With permission, Mr Speaker, I would like to make a statement regarding the Chancellor’s speech at Mansion House last night.
First, I turn to the Royal Bank of Scotland. The £45 billion that the previous Government paid for the Royal Bank of Scotland represents the largest single bank bail-out in the world. The bank employs over 60,000 people in Britain and provides over a quarter of all small business lending in Britain. Its problems and its slow recovery have been one of the biggest drags on our economy, as many smaller firms know all too painfully. The restructuring of the Royal Bank of Scotland and the work that Ross McEwan and his team have done since have brought us to a decision point. This Government were not responsible for the bail-out of the Royal Bank of Scotland or the price paid then for shares bought by the taxpayer, but we are responsible for getting the best deal now for the taxpayer and doing whatever we can to support the British economy.
As the Chancellor set out, there is no doubt that starting to sell the Government’s stake in RBS is the right thing to do on both counts. That is not just our judgment—it is the judgment of the Governor of the Bank of England, whose views the Chancellor sought and whose letter on this issue we published last night. In the Governor’s words, “it is in the public interest for the government to begin now to return RBS to private ownership.”
He goes on to say that this
“would promote financial stability, a more competitive banking sector, and the interests of the wider economy.”
Indeed, he adds that
“there could be considerable net costs to taxpayers of further delaying the start of a sale.”
That is also the conclusion of the independent review that we commissioned from Rothschild and that was published last night. It says that beginning sales now, and increasing the free float, will improve the marketability of our remaining stake, and it means that we can expect to see larger sales on better terms in the future—but only if we start now. This independent report confirms that taking into account all the sales we have authorised of our bank assets, and the fees we have received, at the current valuations taxpayers can expect to make £14 billion more than they paid out.
In the coming months we will therefore begin to sell our stake in RBS. It is the right thing to do for British businesses, British taxpayers and the British economy. Taking all the bank interventions in total—Lloyds, Northern Rock, and the scheme fees—we are making sure that taxpayers get back billions of pounds more than they were forced to put in. Of course, given the size of our stake in RBS, the sales will take some years and are likely to involve all types of investors. With such a complex investment case, we have to start with institutions, but, as the Chancellor said, there is no reason why ordinary investors—in other words, members of the public—should not take part in due course.
I now turn to Royal Mail. As the Chancellor set out last night, the first sale of our remaining stake in Royal Mail has begun. The Government have today sold half of the 30% stake they retained in Royal Mail plc at a price of 500p per share. This sale has raised £750 million, and that money can be used to reduce public debt. We have said that we will dispose of all our shares in Royal Mail in this Parliament. We will continue to review the options in the light of our stated sale objectives, but there is no rigid timetable. Value for the taxpayer remains the priority. The Chancellor also announced last night that the Government intend to gift up to 1% of the shares of the company to Royal Mail’s UK employees, in recognition of their work in turning Royal Mail around.
Finally, the fair and effective markets review yesterday published its final report. The report sets out 21 recommendations to help to restore trust in the wholesale fixed-income, currency and commodity markets. The review was established by the Chancellor of the Exchequer and the Governor of the Bank of England in June 2014 to help to restore trust in those markets in the wake of a number of recent high-profile abuses. The review is centred on four principles: first, individuals must be held to account for their own conduct; secondly, firms must take greater collective responsibility for market practices; thirdly, regulators should close gaps in regulatory coverage and broaden the regime holding senior management to account; and fourthly, given the global nature of these markets, co-ordinated international action should be taken wherever possible to improve fairness and effectiveness. As the Chancellor set out in his Mansion House speech last night, there is no trade-off between high standards of conduct and competitiveness. Implementing the reforms set out in the review will ensure trust in our markets and strengthen London’s global leadership position.
This Government have a long-term plan to make the UK economy the most prosperous of all the world’s major economies in the coming generation and for that prosperity to be shared widely across our one nation. The steps we are announcing today are a key part of achieving a new settlement for our public finances and for our financial services industry, and they will help us secure that bright future for all. I commend this statement to the House.
I welcome the new Minister to her role, but where is the Chancellor of the Exchequer? Should he not have the courtesy to come to House of Commons and answer questions on what might be one the most important financial decisions of this Parliament? Taxpayers deserve to know more about what is going on here. Why is it that when there are difficult questions, the Chancellor always blames someone else or sends someone else?
