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I was going to say that over the past few months, I have seen more details of college capital building projects than I would otherwise have done as a new Minister, and rarely have I seen any that I have been more tempted to visit because of their and interest and excitement than those in Canterbury. Given that
the third phase includes a spa and tennis courts, which are already well advanced, I might take up the hon. Gentlemans offer.
Naturally, I will not comment in detail on Canterburys application, as individual funding decisions are the responsibility of the LSC and not of Ministers. However, what I can say is that I am listening to college principals and MPs. I genuinely understand their concerns and am urgently pressing the LSC to give everyone a clear way forward.
According to the Foster review, there are currently 79 projects. The hon. Gentleman asked me for the total outstanding cost of those that have received approval in principle. It is £2.7 billion and there are projects worth a further £3 billion that have applied for, but not yet received, approval in principle. It is quite clear that all such projects cannot be funded on the time scale envisaged in this funding round. That is why my right hon. Friend the Secretary of State asked Sir Andrew Foster to compile his review.
A good policy has been compromised by the manner of its implementation. The policy intent to transform the FE estate is clear and positive. But the implementation approach
did not include a robust financial strategy or a regional or national approach to prioritisation.
Recognising the failures, the LSCs former chief executive, Mark Haysom, resigned on 23 March and Geoff Russell, formerly of KPMG, was appointed as acting chief executive on the same day. He said that his first task was urgently to provide certainty and clarity about the college building programme. Geoff Russell has appointed property experts to support the LSC to undertake a comprehensive assessment of all colleges to get more robust and reliable information. Secondly, he has asked Grant Thornton to review the financial data held by the LSC to ensure, as Sir Andrew Foster recommends, that
the process is grounded in fully accurate and detailed information about capital schemes in the pipeline.
Thirdly, he has immediately appointed a director to be personally responsible for the capital programme, which was in response to Sir Andrews conclusion that there was no clear overall responsibility for the capital programme within the LSC.
While that work is going onI have been told that it is going on very speedily and successfullyI have made it clear to all college principals that we will not allow any college to get into a situation in which it cannot meet its financial obligations as a result of decisions taken by the LSC on the capital programme. I should like to take this opportunity to say that if any principal is worried about their financial situation, they should get in touch with their local LSC, which will advise them on the best course of action.
Let me turn to some of the last questions raised by the hon. Gentleman. He asked for the machinery of Government changes to be stopped. I understand where he is coming from, but I have to disappoint him. Now, more than ever, is a time when employers and individuals need the skills that will help them not just to survive the economic downturn but to emerge more competitive when business picks up again. That is why we are creating the Skills Funding Agency, which will concentrate on results, not processes. It will help employers find the
training that they need, and access Government funding in a much more direct and straightforward way. As this process is now so near to completion, it is the time not to slam on the brakes but to press ahead and deliver the changes as speedily and efficiently as we can, which we think that we are on track to do.
Capital projects are long-term schemes that are prepared, built and paid for over a number of years, which is why Geoff Russell, the new acting chief executive, has appointed external property experts, Grant Thornton, to verify the information and to ensure that Sir Andrews recommendation that the process is grounded in accurate and detailed information is met. Clearly, however, as Sir Andrew also recommends, the programme must move from a demand-led process to a needs-based approach. It is vital that, moving forward, we have a set of transparent criteria that the sector supports. That is why the LSC is consulting the sector. In co-operation with the Association of Colleges, it has established a group of college principals to help draw up the criteria for prioritisation to meet Sir Andrews recommendations.
Mr. Brazier: I am listening carefully to the Minister. Clearly, the working group will come up with some recommendations on the crucial prioritisation factors to decide what can and cannot be afforded. However, presumably, Ministers will at least have an input to that. In fact, I imagine that they will have to sign off the list of criteria. Will the Minister give some indication what criteria he and his ministerial colleagues in the Department for Innovation, Universities and Skills believe should be given importance?
Mr. Simon: Ministers will have some input in drawing up, at the very broadest level, the policy parameters of the criteria that may be taken forward, but they will not have an input in the process at any level of detail. Certainly, they will not have an input in deciding which colleges get what in future.
Mr. Brazier: The Minister is making a serious attempt to answer all my points, for which I am grateful, but we are in danger of mixing two separate points. Everybody understands that the LSC and successor bodies will decide the allocation to individual projects, but the question of setting the criteria must surely be agreed between the LSC and the Government. Presumably, the Government of the day, who are answerable to Parliament, will not let the LSC make the criteria without Ministers taking a view on them.
Mr. Simon: The hon. Gentleman has given an accurate description of the situation. The Department and the Government are talking with LSC officials about the kind of criteria that will guide the process. Those talks are ongoing. The process of drawing up the criteria is making good progress and we expect to be able to report on it pretty soon. The Government remain committed to rebuilding the further education estate but, again, I understand the frustration caused by the delays.
As the hon. Gentleman eloquently said, colleges are an essential part of communities. Investment in further education has been doubled since 1997 and colleges now bring learning directly to the heart of communities in ways that were not previously imagined. That learning is practical and grass-roots. It gives people the basic skills to enable them to get sustainable employment, and business the skills to generate wealth and prosperity.
