Taxation (Cross-border Trade) Bill (Second sitting)

William Wragg Excerpts

Tuesday 23rd January 2018 Public Bill Committees

[The Chair]

Thank you.

[Mr William Wragg (Hazel Grove) (Con)]

Q It is good to see you. You were on the panel that came before the Procedure Committee, of which I am a member, when we were drawing up the amendments that were accepted by the Government on the European Union (Withdrawal) Bill about a sifting committee for secondary legislation. It appears that secondary legislation is talked about more than ever at the moment. Is it a problem of the system or just an excuse for ineffectual parliamentarians?

Joel Blackwell: That is a good question. In 2014, with our “The Devil is in the Detail” report, we wanted to tell the story of delegated legislation. The research that we did, as far back as the Statute of Proclamations, but particularly in the 20th century, showed that many reports had been published that raised big concerns with the way that the House of Commons in particular scrutinises statutory instruments. In 1933, the Donoughmore Committee reported on the inadequate procedures in place and the inadequate scrutiny of SIs by Parliament. We wanted to raise the point that the issues raised by that Committee in 1933 had not been resolved.

There has been a problem in the past, particularly in the House of Commons, with engagement with the scrutiny of delegated legislation. Part of that could be because it is very technical and can be, dare I say it, quite boring at times.

[Mr Wragg]

Q Would you not think that given all the interest expressed in it, whether it is boring is neither here nor there? People are able to do it.

Joel Blackwell: Exactly. We think that the lack of engagement has been primarily because of the inadequate procedures in the House of Commons—particularly two things. The first is the way that MPs, if they want to debate a negative instrument, have to use the early-day motion procedure. Secondly, we think the Delegated Legislation Committees for debating under the affirmative procedure are inadequate. We think that has been the issue with engagement thus far.

[Mr Wragg]

Q Do you think it is perhaps not the system but rather the ignorance of parliamentarians?

Joel Blackwell: It is a very complex, convoluted process. During our research, which started in 2011 and culminated in the report in 2014, that was a big issue for parliamentarians and, more importantly, for individuals and businesses that are supposed to adhere to the rules and regulations that are being brought forward in Parliament. Complexity is a problem, but I think it is more to do with the processes, particularly in the House of Commons.

[Mr Wragg]

Q Forgive me—just one more question, Mrs Main. I was playing devil’s advocate there. You mention that this goes back as far as a report in 1933. So it really is not the case that somehow our Brexit legislation and this legislation brings forward new questions about secondary legislation.

Joel Blackwell: It is bringing forward old questions that are yet to be addressed, despite numerous parliamentary Committees trying to, and then putting them on the “hard to do” pile. Knowing that the Brexit Bills are going to have to be framework Bills—based on the fact that the legislation for Brexit is going to need some speed and flexibility—the Hansard Society thinks that this is a perfect opportunity to highlight the problems and for parliamentarians to get to grips with them, when challenged and faced with one of the most complex legislative tasks that Parliament has seen.

[The Chair]

Thank you. There are five Committee members who wish to pose a question. I would ask that you keep your answers as concise as possible, so that everyone gets a chance to touch on the point that matters to them.

--- Later in debate ---

[Jonathan Reynolds]

Q Are there any specific areas of the Bill that currently put significant powers in the hands of the Secretary of State but that make you think we should consider the arguments for an enhanced degree of parliamentary oversight?

Joel Blackwell: That is a question I have been posing to myself for the last few days. Honestly, no. We have to be careful, knowing that the procedures for the scrutiny of delegated legislation in the Commons are inadequate, that we do not just fall back on using a strengthened, enhanced or super-affirmative procedure for everything when the affirmative procedure would be appropriate. We need to play the ball rather than the man, to use a football analogy. You have to look at the powers that are brought in front of you and decide there and then whether the scrutiny period is appropriate.

The problem with this Bill, and with other supply Bills, is that the vehicle to highlight inappropriateness in the degree of scrutiny and the appropriateness of delegated powers is the House of Lords Delegated Powers and Regulatory Reform Committee, and there is no counterpart in the House of Commons. The Bill just highlights the lack of that counterpart. But no, looking at the powers, I do not think that the strengthened scrutiny procedure would be useful in this case.

[Mr Wragg]

Q What are the constitutional similarities between this Bill and the European Union (Withdrawal) Bill?

Joel Blackwell: Having said that I do not think the strengthened scrutiny procedure would be appropriate for any of the powers, they are wide powers. If we look at clause 51 in particular, the wording is very similar to that used for clause 7, so I think there are similarities. What has been highlighted is that people would like, potentially, to use a Committee to look at all Brexit statutory instruments and at the moment that will not happen. You could insert a change into the Standing Orders that would allow you to do that, which is something to consider.

[Mr Wragg]

Q But do you recognise the fundamental difference between this Bill and the European Union (Withdrawal) Bill, on which the Government accepted five of the amendments that concerned enhanced scrutiny? Do you recognise that distinction?

Joel Blackwell: Yes.