Taxpayers who bailed out RBS during the global financial crisis want their money back and will rightly be suspicious of any rush to sell. When RBS is still restructuring the business and awaiting a US settlement for the mis-selling of subprime mortgages, would a premature sale not pose a risk for the taxpayer? The Chancellor said two years ago that he would countenance a sale of RBS only when
“the bank is fully able to support our economy and when we get good value”.
Does the Minister really think that those tests have now been met?
Although we have always supported the eventual return of RBS to the private sector, is it not essential that the Treasury get back as much money as possible to help pay down the national debt? Why the rush when the share price is so far below the break-even point? RBS had to be bailed out urgently, but it does not have to be sold off at the same speed. The Minister should not give the impression, either, that the Governor of the Bank of England is telling Ministers that the price is now right, because he makes it very clear in his letter that questions of valuation are entirely for the Government.
Before Government Members start pretending that the RBS rescue was somehow not a matter of consensus at the time, we are not going to let them re-write history. The truth is that the Chancellor did not oppose the urgent rescue of RBS at the market price back in 2008. The National Audit Office says that the rescue price was “justified” and the Institute for Fiscal Studies says it was
“not obviously unfavourable to taxpayers”.
They know full well what the consequences would have been if the bank had gone under.
On the specifics, will the Minister clarify for the record exactly what the Government accept the break-even share price for the bank to be? The figure of a potential £7.2 billion loss might be understating things, because the Rothschild calculation she mentioned nets off the fees the Government have received from the bank since 2008.
On Lloyds, the Treasury has already pledged that shares sold through the Government’s trading plan will not be sold for less than 73.6p—the price the Government paid for them. What is the equivalent red line below which the Treasury would not sell an RBS share? Why can the Minister not give us more detail about precisely when the sale will commence and what impact she predicts it will have on debt reduction?
As for the extremely dodgy claim that if we roll everything together, stand on one leg and squint a bit, losses at RBS do not really look that bad after all, is not that a bit like saying, “I’ve sold the house and lost a fortune, but don’t worry because I got a great deal on the car”? Come off it! The Government cannot pretend they are not making a loss on RBS just because they are making a gain on completely separate assets elsewhere. At a time when the Chancellor is reportedly on the brink of axing £5 billion from tax credits for children of working parents, should not the Government be far more careful not to lose billions more by rushing a sale on RBS? Everyone knows that when it comes to getting value for money, they have poor form: just look at the fire sale of Royal Mail.
We have to ask what the real reasons for this hasty sell-off are. We saw in the March Budget that the Chancellor rushed forward asset sales in order to just about meet the Treasury’s debt target. Is he repeating the same thing before the emergency Budget, regardless of the best price for the taxpayer? Or perhaps this is the Chancellor trying to prove his ideological credentials as part of his leadership bid, to impress all those new Conservative Back Benchers. Taxpayers need to know that there are sound reasons for this and that he is not doing it just to suit himself. We have a hidden Chancellor and a hidden agenda. It is now for the Government to justify the claim that they are putting taxpayers’ interests first.
Clearly, the Chancellor is not dodging any difficult questions because I did not hear any difficult questions from the hon. Gentleman. It is a bit rich that the new shadow Chancellor has chosen to make his first attack on the Government’s economic policy by drawing attention to his party’s woeful track record on bank regulation and by publicly disagreeing with the advice of the Governor of the Bank of England.
Last week the hon. Gentleman told this Chamber:
“I have had plenty of time to reflect on the result of the general election. Obviously, we are disappointed with it and we will review our policies accordingly”.—[Official Report, 4 June 2015; Vol. 596, c. 789.]
Clearly, that reflection does not include apologising for the lax regulation of our banking sector or realising that the British people do not want a Government who are committed to borrowing more, spending more and nationalising more. Above all, the hon. Gentleman’s reflection clearly does not include recognising that his mentors, Gordon Brown and Ed Balls, paid a high price for their intervention in the Royal Bank of Scotland. I will take no lectures on economic competence from an Opposition party that in office sold off the country’s gold reserves at an all-time low, crashed the banking system and the economy, and left us with the biggest peacetime deficit in our nation’s history.
I will answer the hon. Gentleman’s questions. He asked whether the Government will publish a break-even share price for RBS. I do not know whether he is Mystic Meg, but I do not know exactly at what price the sales will be made. The hon. Gentleman will have seen the Rothschild report that we have published today. Under his Government, it was forecast in 2009 that the bank interventions would result in a total loss of between £20 billion and £50 billion. We have turned the economy and the banking sector around, and as of this week the Rothschild report estimates that the overall sum total of the interventions will benefit the taxpayer by £14 billion.
