Banking (Responsibility and Reform)

Mark Prisk Excerpts

Tuesday 7th February 2012 Commons Chamber

[The Minister of State, Department for Business, Innovation and Skills (Mr Mark Prisk)]

We have heard 11 interesting contributions from Back Benchers, although I cannot say that the last contribution was either interesting or, indeed, informed. I should begin by drawing the House’s attention to my entry in the Register of Members’ Financial Interests.

I have to say that the last contribution was in sharp contrast to the more emollient tones of the shadow Secretary of State, the hon. Member for Streatham (Mr Umunna), who actually admitted—I think for the first time from the Dispatch Box—that Labour got it wrong on this issue when it was in government. What is not clear, however, is whether he cleared those remarks with the shadow Chancellor. It seemed that this set of remarks was new to a number of faces on the Back Benches.

We heard very good contributions from my hon. Friends the Members for Halesowen and Rowley Regis (James Morris) and for Nuneaton (Mr Jones) and excellent contributions, too, from my hon. Friends the Members for Bedford (Richard Fuller) and for Stourbridge (Margot James). We heard an interesting contribution from the Chairman of the Select Committee, the hon. Member for West Bromwich West (Mr Bailey), who pointed out that it was my right hon. Friend the Member for Twickenham (Vince Cable)—[Interruption]—who, notwithstanding the shouting and screaming from Labour Members, highlighted the existence of real challenges and problems when his party was in opposition. I am sure that my right hon. Friend will be happy to acknowledge that.

Let me begin by making it clear that this Government have an absolute commitment to addressing excesses in the banking system that were allowed to go unchecked and unregulated for much of the 13 years before we came to office. It was a system in which light-touch regulation and record bonuses were encouraged by a Government who were keen to reap the rewards. Since coming to office, we, as a coalition Government, have made a return to responsible banking a key priority. We have taken concerted action to ensure that, in return for extensive taxpayer support, banks must once again live up to their obligations to support the wider United Kingdom economy.

That is why, as my hon. Friend the Financial Secretary to the Treasury pointed out, we are discarding the discredited tripartite system and implementing the recommendations of the Vickers commission. It is also why we are actively supporting the flow of lending to businesses, especially small businesses, so that they can gain access to the finance that they need if they are to invest and grow. We on these Benches passionately support the entrepreneurs and hard-working small business owners who create the wealth and jobs on which the rest of us rely.

There has been some discussion about the Merlin agreement this evening. Let us be clear about that. Under the terms of the agreement, the five major UK banks committed themselves to making £190 billion of new credit available last year. Of that new lending capacity, £76 billion was dedicated to small and medium-sized enterprises, which would be a 15% increase on the previous year. The latest figures, for the third quarter, show that the banks are broadly on track. At that point banks had lent more than £157 billion to UK businesses, 11% above their implied target, and three—Barclays, Santander and HSBC—have all made recent statements to the effect that they have met their Merlin targets. We await the final figures, but that is good news that we should bear in mind.

Moreover, a report from my Department, to which the motion refers, reveals—although I did not hear this from Labour Members—that three quarters of SME employers are being given the loan or overdraft they request. My hon. Friend the Member for Stourbridge rightly pointed out that it is wrong to suggest—as some Opposition Members do—that no small firm can obtain a loan.

[Mr Umunna]

rose—

[Mr Prisk]

I will not give way. The hon. Gentleman spoke for 45 minutes, which meant that Back Benchers did not have a chance to contribute to the debate.

I understand—we understand—that to the 25% of SME employers who do not obtain that loan or overdraft, the fact that 75% do will be no consolation. That is why the Chancellor is taking decisive action to provide some £21 billion, £20 billion of it under the national loan guarantee scheme, which will be available over two years and will allow banks to offer lower-cost lending to smaller businesses. [Interruption.] Notwithstanding the chuntering of Opposition Members, that scheme is supported by the Federation of Small Businesses, the British Chambers of Commerce and the CBI. The details will be made clear in the next few weeks.

[Rachel Reeves]

rose—

[Mr Prisk]

No, I will not give way to the hon. Lady. We heard a diatribe of clichés from her, but we heard no policy, no original ideas and no original thoughts.

We are also making available an initial £1 billion through a business finance partnership that will allow small businesses to invest through non-bank channels. My hon. Friend the Member for Bedford was absolutely right to say that we should not just consider the bank channels, but should ensure that other players in the market can come forward. My hon. Friend the Member for Halesowen and Rowley Regis—who, unlike many Opposition Members, has actually run a business—was also right to draw attention to the importance of choice and competition. I agreed with the shadow Business Secretary when he said that we should think about the business model and the return of relationship management. I hope that we shall hear some positive contributions about that from Labour, and not just the usual flannel.

The Opposition motion refers to the need for a reform of banking, and to the need for more regulation and responsibility. The motion is right to refer to responsibility; it is just a shame that that was not one of Labour’s policies when it was in government. However, I suppose that it is nice to have a convert, even if the conversion is late in coming.

Yesterday the Chancellor introduced the Financial Services Bill, demonstrating that we would overhaul the regulatory environment that we had inherited. The Bill’s principles are important: responsibility, prudence—I think we may remember that word—and sustainability. That means addressing the old system of excessive and irresponsible levels of pay.

As we have heard this evening, under the new FSA remuneration code we have ensured that bonuses will be deferred by at least three years and linked to the performance of employees and companies. Through the disclosure regime, we are providing more transparency than we ever saw from the Labour party when it was in government. Bonus levels are already starting to fall. As we heard earlier, last year they stood at £6.7 billion, just half as much as when the shadow Chancellor was the City Minister in the last Government.

This evening’s debate has also dealt with the wider issue of executive remuneration. The Government strongly believe that successful people who work hard should be properly rewarded. It is vital that, in a debate about the excesses of a few, we do not give the impression that enterprise and endeavour are unwelcome in Britain; but, sadly, quite a few Opposition Members simply do not understand that. We need to make our message clear. The Government are determined to work with businesses to reform executive pay, and to do so in a way that strengthens business in Britain in the long term. As was alluded to but never actually examined by the hon. Member for—

[Ms Rosie Winterton (Doncaster Central) (Lab)]

claimed to move the closure (Standing Order No. 36).

Question put forthwith, That the Question be now put.

Question agreed to.

Main Question put accordingly.