[Kirsty Blackman]

Q With all the issues that have been raised, especially about the negative procedure and the ways in which the House of Commons can scrutinise this, given it is not going to the Lords particularly, do you think this is a good way to do things or would there be a better way?

Joel Blackwell: I think that the Hansard Society would like to see an equivalent Delegated Powers and Regulatory Reform Committee, first off, in the lower House—or some MP in the composition of a Joint Committee or what have you. That would be a good opportunity.

I think that delegated powers notes are extremely useful documents. This one is 174 pages long. There are well over 150 delegated powers in the Bill. Some of the justifications I am struggling with, particularly as regards the use of urgency and non-urgency. I think time is an issue here, particularly if you do not have the backstop of further scrutiny by a Chamber—the second House—that is usually very good at looking at delegated legislation and has taking the lead on it in the past.

When we were doing a similar Bill, which became the Welfare Reform Act 2012, a call by many MPs on the Public Bill Committee at the time was that it would be really useful if they had draft regulations alongside the scrutiny of the Bill. You could do things like that to improve scrutiny of delegated powers but, fundamentally, the lack of representation, the fact that you would have to wait for the Bill to get to the House of Lords for a report to be published, is an issue.

Perhaps one way around that is that the House of Lords Delegated Powers Committee does what it has done for this Bill and the European Union (Withdrawal) Bill, and publishes, as usual practice, the Bill as soon as it enters the House of Commons.

RBS Global Restructuring Group and SMEs

William Wragg Excerpts

Thursday 18th January 2018 Commons Chamber

[Mr William Wragg (Hazel Grove) (Con)]

I congratulate the hon. Member for Norwich South (Clive Lewis) on securing this debate. I was pleased to be a member of the Backbench Business Committee when his application came before us, because such debates show the House at its best.

I have a confession to make: I am a capitalist. But I am a capitalist who believes in a system that depends upon sound financial management. The dishonest practices and systemic mismanagement by RBS in this case fundamentally undermine capitalism. We know that the behaviour of the bank was wrong, both legally and morally, as reported and evidenced in the Tomlinson report and the FCA’s skilled person reports. The injury to individual businesses and the business banking system as a whole has been compounded by the system of redress, which is judged to be inadequate by many.

Like many hon. Members on both sides of the House today, I have constituents who have been affected by this case. Just one such example of malpractice was the forced liquidation in 1998 of Pickup and Bradbury Ltd, a company formerly owned by a constituent of mine, Mr Eric Topping. Pickup and Bradbury was a building and joinery company based in Stockport. It was a business customer of RBS and, like many other businesses, used an overdraft to manage its cash flow. In 1998, the overdraft was £345,000—not an unreasonable amount for a business of that scale—and the company had been happily trading and growing under that arrangement for several years. Then, in February 1998, RBS wrote to Mr Topping saying that it wanted to reduce the overdraft facility to £200,000 and, moreover, that the company owed the bank over £700,000—a figure that is still in dispute today.

Unable to operate under more restrictive conditions, the company was moved into RBS’s Global Restructuring Group, according to RBS, to help it to repay the money it owed. While under the administration of the GRG, the bank’s advisers consistently undervalued the company’s assets, while simultaneously overvaluing its liabilities, to support its claim the company was unviable and, in July 1998, it forced Pickup and Bradbury into receivership. The GRG engineered the fall of the company by demanding aggressive repayment plans and allowing insufficient time for company directors to appoint independent valuers to prove the worth of the company’s assets and its solvency. Mr Topping believes the difference between RBS figures and his own was around £2 million.

Knowing that time is short and that many right hon. and hon. Members want to contribute, I will move on from that case and put some questions to the Treasury Bench. A scandal such as this, just like LIBOR before it, is yet another reason why people and businesses lose faith in the banking sector. Faith in the banks is essential for faith in our whole capitalist system, which I have hitherto been proud to defend. This scheme was organised fraudulent asset stripping on a massive scale, leading to the forced liquidation of many businesses—companies that people had poured a lifetime of effort into and which were their livelihoods. In the case of my constituent and many others, those businesses were their nest eggs for retirement. RBS likely made billions from the activity, but how many lives and livelihoods did it crush in the process?

We on the Conservative Benches in particular rightly tell the country we stand up for hard-working people. Mr Topping, and hundreds of business owners like him, are just such hard-working people, yet they have had their assets stripped by RBS and now have very little to show for it. It is time that we stood up for them. I have some questions for my hon. Friend the able and newly appointed Economic Secretary to the Treasury. While Her Majesty’s Government have a controlling stake in RBS, what is he doing to ensure that the bank does the right thing by its former customers, both by the law and by the sense of common decency on which all civilised business ultimately depends?

[Tony Lloyd (Rochdale) (Lab)]

The hon. Gentleman is making an excellent speech, but may I ask him to widen his ambition? My constituent Derrick Cullen was the victim of Lloyds bank, so it is clear that the conspiracy was not confined to one bank, but was industry-wide— the lies spread across the industry. On that basis, the Government should do more than use their powers on a nationalised bank; the action must be systemic across the whole banking system.

