[Mr Laurence Robertson in the Chair]
Before I call Mr Wragg to move the motion, I say to Members that I will ask Back Benchers following him to take just five minutes each initially. That is not a time limit imposed from the Chair, but I ask for self-restraint, and we will see how we go so that we can get everyone in.
I beg to move,
That this House has considered the investigation of business banking fraud.
It is a pleasure to serve under your chairmanship, Mr Robertson. We have had many debates in both Westminster Hall and the Chamber that have focused on the mistreatment of thousands of small and medium-sized enterprises at the hands of financial institutions which, in the wake of the financial crisis, sought to shore up their balance sheets as they plundered those of their business customers.
The subject is becoming an all too familiar one for debate. Indeed, this is the fourth such debate in which I have spoken. Looking around at my distinguished colleagues from across the House I see many familiar faces who have taken part in previous debates. Many Members will be familiar with the cases of hard-working businessmen and women who have had their businesses broken up and livelihoods destroyed by acts of deliberate deception and fraud, systemic asset stripping and inflated charges and fees, all at the hands of their banks.
I thank my hon. Friend for securing the debate. It is sad and disappointing that this is the fourth time he has had to speak on the subject. Does he agree that it is an indictment of the Financial Conduct Authority that proper, independent redress schemes have not been set up and that, 10 years on, no one has been brought to justice for destroying many people’s lives?
My hon. Friend is absolutely correct. In his remarks in previous debates he has shown his personal experience, and he speaks for many on the issue. With the passage of time, the issues that are exposed only multiply rather than diminish. I have spoken before at length about my constituent Mr Eric Topping, who lost hundreds of thousands of pounds, including his home and retirement savings, when his profitable building company was forced into liquidation by the Royal Bank of Scotland. For every constituent like him, there are a thousand more SME owners across the country who were similarly victims of the widespread malpractice across the entire banking sector, and today we speak for them collectively.
Does the hon. Gentleman accept that what makes it even more difficult for people is that those banks have been financed by taxpayers? They are using taxpayers’ money to fight these legal cases when they know that they have done wrong but that their victims do not have the resources to take them all the way through the courts.
The right hon. Gentleman is correct. The actions of the banks are entirely indefensible. It is, I hope, for the Government to seek appropriate redress.
While the Hansard column inches increase, meaningful actions to properly investigate business banking fraud and seek redress for its victims have been woefully insufficient so far. I would like to turn attention to the investigation of allegations of fraud by our crime prevention agencies and regulators, to the role of financial institutions, and to the role the Government play.
As a nation, we pride ourselves on the rule of law. Above the Old Bailey stands the gilded statue of Lady Justice. She carries the sword of justice in one hand and the scales of justice in the other. She wears a blindfold to symbolise that justice is blind and does not distinguish between the powerful and the weak. Yet for those who have been the victims of the systematic fraud practised by UK banks and financial institutions, such sentiment is nonsense. The statue representing their experience of justice would be heavily rusted rather than gilded. It would wear a blindfold to avoid having to see the activities of the financial institutions whose wrongdoing has ruined individuals and families, and its arms would be firmly tied behind its back to symbolise the lack of activity by both the police and the regulators.
It is 10 years this week since the taxpayer bailed out the financial services sector, and the state continues to control a significant stake in certain institutions. Ten years on, confidence in the sector is low, particularly among small and medium-sized enterprises. The nation has yet to fully recover from a decade that saw the destruction of viable businesses, jobs and thousands of individual lives as banks frantically rebuilt their balance sheets following the crash, at the expense of their customers’ financial wellbeing and their own reputations. We need to be clear: the process of shoring up a balance sheet is a zero-sum game. For every winner there is a loser. The losers here were small and medium-sized enterprises, the backbone of our economy. They lost because they did not have the resource or the legal firepower they needed, or a system to support them.
We are not saying that every SME business that folded over the last decade was viable, nor that every business was the victim of fraud. But we have seen clear evidence of tampering with documents, false witness statements and the leveraging of a position of power and clout to drive many thousands of good businesses into insolvency. In a free economy there will always be legitimate failures alongside legitimate successes. Many businesses may not have been viable and may not have survived, but that did not make them fair game for mistreatment or, even worse, fraud. It just made them easy targets.
Is my hon. Friend aware that in one year alone the Global Restructuring Group division of RBS made over £1 billion in profit? He says that some of these businesses may have failed, but rightly points out that a lot of them were viable and had a lot of hidden assets.
My hon. Friend is absolutely correct about the role of GRG.
Following the cases of, at times, blatant mistreatment and fraud, which we saw consistently and across the board, there is either a lack of willingness or lack of capability from our investigative bodies, both civil and criminal, to pursue complaints. Instead, the victims of mistreatment and fraud are left to go round in circles making a series of fruitless complaints. The complaints are either made directly to the institutions that defrauded them in the first place, which have a vested interest not to investigate properly—as was the case with my constituent and the Royal Bank of Scotland—or referred to a series of industry-led trade bodies or the Financial Conduct Authority, which does not take on individual cases. It is simply not good enough.
The only successful prosecution for fraud thus far has been that of HBOS in Reading. That was not down to the actions of our regulator or the Serious Fraud Office relentlessly pursuing the truth to bring the perpetrators to justice. Indeed, the bank—first as HBOS and then as Lloyds, after the takeover—insisted there was no fraud, despite there being a victim with losses in the hundreds of millions of pounds.
I want to put on record my personal admiration for the police and crime commissioner for Thames Valley, Anthony Stansfeld, who personally saw to it that the fraud was prosecuted.
I hope that my hon. Friend will agree that the current situation is not good enough. If the state is to fulfil its duty to protect the public from fraud, it will be necessary for the Government to find the money to equip the authorities to prosecute fraud cases without funds coming out of individual PCCs’ budgets.
My hon. Friend hits the nail on the head. I pay tribute to the police and crime commissioner, but I also wish to pay tribute to a couple of people who I believe are here in the Gallery today. Instead of the authorities investigating, it was left to a couple of music producers from Cambridge, Paul and Nikki Turner, to crack the case. I hope they are here in Parliament. They are still fighting for compensation for other victims of the crime.
I endorse what has been said about Anthony Stansfeld.
Does the hon. Gentleman agree that this is not just about RBS, as some people seem to think? My constituent, Mike McGrath, went out of business because of his treatment by Lloyds bank.
The hon. Gentleman is absolutely correct: it was systemic across the whole business lending sector. He is right to put that on the record.
The Turners’ reward for bringing the case to the bank’s attention back in 2007 was to be branded conspiracy theorists. The bank—first as HBOS, then as Lloyds—tried to evict them from their home 22 times, spending more on legal action than the value of the home itself. It sent a top partner from one of the country’s best regarded law firms to Cambridge county court to watch the hearings. The Turnbull report, which details a comprehensive cover-up of the fraud from within the bank, notes lawyers as saying that, once the Turners were out of their home, they would have to accept their fate. This was not the pursuit of justice but a witch hunt to silence whistleblowers.
The Turners approached the Financial Standards Authority, the Serious Fraud Office and the Treasury. Indeed, there was a debate in this very room in June 2009, during which Members urged the authorities to investigate. However, all they encountered was denials and deflection. As my hon. Friend the Member for Wycombe (Mr Baker) pointed out, the case was eventually taken seriously only after Thames Valley police recognised that a crime had been committed. The investigation took seven years to complete and the resource of 151 officers and staff, and it cost £7 million, with only £2 million eventually recovered from the Home Office. Thames Valley police stated that they could have done it in half the time and for half the money, if only the bank had co-operated fully. Unfortunately, the scale and difficulty of investigating the fraud only serves as a warning to other cash-strapped police forces: “Investigate at your peril”.