First, may I warmly welcome the Minister to her new role? She has a great job and I congratulate her on obtaining it. May I also warmly welcome her statement? We need to grasp that the loss has already occurred: it took place in 2008. It was made possible by poor regulation and it was made certain by shocking incompetence by the RBS board.
The Rothschild report was made available in the Vote Office only a few minutes before the end of the previous statement, so I have had only a brief chance to look at it. The overall surplus identified from the total sales of financial sector interventions is £14 billion, but a footnote makes it clear that that excludes the cost of funding. I gave the Minister only a few moments’ notice that I would raise this issue, but I would be extremely grateful if she could say what the cost of funding is and what the number would be, were it included in the table.
I congratulate my right hon. Friend on his unopposed re-election as Chair of the Treasury Committee. That he asks a question about the footnote illustrates his forensic reading of the published materials. As he knows, at the end of 2009 the estimate was that the cost of bank interventions would range between a £20 billion loss and a £50 billion loss. As of last week, the Rothschild report estimates that that situation has completely turned around, and that the overall recovery from the bank interventions is in the order of a £14 billion magnitude. The overall cost of funding on our Treasury issuance is at record lows thanks to the prudent economic management of my right hon. Friend the Chancellor.
I welcome early sight of the statement.
The Government are fond of talking about long-term economic plans—[Hon. Members: “Hear, hear!”] Absolutely. However, a sell-off is not a strategy, and a strategy for the banking sector is completely missing from the statement. My first question is this: is it not the case that there remains scope for a proper review of the options for the future of RBS, such as the consideration of creating challenger banks out of it? Secondly, yesterday I asked the Secretary of State for Scotland about the branch closures the length and breadth of the country that are being announced by RBS. Is that part of the price that people are expected to pay for this rushed sell-off? Thirdly, the statement mentioned concern about the drag on the economy and the poor performance in supporting small and medium-sized enterprises, so will the Minister explain precisely how the policy will further strengthen the SME sector?
I welcome the new hon. Member for Kirkcaldy and Cowdenbeath (Roger Mullin). What a refreshing change it is.
The hon. Gentleman asks about Royal Bank of Scotland in particular. I gently point out that if the Scottish National party had won the independence referendum, there would be no ability to intervene in the banking sector in the way that the UK Government intervened.
The role that Royal Bank of Scotland plays as the most significant lender in the SME sector is critical. It has not been able to play its full part because of public ownership. The Bank of England letter states that a phased return of RBS to private ownership would promote financial stability and lead to a more competitive banking sector, in the interests of the wider economy.
I welcome my hon. Friend to her long-overdue promotion. Will she confirm that any cost calculation will have to take into account the fact that the sale will reduce the deficit, and therefore prevent any extra debt interest that would otherwise be incurred by this country? Will she tell the House that putting the banks into the private sector is not a matter of ideology, but simply because, as previous privatisations have shown, when companies are free in the private sector they make more profit, pay more taxes and serve their customers better?
My right hon. Friend is absolutely right, and I thank him for his kind words of welcome. He is correct to say that we are not doing this purely for price reasons. It is important to take into account the wider economic impact. That is why I am grateful to the Governor of the Bank of England for highlighting the ways in which a banking sector free of public ownership will allow more capital, more restructuring and more competitive characteristics in our economy.
I, too, welcome the Minister to her post. In her statement, she rightly draws attention to the scale of the bail-out of RBS. For the avoidance of doubt, will she give the House a quote from the Chancellor, who was shadow Chancellor at the time, criticising either the bail-out in principle or the share price paid by the Government of that time?
I thank the right hon. Gentleman for his kind words.
As the Chancellor made clear in his Mansion House speech last night, he was responsible for the decision point yesterday and for articulating a future path away from the situation he inherited. The right hon. Gentleman will remember that the Treasury predictions at the time of the interventions were that they would cost the taxpayer between £20 billion and £50 billion overall. The situation has moved on and the economy has recovered substantially from the largest recession in our peacetime history. It is time to put the banking sector into a new settlement, and to have a new settlement for our financial services.
Sir Mervyn King, the former Governor of the Bank of England, said:
“Why…did the Bank of England not do more to prevent the disaster? We should have. But the power to regulate banks had been taken away from us in 1997. Our power was limited to…preaching sermons.”