[Mr Wragg]

The hon. Gentleman is right to highlight the broader practice in the banking sector. I have confined my remarks to RBS given that it was a constituency case, but he is absolutely right and perhaps draws on the work of the all-party parliamentary group on fair business banking and finance. I pay tribute again to the hon. Member for Norwich South and to my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) for their assiduous work on that APPG.

The hon. Member for Rochdale (Tony Lloyd) is generous in allowing me an extra minute through his intervention, but I have only one more sentence to say to the Minister. I will put it as simply as this: what does my constituent have to do to get back the money that was stolen from him?

[Several hon. Members rose—]

Oral Answers to Questions

William Wragg Excerpts

Tuesday 24th October 2017 Commons Chamber

[Mr Hammond]

As I have already said, the Government have made it clear—the Prime Minister set this out in the Florence speech—that we want to agree an implementation period as part of a deal with the European Union. We are greatly encouraged by the fact that, at last week’s European Council, the 27 agreed to start internal preparatory discussions on guidelines in relation to an implementation period. We are confident that that will give British businesses confidence that we are going to provide them with the certainty they require.

[Mr William Wragg (Hazel Grove) (Con)]

11. What assessment he has made of the effect of Government investment on infrastructure since 2010.

[Luke Graham (Ochil and South Perthshire) (Con)]

14. What assessment he has made of the effect of Government investment on infrastructure since 2010.

[The Economic Secretary to the Treasury (Stephen Barclay)]

Infrastructure is at the heart of the Government’s economic strategy, and our investment will boost productivity and growth. Since 2010, more than £250 billion has been spent on public and private sector infrastructure.

[Mr Wragg]

The biggest investments in transport infrastructure in generations, including the Ordsall rail curve in Greater Manchester, have been made possible by this Government. Will my hon. Friend commit to further investment in our rail network, particularly on local commuter routes through my constituency?

[Stephen Barclay]

My hon. Friend makes a good point. This Government have committed to the largest rail investment programme since Victorian times, including a £55.7 billion investment in High Speed 2. He will be aware of the Chancellor’s announcement in Manchester last month of £300 million to improve connectivity to High Speed 2 across the northern region.

Oral Answers to Questions

William Wragg Excerpts

Tuesday 18th July 2017 Commons Chamber

[Mel Stride]

My hon. Friend is entirely right. The OECD has made it very clear that corporation tax increases are the most harmful tax increases for economic growth. By keeping business taxes down, in 2015-16 we saw a record number of inward investment projects creating more than 1,600 jobs per week.

[Mr William Wragg (Hazel Grove) (Con)]

T1. If he will make a statement on his departmental responsibilities.

[The Chancellor of the Exchequer (Mr Philip Hammond)]

My priority is to ensure that the economy remains resilient as we negotiate our exit from the European Union. That means building on this Government’s achievements in reducing the deficit by two thirds, delivering record levels of employment and getting unemployment down to the lowest rate since the mid-1970s, while continuing to tackle the long-term challenge of productivity enhancement and making steady progress towards balancing the budget

[Mr Wragg]

I thank my right hon. Friend for that reply. Raising the personal tax allowance has been a key achievement of this Government. What recent assessment has he made of the number of my Hazel Grove constituents who have benefited from that policy?

[Mr Philip Hammond]

I agree with my hon. Friend. The UK will have increased the tax-free personal allowance by over 90% compared with 2010, completing a decade of sustained tax cuts for working people. Over 31 million taxpayers will pay less tax in 2017-18, including 3 million taxpayers in the north-west. Since 2010, more than 4 million taxpayers have been taken out of income tax altogether.

Oral Answers to Questions

William Wragg Excerpts

Tuesday 17th January 2017 Commons Chamber

[Mr Hammond]

The way it works is that the pricing of new Government debt is determined by the auctions around new issuance, which, clearly, is bought at current exchange rates by foreign purchasers of debt. The hon. Lady makes a good and important point: currency volatility, rather than the actual level of the currency, does introduce an additional dimension for foreign purchasers of UK Government debt. I have said many times that the process that we are embarked on of negotiating our exit from the European Union creates some uncertainty, some of which we have seen manifesting itself in the currency markets. The sooner we can get through that period of uncertainty and have clarity about our future relationships with the European Union, the better for markets, business and people in this country. The purpose of the speech that the Prime Minister is making right now is to start to give some clarity to the situation.

[William Wragg (Hazel Grove) (Con)]

5. What fiscal steps he is taking to improve the resilience of the economy in preparation for the UK leaving the EU.

[The Chancellor of the Exchequer (Mr Philip Hammond)]

We have committed to returning the public finances to balance as soon as possible in the next Parliament, and to reducing the structural deficit to below 2% of GDP by the end of this Parliament. As I have said, that strikes the right balance between restoring the public finances to health and giving ourselves enough flexibility to allow us, if necessary, to support the economy in the short term as we go through this period of greater uncertainty. We have also been able to commit an additional £23 billion to a national productivity investment fund to improve our economic productivity.