The reality is that white-collar crimes such as this are expensive and difficult to prosecute, and the agencies responsible for fighting economic crime simply do not have the necessary resources to tackle complex, mid-tier banking fraud. The SFO takes on only a small number of very large cases and has a budget of £53 million. The National Crime Agency’s economic crime command has a budget of £10 million, and the newly established National Economic Crime Centre has a budget of just £6 million. Compared with the sheer scale of fraud in the United Kingdom, which is estimated at more than £190 billion a year, and given the potential for consequential losses, these investigative budgets are, frankly, insignificant.
For those who may think that this is a one-off, it is important to note that the processes employed by HBOS in this case—turnaround units, business valuations and the use of insolvency—are exactly the same tactics seen in the case of other complaints that the all-party parliamentary group on fair business banking has investigated. Such complaints were found to be commonplace, as the hon. Member for Cardiff West (Kevin Brennan) alluded to, across most financial institutions. The system is ripe for abuse, and we have serious concerns about it.
At this point, I pay tribute to the incredible dedication of the co-chairs of the all-party group, my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) and the right hon. Member for North Norfolk (Norman Lamb). In addition, I thank the group’s officers and members for their significant work in running a thorough inquiry into how so many SMEs were abused by their banks, exposing the scale of the issue and the mechanisms by which the frauds were conducted. The APPG has produced an important report that identifies the shortcomings in the current investigative tools and bodies and makes vital recommendations as to how we might start to unpick this sorry mess.
I reiterate the APPG’s calls for a full public inquiry into the treatment of businesses by financial institutions. There are currently more than 10 different inquiries looking at different, isolated issues. It is time that we had a holistic approach and investigated the system as a whole.
I thank my hon. Friend for his work in this area. Two of my constituents have been affected—one through a mis-selling of swaps by RBS and the other through the dreadful situation at HBOS that my hon. Friend has mentioned. Does he agree that the tragedy of this case is partly the lack of transparency and independence, and that people feel that they cannot get fair redress? A decade later they are still not being treated fairly by those institutions.
My hon. Friend is spot on. The level of obfuscation by these institutions would be quite suspicious if one were to suspect them of any wrongdoing. I am sure that we can deduce our own conclusions from their behaviour.
On a civil level, the APPG’s proposal for a financial services tribunal has been well received, and we look forward to the Government’s response. That may at least provide a civil remedy for those who have been wronged. However, we have been asked what will happen when civil mistreatment tips over into the criminal abuse of power. Where is there to go? At this point, there is no satisfactory answer. The Thames Valley police and crime commissioner believes that we should have regional fraud squads akin to our counter-terrorism squads, funded by the Treasury via FCA fines and funds recovered from criminal gangs. We wholeheartedly support those proposals. Whatever action is taken, it requires the utmost degree of urgency, so that more and more cases do not—as has already started to happen—run into statutes of limitations, lose documents and evidence to the sands of time or see responsible and culpable individuals leave the industry and witnesses become unavailable.
I look forward to Members’ contributions and the Minister’s response. As I mentioned at the start, this is becoming an all too familiar debate, and I rather hope that we are not all back here in six months reliving it again. I also hope that we can resolve to agree a path of action that will see the tarnish start to be scrubbed off Lady Justice and allow her to start to uncross her arms.
It is a pleasure to serve under your chairmanship, Mr Robertson. I thank the hon. Member for Hazel Grove (Mr Wragg) for securing the debate. It is a pleasure to speak after him. I have raised the plight of my constituent, Mr Kashif Shabir, for many years. His case is about corporate collusion between Lloyds bank and a firm of receivers in Bristol, Alder King, which was embedded in the bank’s recovery department and effectively destroyed businesses to pick up work for itself.
I led a debate here in September 2016 concerning the role of the SFO, and there was a second debate here in April 2017 about the role of the Royal Institution of Chartered Surveyors as an adequate regulator. Both debates followed a March 2014 Select Committee inquiry into the regulation and policies of the insolvency sector. There have also been many other debates, as has been referenced. The HBOS six have been jailed, the Turnbull report has been released and many victims of quite appalling practices have come forward. My question to the Minister, therefore, is why are the owners of SMEs that were destroyed by the actions of Lloyds bank and RBS still suffering 10 years on?
My constituent’s experience is a case study in the cynicism and arrogance with which Lloyds refuses to right the effects of its wrongdoing, and of the ineffectiveness of organisations such as the FCA, the police and the regulators that are supposed to oversee and enforce the integrity and honesty of businesses in this country. Mr Shabir has been fighting Lloyds bank for 10 years. As far back as 2011, Lloyds acknowledged fault by making an offer of settlement—the bank would not pursue him for the balance of losses, which it had itself created, in return for a gagging order. Mr Shabir quite rightly refused to sign up to that.
Subsequent approaches by Mr Shabir, myself and many people working on his behalf to both Lloyds and Alder King have either been ignored or met with deliberate stonewalling tactics, because those organisations know that they hold the power in this relationship. Their actions have impoverished hundreds of businesspeople, who cannot sue, because they cannot afford to litigate. The banks and others know that and are taking advantage of it.
At the same time, Lloyds has openly stated that it will co-operate and work with the APPG on fair business banking, but we know that, in reality, the opposite is true. If the bank cannot settle with a victim to whom it has already made an offer, even if that offer is derisory, it is clear that that stance is completely disingenuous. In such instances one would expect the regulators to redress those shortcomings, and investigators and prosecutors to look at them. As we have heard, however, they have not done so far.
In the September 2016 debate, I asked the Solicitor General to look at this and explain the threshold for prosecution. He outlined the criteria and the threshold for prosecuting, and said that these cases would not reach that threshold. We know, however, that while individually none of these cases will reach the FCA’s prosecution threshold, collectively they will.
My hon. Friend the Member for Norwich South (Clive Lewis) summed up the matter well in the debate in the main Chamber in January:
“We do know that 90% of GRG-administered businesses never made it back to mainstream banking…The cost is immeasurable, but we believe it to be in the tens of billions…If it is indeed that big, it may be the largest theft anywhere, ever.”—[Official Report, 18 January 2018; Vol. 634, c. 1086.]
If that does not meet the criteria for an SFO investigation, I do not know what does. Why is it not investigating? We have heard many times that hundreds of victims of this fraud have lost large sums individually and collectively.
Mr Shabir tells me that there has never been a rejection of his complaint on the evidential merits; it has been purely on the basis of the threshold. The Avon and Somerset police economic crime team refused to investigate the case, because it said it had already been investigated by other bodies. The Royal Institution of Chartered Surveyors turned it down. The Financial Conduct Authority and the banking ombudsman said they had no locus to investigate it. The police have refused to properly investigate this fraud. Mr Stansfeld has had to write to that constabulary to ask it to look into the case based on the evidence that he has seen.
Mr Shabir will not go away, and nor will the other victims. Whatever the shortcomings of the regulators, investigators and prosecutors, they must not detract from the main issue, which is the fraudulent actions of the banks and the question of where the responsibility for such actions ultimately lies. It lies with Lloyds bank and RBS. It is time for the people in charge of those organisations to take responsibility for their actions.
I congratulate my hon. Friend the Member for Hazel Grove (Mr Wragg) on raising this important issue. It is a shame that he continues to have to do so.
Several of my constituents have been adversely affected by the unscrupulous behaviour of the banks mentioned today. I want to bring attention to the despicable actions of Clydesdale bank, which has not been mentioned, under the tutelage of its parent company National Australia bank.
