Corporate Structures and Financial Crime

Steve Barclay Excerpts

Thursday 4th July 2013 Commons Chamber

[Emily Thornberry]

I am getting to that. I am grateful to my right hon. Friend.

Is it any wonder that KPMG has just reported that in the UK, fraud cases totalling more than £500 million were recorded in the first half of 2013, which is up by more than a quarter on the previous year?

We need a change of culture in our law enforcement agencies. We must equip them with the tools and resources that they need to get on the front foot. Under English law, companies are criminally liable only if it can be proved that a director was personally involved in the wrongdoing. That is an extremely high threshold—a problem to which the hon. Member for Wells (Tessa Munt) referred.

There is a good case for holding companies vicariously liable for their employees’ economic crimes, unless they can demonstrate that they had adequate compliance procedures. The last Labour Government did that in relation to bribery with the Bribery Act 2010. We want to build on that, but this Government want to water it down. They say, for some reason, that rules against bribery are red tape. That stopping people bribing one another can be seen as red tape is beyond belief.

If we change the law on corporate responsibility, we may see an increase in the number of companies that are prosecuted, so we must have a penalty structure that is worthy of receiving them. The highest fraud fine to result from an SFO prosecution is £2.2 million. The highest fine clinched by the US Department of Justice is larger than $3 billion. Why do we not introduce a system in which sentences are based on a percentage of the company’s turnover over the past three years?

Although the SFO’s problems are not entirely down to under-resourcing, resources are important because these crimes are expensive to investigate. Last year, the SFO’s budget was £34 million, compared with £40 million in 2009-10. In 2014-15, it will fall to only £30 million. It is so short of money that it has to go cap in hand to the Treasury whenever it wants to take over a major prosecution. That at least gives the impression that the Chancellor has a secret veto on whether fraud investigations take place.

The US approach of topping up the funds of fraud prosecutors is much more appealing. Where possible, confiscated assets are returned to the victims. The proceeds from the many cases in which the victims cannot be traced are poured into a central fund. Each year, teams of prosecutors bid for a portion of that fund for asset tracing and law enforcement investigations. We have the beginnings of such a system in the UK. We could extend that and put large fines or at least part of them into the pool as well. In these austere times, we need to explore such alternative means of funding.

[Stephen Barclay (North East Cambridgeshire) (Con)]

The hon. Lady is eloquently describing the failure of the tripartite regulatory regime that her Government put in place. She is correct that the fines in the UK are a fraction of those in the US. A further failure is that the fines have rewarded other banks. This Government have ensured that the fines that are paid do not reduce the levy so that banks no longer profit from the wrongdoing of other banks. That was the regime that her Government put in place.

[Emily Thornberry]

I am grateful to the hon. Gentleman, but in the time I have available, I would like to look to the future and consider the best method that we have for solving the current problems. I am happy to talk to him at some length outside the debate, because I am committed to the issue and will be interested to hear his point of view.

It seems to me that one good way in which the assets in question can be used, instead of lowering the levy, is to put them into a pool that prosecutors can use in future. That would help to pump up what we are doing. That seems to be a way forward, and I am putting it before the House today to get some sensible responses.

Economic Growth

Steve Barclay Excerpts

Wednesday 15th May 2013 Commons Chamber

[Mr Geoffrey Robinson (Coventry North West) (Lab)]

I think that some of us who have sat through this debate find it regrettable that, to a large extent, it has been hijacked by the obsessively anti-European faction in the coalition parties. It is not that Europe is not important, but the debate is about the Queen’s Speech and a reflection on the Government’s record after three years in office. Rather than intruding on the private grief of Government Members caught up in their internal and agonising debates, I would much rather say to those on the Treasury Bench that, in all seriousness, they have to face up to the fact that after a full three years in office they are responsible for the economy: they are responsible for the situation we are in, and they are responsible for getting us out of it. Unless they accept that responsibility, they will never accept the measures that are necessary to find a way out of the chronic situation in which we still find ourselves.

Three years ago, after only a few months into office and after they brought in the cuts that went too far and too fast, the Chancellor was already crowing that the plan was working and the recovery was on track. We know what the recovery was meant to achieve: central to all economic policy is growth. In the three years to date, we were meant to have achieved 6% growth, but have achieved only 1.1%. I wonder whether the Government realised that what they were committing themselves to, and which after three months they thought was working, would achieve only one-sixth of their central economic objective. Those who have doubts about whether they should change course should reflect on that. Had they realised what that would achieve, they would never have embarked on it. The only way forward is to change course. Of course, as my right hon. Friend the Member for Morley and Outwood (Ed Balls) pointed out, to do that would mean going back on so much of what they proclaimed to be absolutely essential, and that is impossible for them to do.

Time is limited for all Members, so I want to concentrate on just two aspects of economic policy where the Government’s incompetence and failure is hard to explain. The first is investment. What the Government call the national infrastructure plan has been variously described by conservative organisations as “hot air”, “complete fiction” and, by the chairman of the CBI, as “lacking all delivery”. Where does this leave investment? One cannot understand the Government’s failure, because there is no cross-party debate on investment or conflict over it. Less still is there any doctrinal argument such as we have on economic growth or financial policy—on the components, predictors or causal factors of, say, bond yields in 30 years and so on. Everybody in the House I have ever heard speak on this has said, “We must have more investment,” because traditionally the UK has not invested in R and D or fixed equipment and plant as much as we should have done or as much as our competitors have done. There is no argument about that.

[Stephen Barclay (North East Cambridgeshire) (Con)]

I am struck by the hubris of the hon. Gentleman, who is a former Paymaster General. The report on the extension of the private finance initiative by the Public Accounts Committee, which is chaired by a Labour Member, found that the previous Labour Government wasted more than £1 billion. Half, or more, of the PFI projects in the housing sector came in at double their original budget. He needs to accept his party’s record on major infrastructure projects.

[Mr Robinson]

Here we go again. I do not know of any major infrastructure project that has not run over budget. As my hon. Friend the Member for Huddersfield (Mr Sheerman) said, let us see what happens to HS2. They all run over budget. Some terrible PFI deals were done—there is no question about it—but all Government Members ever do is say what Labour did badly. We have admitted that we did many things badly. We failed on certain things, but it will not help to get the Government’s plan going to say, “Oh, look what you did when you were in office.” Nothing could be more pathetic. That is what I am trying to get through to the Government. They are now in charge, and they now have to face up to their own failures and the things that need to be done to put them right.