[William Wragg]

Does my right hon. Friend agree that the resilience of our economy is best served by what the Prime Minister has said today, which is that Britain will be leaving the single market with no ifs and no buts?

[Mr Hammond]

For six months, we have kept open as many options as possible while we review the way forward in this negotiation with the European Union. We have heard very clearly the views and the political red lines expressed by other European leaders. We want to work with those leaders and to recognise and respect their political red lines. That is why the Prime Minister is setting out right now a position on which we will go forward, understanding that we cannot be members of the single market because of the political red lines around the four freedoms that other European leaders have set. She is expressing an ambitious agenda for a comprehensive free trade arrangement with the European Union that will allow our companies to trade in Europe, and European companies to trade in Britain, while minimising disruption to business patterns and to pan-European supply chains.

Budget Resolutions and Economic Situation

William Wragg Excerpts

Monday 21st March 2016 Commons Chamber

[William Wragg (Hazel Grove) (Con)]

It is a pleasure to be able to speak, albeit briefly, in this debate, and I thank you, Madam Deputy Speaker, for accommodating as many speakers as possible.

The Budget contains welcome measures to improve our schools so that all children get the best start in life. It includes extra money to every school in England either when it becomes an academy or when it is in the process of conversion. That process is relevant to the DCLG, as the role of local education authorities will be reduced. The academies programme is transforming education for thousands of pupils across the country.

My closeness to the issue and my personal experience as a teacher mean that I sympathise entirely with many of the frustrations that teachers sometimes express towards LEAs, but I do not want to speak with vitriol—quite the reverse. I do not think that LEAs have been all bad. In many circumstances, they have empowered staff and they will play an important role in continuing school improvement over the next four-year transition period. I emphasise that it is important that the Government get the policy clear, and I hope it will be implemented in a considered way, without rancour from either schools or local authorities.

Most importantly, this Budget accelerates the move towards fairer funding for schools, which I welcome after a long campaign. Indeed, last December I presented to the House a petition calling for a fairer school funding formula, which was signed by hundreds of local parents and teachers in my constituency. I am delighted, on behalf of my constituents, that their voice has been heard.

My right hon. Friend the Chancellor confirmed on Wednesday that the arbitrary and unfair system of allocating school funding will be replaced by a fairer national funding formula. Under the proposals, every school and local area, no matter where they are in the country, will be funded fairly, according to need.

The starkness of the current discrepancy in funding was brought home to me when I visited a school in Stockport on Friday. The Pendlebury Centre pupil referral unit works with some of the most vulnerable students from my constituency, yet its per-pupil allocation is several thousand pounds lower than that in neighbouring authorities. I therefore congratulate my right hon. Friend the Chancellor on this bold and important policy.

I also welcome the new £20 million-a-year northern schools strategy, which will help transform northern schools and tackle the discrepancies in school performance that have resulted in educational progress in some parts of the north lagging behind that in the rest of the country.

In conclusion, I welcome many elements of the Budget, particularly those to which I have referred, but I will add my voice to those welcoming the rethink by Her Majesty’s Government over disability benefit matters. It is important to keep our country on the right track to recovery and to continue to grow faster than any of our European neighbours. It is also important that we take the right decisions to make people better off, protect the vulnerable, help business, boost jobs and invest in our children and the next generation.

Budget Changes

William Wragg Excerpts

Monday 21st March 2016 Commons Chamber

[Mr Gauke]

I remind the hon. Gentleman that there have been a number of city deals done with authorities in the north-east of England, and a number of deals done with Labour authorities around the country. The employment record in the north-east of England is extremely strong.

[William Wragg (Hazel Grove) (Con)]

The Budget contained many welcome measures for my constituents. Will the Minister comment on the idea that it is a sign of strength to have a Government who listen? Perhaps we should compare that with Gordon Brown and his refusal to reconsider the 10p tax rate.

Financial Conduct Authority

William Wragg Excerpts

Monday 1st February 2016 Commons Chamber

[William Wragg (Hazel Grove) (Con)]

It is a pleasure to speak in this debate and, like many colleagues across the House, I wish to place on record my thanks to my hon. Friend the Member for Aberconwy (Guto Bebb) for his tenacity in the work he does and for securing this debate.

Speaking in this debate allows me to raise for the second time an important case in my constituency involving the FCA, which I fear may be typical of cases in other constituencies. I last mentioned this issue during the debate on the sale of the Government’s Royal Bank of Scotland shares on 5 November last year. At that time, my hon. Friend the Economic Secretary to the Treasury—the City Minister—responded to some of the points I raised and subsequently followed up in writing, and I want to place on record my thanks to her for that. For the benefit of Members who were not present in November, I shall briefly outline the case and the role of the FCA in dealing with its consequences.