The NAB Customer Support Group was set up by a small group of SMEs that were crippled by long-term, fixed-rate loans made via tailored business loans issued by the Clydesdale and Yorkshire banks. Many of the businesses have closed down, but most are struggling to survive, burdened by unmanageable interest rates and unable to break from the fixed rate due to extortionate breakage penalties of up to 40% of the loan, arising from the bank’s alleged signing of interest rate swap agreements with third parties.
The bank charges costs arising from exiting embedded interest rate swaps via the small print in the terms and conditions. However, with the passing of time, the bank admitted that there were no such micro-hedges, or match hedges, in place and that all interest rate risk was dealt with by the parent company, National Australia bank. The uncontrolled promotion of these products—driven, as always, by generous commissions—has caused enormous damage to the SME sector and the wider economy, especially in Scotland, including the west of Scotland.
Members of the support group are here today, including my constituent Ian Lightbody, and their objective is to bring the bank to account for the damage it has caused and to persuade or force it to apply satisfactory redress to all affected SMEs. Over the past few years, the FCA has been shown to be impotent. That must change, particularly now that some of these cases are so serious that even Police Scotland feels they merit investigation.
In June 2014, representatives of Clydesdale bank appeared before the Treasury Committee. The bank’s evidence was weak and, to be frank, misleading—apparently, with the benefit of hindsight, deliberately so. It said it would investigate fixed-rate tailored business loans, but it investigated only cases where a complaint was already live or had previously been made. That meant that around 7,500 people were not contacted or given the opportunity to have their loan investigated. The bank’s chief executive officer confirmed to the Treasury Committee that he did not believe that his bank’s tailored business loans were deliberately designed to avoid FCA regulation. However the Committee’s subsequent report, “Conduct and Competition in SME Lending”, concluded:
“The lack of public oversight, minimal transparency and limited coverage of the scheme mean that the Committee cannot be confident that Clydesdale’s separate internal review will deliver outcomes equivalent to the FCA review upon which it is intended to be based.”
The report went on to state:
“To protect themselves against the risk of providing a TBL’s hedging function, banks need to hedge the risk themselves. The FCA said that ‘the bank will have entered into a separate IRHP’”—
interest rate hedging product—
“‘with a third party in order to manage its financial risk of entering into the loan’.”
The Bank’s CEO, Mr Thorburn,
“confirmed that this was the case for Clydesdale Bank.”
Clydesdale bank subsequently confirmed that there was actually no third party and that, in effect, all the loans were self-funded. Despite that, and despite it charging and receiving substantial break costs from customers, it refused to address the devastation it caused to businesses and lives across Scotland. It charged for long-term interest rate hedges that, it can be proved, it and its parent company never matched.
Ian Lightbody’s firm was informed in 2012 that to break its loan it would have to pay a 22% break cost on a loan of hundreds of thousands of pounds. It had cashed in personal pension funds and arranged alternative funding to secure the future of its companies and, in particular, of long-standing employees. Naturally, that became untenable, and it had to close several companies.
Another of my constituents, Craig Brock, had long-standing companies with loans amounting to substantial millions of pounds with Clydesdale bank. In 2012 it gave him just 30 days to refinance. It appointed BDO as administrators, and the companies were sold on to Paradigm Ltd, allegedly at arm’s length. It turned out, of course, that Paradigm was another Clydesdale-funded company. The FCA confirmed to the 2015 Treasury Committee inquiry that it wanted more power to investigate Clydesdale’s tailored business loans:
“The FCA has written twice to the Treasury to raise concerns about the sale of loans with embedded interest rate hedging features and the FCA’s inability to address the problem under the current perimeter of regulation. However, the Treasury appears not to have responded formally to the FCA on the matter”.
There can be no doubt that these products were, at best, mis-sold and, at worst, fraudulently pitched and designed to fall outside the FCA rules. The bank and these products should be investigated by the FCA without delay. Thousands of SMEs and businesspeople across the UK took these products with no proper explanation of either the conditions or costs associated. They deserve our support, and they deserve justice.
It is a pleasure to serve under your chairmanship, Mr Robertson. I congratulate the hon. Member for Hazel Grove (Mr Wragg) on securing this debate. I have to say, however, that this is the fifth debate I have taken part in on this matter in my two and half years in the House. It is disappointing that we are here again. We are not making the progress that we should be making and that our constituents deserve.
As we have heard, many colleagues have experience of many examples of serious malpractice within the banking sector. Indeed, from discussing my experiences of this issue with colleagues from across the House, it seems that the majority of cases remain unresolved. I wholeheartedly agree with my colleagues from the all-party parliamentary group that it is now time the Government provided adequate resources for these cases to be reviewed, to ensure that those who have been treated poorly receive the justice they deserve.
I would like to raise the case of my constituent Mr Alun Richards, which I have raised many times since I was first elected. This case has been going on so long that my predecessor, Huw Irranca-Davies, raised it nine or 10 years ago. Until around a decade ago, Alun Richards was one of Wales’s most successful businessmen. By the early noughties, Mr Richards’s farming and property enterprises had received award recognition and his efforts soon attracted—at the time, welcome—attention from Lloyds Banking Group. Lloyds offered Mr Richards a gold star account and an interest rate of 1% over base. After weighing this up against other offers, Mr Richards accepted the Lloyds offer, and his business continued to thrive.
The financial crash in 2008 was a global turning point. Mr Richards believes that his relationship with Lloyds acutely deteriorated at that point. Suddenly, with little notice, Alun’s bank managers in Carmarthen, Gwilym Francis and Ian Richards, transferred his accounts to a larger branch based in Bristol. After a short period, Alun approached his new branch and was alarmed to discover that his new bank manager, Max Meredith, was from the business support unit, which focuses on recoveries. Alun was deeply worried about this change as, prior to that, he had considered his business to be booming. Mr Meredith agreed with Alun that his circumstances were not typical for such a transfer and agreed to transfer his account back to Carmarthen. To Alun’s dismay, Gwilym Francis and Ian Richards refused to accept the account back in Carmarthen.
Alun soon received a visit from Mr John Holiday and Mr Jonathan Miles from the business support unit in Bristol. During this meeting, one of Alun’s accountants questioned Mr Miles’s behaviour and background. Mr Miles claimed that he worked for Lloyds Banking Group, and repeated that claim for the following two and a half years. Mr Richards has since discovered that Mr Miles was a chartered surveyor, a member of the Royal Institution of Chartered Surveyors and a partner of Alder King. It appears that no official secondment was in place. Mr Miles even appointed partners from Alder King—Julian Smith and Andrew Hughes—as the Law of Property Act 1925 receivers. When that initially surfaced, Mr Hughes temporarily resigned. RICS has refused to take any action and, following complaints against Bristol-based lawyers TLT, so have the Solicitors Regulation Authority and the Insolvency Practitioners Association.
Alun Richards’s decade-long struggle has involved Lloyds Banking Group, Alder King and the Royal Institution of Chartered Surveyors. Surely it cannot be right that Mr Richards, whose enterprise was worth about £5 million, has been left with nothing as the direct result of the actions of Lloyds bank and the others I have listed, as he believes.
Mr Richards and many others across the country feel that their cases have not been investigated properly, despite my appeals and those of other hon. Members from across the House to many different bodies. Most recently, we wrote to the Chair of the Treasury Committee, the right hon. Member for Loughborough (Nicky Morgan), asking her to open an inquiry into these alleged malpractices. Disappointingly, she was unable to give us that inquiry, but I sincerely call on the Minister to take action to ensure that these unresolved cases are comprehensively reviewed to ensure that those individuals who have been wronged receive the justice they deserve.