I come now to what those things are. I have mentioned how the Government budgeted for 6% growth, but in fact have achieved about 1% growth. It could not get much worse than that. Under their national infrastructure plan, they have about 567 projects in the pipeline, ready to go, but in three years they have achieved seven of them, or 1.2%. Everyone agrees that these projects are good ideas, so why can they not get these things done? We own one of the banks outright—I shall come to the banks in a moment—and we have a substantial stake in another, but the Government have created their own business bank. It could be investing in some of these projects, but against a background in which bank lending to businesses has fallen by £4.8 billion in the last quarter alone, they are offering £300 million through the British business bank. It is no wonder they are not getting the projects through. It is no wonder they are failing.

[Stephen Barclay]

With respect to the hon. Gentleman, who is a senior Member of the House, he is just not engaging with the facts. Public investment as a share of GDP will be higher on average over this Parliament and the next Parliament collectively than under the last Government. On housing, which was my previous example, his party’s record was absolutely shocking, whereas our build to rent fund is addressing some of these issues. Action is being taken. He is ignoring his own record as a former Treasury Minister and the action that this Government are taking. It is remarkable.

[Mr Robinson]

The Chancellor produces that tired statistic every time we mention investment. Let us take construction. The last time the level of house building was this low was in the 1920s. Overall, the level of construction has fallen 11% in the last year. This is against a background of a chronic need for the jobs and growth that investment can supply. We need a major uplift in the level of investment. It is higher, marginally, than it was 10 years ago, but so it ought to be. It is pathetic that Government Members continue not to face up to the reality of the failure of their own programme. As long as they do not, they will not succeed. Would the hon. Member for North East Cambridgeshire (Stephen Barclay) really have embarked on this plan if he had known that, instead of 6% growth, we would end up three years down the road with 1% growth? Would he? Of course not: nobody on the Government Benches would have done that, and if they had, they would have needed their brains tested—perhaps they need them tested anyway. That is the truth of it.

Then we come to the failure of Merlin and the question of the banks. Instead of making the Royal Bank of Scotland a national bank to invest in such projects, all the Government want to do is flog it off ahead of time. That will be another failure to add to the long list. This is a Government of failure who will not admit it, and therefore they will not put things right.

Financial Services (Banking Reform) Bill

Steve Barclay Excerpts

Monday 11th March 2013 Commons Chamber

[Chris Leslie]

My hon. Friend is entirely right. Ducks go quack, cows go moo and Conservatives hate regulation of the market. It is part of their ingrained DNA.

[Stephen Barclay (North East Cambridgeshire) (Con)]

Will the hon. Gentleman give way?

[Chris Leslie]

I will make a bit of progress and give way in a minute.

There is not enough in the proposed legislation on the safety of the banking system, not enough to rebuild consumer confidence, not enough to reform the high-risk banking culture and not enough to support growth and create a banking system that serves the needs of our economy. Too often, Ministers sound as though they are acting like shop stewards for banking executives desperate to retain bonuses that are many multiples of their salaries. Instead, Ministers should roll up their sleeves and put the taxpayer, the consumer and the UK economy first.

I want to address some of the issues the Minister raised about the detail of the Bill. First, on banking safety and protections for the taxpayer, Labour believes that a reserve power for full separation is needed, not just the firm-by-firm approach that the Government have conceded. Stopping short on backstop powers will reduce the chances that ring-fencing will succeed. Ministers are ignoring the commission’s conclusions, claiming that it would be wrong to give the regulators full separation powers, but the commission is scathing in its report today, saying:

“The Government has erected a straw man which it has then successfully demolished, because we made no such recommendation”

in the first place.

It is clear that the commission wants a full separation power only after a full review and decision by Government and Parliament—perhaps it was being inadvertently misrepresented by the Treasury—so it would be far more sensible to legislate now, not just if one or two individual banks misbehave, but in case ring-fencing as a whole fails across the sector. Indeed, we see cross-sector failings, as LIBOR illustrates, so it is not enough to have a half-done backstop. Stopping short will deliver only half the backstop measures that we need and will have corporate lawyers across the City rubbing their hands with glee at the prospect of litigation against regulators who might want to intervene on a case-by-case basis. However, given the possible views of the other place, I suspect that the Government will eventually be forced to change their mind.

Let me turn to leverage and the risk-weighting of assets, which has been introduced as an antidote by regulators to the high-risk, high-reward culture that was pervasive in banks before the crisis. However, the risk-weighting process has been partial and, in some cases, self-defining by the banks, and in the EU the zero risk-weighting attributed to some palpably risky sovereign debts has brought the system into some disrepute. The Basel committee published new evidence in January highlighting the major variants between jurisdictions and banks on this issue. Regulators and the Bank of England need to get a grip of this, but as a counter-balance we also need protections against the over-extended vulnerability of bank balance sheets. That is why the leverage ratio powers need to be clearly set out in the Bill and phased in ahead of the European Union plans for the end of this decade, which is one of the main recommendations and conclusions of the Vickers report.

--- Later in debate ---

[Chris Leslie]

If the hon. Gentleman’s analysis is correct, he will no doubt join us in the Division Lobby to institute the recommendations on leverage from the parliamentary commission. Is that his intention? Will he join us in supporting our amendments? I will give way to him if he wishes to answer that question, but I do not think he does. That is a shame, because I know that he feels strongly about these matters, but I can detect the gagging influence of the Treasury Whip as he texts the message “Be careful: Jesse Norman is on his feet again.” Forgive me, Mr Deputy Speaker, I meant to say the hon. Gentleman. The alert has gone out that rebellion is in the air.

We need more protections to deal with standards and culture, and we need to make sure that whistleblowers in the banking sector are given protection. We also need to set up a financial crime unit within the Serious Fraud Office, using some of the resources that are flowing from the fines. We probably also need to deal with the statute of limitations issue, going beyond the three years to give the regulators additional powers.

[Stephen Barclay]

rose—

[Chris Leslie]

I think I ought to make some progress, and I want to talk about the need for the banking system also to enhance our economic prospects, support enterprise and growth, and maintain the supply of credit to the economy. Those are some of the issues that our constituents are concerned about for the future. Nothing in the Bill looks forward at the challenges facing business or the economy more broadly. So we want to see urgent action—ideally in the Budget, but if not in this Bill—that improves the operation of the funding for lending scheme to ensure that lending to small business is prioritised. We called for that last summer when the scheme began, but since then net lending to business has fallen further and further still. It is very important that we take this moment to improve and adapt the funding for lending scheme in this way. We must recognise that we have had the failure of Project Merlin and we have had credit easing, which was given eight months to do the job. So funding for lending is the third scheme that the Chancellor has tried and we have to make sure that it is changed in a way that makes these things work.

Even if the Government eventually create a fully formed Bill, we need regular parliamentary oversight of how ring-fencing and the new structures are working. As the Parliamentary Commission on Banking Standards says today:

“The Government’s proposal for the periodic review to be conducted by the regulator is wholly inadequate.”

