Business Banking Fraud

Vicky Ford Excerpts

Tuesday 9th October 2018 Westminster Hall

[Mr Wragg]

The hon. Gentleman is absolutely correct: it was systemic across the whole business lending sector. He is right to put that on the record.

The Turners’ reward for bringing the case to the bank’s attention back in 2007 was to be branded conspiracy theorists. The bank—first as HBOS, then as Lloyds—tried to evict them from their home 22 times, spending more on legal action than the value of the home itself. It sent a top partner from one of the country’s best regarded law firms to Cambridge county court to watch the hearings. The Turnbull report, which details a comprehensive cover-up of the fraud from within the bank, notes lawyers as saying that, once the Turners were out of their home, they would have to accept their fate. This was not the pursuit of justice but a witch hunt to silence whistleblowers.

The Turners approached the Financial Standards Authority, the Serious Fraud Office and the Treasury. Indeed, there was a debate in this very room in June 2009, during which Members urged the authorities to investigate. However, all they encountered was denials and deflection. As my hon. Friend the Member for Wycombe (Mr Baker) pointed out, the case was eventually taken seriously only after Thames Valley police recognised that a crime had been committed. The investigation took seven years to complete and the resource of 151 officers and staff, and it cost £7 million, with only £2 million eventually recovered from the Home Office. Thames Valley police stated that they could have done it in half the time and for half the money, if only the bank had co-operated fully. Unfortunately, the scale and difficulty of investigating the fraud only serves as a warning to other cash-strapped police forces: “Investigate at your peril”.

The reality is that white-collar crimes such as this are expensive and difficult to prosecute, and the agencies responsible for fighting economic crime simply do not have the necessary resources to tackle complex, mid-tier banking fraud. The SFO takes on only a small number of very large cases and has a budget of £53 million. The National Crime Agency’s economic crime command has a budget of £10 million, and the newly established National Economic Crime Centre has a budget of just £6 million. Compared with the sheer scale of fraud in the United Kingdom, which is estimated at more than £190 billion a year, and given the potential for consequential losses, these investigative budgets are, frankly, insignificant.

For those who may think that this is a one-off, it is important to note that the processes employed by HBOS in this case—turnaround units, business valuations and the use of insolvency—are exactly the same tactics seen in the case of other complaints that the all-party parliamentary group on fair business banking has investigated. Such complaints were found to be commonplace, as the hon. Member for Cardiff West (Kevin Brennan) alluded to, across most financial institutions. The system is ripe for abuse, and we have serious concerns about it.

At this point, I pay tribute to the incredible dedication of the co-chairs of the all-party group, my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) and the right hon. Member for North Norfolk (Norman Lamb). In addition, I thank the group’s officers and members for their significant work in running a thorough inquiry into how so many SMEs were abused by their banks, exposing the scale of the issue and the mechanisms by which the frauds were conducted. The APPG has produced an important report that identifies the shortcomings in the current investigative tools and bodies and makes vital recommendations as to how we might start to unpick this sorry mess.

I reiterate the APPG’s calls for a full public inquiry into the treatment of businesses by financial institutions. There are currently more than 10 different inquiries looking at different, isolated issues. It is time that we had a holistic approach and investigated the system as a whole.

[Vicky Ford (Chelmsford) (Con)]

I thank my hon. Friend for his work in this area. Two of my constituents have been affected—one through a mis-selling of swaps by RBS and the other through the dreadful situation at HBOS that my hon. Friend has mentioned. Does he agree that the tragedy of this case is partly the lack of transparency and independence, and that people feel that they cannot get fair redress? A decade later they are still not being treated fairly by those institutions.

[Mr Wragg]

My hon. Friend is spot on. The level of obfuscation by these institutions would be quite suspicious if one were to suspect them of any wrongdoing. I am sure that we can deduce our own conclusions from their behaviour.

On a civil level, the APPG’s proposal for a financial services tribunal has been well received, and we look forward to the Government’s response. That may at least provide a civil remedy for those who have been wronged. However, we have been asked what will happen when civil mistreatment tips over into the criminal abuse of power. Where is there to go? At this point, there is no satisfactory answer. The Thames Valley police and crime commissioner believes that we should have regional fraud squads akin to our counter-terrorism squads, funded by the Treasury via FCA fines and funds recovered from criminal gangs. We wholeheartedly support those proposals. Whatever action is taken, it requires the utmost degree of urgency, so that more and more cases do not—as has already started to happen—run into statutes of limitations, lose documents and evidence to the sands of time or see responsible and culpable individuals leave the industry and witnesses become unavailable.

I look forward to Members’ contributions and the Minister’s response. As I mentioned at the start, this is becoming an all too familiar debate, and I rather hope that we are not all back here in six months reliving it again. I also hope that we can resolve to agree a path of action that will see the tarnish start to be scrubbed off Lady Justice and allow her to start to uncross her arms.