There is a real need to give the Serious Fraud Office extra funds to investigate the ever-increasing list of actions by Lloyds and those other organisations. The FCA’s line—that the alleged fraud does not reach the limits to investigate—simply will not wash any longer. There are too many cases involving large sums of money—millions and millions of pounds—for the FCA to simply say that the figure is not high enough to investigate.
Ten long years on from the crash, it can only be right that the Government provide adequate resources for these cases to be reviewed. It is their duty to investigate these malpractices to ensure that they never happen again and that constituents such as Mr Richards, and those of all hon. Members from across the House, get the justice that they rightly deserve.
It is a pleasure to serve under your chairmanship, Mr Robertson. I, too, congratulate my hon. Friend the Member for Hazel Grove (Mr Wragg) on securing the debate. He is a great advocate on behalf of victims.
I will start with a few words in support of banks and bankers. I have been in business for 25 years, and I could not have achieved anywhere near as much as I achieved without the support of bankers, the vast majority of whom do a good job of supporting the UK economy by offering vital support to businesses. I am sure that most people in the banking world are as shocked as we are by some of the scandals of the last 10 years.
It is critical for us all to play on a level playing field—that is the free-market economy principle. We need to adhere to some basic rules, which must be the same whether someone is a businessperson or a banker. As my hon. Friend the Member for Hazel Grove said, the key principles that we must all adhere to are that justice is blind, no one is above the law, and justice must be done and be seen to be done. Where we are is a mile away from that, because there is so much evidence not just of malpractice and mistreatment, but of fraud throughout the banking sector, particularly in RBS and in Lloyds and HBOS.
For a while, the accusation was that the people who were bringing forward these claims, such as the Turners, were conspiracy theorists—they had failed businesses that could not survive anyway, so it was something that we did not need to look into properly. Then along came the section 166 report into RBS, which clearly identified that RBS had mistreated thousands of businesses. Of course, that report nearly never came out, but when it did it was a critical moment.
It is the same with Lloyds and HBOS: but for the persistence of one or two individuals, the case would never have come to trial and those people would never have been convicted. They are not isolated cases; there was widespread abuse.
I am quite concerned, because I have looked through the banking code of conduct and it seems to mention only banks. Is there any personal responsibility in it, so that the people who make the decisions can be brought to account for them?
My hon. Friend makes a good point, which I will come to. Interestingly, our campaign, which is supported by so many of the hon. Members present, is also supported by some interesting people. Gordon Brown, the former Prime Minister, has said that he fears another crash because the bankers have no fear of imprisonment—the personal accountability that my hon. Friend referred to. Andrew Bailey of the Financial Conduct Authority expressed real concern in a recent newspaper article that no one
“has been banned as a consequence of the financial crisis.”
My hon. Friend is absolutely right, because the problem goes beyond mistreatment. We have seen evidence of forged signatures, manipulated valuations, manufactured covenant defaults, asset acquisition opportunities being sought out, and conflicts of interest almost everywhere we look. That includes the case of Julia Davey, who is present today.
Julia Davey is one of the most successful businesspeople in the UK, but Lloyds and KPMG forced her into the business support unit. David Crawshaw of KPMG was the independent reviewer of the business, the consultant advising the business and the administrator to the business. How can that be right? That multimillion-pound business was taken down by a £100,000 utility bill, when there were ample moneys in the bank. That money was used to pay the advisers, not the debt. It is outrageous.
The banks’ default position has been denial all the way. When Lawrence Tomlinson first established that there was abuse, they tried to withdraw the funding for his business to keep him quiet, which is a disgrace. Throughout the section 166 report, there is clear evidence of malpractice that goes beyond simple mistreatment and into fraud. The same is true for Lloyds and HBOS. The regulators’ attention was drawn to the fact that the abuse was going on thousands of times, but there has still been no action.
The FCA still says that the banks must be trusted to run their own internal redress schemes for the abuses. At Lloyds, the Griggs review is an internal scheme with no independent verification of the settlement that is made. At RBS, the situation with Sir William Blackburne’s review is similar. I do not dispute the fact that they are honourable people, but how can justice be seen to be done if these matters are decided internally? It cannot be right. What if those people, who are working internally for those banks, find evidence of fraud in their investigations? Would they put it in the shredder or would they hand it to the police? I will leave that for those in the Chamber to decide.
We need action. We need regional fraud squads and a twin-track approach, so that the Serious Fraud Office works with the Financial Conduct Authority, as happens in the US. There has to be criminal liability for the failure to prevent economic crime, as we have for the failure to prevent bribery and tax evasion. We need to introduce conduct of business rules to SME banking, so that regulators have a basis on which to judge a claim. We need our financial services tribunal and a public inquiry. There are 12 separate inquiries and counting into various parts of the banking system—a piecemeal approach to a systemic problem. We need cultural change. We need to restore faith in the system. Justice must be blind. No one is above the law. Justice must be done, and justice must be seen to be done.
I, too, congratulate the hon. Member for Hazel Grove (Mr Wragg) on securing the debate. He is right that we have discussed the subject many times, as the hon. Member for Thirsk and Malton (Kevin Hollinrake) also mentioned. We look to the Minister, who understands the issues that we bring forward very well, for a substantial response. I am grateful to other right hon. and hon. Members for their contributions to the debate about the mis-selling of interest rate hedging products since 2001.
It is important to say, as the hon. Member for Thirsk and Malton did, that my relationship with the banks has been good. My mother and father’s relationship with the banks was also good, because in those days banks were easier to get on with. The borrowing of money was probably very simple. To be fair, the sums involved then were not the large sums that are involved today. Nevertheless, as elected representatives, issues and complaints come forward to us, and in the Gallery behind us there are many constituents who have been wronged, abused and disenfranchised by the banks, and we are here to put their cases forward.
Some of my constituents have been appallingly and despicably treated. I will mention a couple of them, without giving too much detail, just to put their cases on the record. As Members will know, the Democratic Unionist party has consistently said that there is a role for a financial services tribunal and a competent ombudsman service for banking complaints, which would follow the parliamentary intent that such cases should be treated fairly and reasonably, and with timeliness.
In Northern Ireland, we use the terminology of “keeping people’s feet to the fire”; we do not want them to get burnt, but we want people to feel the heat of what we are saying in this Chamber. So I look to the Minister to ensure that the people involved feel the heat, and will thereby respond and look after the people in the Gallery today, as well as my constituents who have been disenfranchised despicably.
The small and medium-sized enterprises are the ones feeling the pain. I will name two in particular in my constituency: the Armstrongs and the Semples. Their cases have been recorded in Hansard before and in the short time that I have today I could not do either of them justice, but Hansard will record the fact that I have put their cases in the main Chamber on two occasions in the past.
The Semples are large dairy farmers who had borrowed a lot of money. They were then squeezed to the point where they had to pay back almost a million pounds. The Armstrongs had made some land acquisitions, but the banks involved squeezed them. They offered them the money and then squeezed them to a considerable extent. The effect on these people’s health, their families and their relationships has been absolutely enormous—we cannot begin to understand that. Without mentioning the person specifically, one of the people I have referred to has serious health issues. Family relationships become strained or break down; they do at the best of times.
Very quickly, I just want to say that we believe that in the discussions about this issue a broad consensus has emerged, similar to that concerning the Financial Conduct Authority consultation.
I will refer to the issue of compensation, because it is very important that the Minister takes it on board. An upper level of £600,000 is appropriate where the complainant is still trading and has a choice of which route they wish to pursue. Latterly, a few people sought the view of the DUP and that of a few other parties on the idea that there should be lower and upper limits of compensation. After much research and reflection, we now believe that Her Majesty’s Government should consider that claims of less than £25,000 should only be eligible for an ombudsman-type service and that the upper limit should be £600,000, which is the figure I mentioned earlier. For those affected businesses that are still trading, the lower limit for a financial services tribunal should be £25,000 and the upper limit should be £5 million. Those are the changes we ask the Minister for in respect of compensation.
