Arch Cru Compensation Scheme

Tristram Hunt Excerpts

Wednesday 19th October 2011 Westminster Hall

[Tristram Hunt (Stoke-on-Trent Central) (Lab)]

It is great privilege to serve under your chairmanship, Mr Owen, and to follow the hon. Member for Vale of Glamorgan (Alun Cairns) who, along with my hon. Friend the Member for Rutherglen and Hamilton West (Tom Greatrex), has pursued this matter with such dedication.

I rise to speak on behalf of my constituents who have been affected by this debacle, including Michael Sharkey, Ian Matthews and Donald Tart. They have invested not hundreds and thousands of pounds but smaller amounts, which are highly significant for their future standard of living. There is widespread concern, nay fury, among my constituents that they are seeing only up to 70% of the returns in this so-called £54 million funding package. In many circumstances, they face the loss of more than 40% of their investments. As we have heard, we are discussing people’s lives and money that people had worked hard for and put away for retirement or hoped to pass on to their children or grandchildren.

Of course, we will not know the full scale of the negligence involved and the real losses until all the remaining assets of the fund are eventually sold. However, private advice has conservatively estimated the losses in my constituency alone at around £1.5 million, which is a sizeable amount of money for my constituents, or to put it another way that is around 1.5% of the value of the contract recently awarded to Capita to run the national pension scheme. As the authorised corporate director for the Arch Cru investment fund, and therefore having the regulatory responsibility that we have heard so much about today, the Government might think about stepping back from giving Capita further powers and authorities. We have heard about the extraordinary negligence and even allegations of criminal activity involved in the running of these funds.

In June, I tabled 19 parliamentary questions to find out just how much business this Government have awarded to Capita. As of 3 August 2011, the Government had awarded 447 contracts worth at least £112 million to Capita. The hon. Member for Worthing West (Sir Peter Bottomley) has suggested that the Government have a role to play in bringing people to the table. I suggest that if someone is awarding £112 million-worth of contracts, they have a powerful role to play in bringing people to the table.

[Jonathan Evans]

Has the hon. Gentleman done the research to help hon. Members understand how many contracts Capita received before 2010, under the previous Administration? My guess is that it would be a significant multiple of the figure that he has just given.

[Tristram Hunt]

I was going to say that I thank the hon. Gentleman for his intervention, but he seemed to be making an unnecessarily partisan point when we are trying to work together for the good of our constituents. I will simply let it pass in that manner.

That figure of £112 million does not include contracts from the Department of Energy and Climate Change, contracts from the Ministry of Defence, which would only provide ranged values of contracts up to a total of £20.6 million and contracts awarded by the Department of Business, Innovation and Skills, which simply did not answer my question. I hope that the Minister will seek out the truth himself.

[Sir Peter Bottomley]

Does the hon. Gentleman agree that one important aspect is what attitude the Government take? The second important point is that Capita and its shareholders ought to make a clear assessment of the reputational risk of Capita handling something where things clearly went wrong and of its failure to spot what was going wrong.

[Tristram Hunt]

The hon. Gentleman is absolutely right that what we are seeing this morning is the decimation of the reputation of Capita. That decimation will only grow unless Capita steps up to the plate, works with the Government and accepts that it is in its own long-term interest, as well as its moral obligation, to ensure that those who invested in this fund on the basis of Capita’s reputation see their payments returned.

I will not go through all the intricacies of my investigation into the awarding of contracts to Capita. Suffice to say that the Government have a whip hand on this issue and should be thinking about using it.

The point is that with financial products and investment opportunities becoming ever more complex, it is vital that investors have confidence in the regulatory framework that upholds their investment. It has been said that

“A badly designed product or a product that is widely mis-sold can have a negative effect on consumer outcomes and actually, over the long term, a negative effect on the industry. It doesn’t just affect the particular product or firm involved. It also erodes people’s confidence in financial services.”

As the Minister will know, those are not my words but his words.

[Mr Gregory Campbell (East Londonderry) (DUP)]

The hon. Gentleman is making a crucial point about confidence. Although it is important that people have confidence in the independent financial adviser that they go to, and that they have confidence in whatever companies are operating under the different structures, surely the supreme amount of confidence must be placed in the regulatory authority that has to oversee all those things. That is the crucial point that the Minister must respond to.

[Tristram Hunt]

The hon. Gentleman is absolutely right. What we have seen with the Financial Services Authority is a lack of confidence in its capacity to deal with this inquiry and the regulation of it. That is why I join my hon. Friend the Member for Rutherglen and Hamilton West in urging the Minister to take advantage of section 14 of the Financial Services and Markets Act 2000 to launch an inquiry, because the FSA has been silent on this matter for too long and as a result investors have little confidence in it. The FSA is part of the regulatory framework that initially failed our constituents.

I will wrap up now as I know that other hon. Members want to speak. I agree with my hon. Friend the Member for Rutherglen and Hamilton West that we are only at the beginning of this process. As I have said, we need the sort of inquiry allowed under section 14 of the 2000 Act. We also need a proper compensation deal and package, and I am struck by the 1996 Investment Management Regulatory Organisation model as a way of moving forward.

However, the Government have a role in this process. They are pouring money down the neck of Capita and for the Government to say that this issue is nothing to do with them strikes me and my constituents as remarkably detached and arrogant. Actually, the Government have a role to play in bringing people to the table, making Capita see sense and delivering justice for our constituents.

[Albert Owen (in the Chair)]

Before I call Guy Opperman, I remind Members that I will call the Front-Bench spokesmen from 10.45 am onwards. If Members wish to catch my eye and speak, will they stand up when I call Guy Opperman?

--- Later in debate ---

[Guy Opperman]

I endorse those comments. Capita will need to look over its shoulder after today’s debate.

[Tristram Hunt]

Does the hon. Gentleman not think, then, that the Government have a role to play in relation to the extraordinary award of contracts to Capita?

[Guy Opperman]

I accept that they have a role to a degree. The hon. Gentleman is being a little naive, because the provision of certain services by a perfectly reputable part of the company is satisfactory, and he is far too intelligent not to know that. However, we must deal with individual mismanagement by parts of the company, which happened in years gone by, and the hon. Gentleman knows that companies have obligations in relation to such matters. The matter can be pursued either as a civil obligation in the High Court or by way of criminal compensation arising out of a prosecution. Alternatively, it can be dealt with under section 14 of the Financial Services Act 2010. However, it is over-simplistic to say that just because the Government provide contracts to an organisation that is performing perfectly satisfactorily in some respects, they cannot be involved in seeking other compensation.

This debate is an opportunity for the Government to give a lead on what they will do, and they need to answer some questions. I want to discuss examples involving a couple of my constituents. The point has been fairly made that the losses have been suffered by people who are not wealthy. We are not standing up for toffs and fat cats, but for people who have lost £1,000, £2,000, £5,000, £10,000 or £15,000— people who have lost their life savings, and who were encouraged to put their money in.