I can assure the House and the hon. Gentleman that my Department and the LSC fully understand the need for urgency. Well advanced projects such as Canterbury are crying out for clarity and certainty. We understand that, as does Geoff Russell in the new leadership of the LSC. My commitment to those colleges, the hon. Gentleman and the House is to identify quickly, and set in place, a clear and coherent approach to ensure that lessons are learned, not only by my Department and the LSC, but by the new SFA.
Mrs. Linda Riordan (Halifax) (Lab/Co-op): I am delighted to have secured this debate on responsible banking. It is an important issue in my constituency, where many jobs, provided mainly by Halifax Bank of Scotland, are reliant on the banking sector. It almost goes without saying that the debate is timely. Indeed, I should like to pay tribute to the thousands of people who work in the finance sector in Halifax and neighbouring constituencies such as Calder Valley. During these uncertain times, they have kept quiet, complained little and continued to do a superb job at work. They are loyal, dedicated and committed workers who deserve more information and reassurance about the future security of their jobs and the banking sector in Halifax than they are privy to at the moment.
Despite the irresponsibility of HBOS management over the last 12 years, the banks position in my constituency would be far worse without the hard work and diligence of its employees. Because of the reliability and devotion shown by employees in my town, I urge the Minister to place on record an assurance that the Government are doing all that they can to guarantee that there will be no compulsory redundancies in the banking sector in Halifax.
The events of the last 12 months have changed the banking sector for ever, not just in this country but around the globe. Many words have been spoken, pamphlets printed and hours of debate held in the House on why the problem arose, what is to be done to prevent it from happening again and how we can help change the direction of banking to take the industry down a more responsible road that embraces the values that many banking bosses failed to embrace during the age of irresponsibility.
During this debate I will outline from my constituencys perspective how that lack of basic prudence and common sense has caused pain and uncertainty to the people who work in the banking sector and rely on it. Families are supported by it, businesses are dependent on it and the town is built on the Halifax building society. In short, not one voter in my constituency has not been and will not be affected by the poor choice and misdemeanours of a few.
To reflect on some of the events of the last decade, it is surprising only that the banking system did not fall earlier. I applaud the measures that the Government have taken in the past year to address the situation, intervene and save jobs and banks. The banks jumped off the cliffs; thankfully, our Government caught them. Without their swift action, regulatory policies and injections of finance, things would have been a lot worse. However, we now need to shift the agenda from the spend today, worry tomorrow attitude to which so many financial institutions have become accustomed to a responsible lending, responsible borrowing dialogue between banks, customers and the Government.
The Chancellor recently urged a much-needed change in the culture of our banks, yet that change cannot and will not happen unless we the customers, when we want to buy a house, take out a loan or deposit money, have the necessary and currently lacking confidence in the banking sector. That requires an industry accountable to its members and to customers, not to stock markets
and speculators, in which responsibility is paramount and prudence is at the heart of its reformed corporate ethic.
I gained some reassurance from Lord Turners recent comments. He envisaged a future situation, once the current mess is cleared up, where the banking sector emerges from the rubble looking very different. I propose that that difference involves integrity, foresight and accountability. Unfortunately, there is a lot of debris to clear up before that can happen. Much more can be done to ensure that that transition is completed. I press the case for more responsible banking, not merely as a short-term fix to overcome the current problems but as a means of ensuring a sustainable, responsible banking system, not just for today or for the next couple of years but for generations to come.
The mistakes that helped bring about the current crisis and the irresponsible way that some banks were run and operated purely for short-term gain have been well documented. Those days may have gone for now, but they remain on record as a reminder of the absolute chaos that caused one of the most intense and unsustainable recessions that this world has ever seen. It is our job as legislators to ensure that they never return. When the Titanic sank, we ensured that no ship ever ran that risk again. When world war two finished, we made peace with our neighbours. However, when it comes to the great depression, it turns out that we were not so good at learning from history after all.
The performance of the former members of the HBOS board who let down so many of their staff and customers was formidable. Their refusal to apologise or grasp their monumental failures was breathtaking. Added to that, the fact that they are cashing in huge pensions while people in my constituency wonder if they will still have a job and be able to feed their families next week speaks volumes. The management teams priority was banking for profit, profit and more profit. There was no onus on them regarding responsible business, customer care or building a solid banking model, the rock on which the Halifax building society was built. It is true that many of the banking sectors problems were caused by the global recession, but I feel that many of the troubles in our banking sector occurred despite the global downturn, not because of it.
HBOSs biggest mistake was to take its eye off the financial ball. Its slogan during its decade of decadence should have been Greed is good. It over-relied on money markets to raise funds to finance its business, short-sold and lent at six times peoples salaries. I could go on. The problems at HBOS can be traced back 12 years to when it demutualised. From that moment, all the things associated with the Halifax building societyreliability, dependability and securitydisappeared. For 150 years, the Halifax building society was a safe place for investors and a dependable mortgage broker. Unfortunately, 150 years of reliability have been undone during the last 12 years of irresponsibility.