For those businesses that are now insolvent as a result of alleged bank conduct and behaviour, the upper claim limit should be £10 million and of course such cases can only be dealt with by a financial services tribunal. In all cases where there are claims above that sum, it should be a matter for the commercial courts.
We have met the Minister who is here today, and tomorrow the hon. Member for Thirsk and Malton will meet the Chair of the Treasury Committee. I met a former Chair of the Treasury Committee some time back, and we have met the FCA and the Financial Ombudsman Service as well. We have done all the door-knocking that we can possibly do and what we need, with respect to all those people we have met, is not to hear words; we need to see action and that action has to come from the Minister who is here today.
Once again, I will just reiterate our view in the DUP that all legacy complaints should be the subject of a voluntary review in the first instance by the bank concerned, with priority given to those complaints that Members of Parliament have already brought to the attention of the House—every Member in this Chamber today has done just that—or to the attention of the FCA or the FOS, as set out in early-day motion 1162 in April 2017.
We need accountability in this process; we need those who have been guilty of criminal acts, as has been alleged, to feel the punishment for their wrongdoings; and I believe that the responsibility that I have as the Member of Parliament for Strangford is to speak up for the Armstrongs, the Semples and for many others in my constituency. There are at least half a dozen others who I cannot mention because they are embarrassed; they are in business and they do not want to have their names mentioned. People should be sure that when we mention names, it is like an iceberg, with nine tenths of the people affected not being mentioned, and they are not being mentioned because of the embarrassment. The enormity of this issue must not be underestimated. However, I have already spoken for too long, Mr Robertson.
It is a pleasure to serve under your chairmanship, Mr Robertson. I thank my hon. Friend the Member for Hazel Grove (Mr Wragg), who secured this debate, for an excellent and powerful speech.
I will refer straight away to the speech made by Andrew Bailey of the Financial Conduct Authority at its annual public meeting just a month ago, in which he said the following, which I find quite shocking:
“Given the serious concerns that were identified in the independent review it was only right that we launched a…investigation to see if there was any action that could be taken against senior management or RBS.”
He was talking about the Global Restructuring Group, or GRG. He went on to say:
“It is important to recognise that the business of GRG was largely unregulated”—
what a telling statement—
“and the FCA’s powers to take action in such circumstances…are very limited.”
Surely that is where we have gone wrong—commercial lending to businesses was “unregulated” to the extent that those businesses were vulnerable to the indiscriminate action of the banks. I will leave the rest of that statement unread.
I also thank my hon. Friend for his fitting use of the metaphor of Lady Justice to represent the dire situation that so many business owners face. Indeed, I suggest that Lady Justice is not only blind and has her arms tied firmly behind her back but is gagged and silenced. Onerous gagging clauses were incorporated into confidentiality agreements, with the effect of silencing witnesses and ensuring that justice is never done. The use of those gagging clauses ensures that organisations responsible for wrongdoing can not only conduct an operation of denial and obstruction of justice but use the clauses as a tool of abuse, to suppress any evidence of criminal behaviour. We are aware of several instances of gagging clauses that specifically state that an individual is unable to voluntarily approach the police or regulators with concerns about potential criminal activity. Let us be clear: that is unacceptable.
At this point we need to turn to the solicitors who are, quite frankly, aiding and abetting concealment of potential criminal activity by writing contracts that contain such onerous gagging clauses. In essence, they are bullying victims into silence and preventing them from discussing their case with those who are there to protect them: the police, Members of Parliament and regulators. That is a deeply troubling fact.
One pertinent example of such practice, cited on numerous occasions by the hon. Member for Cardiff Central (Jo Stevens), is a constituent of hers who accused Lloyds Banking Group plc and the Law of Property Act receivers, Alder King LLP, of a fraud that robbed them of their business and their livelihood. Once the allegations were made by the individual to the bank, Lloyds Banking Group plc proposed to forgive the constituent’s indebtedness, which had ultimately been caused by the actions of the bank and Alder King LLP, in exchange for the signing of a confidentiality agreement that would have prevented any further discussion of the case. Thankfully, the constituent declined the offer, making it possible to discuss their case here today. It will be clear to everyone in attendance today that that tactic was used by the banks and their solicitors to hide abuse and allegedly criminal activity.
The Solicitors Regulation Authority, which is the regulatory body for solicitors in England and Wales, has a duty to society, and I encourage it to issue very firm guidance to prevent solicitors from contractually silencing allegations of criminal conduct.
I am grateful to the hon. Gentleman for giving way and for his reference to my constituent, Mr Shabir. In Mr Shabir’s case, not only was a gagging order presented to him, but he also has a legal opinion from Queen’s counsel saying that a criminal fraud has been committed against him. That is exactly the sort of circumstance that the hon. Gentleman is talking about.
I thank the hon. Lady for her intervention. She made the point that I was just about to make, namely that it is not possible to contract out of criminal behaviour, and it may be that these gagging clauses are in fact unenforceable. However, that is not the point. Such clauses serve the purpose of instilling fear and effectively silence concerns, and potentially suppress valuable evidence. The all-party parliamentary group on fair business banking and finance has found dozens of cases like that one, and people are scared.
Time and time again in this House, we call for transparency and we hear a lot of lip service about the industry’s commitment to it, but there can be neither transparency nor fairness if people are being subjected to onerous confidentiality agreements that prevent the investigation of allegations of criminal activity and obstruct justice, stopping it being served.
This issue should be deeply troubling for all Members of the House. Greater scrutiny must be applied to the use gagging agreements and the role they play in the concealment of criminal activity.
It is always a pleasure to serve under your stewardship, Mr Robertson. I thank the hon. Member for Hazel Grove (Mr Wragg) for raising this issue, which is very important, particularly for our small and medium-sized enterprises, which work extremely hard to build their businesses, and which want to move forward and contribute to their local communities, employing people in the process.
One of my constituency cases is to do with HSBC. The director of a company that was not failing—it had a huge number of assets—was asked to sign over to a new loan agreement, but he was attending his dad’s funeral in India so the agreement was signed on his behalf by someone in the bank. Someone faked his signature on the document. On his return, he was told he had no choice but to proceed. The loan was offered to the company without its asking for it, to invest further in the capital assets into which it wanted to expand its business. It was forced into the position of having an additional loan and, because of the terms and conditions of that loan, the company was offered restructuring. So a company that was fluid in its assets and able to function normally was forced into restructuring. The personnel initially involved in the restructuring—those who were forcing the company into that corner—then turned into the recovery personnel, so there were people in the bank with the dual role of restructuring and recovery.
The company has fought the case for more than 10 years. It has fought extremely hard, despite the main director having lost his father and the huge stress caused throughout the family. There has been continuous suffering. The company was bound into a non-disclosure agreement and was stuck for many years. Through a lot of hard work and pain, with my office and one of my senior advisers dealing with the case, we have managed at least to get to the stage where the NDA has been removed. Yet the company cannot get any recourse for the losses incurred, let alone the initial debt problems that the bank caused, which put the company in such a predicament. Those are the problems we have; that is what these banks do.
There are two of my constituents in that position with HSBC, and two in that position with Lloyds. Both banks operate in exactly the same way. Another constituent who is involved with Lloyds bank had the bank decide to call in the receivers on a Friday at 5 pm, so it was not possible to have recourse through lawyers or anyone else to stop the injunction. That was someone rich in assets being closed down and locked into this process. The modus operandi of these banks is clear. All four of my constituents who have been dealt with in this way were fluid in their asset base—they were not struggling for money—yet, at the moment, one of them is unable to go to another high street bank because of what the people in HSBC have put them through. That is where the real issues are.