We also need to have more than the one-and-a-half-hour, rubber-stamping Committees to scrutinise the detailed secondary legislation, which is why we advocate a super-affirmative order-making process to give time for the Treasury Committee and others to examine the technical detail of the changes in respect of the clauses and the orders that flow from them.

We want a Bill that makes banking safe and protects the taxpayer, but this one falls short in several areas. We want a Bill that improves banking standards, enhancing probity and conduct, and reforming the culture of banking, but this Bill contains none of those changes yet. We want a Bill that helps to rebuild consumer trust and choice, supporting more competition, new entrants, mutuality and consumer switching. We want a Bill that creates a banking system that supports jobs and growth, and maintains the supply of credit to the economy. The Opposition will not oppose the Bill on Second Reading today, because reforms are clearly needed, but too many important policy changes are still conspicuous by their absence. After such a big global crisis, and so many scandals and inquiries, the Government have no excuses and they need rapidly to populate this shell of a Bill with some real substance.

--- Later in debate ---

[Stephen Barclay (North East Cambridgeshire) (Con)]

It is always a pleasure to follow my hon. Friend the Member for South Northamptonshire (Andrea Leadsom), and, Mr Deputy Speaker, to be the last speaker to catch your eye before the wind-ups.

The Father of the House spoke about one of his speeches in 1984, so I took the liberty of having a look. If the House will indulge me, I will quote from it:

“There has been a great deal of talk about capital. Of course that is important, but vastly more important than that is expertise, integrity and judgment.”—[Official Report, 16 July 1984; Vol. 64, c. 68.]

Indeed, there was much expertise, integrity and judgment in my right hon. Friend’s remarks, and in essence I want to focus my comments on them. The Bill addresses structure and it is right to learn the lessons. Of course there was too much leverage in the system. No one would think that the level of liquidity available to the banks at a time of crisis was adequate, and there has been much work by regulators and central bankers since the 2008 crisis to address that. What there has been rather less of, however, is a willingness to tackle culture.

While I commend the Government for the Bill’s focus on leverage, and on dealing with the well-measured suggestions of my hon. Friend the Member for Chichester (Mr Tyrie) and his commission, we should be clear on what the Bill is not doing. It will not stop retail bank failures, such as Northern Rock and Bradford & Bingley; it will not stop investment bank failures, such as Lehman’s; and it will not stop the regulatory failures of universal banks, as we have seen with the anti-money laundering and sanctions abuses or the LIBOR abuses by some of our largest banks. The Bill does not address the shadow banking world—the £200 billion of risk that is currently carried in private equity. Most of all, the danger of today’s debate is that we do what is so often the case after a regulatory crisis: we focus on solving the problem we have just had. We are not talking about the impact on banks if we lose control of interest rates, which we all hope will not be the case. The focus is on the structural failures relating to liquidity and capital, and that has been the tenet of the debate.

[Jim McGovern]

Why would it be wrong to focus on our recent problem?

[Stephen Barclay]

Of course that is not wrong. I said that the Bill is welcome, and that it is a positive response to the commission’s report. The focus on leverage and liquidity is absolutely right, and that is why I pay tribute to the work of central bankers and regulators. I am not sure that the hon. Gentleman was listening to my remarks. The danger is that we focus on the past and do not anticipate the future. There is a need for flexibility, and for that the Bill needs to tackle culture. The paradox is that individuals in banks are motivated by big bonuses, which drive their behaviour, yet when things go wrong, we do not have their corollary, which is big fines against individuals. That might be the sort of thing to grab people’s attention when they become aware of issues.

I am glad that the hon. Member for Nottingham East (Chris Leslie) is back in his place, because he missed addressing that point in his remarks—it is a shame he would not take interventions from me. Under his Government, the Financial Services and Markets Act 2000, probably the most-debated Act for many years, created a rulebook of more than 6,000 pages. He spoke about the need for more regulation and suggested that Conservative Members had failed because of the lack of regulation, yet we had 6,000 pages of it. The issue was that the regulation was not enforced.

It is even worse than that, because the hon. Gentleman actually allowed a regulatory regime that included things such as guaranteed bonuses. Not only would somebody get a bonus if they performed well, but they got a guaranteed bonus even when the bank collapsed. When the financial crisis hit in 2008, contractually the banks were signed up to guaranteed bonuses, so they were still doling out money under the enhanced regulatory regime to which he referred—true socialism in action.

It gets worse. There was a fines system that incentivised banks to profit from the wrongdoing of other banks. When a bank was subject to a regulatory fine, the money went not to the taxpayer in the form of funding good works or to customers of the bank affected, but to the other banks in the form of lower levies to the regulator. When a bank committed a wrongdoing, therefore, other banks in the sector profited. This is the regulatory regime on which we are now being lectured.

Let me give another example on structure: the collapse of RBS. After 10 months of the brightest minds in our Treasury—I am sure they are the brightest minds—looking at this issue, they still could not rely on the books. So untrustworthy was RBS’s auditing that the permanent secretary to the Treasury had to send for a letter of direction from the Chancellor saying, “I can’t rely on the books. It’s such a mess, Chancellor, you’ll have to give me a letter of direction.” We will not take any lectures from the Opposition, therefore, about their regulatory regime or the mess in which it has left our constituents, who are the ones footing the bill.

[Mr Richard Bacon (South Norfolk) (Con)]

It is a pleasure to listen to my hon. Friend, who, unlike many in the House—particularly in the Opposition, but also, I fear, on the Government Benches—as a former financial regulator actually knows what he is talking about, which is a dangerous thing here. In September 2007, when Northern Rock collapsed, the Treasury did not even know if it had the power to take it over, which was something of an indictment of thousands and thousands of pages of regulation. Does he agree that it might not be a coincidence that John Pierpont Morgan and Nathaniel Rothschild, the founders of two of the most successful banks in the 19th century—JP Morgan and NM Rothschild —had a considerable personal interest and stake at risk in those institutions if things went wrong?

[Stephen Barclay]

My hon. Friend is absolutely right, and he is right because, as I know from my time in banking, people in banks are usually aware of the problems, but there is a perverse incentive—a short-termism—that says, “If the rewards are delivered short term, but the risk is unlikely to crystallise”—

[Chris Leslie]

I believe that the hon. Gentleman was director of regulatory affairs at Barclays bank from 2006 right up, I think, until the general election. Will he assure the House that he was not aware of any of the LIBOR issues that took place under his watch?

