Richard Fuller
Main Page: Richard Fuller (Conservative - North Bedfordshire)Department Debates - View all Richard Fuller's debates with the HM Treasury
(12 years, 6 months ago)
Commons ChamberThank you, Mr Deputy Speaker.
I thank my hon. Friend for his contribution. The Walker review proposals are the start, not the end, of the reform needed, but my hon. Friend makes a strong point about the culture in the financial services sector. On the proposal to have an employee on the remuneration committee, would not the RBS board be in a stronger position if it could say, on matters of pay, that an employee representative had been involved in the decision making?
I am listening with great interest to the hon. Gentleman’s extended exposition on the failings of the previous Labour Government. It is nice to see him joined by so many for such an extended mea culpa. [Hon. Members: “Where’s the question?”] My question is this: does he think that the objectives of a company executive should be to maximise shareholder value for his business, to do the Government’s bidding or to do the bidding of a broader range of interests?
The hon. Gentleman asks a good question. Ultimately, of course, a director’s duty is to shareholders, but I take issue with those who suggest that the Labour Government did not introduce reforms, because we did introduce reforms, one of which was the Companies Act 2006, which changed the nature of company law so that other stakeholder interests could be accounted for. In some respects, though, shareholder interests are not necessarily completely separate from those of wider society. My strong view is that business and society are mutually dependent, and that goes for our banks as well. Banks rely on society to provide talent, skills and custom, and we rely on banks not only to perform a social utility function for individuals and businesses, but to provide growth and jobs. How does that relate to the hon. Gentleman’s point about shareholder value? If a bank fails its customers—as happened, for example, in the payment protection insurance scandal—that has a knock-on impact on reputation, which can ultimately have a knock-on impact on profit, which is against the shareholder interest.
I gave the hon. Gentleman the figures earlier. As I said, by the third quarter of last year banks had exceeded their Merlin targets for lending to businesses as a whole, and were about 10% ahead of their lending to SMEs in comparison with the same point last year.
Let me say a little more about the credit-easing measures that we are introducing. There will be a £1 billion business finance partnership to co-invest in funds that can lend directly to middle-sized businesses and further stimulate non-bank lending channels for SMEs. Those schemes capitalise on the Government’s commitment to tackling the deficit that the last Government left behind. Unlike the Opposition, we are determined to safeguard our economic stability and protect our credibility in the world market—credibility which has secured our triple A rating and kept our interest rates at record low levels, and which allows us to pursue innovative credit-easing measures to reduce costs for businesses and ensure that more money goes where it is needed.
In referring to the “non-bank” ways in which credit easing could be used, my hon. Friend has identified one of the best ways of establishing responsibility and reform in our banks: through the creation of powerful alternative mechanisms enabling our small and medium-sized businesses to raise finance.
It has been interesting to sit in this debate and hear such an extended series of mea culpas from Opposition Members for the failings of the last Labour Government on this issue. Let us not forget that that Labour Government presided over the decline of British manufacturing, under which the concentration of banks about which they now complain took place and the meaning of the word “bonus” became so debased. There is so much for them to say sorry for, and so little time in a three-hour debate for all of them to come forward and repent.
I am not repenting, but the hon. Gentleman might like to repent for the fact that the real origins of the problems that we are facing can be traced back 30 years to Margaret Thatcher’s Government. [Interruption.] I can hear hon. Members cheering, but it was Margaret Thatcher’s Government who undermined the manufacturing industry, used financial services as an alternative engine of economic growth, ran down the mining, steel, shipbuilding and car-making industries and totally destroyed manufacturing in this—
Order. Shorter interventions, as I have already expressed, are the order of the evening.
I thank the hon. Member for Derby North (Chris Williamson) for what will appear in print as a helpful intervention.
I turn to the mishmash of observations that the Opposition have called a motion. It might, to them, make a motion, but it certainly does not make a policy.
On the key issues, the coalition Government have already taken sensible steps towards reform: they have found an answer to the mess of regulation by centralising it under the Bank of England; they will implement the recommendations of the Vickers report; and they are introducing changes to the compensation culture so that it can get back to supporting enterprise and rewarding merit, which is what we all want.
