As you will be aware, Mr. Speaker, the Chancellor of the Exchequer is at a meeting of European Finance Ministers in Brussels today. However, he and the Treasury hold frequent discussions with United Kingdom Financial Investments Ltd on a range of topics related to the Government’s holdings in financial institutions, in line with the UK Financial Investment’s framework document and investment mandate.
Given that the Government have reduced competition among high street banks, does the Minister not recognise that many small and medium-sized businesses will be frustrated by an economic recovery, because they will be unable to access finance on the terms that they need for expansion and recovery? Is it not the Government’s responsibility to ensure that they can do that, so will he do something about it rather than being passive on the sidelines?
We are certainly not being passive on the sidelines. As the House is well aware, the Government have negotiated binding commitments with RBS and Lloyds Banking Group on lending to businesses, as well as mortgage lending. We have taken further actions to help small, growing companies, through the enterprise finance guarantee, which has been a big success in lending to small businesses, and through intermediate lending by the European Investment Bank. We have also seen EIB loans at cheap rates to help companies through the recovery, which is what we all want to see.
Like many hon. Members, I have probably spoken to more constituents over recent months than I would normally, and there is still a huge amount of anger among my constituents—and, I suspect, many others—about bankers’ bonuses. They feel that, as the Government have a stake in a number of such institutions, perhaps they should have taken a lot more action to curtail the amount that bankers are still being paid.
The whole House will have had representations from constituents on the issue of bankers’ bonuses. My hon. Friend will be aware that UKFI manages the Government’s interests in RBS, Lloyds Banking Group, Northern Rock and Bradford & Bingley on an arm’s length basis. It is not in the interests of shareholders, including the taxpayer, for banks to lose key profit-making staff, but we have to ensure an appropriate balance. As she will be aware, RBS made a commitment to pay the minimum possible, to protect the banking franchise, and it is in investment banking where that issue is most apparent. On behalf of the Government, UKFI took independent analysis and looked at sector averages in coming to its conclusions, and it was entirely appropriate that it showed that due diligence.
On lending banking, has the Chancellor yet modified his opposition to Mr. Paul Volcker’s view, which is strongly supported by President Obama, that it is a mistake for commercial banks to allow their depositors to run the risk of their money being handled by investment banks?
No, I do not think that the Chancellor has changed his views on that. Indeed, he has clearly expressed the view to the House on a number of occasions that he does not believe the causes of the current financial crisis to have been brought about as a result of a failure to implement Glass-Steagall and split investment banking from ordinary commercial banking. Both types of banks have got into difficulty over the past couple of years. What is important is that we pay due attention to ensuring the effective regulation of the banks. That is the approach that we have adopted, which is why we have introduced recovery and resolution plans, for instance, as part of our new legislative programme.