[Stephen Barclay]

Once again the hon. Gentleman has got his facts plain wrong, because although I was—[Interruption.] We can all see that he has had a quick read, but as so often with Labour politicians he has not understood what he has read. I was director of regulatory affairs in the retail bank and, as anyone knows, the retail bank was not responsible for LIBOR. That was an investment banking issue.

[Chris Leslie]

Will the hon. Gentleman give way?

[Stephen Barclay]

Unlike the hon. Gentleman, who repeatedly refused to take interventions, I will happily take another.

[Chris Leslie]

I did take a fair few interventions. If the hon. Gentleman was the director of regulatory affairs at Barclays bank from 2006 until the general election on the retail side, was he aware of the mis-selling of payment protection insurance?

[Stephen Barclay]

Once again the hon. Gentleman has not listened to the answer. I was actually head of anti-money laundering and sanctions for half the period, so once again he is getting the basic facts wrong. It is interesting that he does not want to debate the issues. He does not want to debate the fact that there were guaranteed bonuses or a fines system that incentivised the wrong things. He does not want to debate the fact that, as my hon. Friend the Member for South Norfolk (Mr Bacon) correctly pointed out, we had a Treasury that was not even aware of its own powers. We also had a tripartite system in which it was unclear who was in charge. We then had Treasury officials looking at banks and their assets without being able to rely on what was under their noses. That is the legacy that Labour left us.

[Chris Leslie]

Will the hon. Gentleman give way?

[Stephen Barclay]

No. I have taken two interventions from the hon. Gentleman and he did not do well with either. I want to make progress, because I am conscious that time is moving on.

I shall return to the comments made by someone who, unlike the hon. Gentleman, speaks with professional expertise, namely the Father of the House. He was correct—as he is on so many issues, but particularly this one—to talk about the danger of focusing on structure and not rooting out conflicts of interest. That is at the heart of the point I want to make about individual accountability, linked to conflicts of interest—about the awareness, as my hon. Friend the Member for South Norfolk pointed out, of those in institutions who know where the risks are and how they are incentivised to speak up. On Thursday we will have a debate on the NHS and the fear of whistleblowers to speak out. Many of the issues in the NHS are similar to what we have seen in our banks. Let me give the House an example that makes the point highlighted by my hon. Friend. So far, the two biggest fines imposed on any individuals in banking were imposed on two Northern Rock executives. On both occasions they were less than those individuals’ bonuses the preceding year. How are people incentivised to do the right thing in our financial sector when they can see such short-term benefits from wrongdoing and very little downside risk?

I very much endorse what my hon. Friend the Member for South Northamptonshire (Andrea Leadsom) said about empowering consumers by having portability in the system and grass-roots pressure. However, we cannot rely on that alone—I do not think she would suggest for a minute that we could—to address the regulatory failures or the asymmetry of information that customers face.

[Jim McGovern]

I became an MP in 2005, and between then and about 2009, I do not think any business people approached me. Since then, however, a lot of them have approached me to express their grievous concern about keeping their businesses going. I have to say that I am struggling to understand what the hon. Gentleman means, and I think the people in my constituency who have started small businesses as joiners, bricklayers or whatever would also struggle to understand him. Will he please make his point in lay terms?

[Stephen Barclay]

Yes, I can address that question head on. It is logical to have introduced measures to try to manage risk in the financial sector, but we are requiring banks to retain more and more assets at the same time as asking them to lend more. We are therefore asking them to do two conflicting things, as well as introducing a structural fix that innovative people will often be able to find ways around. For example, the shadow banking sector is not affected by this kind of proposal. If we want to address innovation, to be flexible and to move with the market, and retrospectively to impose fines for wrongdoing, we would be far more successful if we changed the culture than if we imposed rigid rules.

In many ways, I agree with the hon. Gentleman, in that we all have constituents who complain that the banks are not lending, but perhaps that is an issue for another day. There are many areas in which the banks’ behaviour is wrong, but we cannot change the culture through rules alone. We had more than 6,000 pages of rules, but that did not achieve the right culture. We can achieve it by having individual accountability, and one of the best ways of doing that is through personal fines.

I am sure that the hon. Gentleman read the Daily Mirror today, as I did; I always try to avail myself of the Daily Mirror. On the front page, there was a story about the “Fat cat in the hat”, who is a former Barclays executive, according to the report, and it must be true because it was in the Daily Mirror. The point is that it is individuals like that, where there is alleged wrongdoing, who are able to keep their bonuses and keep their profits. That does not send the right message on culture. Rules are too blunt a tool.

If we want to change the banks, the Bill is extremely welcome, but I hope that the very constructive proposals put forward by my hon. Friend the Member for Chichester will be given further consideration. There is much to support in the Bill, however.

[Mark Garnier]

Does my hon. Friend agree that the Chancellor’s measures stating that the fines levied on RBS should be taken from the bonus pool go some way towards addressing the point that he makes?

[Stephen Barclay]

Those measures are a step in the right direction, but they will also catch the legitimate people, rather than focusing on those who have done wrong. There will be no means of clawing back from wrongdoers. Let us take the example of Sir James Crosby. To what extent would he face retrospective clawback? He is long gone, and he has taken the money.

[Andrea Leadsom]

Is not this exactly the issue that we have been debating over the past week, with the EU proposal to cap bonuses? That would have the unintended consequence of pushing up salaries, which are notoriously difficult to claw back. Does my hon. Friend agree it would be much better to put in place a proper compensation scheme, perhaps through statute, that was determined by the banks themselves and that ensured clawbacks and full accountability?

[Stephen Barclay]

My hon. Friend is absolutely right. One-size-fits-all rules often capture the good but are insufficiently robust to deter the bad. Yes, the Bill is welcome and takes constructive steps forward, but we also need to see more measures from the Treasury on individual fines.

[Mr Bacon]

There are some people here who are not interested in the debate, but they can go away if they want to. I am grateful to my hon. Friend for giving way; I have now caught up with those on the Labour Front Bench in terms of interventions.

I heard from 27 employees of Lloyds bank who were caught by the temporary ban on bonuses. Some of them were getting bonuses of only £2,000, so that was quite unfair. I think my hon. Friend the Member for Wycombe (Steve Baker) might have suggested that senior bankers and bank directors should be required to post personal bonds. Does my hon. Friend agree that that would go some way towards dealing with the problem?

[Stephen Barclay]

My hon. Friend is right. We have to introduce into the system a position in which those at the top who are getting the biggest rewards also face the biggest risks. Some colleagues have talked about criminal sanctions, but the burden of proof is such that it is often difficult for the prosecuting authorities to get sufficient evidence to make it an effective tool. I am not against that, but it is often not an effective tool in practice. We need to ask how we can get to a situation where we do not catch those on £2,000 bonuses and those who have done no wrong, and do not set in place a whole load of rules that fetter innovation or deter business, but where we do create a stick and a deterrent for those who have abused the system and know they are still on the hook for significant financial loss. Those are the people most motivated by big fines in the first place; we should have a correlation between the bonuses and the fines.