The case relates to a business in my constituency, Pickup and Bradbury Ltd, which was owned by a constituent of mine, Mr Eric Topping. It was a medium-sized, family-owned construction firm operating out of Romiley. It engaged in many commercial construction contracts, with clients in both the private and public sectors. It was well-regarded across Greater Manchester. However, in 1998 Mr Topping and Pickup and Bradbury Ltd allegedly fell victim to a set of actions and behaviours from RBS, the bank with whom Mr Topping had held his business accounts for many years, and specifically its turnaround division, the so-called Global Restructuring Group, which dealt with businesses in distress.

It is alleged that Pickup and Bradbury found itself in circumstances in which the bank unnecessarily engineered a default to move the business out of local management and into the turnaround division, in order to generate revenue through fees, increased margins and devalued assets. Pickup and Bradbury was forcibly moved by RBS into the Global Restructuring Group after the bank claimed the business owed it a significant debt in excess of £700,000. My constituent acknowledges that some debt was owed but that the business was perfectly capable of managing and servicing it. However, the crux of the case was that, although the business’s balance sheet at the time showed net assets of over £1 million, after being run through the process of the restructuring group, RBS placed a valuation on the business at negative £1.1 million, a discrepancy of over £2 million. Mr Topping and RBS are still in dispute over these figures to this day. The upshot was, however, that this led to the forced liquidation of Pickup and Bradbury, costing the jobs of all its employees and forcing Mr Topping to sell his home.

[Caroline Nokes (Romsey and Southampton North) (Con)]

I, too, would like to pay tribute to my hon. Friend the Member for Aberconwy (Guto Bebb) for his hard work on this issue. Does my hon. Friend the Member for Hazel Grove (William Wragg) agree that the real tragedy of many of the scenarios that have been played out in constituencies up and down the country is that it is not simply businesses or individuals who suffer. The suffering is also felt by a whole range of employees, whose jobs have been liquidated in this way by the banks?

[William Wragg]

My hon. Friend is absolutely right to raise that point. Too often, perhaps, we focus on the concerns of businessmen, but we should also focus on the people they employee, and who keep the economy of this country going.

This is about people’s businesses, jobs, homes and lives, so we must remember that while organisations such as the FCA deal with the regulation and supervision of complex financial institutions and products—subjects which most people may consider dry, and perhaps even dull—these matters have a real human cost, which my hon. Friend just alluded to, beyond just numbers on a balance sheet.

Colleagues will be aware of the report by the businessman Lawrence Tomlinson, which looked in depth at RBS’s Global Restructuring Group. Tomlinson received large bodies of evidence on RBS practices, including from its business customers. The report found

“very concerning patterns of behaviour leading to the destruction of good and viable UK businesses”,

all for the sake of profit for RBS.

Just as RBS has failed to resolve the case of Pickup and Bradbury, I am sure the same can be said of many hundreds of cases across the country. The Tomlinson report suggests, in fact, that this was a widespread and systemic practice applied to many RBS customers.

Once placed in this division of the bank, these businesses were trapped with no ability to move or opportunity to trade out of the position. Good, honest, and otherwise successful, businesspeople were forced to stand by and watch as they were sunk by the decisions of the bank. The bank would then extract maximum revenue from the business, beyond what could be considered reasonable, and to such an extent that it was the key contributing factor to the business’s financial deterioration.

The reported practices of the restructuring group, if accurate, were, on a generous interpretation, dubious and questionable, but it may be truer to say unethical and totally scandalous. It is therefore no wonder—indeed, it is proper—that, following the publication of the Tomlinson report in 2013, the Government invited the FCA to investigate the alleged actions and practices of RBS and other banks. The FCA and the Prudential Regulation Authority were established by Parliament with legal powers to investigate such a situation. I am aware also that two accountancy and consultancy firms were appointed to carry out a skilled person review of the allegations against the Royal Bank of Scotland.

However, more than two years on, we are still waiting for the FCA to present its findings. In the meantime my constituent, Mr Topping, and hundreds like him across the country are unable to move on with their lives or get closure on the matter. They are unable to seek compensation or even receive an apology.

[Richard Arkless (Dumfries and Galloway) (SNP)]

The hon. Gentleman is making a compelling case and I echo his sentiments. My constituent, Victor Singh, owns a property company in exactly the same position. His fear is that the report is being delayed by RBS as a tactic to delay the litigation and reach a more favourable position for the bank. Does the hon. Gentleman agree that the House should use this debate to call on the FCA to publish that report as soon as possible so that the litigants can have a fair hearing?

[William Wragg]

I thank the hon. Gentleman for that timely intervention. I agree with him to the extent that I hope the voice of the House this evening will be heard loud and clear, and that the FCA will proceed with a degree of alacrity that it has so far not shown.

Madam Deputy—Mr Deputy Speaker. Forgive me—I have been thrown off course. I will not use a football analogy, I promise.