Will my hon. Friend confirm that the Bank of England now has the power to do more than just preach sermons?
I welcome my hon. Friend to the House and congratulate her on an excellent question. The tripartite arrangements for bank regulation put in place by the former Member for Kirkcaldy and Cowdenbeath let the country down. The work of the last Parliament was to reframe our financial services regulation, so that the Bank of England could take responsibility, and so that we have a single point of regulation for the financial sector overall, supplemented by the important work of the Financial Conduct Authority on behaviour, and by the Prudential Regulation Authority. It is incredibly important that we have moved on from the tripartite arrangement. We do not want another situation in which the British taxpayer has to bail out a bank.
Is it not just conceivable that this mad rush is being perpetrated because the Government know that, with more than 50 rebels on the Back Benches, they are likely to lose their majority sooner rather than later, and lose credibility in the process? This is coming from a Chancellor who has added more in five years to the national debt than all the Labour Chancellors put together. He has been blaming Labour for bailing out the banks, but he supported it. He is now bailing out his friends in the City.
What can I say? It is extraordinary. I do not suppose we heard that kind of rant when the former Member for Kirkcaldy and Cowdenbeath was intervening in the banking sector. Perhaps the hon. Gentleman has not noticed that, in the single vote on legislation on Second Reading we have had in this Parliament, the Government won by a majority of 491. [Interruption.]
When the hon. Member for Bolsover (Mr Skinner) has finished, may I welcome the Minister to her place? She brings with her a great wealth of experience from the City. Part of that wealth of experience is a full knowledge of the sunk cost fallacy. Does she agree that it is completely ludicrous to say that an investment decision made in 2015 should be based solely on the information known in 2008, and that that view betrays a staggering lack of knowledge about the investment process among those opposed to selling the stake in RBS at potentially a loss?
I thank my hon. Friend and constituency neighbour for his question, which shows his depth of knowledge. He is right. In my years of managing portfolios, what I paid for investments in the first place was a fact, but managers also have to factor in the future. None of us has a crystal ball. My hon. Friend’s words are wisely taken.
I welcome the hon. Lady to her new role at the Dispatch Box. Everyone agrees and understands that the RBS shareholding needs to be transferred to the private sector. The Rothschild report states that if shares were sold at the current share price there would be a paper loss of £7.2 billion, which by anybody’s standards is a lot of money. What the report does not show, however, is why the public benefits add up to £7 billion. Could the Minister explain that please?
I thank the hon. Lady, who has great knowledge of these matters, for her question. Any estimate—and the one in the Rothschild report is no different—will be based on the current market conditions. The number that the report cites is, I think, as at 5 June. I note that the share price of RBS has performed well today; there will be different prices in the years to come. The Government have made it very clear that this will not be a quick process; it will take time. We can only project as at today’s prices the £7 billion figure, but it may or may not be a bigger number in the future.
I welcome my hon. Friend to his place. I know he has a great deal of experience in these matters. He is absolutely right that this is a key part of the long-term economic plan. We cannot have a healthy economic recovery without a healthy financial sector. I do not think that anyone in this place would argue that we can have a healthy banking sector when a large chunk of it, as my right hon. Friend the Chancellor has said, is in taxpayers’ hands.
Does the Minister think it would be prudent to have pre-scrutiny by Parliament, either through the National Audit Office or the Treasury Committee, of the Government’s objectives in the sale and the money they could be seeing? Will she also say a word about RBS’s liabilities? For example, there is currently a mis-selling inquiry into the enterprise finance guarantee scheme, which my constituents are facing. Who will ultimately be responsible for those liabilities?
The right hon. Gentleman asks a good question. I am sure the relevant Committees will take a close interest in this matter, because it is obviously a very large public investment. In terms of the liability side of the equation, he will be aware that there are a number of different pending regulatory matters that affect RBS. He will also be aware, as I think it says in the Rothschild report, that the market is aware of these things and will factor them into the price of the shares.
May I, too, welcome my hon. Friend to her post? I also welcome the shadow Chancellor, although I think we rather miss the more rambunctious approach of his predecessor. My hon. Friend the Member for Wyre Forest (Mark Garnier) illustrated the fundamental investment fallacy of not selling things on the basis of an historic price. Does my hon. Friend the Minister agree that the only reason the Opposition can take this foolish position is that clause IV may be out of their rulebook but it remains within their hearts?