In conclusion, the Bill is constructive and welcome, but we need to hear much more from Treasury colleagues about individual accountability, not just structures.

[Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)]

We have had a wide-ranging debate and heard some useful, thoughtful and constructive contributions. Everyone has had the opportunity to make all the points they wanted to—except, perhaps, for the Father of the House, who understandably bemoaned the fact that he had only 12 minutes. He might well be disappointed not to have been here at a later stage of the debate to give us the benefit of his wisdom, as he certainly gave us an interesting contribution.

We heard the maiden speech of the hon. Member for Eastleigh (Mike Thornton). He paid tribute to his predecessors in the traditional style, but raised a number of important points, not least of which was about bank lending and particularly the lending scheme for small businesses.

I would like to pick up some of the general points and themes running through the debate. My hon. Friend the Member for Nottingham East (Chris Leslie) gave a comprehensive opening speech from the Opposition Front Bench. Other Members picked up the point that he made that we cannot have any repetition of the actions that led to the taxpayer bail-out. The actions and attitudes of the bankers meant that the banking sector—or individuals in it, as many hon. Members have said—thought that it was okay to retain the profits privately when the sun shone, to use that metaphor, but to let the losses fall to the public purse when the rainstorms arrived. We simply cannot allow a repetition of such risks to taxpayers in the future. That is why the banks must be reformed here in the UK, and further reformed in the EU and across the world.

As my hon. Friend the Member for Nottingham East outlined—it was echoed by my right hon. Friend the Member for Wolverhampton South East (Mr McFadden) and by my hon. Friend the Member for Wirral South (Alison McGovern)—our financial sector is larger than most. The greatest global financial centre is in the City of London, and there are important centres in Edinburgh and across the UK, so we have to take any additional steps required to guard against any risk of future collapse.

My hon. Friend the Member for Nottingham East also spoke eloquently about the passage of the Financial Services Act 2012, which sought to address some regulatory shortcomings. Many hon. Members will have heard him during the course of the Public Bill Committee speaking eloquently—and, I have to say, frequently—about many of the issues that we are looking to this Bill to address. He highlighted a number of them, including concerns about LIBOR.

I hope that the hon. Member for North East Cambridgeshire (Stephen Barclay) will take the point made by my hon. Friend the Member for Nottingham East. The hon. Gentleman talked a lot about regulatory shortcomings, but we need to remember how members of the public and ordinary people in the street will view this issue. People in the banks were culpable; they were individuals who somehow thought it was all right to take those risks and—[Interruption.] I hear the hon. Gentleman say, from a sedentary position, that it was our system. At the end of the day we can have systems, we can have regulatory reform, we can have all those rules in place, but if the culture and the attitude of the people involved do not change, that will simply lead to more problems in the future. Members on both sides of the House have recognised that today. I am surprised that the hon. Gentleman, who, I understand, previously had a career in the banking industry and, indeed, in regulation, does not seem to accept that individuals as well as systemic failures bear some responsibility.

[Stephen Barclay]

rose—

[Cathy Jamieson]

I am happy to be corrected if I have misunderstood the hon. Gentleman.

--- Later in debate ---

[Stephen Barclay]

The hon. Lady seems to be misrepresenting the entirety of my speech. The whole speech was about the need for individual accountability. I said that under the system established by the hon. Lady’s party, there was no such accountability. That is why Sir Fred Goodwin walked away with his huge bonus untouched. Under that system, there were no real fines and no individual accountability. That is the essence of it.

[Cathy Jamieson]

I understood the hon. Gentleman to be blaming the regulators rather than the individuals who were involved in the wrongdoing. Let me repeat that, notwithstanding the amount of regulation that is introduced, if there are people who are intent on wrongdoing, we need to address the culture and the expectations in banking. I think that members of the public expect us to do that.

A number of important points were made at the outset of the debate about the timing of the Committee stage. My hon. Friend the Member for Nottingham East, and a number of those who intervened subsequently, expressed concern about the fact that the Bill provides such a slim framework for further secondary legislation, largely by Treasury order. My hon. Friend the Member for Bassetlaw (John Mann) described it as an “Is this it?” sort of Bill, and my right hon. Friend the Member for Oldham West and Royton (Mr Meacher) called it a mini-Bill.

The Minister seemed to suggest that we would have adequate opportunities not only to scrutinise the Bill itself, but to scrutinise and respond to whatever other measures or recommendations were made by the parliamentary commission at a later stage. I think that how, when, and where that scrutiny will take place remains rather uncertain. The hon. Member for Chichester (Mr Tyrie), the chair of the commission and of the Treasury Committee, asked for two days to be provided on Report, but it seems that Ministers did not consider that appropriate, or did not wish to do so. That is serious, because the Bill is very thin as it stands, and a great deal of work will be needed in connection with the secondary legislation. We ought to have every opportunity to scrutinise not just the good work that has already been done by the commission, but what it will do in future.

The commission report has helpfully provided us with a series of amendments and explanations of why they are important. It has also provided us with information on why the members of the commission feel that certain amendments should be proceeded with even if the Government do not agree with them. I think that we should have an opportunity to look at those amendments properly. I think that the public would expect us, having given the responsibility to the commission to make recommendations, to pay proper attention to them, and would expect the Government to take heed of them.

It is hard for the public to believe that things have changed when they perceive that a massive bonus culture is alive and kicking, and that has been reflected in the debate. A number of Members pointed out that debates of this kind may appear to be technical, and concerned very much with the rules and regulations. People watching may wonder how it affects their everyday lives. A number of hon. Members made the point that we have to ensure that we use the opportunity of legislation to rebuild consumer confidence, but we also have to talk about financial inclusion and diversifying the sector, and we have to change the culture of high-risk banking and see an improvement in standards, because that is what people expect legislation and the change to deliver. We also want action to support growth and to create a banking system that serves the needs of our economy, a point well made by hon. Members on both sides of the House.

LIBOR (FSA Investigation)

Steve Barclay Excerpts

Thursday 28th June 2012 Commons Chamber

[Mr Osborne]

It is entirely up to the Treasury Committee to decide how it wishes to conduct its business.

This Government are introducing far-reaching changes to our regulatory system and the structure of our banking system. It is far from clear that that receives the support of the shadow Chancellor. He has gone out of his way to point out what he thinks are the flaws in the Financial Services Bill, and he has gone out of his way at the Dispatch Box to defend the tripartite system that he designed. The hon. Member for Rhondda (Chris Bryant) talks about all-party consensus; let us have all-party consensus on clearing up the mess that the previous Government presided over.