The FCA review is ongoing. We were promised it at the end of the year. Now we are told that it will be published as soon as possible. For the businesses and people who have suffered as a result of malpractice in the banks—the malpractice that the FCA is charged with investigating and putting a stop to—I think we owe them better than that. Although I am sure the FCA and its partner investigators are conducting a deep and thorough review, and there are no doubt many dozens of filing cabinets full of evidence through which to sift, two years should be long enough to present at least some preliminary findings. This two-year wait is compounded by the fact that these cases of forced liquidation and destruction of viable businesses were historic and often over a decade old. That is an awfully long time to wait for justice or closure, particularly for individuals who have had their livelihoods destroyed.

The FCA, and also the Government, should be aware of the negative impact this is having directly on the individuals involved, and also on the image and reputation of the FCA. So can the Government give an assurance today about when the FCA will conclude this review? What steps are they taking to ensure that it is delivered promptly?

In my closing remarks, I want to turn to the role the FCA has to play more widely in clean-up and reform of our banking sector. Notwithstanding the issue I have just discussed, I am not one of those who readily engage in the increasingly popular pastime of banker bashing. I believe instead that we should be proud and supportive of our financial sector, not just in the City of London, but in regional financial hubs, such as Bristol, Edinburgh, and of course Manchester, where many of my constituents work.

Our financial services sector, which leads the world in its success, innovation, and efficiency, should also lead the world in regulation, fairness and propriety. We need a sector with more competition to remove incentives to make short-term decisions purely in favour of bank profit, rather than in the interests of longer-term customer relationships. The Tomlinson report makes it clear that institutional attitude was one of the core reasons that RBS’s restructuring group acted as it did, and that needs to change. The Financial Conduct Authority is responsible for ensuring that the top management of banks instil the right culture and standards of conduct in their institutions and that this remains a priority. The FCA surely faces a difficult task in this regard, and it is a task that I do not envy, but I urge it to show its mettle.

[Several hon. Members rose—]

Royal Bank of Scotland

William Wragg Excerpts

Thursday 5th November 2015 Commons Chamber

[William Wragg (Hazel Grove) (Con)]

It is a pleasure to take part in the debate, particularly as today we commemorate a most significant day in the history of Parliament. Although I have not signed the motion and am minded to abstain, I understand entirely the perspective from which it has been approached.

The financial crisis of 2008 did much to rock public confidence in the UK’s financial sector, with the collapse of several household names in banking. It could be argued that to a great extent the banks brought that fate on themselves. Years of overambitious and risky lending practices led to kegs of bad debt being piled up around the foundations, so it all came unstuck in an explosive fashion. Members will be pleased to hear that is the end of my joke this afternoon—[Hon. Members: “Shame.”] We might, perhaps, be able to discuss the punishment inflicted on Guy Fawkes, which some Opposition Members would like to see replicated for the bankers.

The Government in 2008 had to perform significant bail-outs and interventions and introduce stimulus packages, leaving us in with large state-owned holdings in financial institutions, most notably the Royal Bank of Scotland, in which the Government have a share of 73%.

[Liz Saville Roberts (Dwyfor Meirionnydd) (PC)]

The National Audit Office issued a highly critical report in September on how the Government manage their £222 billion of assets in RBS and 53 other financial institutions. Does the hon. Gentleman not agree that a transparent portfolio approach should be taken towards the management of such assets, as recommended by the NAO, and that a fair share of the profits arising should be directed to the areas most in need of real economic investment, such as Wales?

[William Wragg]

I am glad that the hon. Lady, representing Plaid Cymru, managed to refer to Wales in her question. I am not sure whether it is quite within my remit to say how the Government should direct such profits towards Wales.

The return of RBS to private ownership is an important first step, but the motion provides the opportunity to debate some particulars of RBS’s business and some important aspects of the aforementioned lending practices, which occurred both before and after the crash. I am sorry to say that RBS, in particular, was found wanting in that regard.

I want to highlight certain negative practices that have been shown by independent sources to have occurred in RBS that affected its small and medium-sized business clients, particularly one business in my constituency. I want to place my concerns on the record and am keen to hear from my hon. Friend the Minister how such practices will be investigated and what action will be taken to restore public trust in RBS and the banking sector more widely in the run-up to any further share sales.

The Government will no doubt be aware of the report by the businessman Lawrence Tomlinson, to which the hon. Member for Edmonton (Kate Osamor) referred. It was published in 2013, when Mr Tomlinson held the position of entrepreneur-in-residence at the Department for Business, Innovation and Skills. Mr Tomlinson’s report considered the lending practices of banks and in particular the treatment of businesses in distress. It considered several banks in general, but took a particularly in-depth look at RBS’s turnaround division, the global restructuring group, or GRG. Tomlinson received large bodies of evidence on RBS’s practices, including from its business customers. The report found

“very concerning patterns of behaviour leading to the destruction of good and viable UK businesses”,

all for the sake of profit for the Royal Bank of Scotland.

[Grahame M. Morris (Easington) (Lab)]

I agree with the hon. Gentleman’s point about some of the business practices, but does he accept that the motion is a reasonable and moderate proposal, and the contention of my hon. Friend the Member for Edmonton (Kate Osamor) that we should consider other models, such as the Sparkassen model in Germany? Does he agree that bankers’ bonuses have been a significant factor in driving the misbehaviour that led to the downfall and the financial crash in 2008? Is it not true that the German banking system is geared towards supporting jobs and the real economy, and it would be a far better approach altogether if we did the same?