I have another constituent, Mr Elliott, who is here today. He has a significant number of companies that are doing well. He fought his case and managed to get to the court stage. Two weeks before the trial, he got an order from Lloyds saying that it would sue him for £1 million a day for every day the trial took place. Having taken that huge step, it was fundamentally difficult to tolerate that sort of pressure.
The individuals involved must be held criminally responsible for their actions. It is high time that the Government took charge and that all such businesses, which bring huge benefits to our local communities, were protected from the sharks and the way in which they operate.
It is a pleasure to serve under your chairmanship, Mr Robertson. I congratulate my hon. Friend the Member for Hazel Grove (Mr Wragg) on securing the debate and commend him for his tenacity in maintaining the focus on this issue.
I want to raise the issue of the resources and expertise of those investigating the usually very complex cases of business banking fraud. We are seeing a huge increase in financial crime in our country. Some of it is well known—most of us will have residents who have been scammed out of money by transferring huge sums. That straightforward fraud is hard enough to pursue, but much harder again is complex business fraud.
One such case that has been raised with me has been discussed in this place twice before, in 2013 and 2015: that of the successful, growing and profitable business, Premier Motor Auctions. The detail of the case and the role of the various players was highlighted by the former Member of Parliament for Great Grimsby, Austin Mitchell, and can be read in Hansard. He did an excellent job highlighting the extreme closeness of the working relationship between Lloyds bank and PricewaterhouseCoopers. I do not intend to go over the details of the case in the time allowed; I simply refer Members to that debate, which was clearly feisty and shows just how long Members have been concerned about banking practice.
I have now taken up the case, and my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) and I wrote to West Yorkshire police asking it to commence a criminal investigation. It has decided not to do that, citing the scale of the resources required and the fact that the victim pursued civil recourse—though in fact that was a case taken by the liquidator, which was dropped under extreme pressure from Lloyds bank and PWC. I understand that that pressure was the threat of being sued for £1 million a day—real David and Goliath territory, though with a less satisfactory outcome. The other point the police made was that the case would be more suitably investigated by another body. I am a strong supporter of our police services and I can see their point of view—resources are under pressure. The case referred to here today, which has been investigated by Thames Valley police, took 150 dedicated officers and cost £7 million.
West Yorkshire police has a point when it says that other bodies could be better placed to carry out the investigations, which leads to the underlying question I would like to ask the Minister: do we, in the UK, have the right people investigating the right cases, and are they working as closely as they could be with regulators? That is the two-track approach that my hon. Friend the Member for Thirsk and Malton highlighted. Do our regulators have enough teeth and are they using them? Who is looking at the relationship between banks and accountants? Are local police services the right bodies to be tackling complex corporate cases? Such cases are difficult and require specialist knowledge. If the decision is taken that the local police service is the right body, can more specialised resource or extra funding be provided to help it undertake the work?
It is not at all clear to me that we have this right. I think we need to reconsider it. I can see the challenges the police service faces, but I also see cases, such as that of Premier Motor Auctions, where questions need clear answers and victims need and deserve those answers. It is the underlying national issue, brought into perspective by the local cases, that needs consideration, and I ask the Minister to consider that as he reviews whether our financial system serves our country as well as it could and whether it has addressed the wrongs of the past.
I think I have spoken in all four debates on this subject, and I am beginning to feel like my colleagues: we are voices crying in the blooming wilderness. We have asked for something to happen, and nothing is happening. It is wrong. It is scandalous that decent people have been so incredibly robbed by banks. I cannot understand why we have not been able to get a grip on this matter and sort it out. It is wrong, and we are meant to be the people who sort these sorts of problems out.
One part of National Westminster is particularly to blame. One of my constituents, Dean D’Eye, started an association with that bank’s Romford lending branch in 2000. For eight years, it was all great. That association worked well, and both the bank and the business were profiting, but just after the banking crisis 10 years ago, the destruction of Mr D’Eye’s investment and property development business began. At that time, his company was worth about £11 million and had a debt of about £5.8 million. All his interest payments for debts were on time, and he had a gearing ratio of 60%, which was pretty good.
However, in September 2008, Mr D’Eye began to be inundated with requests for information, which took up a great deal of his team’s time and stopped them doing business. Then, in December, the National Westminster bank suddenly robbed £139,000 from the company’s business accounts, without any reference to Mr D’Eye and despite letters from the bank saying that money could be used by the company. In early 2009, the demands for more information continued, and Mr D’Eye’s group was placed under the watch of that wonderful organisation called the Global Restructuring Group. The situation then grew rapidly worse: suddenly, in April 2009, the bank appointed administrators, who appeared to investigate the business. On 28 May 2009, NatWest formally cancelled Dean D’Eye’s overdraft. Considering the size of the businesses, that overdraft was pretty small, at £40,000.
Within a week, on 1 June, all Dean D’Eye’s loans were called in. By 10.17 am on 5 June, administrators had full control of his companies and were effectively running those businesses from his offices. That decision meant the group lost its cash flow, which in turn created a default with the Dunbar bank, owned by the Zurich insurance group. Dunbar bank has a pretty bad reputation, and is often more ruthless than anyone else.
My constituents, the D’Eye family, have lost their family home, and Mr D’Eye has lost his father’s house as well. Mr D’Eye continues to hope that he can get litigation funding to take NatWest to court for the way it has ruined his business. Who can blame him? A generation ago, banks usually encouraged and supported their customers, giving them a fair shake. How tragic is it that that is no longer the case for so many people?
My hon. Friend is making an excellent speech. He said earlier in his remarks that Mr D’Eye was not behind on his payments when the bank first took action. My hon. Friend may be aware that Australia has brought forward a royal commission because of similar abuses there, and one of the changes that has come out of that process is that a bank cannot take action against a business if that business is not behind on its payments. Does that not underline the need for a full public inquiry?
I thank my hon. Friend for that very good point. Of course it does. We need to get on and sort this matter out.
In the 18th century, highwaymen used to stop coaches, get people outside them and say, “Stand and deliver. Your money or your life.” Those guys had a choice. Now, the 21st century equivalent of highwaymen—some in the banks—shout, “Your money or your lifestyles”, and they take both. Thank you, Mr Robertson.
It is a pleasure to serve under your chairmanship, Mr Robertson. I thank the hon. Member for Hazel Grove (Mr Wragg) for being here. I am not going to say it is a pleasure to take part in this debate, because I do not think we should still be having these debates. The hon. Member for Beckenham (Bob Stewart) is absolutely correct: this subject has been discussed in the House so often, because so many of us have been approached by constituents, that we should not still be at this stage.
A number of hon. Members have raised issues that their constituents have brought to them and that, to me, scream of illegality. People have had things signed against their will, bank accounts opened in their name, or money taken from their bank accounts. Companies have been gone after because they are asset-rich; in Scotland, that particularly affected agricultural businesses, for example, because they had large assets that the bank could chase after. It baffles me that there have not been convictions in relation to those things, because I do not understand how they are not illegal.
Given the number of Members who have come forward about this matter, not all of our constituents can possibly be coming to us with falsehoods. So many people have been affected by this that it absolutely must be true. That was one of the most difficult things for individuals to come to terms with: I heard people talking about the fact that they were going through a total nightmare, and they did not understand how this could possibly be happening to them. In fact, they believed it could not be happening to them and that something must have gone horribly wrong. That has not helped to make sure that many people can come forward.