Will the Minister state the Governments position on remutualisation? Have they pushed the case for remutualising the Halifax, for the benefit of my constituents who work at the bank and give it their custom? Will he also outline what further plans the Government have, in addition to the measures already taken, for encouraging models of socially responsible banking? There is no better time to act, as the Government have never owned
so much of the sector and will never do so again. We need regulation to bring about responsibility. That means creating a banking sector that is accountable to its members and customers rather than stock markets and speculators and that does not rely on money markets. Banks should generate funds from the money that they hold. If more institutions had done so in the last decade, many of the current problems would not have occurred. Ethical policies should be decided by customers, so that they have a sense of ownership of products.
What work is being done to introduce such forward-thinking ideas into other parts of the banking sector? The ideas are not newindeed, the Co-operative bank already uses such practicesso why are other financial institutions not following suit? During the last decade, when banks such as HBOS were short-changing their customers, the Co-op bank was quietly getting on with its job. Of course, its aim was still to make a profit, but by doing it in a socially responsible way, it has reaped rewards. Profits are up, its customer numbers have expanded and a new super-mutual could be created shortly as a result of the banks merger with the Britannia building society. It makes me proud to be a Labour/Co-operative Member of Parliament. Banks such as HSBC have managed to sustain their savings levels. That has contributed to the gratifying position it now finds itself in of being the only institution increasing its lending capacity in a responsible manner.
If one good thing comes from this mess, which was caused by a few poor-thinking individuals and which the Government are taking action to clear up, it will be a progressive, forward-looking and socially-accountable model for the banking system of the 21st century. Responsibility must be put before risk to ensure that the terrible mistakes that have caused so much worry, heartache and distress are never repeated. The Government must ensure that no ship ever sinks again.
The Financial Secretary to the Treasury (Mr. Stephen Timms): I congratulate my hon. Friend the Member for Halifax (Mrs. Riordan) on securing this debate. As she said, there has been a fundamental breakdown of trust in the financial system not just in the UK, but around the world. Governments, regulators and the industry must work together to rebuild that trust, which was once a hallmark of the institution that takes its name from her constituency.
My hon. Friend has raised particular concerns about HBOS, and I pay tribute to the diligence and consistency with which she has pressed the case of her constituents who work for HBOS over the last few months. As she has reminded us, her constituents are right to be proud of the inheritance of the Halifax over many generations. I join her in paying tribute to the hard work of front-line Halifax employees. She asked about compulsory redundancies. I understand that Eric Daniels, the chief executive of Lloyds Banking Group, said that compulsory redundancies are not expected to be required for staffing reductions. I am grateful for the hard work of Yorkshire Forward. It is right that everybody should do what they can to help and Yorkshire Forward has played an important role.
As my hon. Friend said, HBOS expanded quickly and at an inopportune moment in the global markets,
making it particularly vulnerable to the credit crunch. It had a large reliance on wholesale funding and large holdings of US asset-backed instruments, which left it vulnerable to a deterioration in market conditions. The House will recall the events that led to the merger between Lloyds TSB and HBOS. The collapse of Lehman Brothers had ramifications around the world. It followed a difficult period for HBOS, which had experienced poor take-up on a rights issue earlier in the year. The HBOS share price dropped over 80 per cent. between October 2007 and October 2008. In September, Lloyds Banking Group announced its interest in merging with HBOS. The Government agreed to amend competition law to allow the financial stability implications of such a merger to be considered alongside the potential effects on competition.
Recapitalisation by the Government in October, which included agreements with Lloyds TSB and HBOS, ensured that systemic failure was avoided. It is now clear that if HBOS had not merged with Lloyds, it would have required large financial support and may not have been able to continue as an independent financial institution. If HBOS had been allowed to fail, it would have been catastrophic for depositors, business, families, my hon. Friends constituents and for taxpayers. It was right and in the interests of the taxpayer that the Government allowed the financial stability implications of the merger to be considered.
As my hon. Friend has said, we must learn lessons from the financial turbulence of the autumn, including what happened to HBOS. There must be improvements to the regulatory framework and stronger governance arrangements for banks, while we continue to ensure that there is responsible lending to the economy. She said that we need a model for the future with responsibility at its heart. I agree completely. That nails on the head what is required.
I, too, welcome Lord Turners proposals. The Financial Services Authority has been consulting on new conduct of business rules that might be introduced before the end of the year. On prudential regulation, new capital adequacy standards are being negotiated internationally. That was a key element of the recent G20 discussions. The FSA is consulting on new liquidity requirements and new arrangements for corporate governance. The Government are committed to a review by David Walker. I will say more about that in a moment.
My hon. Friend knows that I cannot pre-empt announcements that will be made in tomorrows Budget. However, I can set out in general terms what the Government want in future from the banking system and therefore from the regulatory regime. The design of regulation must recognise the importance of the financial sector to the economy as a whole. It should reinforce good behaviour and act as a check against bad practices. Rebuilding trust in the financial system will take time; there are no instant remedies or overnight solutions. That will start with an acceptance that mistakes have been made and a willingness to learn from them.
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