--- Later in debate ---

[William Wragg]

Following your lead, Mr Deputy Speaker, I will address one of those points, on bankers’ bonuses. Of course, bonuses should not be used to reward wrongdoing. I make my remarks and quote from the motion in the context of the UK’s financial sector.

Further examination of the report revealed that many businesses across the country, at least those among RBS customers, found themselves in circumstances in which the bank unnecessarily engineered default to move them out of local management and into its turnaround division, in order to generate revenue through fees, increased margins and devalued assets.

[Jo Stevens (Cardiff Central) (Lab)]

Does the hon. Gentleman agree that that is not a practice restricted to RBS, but applies also to Lloyds bank? I raised this in a Westminster Hall debate. My constituent Mr Kash Shabir was a victim of exactly that practice. Does the hon. Gentleman have any observations on that?

[William Wragg]

I agree entirely that the practice was not restricted to RBS. The case of my constituent involved RBS, but the hon. Lady’s constituent no doubt had a similar experience with other banks.

Tomlinson said that the practices at RBS’s turnaround division were typical. Once placed in this division of the bank, businesses were trapped, with no ability to move and no opportunity to trade out of their position. Good, honest and otherwise successful businesses were forced to stand by and watch as they were sunk by the decisions of the bank. The bank could then extract maximum revenue from the businesses, beyond that which could be considered reasonable, and to such an extent that it was the key contributing factor in the businesses’ financial deterioration.

[Hannah Bardell (Livingston) (SNP)]

I am struck by the comments made a moment ago by the hon. Member for Cardiff Central (Jo Stevens) about Lloyds TSB. Does the hon. Gentleman agree that we must learn from the bitter experience of the merger of the Halifax Bank of Scotland with Lloyds—a significant loss to the taxpayer, despite a spirited challenge in the Scottish courts? Does he further agree that it is not good enough to pour taxpayers’ money down the drain by short-selling our banks in a short-sighted manner, at a time when the austerity cuts are hitting the poorest and innocent taxpayers the hardest?

[William Wragg]

If I may strip away the rhetoric from the hon. Lady’s intervention, of course I would disagree with pouring away taxpayers’ money in such a fashion.

Tomlinson’s evidence showed that the process was not open or transparent, nor was it a proportionate response from the bank. During the process, businesses were completely in the dark as to what was happening around them until it was far too late. Most worryingly, the businesses affected were often perfectly viable, and, but for the action of the bank, would have made a positive contribution to the UK economy. If the businesses concerned had had more options for moving their banking facilities, and there was more transparency before entering this process, they would have been better protected from the bank’s opportunistic behaviour through which it manipulated the businesses’ financial positions for its own gain.

The reported practices of RBS’s global restructuring group, if accurate, were, on a generous interpretation, dubious and questionable, but it may be fair and truer to say that they were unethical and scandalous. If the findings of the report that I have just summarised sound shocking or alarming to colleagues, they should do. However, consider how much more shocking and alarming it was for the victimised businesses and business owners involved—for the honest and hard-working businessmen and women and their employees, who saw their hard work and investment, often spanning years, eroded from under them; for those who lost their businesses, their jobs, their reputations, and in some cases their homes.

This, unfortunately, was the case for a business in my constituency. Pickup and Bradbury Ltd was owned by a constituent of mine, Mr Eric Topping. It was a medium- sized, family-owned construction firm operating out of Romiley. It engaged in mainly commercial construction contracts, with clients including large retailers, shopping centres, schools, HM Prison Service, several NHS sites, and a host of other local businesses. It was a well recognised and respected name in the construction industry across Greater Manchester. However, in 1998 Mr Topping and Pickup and Bradbury Ltd fell victim to exactly the kind of practices I have outlined. I shall not detain the House with the full details of the case, particularly as Ministers at the Department for Business, Innovation and Skills are aware of the full details, which I have passed on to them.

It may be of benefit to the House, though, if I briefly outline the example. Pickup and Bradbury was forcibly moved by RBS into the global restructuring group after the bank claimed that the business owed it a significant debt in excess of £700,000. My constituent acknowledges that the business had some debt, but it was perfectly capable of managing and servicing it. However, the crux of the case was that although the business balance sheet at the time showed assets of over £1 million, after the restructuring group process RBS placed a valuation on the business at negative £1.1 million—a discrepancy of over £2 million. The upshot was that this led to the forced liquidation of Pickup and Bradbury, costing the jobs of all its employees and forcing Mr Topping to sell his home. He contends to this day that the business was viable, and would still be trading if it were not for the actions of RBS, or if he had been given time to switch to another bank.