I will raise a few issues that the Scottish National party is asking to be addressed. I will focus a little on GRG, because that is the organisation that the majority of Scottish constituents have been hit by, but we have also had constituents hit by HSBC, Lloyds and Clydesdale. We believe that the UK Government need to pick up where the FCA has failed in relation to the comprehensive review of banking culture. The FCA produced a discussion document, but that is not enough. If the FCA cannot do these things comprehensively, the UK Government can step in, take action and make sure that positive changes are made to banking culture, because it is not the case that banks are now perfect.
The SNP will continue to call for the UK Government to create a permanent commercial financial dispute resolution platform to alleviate the suffering of victims of mis-selling. Given the issues that have been raised today, we will continue to say that asking victims of mis-selling to take the banks to court is totally inappropriate, and financially unworkable in the vast majority of cases. If the Government could step in and create that commercial financial dispute resolution platform, individuals would welcome that.
The UK Government have had a significant stake in RBS, and could have done more to highlight the issues there have been in that organisation and to ensure that RBS has told the truth. The internal resolution mechanisms that RBS has put in place could have been stronger and easier for individuals to navigate—particularly given the consequential loss issues involved, it has been very hard for constituents to access justice.
As the hon. Member for Thirsk and Malton (Kevin Hollinrake) said, it is vital that banks lend to small businesses, both for our economy and for those small businesses. These issues have had an economic impact on growth, because businesses have not been able to grow and be successful. There has been a huge impact on individuals’ lives. There has been homelessness, there have been marriage breakdowns and there have been suicides. I have spoken previously about my cousin and her family. She, her husband and their four children were made homeless as a result of what RBS GRG did to them, because they had an agricultural farm, and that farm was an asset that could be taken from them. A constituent also came to me who had suffered huge personal tragedy, as well as financial tragedy, as a result of what happened specifically with RBS GRG.
I have already said that people do not come forward. That is because of the confidentiality clauses that they have had to sign, because they are embarrassed, as has been mentioned, or because they are suffering from financial ruin and have enough to worry about without trying to take on a massive financial institution as an individual. More could be done so that those individuals get justice.
To conclude, we should have a comprehensive review of banking culture and a permanent commercial financial dispute resolution platform. The Government need to take action now so that this can never happen again.
I, too, thank the hon. Member for Hazel Grove (Mr Wragg) for securing today’s debate. Colleagues will know that he and I are constituency neighbours. The powerful case study that he gave on behalf of his constituent could quite easily have been on behalf of one of mine. I first became aware of the scale of the issues through constituency examples. Every Member who has spoken in today’s debate has presented those testimonies extremely well. I also thank the all-party parliamentary group on fair business banking and finance, especially for the efforts of its chair, the hon. Member for Thirsk and Malton (Kevin Hollinrake), who gave an authoritative and powerful account of some of the problems that have come to the group’s attention.
Many of us have participated in similar debates before, but as we mark the 10th anniversary of the financial crisis it is a good time to consider the relationship between businesses and their banks. All of us in the Chamber, even though we have come today with powerful case studies of inappropriate behaviour, want to see a strong relationship between businesses and banks. Having a good relationship between banks and businesses is critical to our economic growth, prosperity, employment and much more.
Unfortunately, research shows that frighteningly low numbers of small businesses trust their bank to do the right thing for them. That is unsurprising given some of what we have heard today. We have to improve that. We have to look at why that is, and how we can change it. We have to restore confidence that the regulatory system is fair, and crucially that there will be a level playing field for businesses when they find themselves in conflict with their bank, especially if their bank is suspected of having committed fraud, as we are discussing today.
The central premise of today’s debate and of all the speeches has been that there are insufficient resources available to tackle business banking fraud. Colleagues will be aware that I agree with that premise. The National Crime Agency, the Serious Fraud Office, local police forces and the Financial Conduct Authority do not have sufficient capacity, either individually or collectively, to look into the matter with the attention that it deserves. I am sure that the Minister will refer to the new National Economic Crime Centre—the NECC—a new unit of the National Crime Agency. An initial budget of £6 million does not seem sufficient when compared with, as I think the hon. Member for Harrogate and Knaresborough (Andrew Jones) mentioned, the £7 million cost of the Thames Valley police investigation into HBOS in Reading, and given the scale of the issues raised today.
I want to say quite a bit more, because I do not think that we can simply say, “This issue requires more resources and that will solve the problem.” It is about how we can change the culture that has led to such outrages happening time and again. I will talk about three different ways in which I believe we could contribute to achieving that. First, we could launch a full public inquiry into recent business banking scandals. Secondly, we could introduce an independent tribunal system for small and medium-sized enterprises to resolve disputes. Lastly, we could put in place a more robust system to better protect and enable whistleblowing.
The first step has to be securing proper redress for SMEs that have been mistreated by their banks. Scandals such as GRG and HBOS mis-selling have been outrages, and have seriously dented business and customer confidence. The shadow Treasury team has consistently called for a judge-led independent inquiry into RBS GRG and other small business banking scandals, so that victims can get proper redress. I know that several colleagues in the Chamber have argued strongly for the same measure. There is clearly cross-party support for that to take place.
Such an inquiry would not just get to the bottom of the case studies that have been raised today; it would establish whether there is further criminal liability to be addressed, and examine the wider systemic issues that have allowed such events to take place. We are talking about people’s livelihoods, homes and relationships. Some people have simply been ruined. These issues are too important for us to sweep under the carpet, with the risk that such events could happen again. We have to be able to go out from a debate such as today’s and promise constituents that this will not happen again. In my view, a full public inquiry is required to do that.
Secondly, in terms of disputes, part of the problem is that it is well recognised that the gap between the financial ombudsman for individuals and the full legal process for very big firms is just too great. I support the all-party parliamentary group’s proposal to establish an independent tribunal to help create a level playing field between businesses and the banks in order to fill that gap.
We all await with interest the outcome of the UK Finance independent review, chaired by Mr Simon Walker, into complaints handling and alternative dispute resolution for SMEs. I have met Mr Walker and I understand that he will report very soon. The review will examine dispute resolution processes in different sectors and countries, and provide some evidence-based conclusions on how we can meet the needs of businesses for larger or more complex disputes.
Other initiatives are under way that will hopefully progress the situation. In July 2017, 20 banks signed up to the new standards of lending practice for business customers, which outlined what businesses should expect from their bank when in financial difficulty. Although such moves are welcome, my view is that ultimately we cannot rely on the industry to self-regulate. Look at the RBS GRG complaints resolution process as evidence. Concerns are being raised about how the goalposts have been moved regarding compensation, and how the process has been subject to quite a lot of individual discretion. That is why an independent tribunal system is necessary.
Lastly, an answer could lie in exploring a change in our approach to whistleblowing in financial services in this country. Whistleblowing will never be a substitute for effective action by regulators, but it can play a part. That is especially important in a time of scarcer resources as a result of public spending cuts. The Dodd-Frank Act in the US, which was introduced as a central piece of post-financial crisis legislation in 2010, is a demonstration of how much more robust the whistleblower protection framework could be. Whistleblowers in the US are entitled to awards where their information leads to enforcement action. The framework is structured in such a way as to disincentivise false reports, but to provide protection in the event of dismissal.
The UK legislation, on the other hand, is much weaker. Although the Financial Conduct Authority can assist whistleblowers under the Public Interest Disclosure Act 1998, it has not been enshrined in regulation in the way the Dodd-Frank Act has been used in the US. There is a case for examining how we could introduce specific financial services whistleblower protection in order to seriously improve conduct in banking. I have encountered significant support for that within the sector itself. I think the hon. Member for Thirsk and Malton mentioned that many good people are working in the sector who want to see such issues improved so that today’s debate does not have to happen again.
