Banking

Sheila Gilmore Excerpts

Wednesday 15th January 2014 Commons Chamber

[Chris Leslie]

The hon. Gentleman and I differ in our analysis of what happened—I will explain why in a moment—and that says a lot about where we need to take policy. I do not believe that we have finished the job of banking reform, which seems to be the impression we are getting from the Government Front Bench. He and I might agree that more is needed—I will talk a bit about that in a moment—but stopping short of those reforms will not prevent another bank failure or protect the interests of normal customers and society so that they, not the high remuneration of those senior bankers, come first.

[Sheila Gilmore (Edinburgh East) (Lab)]

Does my hon. Friend share my incredulity that the Conservative party, which in opposition accused the then Government of over-regulation, should now suggest it was previously in favour of more regulation?

[Chris Leslie]

There is a touch of revisionism from Government Members, but perhaps that is a bit generous; their attempt to rewrite history is breathtaking. I have no doubt that when the Minister speaks my hon. Friends will hear a complacent desire just to move on from banking reform and a desperation to make party political points about the history of the banking crisis. They will try, with all their might, to pretend that it was Labour’s spending on schools and hospitals that caused a global recession in dozens of countries worldwide, but my hon. Friends will not hear from him about how the banks must still be made to pay for their egregious and scandalous abuses and over-leveraged trades in sub-prime mortgage securities.

All sense that the banks must be held accountable for the state we are in has been airbrushed from the Government’s narrative, because they want to blame their political opponents rather than upset their corporate friends. Perhaps the Minister likes to turn a blind eye, in the knowledge that it really was the banks that were responsible for the global financial crisis, or perhaps he has now genuinely convinced himself that it was primarily the fault of Governments and that the banks were only a little bit to blame. Either way, they have the wrong analysis, which explains why they have the wrong policies. By failing to tackle the root causes of recent economic devastation and the deficit that built up as a result, they are maintaining the risk that banks could once again turn to the taxpayer to bail them out, should they fail again. Never again must the taxpayer pick up the losses for the reckless behaviour of banks, and never again must our economy and public services be thrown into such turmoil because of the negligence and monumental greed of banking executives and traders.

--- Later in debate ---

[Sheila Gilmore (Edinburgh East) (Lab)]

The hon. Member for Redcar (Ian Swales) suggested that there was a pattern to these debates. The pattern I am increasingly seeing is rather like the schoolchild saying to the teacher, “I didn’t do my homework today because he didn’t do his homework yesterday.” The answer to virtually everything in the Financial Secretary’s opening speech seemed to be, “If Labour didn’t do it in 13 years, that lets us off the hook.” Regardless of whether his accusations about what the Labour Government did or did not do are accurate, for the Government to say, “Well, we don’t have to bother” is not the answer. There were other aspects of the Minister’s opening speech that I really have to pick up on for the record.

The Minister gave the impression that under the previous Labour Government income inequality mushroomed as never before. By saying something confidently enough, he hopes that nobody will ever question it, but what actually did happen? Using the Gini coefficient, the recognised measure, there was indeed an increase in inequality from 37 to 40 from 1997 to 2009. I am not happy about that—I would have preferred the Labour Government to have done more to close the inequality gap—but the real mushrooming of income inequality was from 1979 to 1997, when it sprang up from 26—a low number, which means there was less inequality—to 37. The Labour Government did not turn it around, despite several measures to help those at the lower income level—for example, addressing pensioner poverty, which most people recognise was done—but it is simply not correct to convey the impression that our record on inequality was particularly bad.

I represent a constituency in a city where the financial services industry is particularly important. In the last census, the industry accounted for 11% of all employment in the city. Many of my constituents work at some level in the financial services industry. I was talking to a constituent recently about the bonus culture. In his field of work, bonuses historically formed a substantial part of earnings. They were expected and taken for granted. However, they were deemed to be increasingly unfair to groups of employees who did not have the opportunity to earn them. After much negotiation, the solution was to modernise pay by ending the award of bonuses. My constituent lost £7,000 a year in that process, which was nearly a quarter of his previous annual earnings.

I am sure that everyone will have grasped that my constituent does not work in the financial services industry. He is not a banker; he is a joiner who works for the council’s building services department. A bonus that is paid every week or every year, with little or no reference to performance, was, it was argued in the negotiation process, a distortion of earnings. Why is that argument not applicable to the banking sector? My constituent claims that morale has been affected by the changes—turnover and sick leave have increased—but that made no difference to the view that was taken on the bonus culture.

Does it matter to a country if there are vast differences in income and inequality? I think it does matter. This is not simply the politics of envy. We risk increasing social disconnect in our society. People feel that nothing changes. As politicians, we spend a lot of time being angsting about why people engage less with politics and why, when we go to their doors, they say to us, “You’re all the same. Nothing ever changes. My life never changes. It’s not worth my while voting. Everything will just be the same. The rich will still be rich and I’ll still be the same as I am.” We worry about how we can do something about that.

I submit that one reason for that is that people see great unfairness and great inequality, and they would like something done about it. If we do not make some changes, we risk seeing the gap between average voters—or non-voters, as they are more likely to be—and the elite running the country get even bigger. Average voters feel that the elite have nothing to do with them.

There are other issues relating to banking. I am glad that the hon. Member for Hexham (Guy Opperman) spoke about banking for the less well-off. Increasingly, and for all sorts of reasons, we would like those who are less well-off to be banked. For example, those paying for energy bills through PayPoint usually end up paying an extra charge on top of their bill, so that the poorest people without bank accounts pay the most. We want people to be banked so that they can get employment—it is often a prerequisite because money needs to be paid into a bank account—and so that they can receive their benefits payments.

The previous Government took up the question of the unbanked, through the introduction of basic bank accounts and putting pressure on banks to do something about it. It was their intention to make it compulsory for banks to offer basic bank accounts, but the incoming coalition Government chose specifically not to go ahead with them, and now only one of the major banks offers basic banks accounts; all the others have stopped. This is important if people are to have the widest possible choice, and much as I support the credit unions in my area and much as I think they have a valuable role to play, they are in their present incarnation—and will remain so without a lot more investment—very far from being able to substitute for proper basic bank accounts and provide for the least well-off. Banks need to do something about that. It is another important aspect of what they should be doing for the country.