The shadow Business Secretary did a good job of holding back the hostile anti-business rhetoric. I just hope that the shadow Chief Secretary to the Treasury can restrain herself in her usual anti-business rhetoric when she winds up for the Opposition.
I would like to give way very much, because the hon. Lady did not get a chance to comment earlier.
The hon. Gentleman is much more generous than his colleague the hon. Member for Nuneaton (Mr Jones). With long-term unemployment up 157% in Bedford since the start of 2011, does the hon. Gentleman think that the priority should be a tax cut for the banks this year or a programme to invest in youth jobs?
That is a very good point. Perhaps the hon. Lady will be interested to know that I am leading the establishment of an enterprise investment scheme fund in Bedford to get local people to invest in jobs and create businesses in Bedford. Government Members believe in practical action to support entrepreneurs and jobs, not the empty rhetoric that we get from Opposition Front Benchers. I invite her to Bedford to see the successes that we are having and from which perhaps her party can learn. The shadow Business Secretary made some interesting points, and I only wish that he had had time to speak more about his idea for moving forward with a UK equivalent of the small business investment company in the United States. That is an interesting direction of travel from the Labour party.
It is always hard in a free society to explain or justify why some people earn more—sometimes fantastically more—than other people. That justification can be secure only when clearly based on merit—the merit that comes from taking a risk that works out or from delivering exceptional performance. It is clear, however, that throughout large swathes of the economy, those two forms of merit have been losing hold in the setting of compensation in our country. My hon. Friend the Member for Halesowen and Rowley Regis (James Morris) spoke eloquently about that disconnect between the financial sector and our entrepreneurs. I know that the Government are committed to changing that.
It is sensible to look for measures that focus remuneration more on merit, but that is precisely what the Government’s recommendations seek to do. The problem with the speeches from Opposition Members was that they could not define the problem that they were trying to solve. Were they trying to solve the problem of compensation in state-owned enterprises? Were they trying to solve the problem of compensation in banking? Were they just hostile to high compensation generally in the economy? They could not define the problem owing to the different points of view among Opposition Members. Some call for a return to the rhetoric of the 1980s, attacking people for earning too much money and trying to draw false and upsetting comparisons between people who get paid a lot and those who cannot find a job.
In this country, we need to support the risk takers and the entrepreneurs to create the jobs that people in my constituency and constituencies around the country want. The promotion of an anti-business rhetoric will be harmful. As my hon. Friend the Member for Nuneaton (Mr Jones) said, the reaction to Mr Hester’s bonus sent the unwanted signal to business that this country was anti-business. As many have said today, Members on both sides of the House have a responsibility to make it clear that that is not the case and that we all want business to be strong in our communities.
Strengthening shareholders’ responsibilities will be central to that. One of the perhaps unintended consequences of the raid on pension funds by the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) was to weaken the ability of shareholders, particularly pension fund holders, to hold boards to account over remuneration. There was a change in the ownership of shares, which increasingly went offshore, while those custodians of long-term interests—our insurance companies and pension funds—had their voices and representation weakened on boards. It is right, therefore, for the Government to consider in detail how to strengthen shareholder representation and control over compensation in general.
Several speakers made the connection between banks and support for small business. I ask the Government to be bolder in looking for alternatives to banks in meeting the challenge of financing our small businesses. We need to consider ways of growing bond markets for small business, and we need to go even further than we already have by adopting innovative schemes for promoting equity financing for our small and medium-sized businesses. There is no more honourable a thing for people with money today to do than putting it into equity and our small businesses, and the Government have already provided tax incentives for them to do so. I only encourage the Minister to do more.
On credit easing, will the Minister be cautious about the ability of Governments to stimulate the economy in the short term? By the time that Governments get round to deciding what to do, often the problem has passed. However, credit easing presents another opportunity, which is to use financing, through a credit easing facility, to reduce some of the long-term debt obligations in this country. As the Minister knows, I have spoken before about the possibility of using either some or all of the credit easing financing to create a future fund and unburden the next generation of taxpayers of some of the tax that would otherwise be needed to meet the unfunded public pension liability. We must look to the long term when considering how to fund our small businesses, and not always think that the Government have the answer in the short term. They rarely do.