[Catherine West (Hornsey and Wood Green) (Lab)]

I think of a similar situation in which a small businesswoman had borrowed from and had a wonderful relationship with the bank manager, but the bank branch closed and the bank manager went. Suddenly the loan was called in and she lost her business on the high street selling children’s clothes, then had to go on benefits and had other financial difficulties. What a knock-on effect that has had not just within the sector, but in the wider local economy.

[William Wragg]

I agree wholeheartedly with the hon. Lady’s remarks. The pattern has no doubt been repeated across the country in different circumstances, but with the same sorry result.

I know that the case in my constituency is not an isolated one, and the Tomlinson report suggests that the bank’s practice was widespread and systemic. RBS has failed to resolve the case of Pickup and Bradbury, and I am sure the same can be said of many hundreds of cases across the country. This is about more than just the numbers on a balance sheet; it is about people’s businesses, their jobs, their homes and their lives.

In addition to raising the issue on the Floor of the House today, I have previously written to my right hon. Friend the Minister for Small Business, Industry and Enterprise about this case. This is obviously a cross-departmental issue covering both the Treasury and BIS. Will my hon. Friend the Minister confirm, on the record, that she is aware of my constituent’s case and similar cases across the country? Can she give an indication of how many small businesses it is estimated fell victim to RBS in a similar way?

The Business Minister has told me that the Financial Conduct Authority and the Prudential Regulation Authority have been established by Parliament with legal powers to investigate this situation. I am also aware that two accountancy and consultancy firms, Promontory Financial Group and Mazars, have been appointed to carry out a skilled person review of the allegations against RBS. The FCA review is ongoing and I understand that it is not expected to report until the end of this year. Given that it is two years this month since the publication of the Tomlinson report, and in view of the fact that some of these cases of forced liquidation and destruction of viable businesses are over a decade old, that is an awfully long time to wait for justice or closure.

[Guto Bebb (Aberconwy) (Con)]

My hon. Friend will be disappointed to hear that at a meeting with RBS this morning it was confirmed that it is not expecting the FCA report until the new year, so the hope of having something in our Christmas stocking has been taken away.

[William Wragg]

I thank my hon. Friend for that intervention, and naturally I am disappointed to hear its content. Can the Government give any assurance about the timeliness of the report from the FCA?

The recommendations of the Tomlinson report call for more competition to remove incentives to make short-term decisions purely in favour of bank profit, rather than in the interest of longer-term customer relationships. When do the Government expect to produce their own full response to the Tomlinson report?

What steps are the Government taking to improve the lending practices and reputation of RBS in the light of what has happened? Let us not forget that they still own over 70% of the bank. I also want to give my hon. Friend the Minister an opportunity to give any message that she feels would be appropriate to the former owners of now liquidated businesses, including my constituent Mr Topping, while we await the reviews of third parties.

In conclusion, the motion before the House concerns the potential sale of further Government shares in RBS. I said at the outset that this is, on the whole, a positive direction, but my question still is this: how can we be comfortable proceeding while this long shadow still hangs over RBS’s reputation? I therefore call on the Government, while they still hold a large controlling stake in RBS, to use their position of influence to ensure that these matters are fully investigated, to deem what admission of wrongdoing is appropriate and, if necessary, to facilitate compensation and the issuing of apologies to those business owners affected by the scandal. I am at present minded to abstain on the motion, pending the Minister’s response, and I look forward to what the Government have to say.

Oral Answers to Questions

William Wragg Excerpts

Tuesday 21st July 2015 Commons Chamber

[Greg Hands]

I thank the hon. Lady for her question. Our welfare reforms are based on the principle of fairness; fair on those who receive the benefits and fair on those who pay the tax. With regard to a specific group, there is clearly a difference between the work-related activity group and the support group, and we are happy to look at those differences. She is clearly not satisfied with what we are doing, but she is also one of the 48 Labour Members who rebelled last night on welfare, so I do not think that she is satisfied with her Front Benchers’ position either.

[William Wragg (Hazel Grove) (Con)]

9. What fiscal steps he is taking to support small businesses.

[The Financial Secretary to the Treasury (Mr David Gauke)]

Small businesses are the lifeblood of our economy and the Government are committed to helping them grow and prosper. In the summer Budget we announced that we will increase the employment allowance from £2,000 to £3,000 to help small businesses with the cost of employment, and support business investment through the highest permanent level for the annual investment allowance. We will also transform the tax system over the course of this Parliament by introducing digital tax accounts.

[William Wragg]

The Government’s policies are creating a climate of economic confidence. However, they are also having the effect of strengthening the pound against other currencies, particularly the euro, which many small exporters in my constituency tell me is making the price of their exports uncompetitive. What advice and support can my hon. Friend give to those small and medium-sized exporters in Hazel Grove so that they can continue to lead our economic recovery?

[Mr Gauke]

We recognise that the recent weakness in our European trading partners has presented a particular challenge for SMEs trying to export. The Government are working hard to help British businesses export to a wider variety of destinations, contributing to strong recent performance in key emerging markets. That help includes a £20 million package of support this year for first-time exporters, but we need to do more and our productivity plan sets out how we will do that.