance of the banking industry not just to bankers but to the rest of industry and commerce in this country and to the UK Exchequer. It does little to get banks to stand on their own two feet, repair their balance sheets and lend again, and it does little to set out a proper strategy for creating sustainable employment for our young people, an agenda that this Government are now tackling with vigour.

[Several hon. Members]

rose—