I thank my hon. Friend for a very good point, very well made. It is absolutely the case that we are responsible for ensuring that, as we go forward from this decision point, we get the best possible value irrespective of what the previous Government paid, which was, in retrospect, too high.
I welcome the Minister to her post. One would expect that the duty of the Chancellor would be to sweat the assets as his disposal, but with the fire sale of Royal Mail and now RBS, the taxpayer is being let down, having had to endure all the pain of the worldwide economic crash caused by the banks with none of the gain in this case.
I really will not take any lectures on letting the country down in terms of economic management. The people who suffer the most when the banks fail, the regulatory system fails and the economy fails are the very poorest in our society. It is outrageous for the hon. Gentleman to suggest that the economic recovery, the clear turnaround in this portfolio of legacy assets and clearing up the mess that his party left behind is anything other than progress.
It is right for the shadow Chancellor to say that the taxpayers want their money back. It is also right, and I hope my hon. Friend agrees, that people should listen to the Governor of the Bank of England when he warns that delaying the sale of our stake in RBS would lead to a considerable net cost for the taxpayer.
I welcome my hon. Friend to her place. I agree with her. She points out an important passage in the letter from the Governor of the Bank of England. He believes, for all sorts of reasons from where he sits as our overarching economic regulator, that it is important that we come to this decision point and staging post. I also emphasise that this process will take some time. It is not something that will happen today, tomorrow or the next day. The process of clearing up the mess left behind by the previous Government is a lengthy one.
I, too, welcome the hon. Lady to her post. Will she tell us whether the Chancellor intends to make a habit of announcing policy to a roomful of bankers, based on a secret review by an investment bank with no public consultation? Did he even consider the alternatives, such as turning RBS into a network of local stakeholder banks, like they have in so many other countries, as a perfect example of localism in practice?
I think my right hon. Friend was delighted to be invited back to the Mansion House to make a speech again this year. The question the hon. Lady asks about locally owned banks indicates that she favours a system of public ownership of our banking sector which, overall, the Government disagree with.
Having worked on the sale of Northern Rock—I refer the House to my entry in the Register of Members’ Financial Interests—may I congratulate the Government on their successful asset sale programme to date? As referenced in paragraph 2.2.2 of the Rothschild report, the benefits of these sales are not just direct for the taxpayer; they are indirect as well. They may result in increased lending and more mortgage approvals. Will my hon. Friend confirm that those indirect benefits will be taken into account when we judge the success of this programme?
I welcome my hon. Friend to his place, and also welcome his wealth of experience and knowledge in this matter, which he ably demonstrates in his question. The sale will bring wider benefits to the overall economy. It will help us to continue to make progress in making the banking sector more competitive, and may result in a more competitive financial services sector and mortgage sector. That position is echoed not only in the Rothschild report, but in the Governor of the Bank of England’s letter.
May I take the Minister back to page 11, table 2 and the footnote, because we did not get an answer when this was first asked? The table lays out not the forecast recoveries but just a statement of where we are at the moment, which could change. It does not include the cost of the funding of the interventions; in other words, the cost of the Treasury paper that was created to buy the assets in the first place and on which interest is being paid. Will the Minister please answer the question—what was the cost of funding the interventions?—so that we know the true cost, not the £14.3 billion?
I welcome today’s statement and the steps being taken to return RBS to private ownership. Will my hon. Friend confirm that the steps set out in the markets review will help to tackle what the Governor of the Bank of England has called a “culture of impunity”, which has been too prevalent in investment banking?
My hon. Friend is absolutely right to highlight a very important part of the Governor of the Bank of England’s announcement last night—the “Fair and Effective Markets Review”; bringing a range of fixed income, currency and commodity markets within the regulatory perimeter; and aspiring to be not only the most competitive country in the world in which to locate a financial services business, but the one with the best, cleanest and most competitive regulatory system.
I join others in welcoming the hon. Lady to her new role. The sale price of Royal Mail shares last night— £5 per share—totally vindicates the cross-party conclusion of the former Business, Innovation and Skills Committee that Royal Mail shares were underpriced in the original sale. One reason was the over-reliance on institutional investors and the under-participation of the public. Will the Minister assure us that that lesson will be learned in the sale of RBS?
I have to disagree with the hon. Gentleman. A long time has passed since the initial flotation, during which the markets have done a lot better. The markets have welcomed the re-election of a strong Conservative Government who have turned the economy around and made huge improvements in our public finances. It is largely due to that that the price is so much higher.