[Stephen Barclay (North East Cambridgeshire) (Con)]

First, I declare that before I joined the House, I worked for Barclays—[Laughter]—and before that, the FSA.

As the Chancellor may recall, I wrote to him on 7 February calling for a change in the way fines were treated, and for an amendment to paragraph 16 of schedule 1 to the Financial Services and Markets Act 2000, so I welcome his announcement that other banks will not profit from the wrongdoing of banks that have breached rules.

I turn to an issue that the former Chancellor, the right hon. Member for Edinburgh South West (Mr Darling), picked up: the ability to take enforcement action against senior managers, particularly at executive level. Lord Turner set out in his RBS report the difficulties of that, in terms of the evidential level required. Can the Chancellor update the House on when a response, in the form of a discussion paper from the Treasury, will be forthcoming? Will it be before the summer recess?

[Mr Osborne]

I am grateful to my hon. Friend for sharing his CV with the House. [Interruption.] At least he did not work for the shadow Chancellor. The answer to his question is that we are publishing the consultation next week.

Jobs and Growth

Steve Barclay Excerpts

Thursday 17th May 2012 Commons Chamber

[Stephen Barclay (North East Cambridgeshire) (Con)]

It is a pleasure to follow my colleague on the Public Accounts Committee, who I always feel puts the “Great” in Great Grimsby.

A number of Members raised the issue of credit for small businesses. The hon. Member for North Ayrshire and Arran (Katy Clark) focused on that, without wanting to give a specific solution, as did her colleague, the hon. Member for Leeds East (Mr Mudie), and, on the Government Benches, my hon. Friend the Member for Northampton South (Mr Binley). But the debate so far has not focused on one of the chief impediments to credit for small businesses: the high capital requirements imposed on banks, which makes it expensive for banks to give credit to small businesses, particularly those deemed to be high risk. To put that in context, at the moment around one quarter of Royal Bank of Scotland’s corporate book is designated as high risk.

It is not just a small sector of the small business and corporate market that is having difficulty accessing credit. The reason for that really goes back to the financial crisis. I think that the right hon. Member for Edinburgh South West (Mr Darling) was correct, following the collapses of 2008, to take a more risk-averse approach to capital requirements, and that led to the requirements we see today. The point I want the House to focus its attention on is whether we can bring greater urgency to the resolution mechanisms that apply to banks, including looking at living wills so that purchasers are in place if a bank gets into trouble, enabling others to step in and take the liability on and away from the taxpayer. If we take the liability from the taxpayer and give banks greater security by pooling assets through insurance mechanisms, we can take a less risk-averse approach to capital requirements. That, in turn, means that banks will be under less pressure to call in loans.

One of the consequences of banks calling in loans is the forced sale of assets, with businesses selling at a time not of their choosing and when the price is not right. Currently, when businesses seek credit to expand, often only short-term credit is available. Banks do not want to lend for the long term in case there is a deterioration—the eurozone is the most visible risk—and by lending short term they can churn loans and impose brutal charges. The impediment to businesses that want to expand and take on additional staff—a business’s biggest overhead is usually employing staff—is the lack of capital. Seeking that capital is therefore difficult. Banks do not want to lend because of the costs that they incur, and if they do lend they pass the costs on to small businesses through brutal charges and wide spreads in interest.

If our Front-Bench team can accelerate some of the special mechanisms that are available through the pooling of risk, through living wills and through identifying purchasers, we will avoid some of the risk that we saw with the Royal Bank of Scotland. Scandalously, for example, after the Treasury undertook 10 months of intensive work, Sir Nicholas Macpherson could not rely on what the balance sheet said the assets were valued at. The scale of the regulatory collapse that we faced and the continued uncertainty of the risks means we now need to put in place those resolution mechanisms if we are to get credit flowing into the small-business sector.

Let me give an example from my own constituency to bring this issue to life. Just this week, a business got in touch, telling me that its site was cramped and that it had borrowed just under £2 million to expand. Its turnover is up, and its profits are up, to £500,000 a year, but it can get only short-term loans on that £2 million. It cannot therefore expand its staff, despite the opportunities its new site offers, because of the spread of interest and the brutal charges attached to that £2 million loan. So I say to our Front-Bench team, let us speed up the resolution mechanisms, reduce the charges from banks lending to high-risk businesses and, as a result, let the credit flow to those businesses so that they can expand and deliver the jobs and growth that Members on both sides of the House seek to achieve.

[Several hon. Members]

rose—

Banking (Responsibility and Reform)

Steve Barclay Excerpts

Tuesday 7th February 2012 Commons Chamber

[Mr Umunna]

My right hon. Friend makes a good point. We should, of course, spare a thought for the employees whom she mentions.

It matters because, as the Governor of the Bank of England said last month, people have seen an extraordinary squeeze in their living standards, but the institutions and bankers at the centre of the crisis that created those problems are not only not suffering a gigantic squeeze on their living standards but continue to get very high remuneration, in part because the taxpayer has been forced to step in and bail them out.

[Stephen Barclay (North East Cambridgeshire) (Con)]

Can the hon. Gentleman explain why, under the regulatory structure introduced by his Government, banks were able to hire staff on guaranteed bonuses totally unconnected with future performance, and why not a single individual in any of the five largest banks was subject to a fine? The two largest fines imposed on Northern Rock executives were less than the bonuses that they had received the preceding year.

[Mr Umunna]

On guaranteed bonuses, there is an element of contract in that, in terms of the arrangements between individual banks—[Interruption.] Will the hon. Gentleman listen and let me finish the point? There is an element of contract that provides for a bonus, but also an element of discretion. The fact that large bonuses were being paid out regardless of performance is, of course, what people outside Parliament object to.

Financial Services Bill

Steve Barclay Excerpts

Monday 6th February 2012 Commons Chamber

[Stephen Barclay (North East Cambridgeshire) (Con)]

It is a pleasure to follow the hon. Member for Glasgow North East (Mr Bain). I pay tribute to my hon. Friend the Financial Secretary to the Treasury for what is a very good Bill. It displays the diligence and expertise that he brings to his ministerial duties.

I am sure that the Financial Secretary would be quick to recognise—and here I have some sympathy with the line pursued by the right hon. Member for Morley and Outwood (Ed Balls)—that no regulatory structure is a panacea for regulatory risk. We saw that with the Bank of Credit and Commerce International and the Bank of England. The Bill does not address the core lesson from the recent regulatory failure, which is the failure of capital and liquidity rules. In essence, what we are debating is the supervisory arm of an EU regulatory policy agenda. Fortunately, my hon. Friend the Member for Stone (Mr Cash) is not in his place or he would be intervening at this point.

