Financial Services Bill

Sheila Gilmore Excerpts

Monday 6th February 2012 Commons Chamber

[Sheila Gilmore (Edinburgh East) (Lab)]

The hon. Member for Vale of Glamorgan (Alun Cairns) referred to what he thought was the regrettable negative public opinion towards bankers, but we have to accept that over a considerable period the banking industry has changed so dramatically that perhaps it needs greater regulation.

My mother-in-law remembered that when as a student she went overdrawn, the bank would write to her father, and that when she got home for her summer holidays, she would be in big trouble. In contrast, my children were automatically given a £1,000 overdraft as soon as they presented their new student cards at the bank. Before I could say, “Hang on a minute, perhaps that isn’t terribly wise,” they found themselves unable to refuse this largesse. That demonstrates the change that has taken place over a couple of generations. To that extent, the banking industry has to look to itself, not just to external regulation, and ask where things have gone wrong.

At the beginning of this debate, when things were a bit livelier—they are often livelier at the beginning than near the end—much was made of whose fault it was, who did not regulate, and whether the Opposition would apologise for failing to regulate and for the financial collapse. That is rich coming from a party that, even when the financial crisis was beginning to crash around us, spent so much time saying that there was too much regulation. There are clear quotations to that effect, with the current Prime Minister saying in 2008:

“As a free-marketeer by conviction, it will not surprise you to hear me say that a significant part of Labour’s economic failure has been the excessive bureaucratic interventionism of the past decade…too much tax, too much regulation, too little understanding of what our businesses need to compete in the modern world.”

There are many other quotations like that. It is not just that the then Opposition were not standing up and saying that we needed more regulation; it is that they were going beyond that and saying that there was too much regulation.

We all have to reflect on that. I have no hesitation in saying that I believe the last Government did not sufficiently regulate the financial services industry and should have done more. We have seen many of the difficulties caused by that. The FSA has been roundly criticised by many of the victims of financial collapses. My hon. Friend the Member for Rutherglen and Hamilton West (Tom Greatrex) talked a lot about Arch Cru and how it worked. Many of us in have had people come to us affected by the Equitable Life collapse, which was due to the failings of both the FSA and its predecessors. We know how people’s lives can be affected. It is extremely important that the new regulatory architecture, as it seems to be called, should grapple with the kind of situations that have arisen and how they affect people.

We also need regulation that looks at the most vulnerable, which is particularly important. Citizens Advice, which deals with a lot of people’s problems, has suggested that the FCA be placed under an explicit duty to be proactive in preventing and responding to consumer detriment, and to have particular regard to the needs of low-income and otherwise vulnerable consumers. Earlier we heard about high-cost credit and what it does to people, but Citizens Advice has suggested that the problem goes much further. It includes, for example, the way that cheques have been phased out of the banking system, with little regard for the needs of those with little choice but to use them, and the way that people have perhaps been encouraged to bank online and not otherwise, which could be to the detriment of those who cannot do so. Indeed, it might even include the way that banking itself works. Many of us think it is wonderful to have free credit for having a current account and not to have to pay fees. However, there is a downside to that, in that it is often funded by what those who become overdrawn—not necessarily because they are wholly irresponsible; rather they may simply be hard up and experiencing difficulties—have to pay for that. Those are all things that we should be considering, but if the new body does not have an explicit duty to consider such matters, they might simply not be dealt with properly.

We have heard, too, that some of the things that the Office of Fair Trading does on consumer credit—things that most of us probably feel it has not done very well over the years—will be transferred to the new organisation. Again, we need to know as much about that as possible, and as soon as possible. It is not good enough to say, “That will all come along in due course.” There have been clear failures in the system to look at the issue in enough depth, to act quickly enough and to ensure that people are not faced with poor banking and credit practices. Basic bank accounts is another area. The current Government appear not to want to place an obligation on banks to provide a right to a bank account, for which the previous Government had proposed to legislate. I hope that the Minister might take this opportunity to reconsider the position that he expressed when I had a Westminster Hall debate on this very subject some months ago, and to decide that he will go ahead with such a proposal, because the position on basic bank accounts has deteriorated since that debate.

[Nic Dakin (Scunthorpe) (Lab)]

My hon. Friend is making a clear and powerful case for regulation in appropriate places, and I would be grateful if she continued her exposition.

[Sheila Gilmore]

Although it is widely believed that regulation for the poorest is particularly important, those of us who have witnessed the kind of financial failure that so many people have had to put up with are aware that it is important not just to the poorest, but to a number of those with reasonable incomes. Our Work and Pensions Committee has been discussing pension auto-enrolment. One of the fears expressed was that people would not want to save because they did not trust the financial services industry. If we want people to save properly we must ensure that they feel that trust, and it could be re-created through proper regulation.