As we return RBS to the private sector, there are three alternatives. One is for the Government to hold on to the shares for as long as possible in the hope that the share price increases. The second is to sell the whole lot in one go and hope that we get the right price. The third is a phased sale that maximises the income for the taxpayer. Which does my hon. Friend believe is the right option?
My hon. Friend ably summarises a range of options. Today’s statement clearly illustrates that we have rejected his first option of doing nothing. The Government have never shrunk from making difficult decisions that are in the right interests of the country’s economic future. On the second option of selling everything in one go, it is not our opinion, given the size of the holding and as the reports make clear, that the sale can be done in short order; it will take a period of time—which leaves us with the third option.
Has the Minister read, “Freeing Britain to Compete”, produced by her party in 2007 and endorsed by the Prime Minister and, I believe, the Chancellor, which called for a vast range of regulation in financial services to be abolished or watered down, including in relation to money laundering? In particular, has she read the part that says that the Labour Government
“claims that this regulation is all necessary. They seem to believe that without it banks could steal our money”?
Is not the reason it is difficult to get our money back from RBS that, other than the Greek banks, no other major bank in the world is in such a parlous, unprofitable state, the root causes of which go back to the last Labour Government—a poor loan book, terrible misconduct, resulting now in catastrophic fines, and ill-judged mergers? Even if we sell the shares at a loss, would that not merely be a tragic reminder to the British public of the failure and economic incompetence of Labour?
As I understand it, the stake was originally acquired for £5 a share and the Government are selling them for about £3.50 a share and claiming that the taxpayer is making a profit. On that basis, with the weekend approaching, is the hon. Lady prepared to lend me £20? I will give her a tenner back next week.
Having spent the last seven years working on the Lehman Brothers unwind and repaying creditors in full, I pay tribute to the thousands of RBS staff across the nation, including those at Cotton Street, Bolsover, for returning the bank to health. Will the Minister confirm that selling the initial stake will make it much easier and more efficient to sell the remainder of the stake?
I welcome my hon. Friend, who has a wealth of experience in insolvency practice that he has clearly put to good use in his first question. Rothschild and the Bank of England Governor have said that one of the challenges facing this stake is the illiquidity of the float—the stock is not liquid enough to be in any of the major indices, for example—so there are liquidity benefits and potential price benefits from putting an initial float in the private sector.
May I welcome the hon. Lady to her post and say how much I agreed with the measured, sensible and absolutely correct points made by my hon. Friend the Member for Bolsover (Mr Skinner)? I can confirm to the hon. Member for North East Somerset (Mr Rees-Mogg) that the old clause IV is certainly alive in my heart. In 1983, I was pleased to stand for election on a manifesto that called for the nationalisation of the banks. Had the banks been nationalised—in public ownership and accountable to the public—all the profits would have accrued to the public purse and they might have been shielded from the world banking crisis. By giving RBS back to the private sector, are we not simply inviting more gambling, more greed, more irresponsibility and more crises in future?
I thank my hon. Friend for a good question that reminds us not only of the failure of the banking regulatory system under the previous Government, but of the rewards for failure. Labour allowed Fred Goodwin to walk away with an enormous pension and a knighthood.
I welcome the hon. Lady to her new role, but gently remind her that the current debt to GDP ratio is 80%, which is 20% higher than it was after a global economic crisis and our recapitalisation of the banks. On the current RBS share price, there would be a loss to taxpayers of £13 billion, if all the shares were sold today. Is this not incredibly insensitive to the millions of disabled people waiting for personal independence payments and to the carers who have seen £3.5 billion cut from social care and who are really struggling in this, carers week, and will she confirm that the Government will sell RBS only at a profit to the taxpayer?
The hon. Lady’s question started off very well by acknowledging the risks of high public debt. It is incredibly important for those people whom she rightly draws our attention to that we have a strong and healthy economy, and a strong and healthy financial sector is part of the solution. I am not sure, however, whether she is arguing that we should borrow more for longer by holding on to the shares for longer.
Is my hon. Friend aware that just prior to the financial crash, the then Labour Government were running an underlying fiscal deficit equivalent to 6% of GDP—twice the level recommended for the EU? Is it not a bit rich, therefore, for Labour Members to dish out advice on both the management of the banks and government finances?