For all the strengths of the Bill, I will touch on three areas where I fear the expectations of our constituents may be raised, but where the regulator may not have the power to meet them. The first is the extent to which the Financial Conduct Authority will have an interventionist approach and its objective of promoting competition. The second is its ability to achieve speedy resolution, which was addressed briefly by my hon. Friend the Member for Cities of London and Westminster (Mark Field). The third is whether it will achieve effective enforcement against individuals and whether there should be strict liability. Indeed, my hon. Friend the Member for West Suffolk (Matthew Hancock) touched on whether there should be criminal sanctions, a point that was floated in Lord Turner’s RBS report but not answered. If time allows, I also wish to put forward a proposal on which there may cross-party consensus about how fines imposed when there is a regulatory breach are redressed and what is done with the funds.

I would be grateful if my hon. Friend the Financial Secretary addressed the risk-tolerance of the new consumer regulator. There has often been a misconception that regulators are about ensuring zero failure, and I would welcome some sense of the point at which the new regulator will be judged as having failed to intervene, and what size and scale of failure in the regime is tolerable.

On the competition objective, some Members have referred to the lack of a power for matters to be referred directly to the Competition Commission. They have to be referred via the Office of Fair Trading. There is potential for two regulators to have different interpretations, and therefore for duplication of costs and confusion about where the power of one regulator ends and that of another starts.

My hon. Friend the Member for Cities of London and Westminster touched on the need for speedy resolution. To take the example of payment protection insurance, a firm can appeal to the regulator and seek a 90-day review, and then it can have the decision judicially reviewed, which can stretch things out for about a further 18 months. A firm can stretch out proceedings in a mis-selling case for tactical reasons, so that it can use the funds in question in the short term. The thoughts of my hon. Friend the Financial Secretary on that would be welcome.

The key issue, which always arises in my constituency, is the sense of grievance that there has not been enforcement action against individuals. That was at the heart of the Treasury Committee’s reason for requiring a report from Lord Turner, but nothing in the Bill really addresses the issue. It does not say whether there will be strict liability, and there are no proposals to frame criminal sanctions. For what it is worth, I believe they would be very difficult to frame.

Within banks, the real problem is that senior executives protect themselves through complex management structures, such as by devolving control functions lower down the organisation so that there is a buffer between them and the decision making and they are knowingly blind. Risk functions often report into finance directors, meaning that there is a potential conflict of interest, and compliance officers often get to shape meetings with supervisors, notwithstanding the more intensive regime that the regulator is currently following.

A key issue that we need to address either in this Bill or in future legislation is how individuals at the top of banks are held accountable when there are mistakes. My hon. Friend the Financial Secretary might need to have discussions with the Lord Chancellor about that, because judicial review and the risk appetite of the tribunal need to be addressed. Given their judicial nature, those points fall within the Lord Chancellor’s responsibility. They go to the heart of whether people get a sense of justice being done when there are serious failures.

I move on to a matter on which I would welcome comments from both Front Benchers in the winding-up speeches, and on which there could be scope for positive reform. That is what happens when a firm pays a regulatory fine. It may surprise Members that currently, under paragraph 16 of schedule 1 to the Financial Services and Markets Act 2000, when there is a fine for a regulatory breach the money does not go to good causes, or even to the Treasury—my hon. Friend the Financial Secretary might think that the Treasury is a good cause in itself. It goes towards reducing the levy paid by other financial firms. When a bank breaks the rules, it reduces the levy for other banks. Over the past two years, such money has amounted to £166 million. I know that a number of Members are keen on financial education—the all-party group on the subject is the biggest in the House. Perhaps such a fund could be hypothecated for use in a more constructive way, and I would welcome comments on that in the winding-up speeches. I recognise that firms are contributing more to financial education now, but it is odd that they benefit from the regulatory breaches of other firms.

I shall conclude, because I am aware of the time limit and want to allow time for others to contribute. The Bill is a good one, but as I said at the beginning of my speech, there will be failure. When there is, an independent report is the most reasonable of expectations. It is instructive that Lord Turner is not a neutral player. Will the Minister clarify how much his report cost to compile? I would like scope in the Bill for an independent report in future if we are in the unfortunate position of having a further regulatory failure. That the Treasury Committee had to seek private experts so that it could comment on Lord Turner’s report speaks volumes. That small matter could be tightened up in Committee.

Overall, this is an excellent set of measures, and I will have great pleasure in supporting my right hon. Friend the Chancellor in the Lobby this evening.

Royal Bank of Scotland (FSA Report)

Steve Barclay Excerpts

Monday 12th December 2011 Commons Chamber

[Mr Hoban]

The hon. Gentleman makes some important points. It is important that shareholders play a more active and engaged role in businesses in which they have a holding. My right hon. Friend the Secretary of State for Business, Innovation and Skills has commissioned John Kay to conduct a review of long-term interest in business and business investment. We need to strengthen corporate governance in boards, as they clearly were not sufficiently robust in their challenge to executives. One of the things that has happened in the FSA is that a much more robust approach is being taken to understanding and examining people who want to hold positions of significant influence in our major banks, including those who want to become board members. That is a good way not only of raising the quality of people in the boardroom, but of ensuring that they are robust enough to stand up against a dominant and aggressive chief executive officer.

[Stephen Barclay (North East Cambridgeshire) (Con)]

Will my hon. Friend ensure that the rules allow enforcement action against incompetence? The point being missed by Labour Members is that there are more than 6,000 pages of FSA rules. There is no shortage of rules, but they do not allow enforcement against incompetence; they allow it only against dishonesty. That is what has fettered the hand of the FSA and what angers my constituents, who are aggrieved that individual directors of RBS have not faced sanction.

[Mr Hoban]

My hon. Friend makes an important point and he speaks with some experience, having worked with the FSA. We need to look carefully at the fit and proper person test for people becoming registered with the FSA to ensure that they are good quality, and can do the job properly and competently.

Private Finance Initiative

Steve Barclay Excerpts

Thursday 23rd June 2011 Westminster Hall

[Andrea Leadsom]

I was coming to exactly that point. The point is that funding the project through a special purpose vehicle means that it is not consolidated into the national debt picture. In other words, it is an off-balance sheet form of financing. Therefore, for a Government who want to spend a lot of money on capital projects without blowing up their national debt picture, it is the perfect opportunity.