Having a banking system that we can trust is essential to our economy. Entrepreneurs who have taken the risk of setting up their own businesses deserve to know that there will be proper redress if they have been the victim of unscrupulous practices. SMEs are the backbone of the British economy. If they cannot trust the financial institutions that are meant to serve them, we will all pay a price.
If we are to begin to restore trust to UK business banking, there are two outcomes we have to achieve. The first is to ensure that the victims of the GRG and HBOS banking scandals get proper redress for the damage done to their businesses and livelihoods, and individuals, as well as the institutions they worked for, must face sanctions for their actions. The second outcome is that we must create a framework in which such a flagrant abuse of the bank and business relationship can never happen again.
With the combination of a full public inquiry, the establishment of an alternative dispute resolution mechanism and a radical rethink of how we treat whistleblowers, we could begin that process. These businesspeople, many of whom are in Parliament today, were badly let down. We must all commit to less talk and more action to get them the redress that they deserve.
It is a pleasure to serve under your chairmanship, Mr Robertson. This has been the fourth such debate since I was appointed on 9 January. In each of those debates we have had a number of passionate contributions from Members across the Chamber. Today has been the same. We have had 10 speeches, each of which has contained compelling evidence of a situation where banks have failed small businesses. We must be honest and true to the reality of the experiences of the many people who have come to the House today to challenge me, as the Government’s representative in this area, over what can be done to achieve proper redress.
I pay tribute to my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) for his campaigning on the matter and to my hon. Friend the Member for Hazel Grove (Mr Wragg), who set out powerfully the case that justice needs to be blind, that it needs to be done and that it needs to be seen to be done.
My deliberations will reach a conclusion imminently; I have not been putting the matter off. As has been discussed, a series of pieces of work are being undertaken, two of which will report in the next few weeks, and I will then make a judgment about the best way forward. Financial sector fraud has had a severe impact on SMEs—we heard today about several individual cases in which lives have been destroyed and families ruined. This is not a subject that I treat lightly; I have been very focused on it over the past nine months.
I am very grateful to my hon. and gallant Friend for his contributions, which I shall address in a moment. I will also set out some of the changes that have taken place, but let me say from the outset that the cases that have been raised today all demonstrate that, whatever mechanisms we have implemented—from the tripartite regulation of banks and the financial system to the redress schemes of recent years—the banks need to deal with the very real legacy of this issue. Simon Walker’s review for UK Finance must listen to what has been said today about that legacy, which will not go away unless the banks face up to and take responsibility for what happened in the past.
Tackling fraud is a Government priority. I want to reflect on a new theme raised today: access to justice and the mechanisms by which it is delivered. The decision to investigate a crime rests solely with law enforcement; I cannot make it myself. Like any Member of Parliament, I can refer a crime to the relevant chief constable, but they will take account of available resources and the likely eventual outcome. It is the chief officer of the local force who is ultimately responsible for such operational decisions, and it is the responsibility of police and crime commissioners to set the budget for local forces, which the chief officer must take into account. Forces can apply for special grant funding to help meet the cost of unexpected events, but I know from conversations with my hon. Friend the Member for Thirsk and Malton that there is sometimes a gap between the costs covered and the actual costs accrued. These are real matters that need to be addressed.
The point is not whether the funds can be squeezed out of current budgets—police budgets are under huge stress at the moment. This is not a one-off; it is a long-standing issue about criminal activity by the banks, and resources need to be available to deal specifically with it.
The Minister rightly mentions resources, which are always tight, but does he see a potential opportunity here? HBOS has not yet been fined for its scandalous abuses of 2007 and 2008, which tore apart many businesses. Would it be appropriate to use that fine to pump-prime a crime agency to deal with these issues? That agency could then be self-funding, because it would constantly be levying fines for abuses.
We clearly need to find an effective mechanism to deal appropriately with the scale of the unaddressed challenges, and I will look at all options for that.
The City of London police have secured funding from the Home Office police reform and transformation fund to provide training for 600 investigators across police forces. There is also now a national register of fraud specialists; I acknowledge that the sentiment in this Chamber is that that is insufficient, but I should point out that it exists.
The regulatory framework has changed considerably since the events of the crash 10 years ago. I will not go through the whole history, but we have now established a network of robust and specialised financial regulatory bodies, each with a clear mandate and a set of responsibilities. However, I understand the concern about the reach of those bodies to deal with outstanding historical matters that our constituents are still raising with us. As part of that network, the Financial Conduct Authority is focused on ensuring that the conduct of firms and the interests of consumers are placed at the heart of the regulatory system and given the priority they deserve. That statutory objective will continue to guide the FCA’s work as it ensures that the highest possible standards are applied to the sector.
On SME lending, I am acutely aware that concerns remain about past cases of misconduct, the effects of which are still being felt today. There has been a great deal of justified anger within Parliament and beyond about cases such as those of the RBS Global Restructuring Group, HBOS Reading and the mis-selling of interest rate hedging products. I have been clear that the inappropriate treatment of SMEs by RBS GRG was unacceptable; I have made that point personally to the chief executive of RBS. The issues surrounding RBS GRG are firmly on my radar in the Treasury and I continue to work on the matter. The case of HBOS involved criminal activity, and it was right that those responsible were brought to justice. RBS and Lloyds, which now owns HBOS, have rightly set up compensation schemes for businesses affected by GRG and HBOS Reading.
My hon. Friend the Member for Stirling (Stephen Kerr) and other Members raised gagging clauses and the need for transparency. I am very sensitive to the pattern of settlements being offered that are effectively gagging clauses, such as in the case of Mr Shabir that the hon. Member for Cardiff Central (Jo Stevens) raised. That does not seem an honourable way of dealing with legitimate complaints, so I will examine the matter carefully before I report back.
I am glad that to say that in response to direct loss claims relating to the GRG scheme, 978 outcome letters have been sent to customers and £15 million has so far been paid out in redress, on top of £115 million in complex fees. Offers have been also made to more than 90% of customers within the scope of the HBOS Reading review, and more than 85% of customers have accepted.
I am acutely conscious of time, but I think that it is important that I give a succinct update of what I will be doing over the next few weeks. I firmly believe that by increasing the emphasis on individual accountability, the senior managers and certification regime will prove hugely important in improving conduct standards in the financial services sector and allowing regulators to deal effectively with cases such as that of RBS GRG. The regime will be extended to the insurance sector in December and solo-regulated businesses will come in next year.
I look forward to Simon Walker’s review because it will allow me to reach a conclusion about what needs to happen. The Government have done a lot of work, but I accept that more is required. I have spoken to Andrew Bailey, to the retired High Court judge Sir William Blackburne, to Ross McEwan, to the chief executive of Lloyds, to the chief executive of the Financial Ombudsman Service and to UK Finance, and I have met members of the all-party group. I am keen to give my hon. Friend the Member for Hazel Grove the opportunity to reply, but let me confirm that there will be action and that I will come back in a matter of weeks.
Thank you for chairing the debate, Mr Robertson. [Interruption.] I can hear the crowds outside protesting at the thought that I will be back in six months’ time to make the same speech—I hope that I will not be.
I thank the many members of the public who are watching from the Gallery. They are the people we are fighting for across the country, so it was good to hear contributions from all four nations of the United Kingdom today.
My hon. Friend the Minister said that action would come “imminently”, at least from the Treasury—a drastic improvement on the “very soon” that he promised before. That action cannot come soon enough.
Question put and agreed to.
That this House has considered the investigation of business banking fraud.