I welcome the hon. Lady to her position, but only the Conservative party could come here and say that this is a benefit to the taxpayer when it is selling this bank at a cost to the taxpayer. This may represent another cash injection, but on this occasion there is nothing left to get taxpayers’ money back further down the road. Can she recall any time when her party criticised the price paid for those shares at the time we bailed out HSBC?
I simply do not accept the hon. Gentleman’s line of argument. If he is such a Mystic Meg, perhaps he will tell me the date on which the price of this bank, which has been completely restructured over the last few years, will change. Rothschild has provided an estimate of the current state of the overall portfolio of bank interventions. I remind the hon. Gentleman that while in 2009 everyone—including Her Majesty’s Treasury—expected that these interventions would cost the taxpayer between £20 billion and £50 billion, evidence today suggests that it will be of overall benefit to the taxpayer.
I remind Members that if they want to ask a question, they need to stand. I am not always sure whether Members have changed their minds when they sometimes stand and sometimes do not stand. It also helps if we have brief questions and shorter answers, which should allow everybody into the debate.
It strikes me that the concern is about the process at the beginning of the sale. All the advice—from the Bank of England and Rothschild—is about phasing, which is part of the journey to return to profitability. May I suggest a rebranding exercise? Perhaps we should call this something different—I know what: a long-term economic plan!
I welcome my hon. Friend and her excellent question. She is absolutely right that today’s statement announces a decision point on the journey of implementing our long-term economic plan. Part of that is returning the financial sector to its normal state of health.
The £3.50 share float price relies on pension fund managers who run Abbey Life, Aberdeen Management, AXA, Clerical Medical, Scottish Widows, six councils, Whitbread, Lloyd’s of London, BAE, Boeing and, of course, Legal and General and the university superannuation schemes, which have already ruled out buying any RBS shares. What they all share is litigation with RBS. Why would they use their customers’ money to buy shares in a company or a bank such as RBS, against which they are taking litigation?
I welcome my friend and parliamentary neighbour to her new role—she has a tremendous wealth of City experience. My constituents would like to know whether the Government expect the share price to go up, in which case they ought to buy some, or whether it will go down, in which case we should sell considerably more.
I thank my constituency neighbour for his question. As he rightly acknowledges, neither he, his constituents, the Government or the market have perfect foresight into whether the shares will go up or down. They will go up or down, and it will be a phased programme for reducing the holdings. Today we are announcing the decision point and the potential for an initial sale.
I, too, congratulate the Minister on her appointment. The Government have consistently talked about banking reform. I am particularly concerned about the small start-ups that find it difficult to access credit, especially in areas such as Hull where there is low private wealth. With the return to the institutional investors, will the Government now decide to have a national investment bank with a regional base that focuses specifically on small and medium-sized enterprises?
I thank the hon. Lady for her kind words. She is absolutely right to highlight this country’s challenge on access to finance, particularly for the small and fast-growing sector for which bank finance might be appropriate, but it might want to move on to something else. My right hon. Friend the Secretary of State for Business, Innovation and Skills is looking at a package of measures to make sure that businesses in Hull and elsewhere are able to have a wider range of choice in accessing finance.
As far as I can make out, the position of the Opposition is that if we delay this sale, the shares might go up by 35%, and they might break even, which would be a good thing. Of course, though, they might go down. Does the Minister agree that they have no right to speculate with other people’s money, particularly when financed by an overdraft? If they believe this, they should buy some shares themselves.
There seems to be no pleasing Opposition Members. They are not happy when Royal Mail shares go up and we sell them for more money; and they are not happy when the RBS share price is where it is today. They seem to argue that the best thing to do, in all these situations, is to borrow more, spend more and invest more in the banking sector.
I welcome the Minister to her post and offer a sobering thought to the Chancellor, who might need it after his Mansion House speech. Given that the nationalisation of RBS was in response to an unforeseen sub-prime debt crisis in America, does the Minister agree that changes to the law to require a budget surplus every year might reduce the fiscal flexibility we need to respond to such a crisis in the future—even by renationalising the banks, if necessary?
I am sorry that the hon. Gentleman’s invitation to yesterday’s dinner got lost in the post—or perhaps he was not invited. What I do not understand about his question is why he seems to argue for ongoing fiscal irresponsibility, which is what got us into this mess in the first place.