[Stephen Barclay (North East Cambridgeshire) (Con)]

Further to the point made by the hon. Member for Cambridge (Dr Huppert), is it not a central claim made by the industry that part of the advantage is the management of construction risk? One of the issues, however, which my hon. Friend the Member for Hereford and South Herefordshire referred to, is the bundling of contracts. The construction risk and the design are bundled with the management service charge, and that drives some of the complexity, which drives some of the cost.

[Andrea Leadsom]

I think that my hon. Friends are reading my speech, because that was to be my next point. They have obviously been given advance notice. That is exactly the point: the builder, in theory, takes the risk on a project such as building a school, and the LEA only ever starts to repay the debt when the school is built and everything is in place. Theoretically, the builder takes the project risk. However, as my hon. Friend the Member for North East Cambridgeshire (Stephen Barclay) says, in reality there is bundling, and because there are sometimes unique risks to a project, often those revert to the LEA. The perceived advantages from the fact that the builder takes the project risk are therefore not always as clear cut as they might appear. In the end the major advantage has been that of not consolidating the debt on the national balance sheet.

--- Later in debate ---

[Stephen Barclay (North East Cambridgeshire) (Con)]

I am conscious that my hon. Friend the Member for Warrington South (David Mowat) wants to speak, so I shall try to limit my speech to half the time remaining.

In this debate and as a member of the Public Accounts Committee, I have heard about many of the things that have gone wrong in PFI, but I want to focus not on the past but on the future. I shall do so by discussing three areas: first, contract design, because 61 PFIs are being planned; secondly, contract management, because there is a big disparity between private sector and public sector expertise, and I do not get a sense that it is being addressed, so it will continue to lead to poor value for money; and thirdly, if time allows I would like to touch on the secondary market, in particular the greater role that insurers and pension funds could play in certain elements of PFI and the regulatory task force that the Treasury has set up. It will be interesting to see how that will interplay and report back to the House.

First, on contract design, my hon. Friend the Member for South Northamptonshire (Andrea Leadsom) mentioned bundling. We had rather disturbing evidence from a Treasury official at the PAC last week, who suggested that bundling remained necessary because without it the design and construction would not take on board maintenance costs in future. I suggest that they can be decoupled. It is possible to design and put out to tender in such a way that the construction risk is assumed through the PFI if required, by buying in management expertise from the private sector. However, the tail, where there is certainty of revenue, which is particularly attractive to other forms of finance companies, can be decoupled. That will also avoid some of the complexity of contracts, which is where the opaque pricing structures often lie and the legal costs come in. I would welcome clarity on the extent to which the 61 pending PFIs will be bundled.

[Mr Bacon]

What is interesting is that the Treasury sounded more reluctant to see unbundling than David Metter of Innisfree, who gave examples of projects in Canada where unbundling appears to work perfectly well.

[Stephen Barclay]

My hon. Friend is absolutely right. It is helpful for the Minister to look at that example as a benchmark.

Secondly, although I am conscious of time, I want to cover the public sector comparator. Hon. Members have touched on the fact that it has often been flawed, because the PFI was a way of taking deals off the balance sheet and it was the only show in town, but there have been other imperatives. There was a regulatory imperative—not to mention, with a lot of marginal seats in the north-west, a political imperative—to go ahead with the Manchester incinerator, even though it was, at 350 base points, over and above the 300 threshold that the Treasury had at the time. Likewise, there was a defence imperative to go ahead with the air tanker contract, which was appalling value. The existing fleet was falling apart and there was no fall-back position, so there was a defence need for that contract to go ahead. It would be interesting to get from the Minister a sense of the extent to which guidance has changed to guard against some of those risks, and how we as a House get visibility of whether a viable fall-back position has been developed for some of those 61 contracts.

Thirdly, specifically on defence, the response in the Treasury minute of December 2010 is a little ambiguous. It says:

“The Government does not agree with the Committee’s conclusion…on the applicability of PFI to Defence, but agrees with the Committee’s recommendation.”

It will be interesting to see how guidance on defence PFIs will be refined.

I welcome the appointment of David Pitchford in connection with the major projects defence review. That will be useful in addressing some of the problems we see with these contracts, such as their long-term nature and the increased costs.

[Stella Creasy]

rose—

[Stephen Barclay]

I will give way, but I wish to allow time for my hon. Friend the Member for Warrington South to speak.

[Stella Creasy]

Briefly, does my colleague on the Public Accounts Committee share my concern that Mr Pitchford has said that he was not looking at PFI as part of his work in the Major Projects Authority? That seems to have been an oversight.

--- Later in debate ---

[Stephen Barclay]

I was just coming on to that exact point. Clarity would be welcome as to what falls under his remit.

Turning to management, my hon. Friend the Member for Warrington South made a point about disparities. One disparity is that, to take as an example Innisfree, that firm has consolidated 24 hospital PFIs with one provider, while 36% of hospitals have fewer than one full-time equivalent person managing PFI contracts, and 12% have no one managing them at all. There is disparity in how contracts are being negotiated and managed, and even a good contract will be ineffective and poor value for money if it is not effectively managed.

In the Treasury minute it says that the Romford pilot, which health officials set great store by, will “hopefully” provide data that trusts can use, but there is no scope to enforce that and no requirement for an increase in the amount of data being asked for. Again, we hear that there is a potential solution, but that solution is not enforceable, the amount of data required will not be increased and there is no transparency in the expertise at the centre. The Department of Health has only four people providing PFI expertise, and the Public Accounts Committee will hopefully get a note from Treasury officials clarifying that.

Finally, in the secondary market there is a problem with regulatory arbitrage, with different treatment of insurers and banks in their access to the market. It is important that the Treasury arm that deals with regulation is joined up with the arm that deals with finance. On the refinancing taskforce, the acknowledgment that life insurance and pension funds are important alternative sources of finance is not clear in the February 2011 minute. It also states that

“the refinancing task force will act on this recommendation”.

That is very welcome, but how will it do it, and by what date? How will the House get scrutiny of that?

Perhaps the Minister can touch on these areas in her closing remarks. I commend my hon. Friend the Member for Hereford and South Herefordshire (Jesse Norman) for the work that he has done in this campaign and for the formidable way in which he has taken it forward.

Oral Answers to Questions

Steve Barclay Excerpts

Tuesday 21st June 2011 Commons Chamber

[Mr Osborne]

I blame the Labour Government. During the election campaign, the Labour Home Secretary said publicly on television that police numbers would have to be cut if Labour was re-elected.

[Stephen Barclay (North East Cambridgeshire) (Con)]

T3. What assessment has my right hon. Friend made of the cost to the public finances of an emergency cut in VAT and the disastrous impact that would have on debt interest?

[Mr Osborne]

The estimate is £51 billion over this Parliament, which I guess is just another nail in the coffin of the shadow Chancellor’s economic credibility.