I congratulate my hon. Friend on her appointment as Economic Secretary, and I congratulate the Government on further recovering our economy on behalf of taxpayers. Mention has already been made of the Governor of the Bank of England saying that, for the sake of the taxpayer, we need to get on with the sale sooner rather than later. Mark Carney also mentioned the need for stricter custodial sentences for those convicted of financial mismanagement. Although this is not my hon. Friend’s brief, will the Government consider it?
I welcome my hon. Friend’s question, and he is absolutely right that the Governor made a powerful speech yesterday, outlining the steps he and the regulators are taking to end the age of irresponsibility. The Government welcome the recommendations of the FEMA—fair and effective markets—review and hope that they will be taken forward internationally via the Bank for International Settlements and under the Governor’s leadership.
I warmly welcome the Minister to her new post. In a week when he have heard that the Hong Kong and Shanghai Bank is planning to refocus its investment and attentions away from Europe to the far east, what implications does the Minister think this sell-off could have for the long-term headquartering of the Royal Bank of Scotland in Edinburgh?
I thank the hon. Lady for her warm words. The Government noted the points made by HSBC in its report this week. We are proud of the fact that the UK remains one of the most attractive and competitive places in which to locate a financial services company and a bank. It is essential, in making us fully competitive in that regard, that we take the steps we are announcing today.
I, too, congratulate the hon. Lady on her appointment. She said in her statement that the Government were not responsible for the bail-out of RBS, but does she not agree with the Governor of the Bank of England that public ownership
“prevented enormous financial contagion at a time when the UK financial system was extremely fragile”?
Will she also confirm that the Chancellor is on record as insisting that the money spent on saving RBS from collapse would be recouped in full? Can she explain why he has changed his mind, by telling us how the perceived public benefit from the sale to which she referred will exceed the £7 billion quantified loss that has been calculated in her own report?
The hon. Gentleman has failed to apologise for the regulatory system that allowed us to get into this position in the first place. The letter from the Governor of the Bank of England is on the record. The hon. Gentleman must accept that this is part of the improvement in the overall long-term economic outlook—[Interruption.]
Order. Mr Gardiner, you must come back and wait for the next Member to speak. You know the courtesies of the House. Members must not do that. It is all about respect, and we must have tolerance as well, on all sides.
If the Minister has finished her answer, I will call David Nuttall.
The Minister experienced the singular disadvantage of being my Whip in the last Parliament. I am pleased to welcome her to her new position.
I regard this share sale as a tremendous opportunity for the Government to widen share ownership, just as the Government of the late Lady Thatcher did in the 1980s. May I urge the Minister to make as many shares as possible available to small investors, to make the application process as simple as possible, and to set the minimum level as low as reasonably possible?
I welcome my hon. Friend back to this place. Let me say what a joy it was to be his Whip for so many years. One always knew where one stood with him, and that also applies to the very sensible question that he has just asked. I think, though, that he needs to hold his horses in relation to RBS. As he will know, the manifesto on which he stood committed us to a wide retail offer of Lloyds Bank shares at some time in the not too distant future, and we will be dealing with that sale first.
I welcome my hon. Friend to the House. He is right: over the past five years, we have taken painstaking steps to establish a system of regulation in the financial services industry that will ensure that never again will the taxpayer be forced to bail out a bank.
As my hon. Friend will know, there is a direct connection between the tolerance of reckless and illegal activities in financial institutions and the destruction of valuable banks such as RBS. Will she confirm that she will allow the Government to give full force to any recommendations concerning the fair and effective markets reform that was announced by the Governor of the Bank of England yesterday? Will she also confirm that unlike the last Government, who showered honours on bankers who were reckless, this Government will bring the full force of the law to bear?
I am pleased to welcome my hon. Friend back to the House. He has made an important point. In his speech, the Governor said that it was right to fine many financial services organisations that had behaved badly in both the recent and the distant past, because such behaviour reduces banks’ capital. Responsibility needs to fall on the individuals who are culpable, and also on the management of those individuals. Reducing the capital that is available through regulatory actions contracts the supply of lending to small businesses.
May I draw attention to my entry in the Register of Members’ Financial Interests? I am a former Royal Mail employee, and a small shareholder.
How does my hon. Friend think posties up and down our great country will have responded today to the announcement of a 1% gift in shares, and the announcement of the continuation of our universal service obligation?
I welcome my hon. Friend to the House. He speaks with great knowledge and eloquence about the real experience of the hundreds and thousands of men and women up and down the land on whom we rely every day for our post. I am delighted to be part of a Government who have enabled them to own shares in the organisation for which they work.