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Business of the House

1.27 pm

The Leader of the House of Commons (Mr Andrew Lansley): With permission, I would like to make a short business statement following the statement made by my right hon. Friend the Home Secretary.

The Home Secretary announced that the Government have committed to a vote in this House and the other place before formally deciding on the United Kingdom’s opt-out decision pursuant to article 10 of protocol 36 to the treaty of the functioning of the European Union.

It will assist the House to know that we intend to schedule that debate and vote to take place on Monday 15 July. As a consequence, the Second Reading of the Defence Reform Bill, provisionally announced at the most recent business questions to take place on that day, will now take place on Tuesday 16 July.

As announced in the earlier statement, the House will also have the opportunity to debate the new Europol proposal, as set out by the Home Secretary in her statement, on Monday 15 July, following the opt-out debate that I have just confirmed.

I will be pleased to answer any questions on the management of business when I make my usual weekly business statement on Thursday.

1.28 pm

Angela Smith (Penistone and Stocksbridge) (Lab): I thank the Leader of the House for giving me early sight of his statement.

It would be incredibly helpful if the Leader of the House told us when the motion for the debate will be published. The Government must have known for some time that they were going to schedule this business for next Monday, yet there is no clear indication of what the motion will look like. Will the Leader of the House commit to ensuring that the motion will be published before the close of today’s business, and will he confirm that it will be amendable?

Is the Leader of the House prepared to guarantee the time that will be available for debate on Monday? Yesterday we heard two major statements which, taken together, seriously curtailed the time available for debate on the main business of the House. Will he therefore guarantee the time that will be available for the debate on this important topic on Monday?

May I go one step further and ask why the debate on this topic has been scheduled so quickly, especially given that the Home Affairs Committee was promised that it would have the chance to scrutinise the proposals before a decision was taken? We will not have the benefit of the views of the Home Affairs Committee on the proposals before we debate and vote on them on Monday.

Will the Leader of the House confirm that he will guarantee the time available for the debate, and explain why there is such urgency and why the Home Affairs Committee has been denied the opportunity to scrutinise the proposals before the House debates them?

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Mr Lansley: As I have just announced the business for Monday, the motion will be tabled in good time so that the House may consider it.

On the timing of the debate, the business on Monday will relate to the justice and home affairs opt-out and opt-in measures and the subsequent Europol measure. There is no other business, so there will be a full day’s debate on those related issues.

On the Select Committee issue, the hon. Lady will have heard what my right hon. Friend the Home Secretary said and I completely endorse that. The Home Secretary was very clear about the Government’s intentions in October. In today’s Command Paper, we have been very clear about the principle behind what the Government are setting out to do. The House will have an opportunity to debate that and to vote on a substantive motion on Monday, which gives rise to the opportunity for amendment. We have been very clear that that is required so that my right hon. Friends the Home Secretary and the Justice Secretary may lead negotiations with the Commission and other member states. That process will lead to another vote in 2010. I am absolutely clear that we are giving the House the opportunities to debate and vote on these matters as we have promised.

Mr Peter Bone (Wellingborough) (Con): I am grateful to the Leader of the House for making an emergency business statement, but he has not explained why there is such urgency. I heard what the Home Secretary said, but I was not convinced that the matter needs to be rushed through now. I ask the Leader of the House to consider two options. Preferably, he will put the debate off until September. At the very least, he should put it in the last week before the recess.

Mr Lansley: I inadvertently spoke of a further vote in 2010. I meant 2014.

My hon. Friend the Member for Wellingborough (Mr Bone) should always trust in what the Home Secretary says, as I do. She is right about this matter. I know from our discussions that it is important that she has the backing of the House as her negotiations with the Commission and other member states accelerate and acquire substance. That must be available to her at the earliest possible time.

Chris Bryant (Rhondda) (Lab): The very fact that this is an emergency business statement suggests that this is an inappropriate way of doing business on a matter that is of substantial national security interest. If the Leader of the House were honest, he would listen to the voices across the House that are suggesting that emergency business is not a wise policy to adopt for next Monday. He has not replied to the specific question of whether the motion on Monday will be amendable.

Mr Speaker: Order. I hope, for the avoidance of doubt, that the hon. Gentleman is not suggesting that the Leader of the House is other than honest.

Chris Bryant: No.

Mr Speaker: I am grateful.

Mr Lansley: I am grateful for that, Mr Speaker, because I might have imagined otherwise from what the hon. Gentleman said. I am always honest with the House. This is an emergency business statement because

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it is not a business statement in the normal course of events. The structure of the business will give the House the opportunity to debate and vote on these issues in the way that we had anticipated.

Mr Christopher Chope (Christchurch) (Con): May I press my right hon. Friend on when the motion will be tabled, because if it is tabled tomorrow it will enable Members on both sides of the House who are concerned about this issue to see whether we can reach an agreement about an amendment?

Mr Lansley: When my hon. Friend looks at the Command Paper that is published today by my right hon. Friend the Home Secretary, he will see what will be the substance of the debate on Monday. That is what it will focus on. The motion will be published in good time. He can take it that the effect of the motion will be to support the Government’s proposals, as set out in the Command Paper.

Wayne David (Caerphilly) (Lab): This is probably the most important European question that we will have to decide on in this Parliament. According to the treaty of Lisbon, a decision has to be taken before 2014. The Government have known from the time the treaty was signed that a debate would be needed with proper time, as the Minister for Europe promised, before the end of this year. Surely it would make sense to have a reasonable period of discussion on this extremely important issue. A number of Members have expressed concerns and reservations on which they want clarification. Let us have a proper debate.

It is particularly important that Select Committees have plenty of time to reach their conclusions. We have heard from the Chair of the European Scrutiny Committee that his Committee needs to give these matters proper deliberation.

I hope that the Leader of the House has second thoughts. I am sure that he would not want to give the impression that the Government want minimal debate because they do not want to expose divisions in the Conservative party. I am sure that that is not the reason.

Mr Lansley: That question was longer than my statement. I know that the hon. Gentleman was in his place last Friday, but he did not take part in the vote, unlike some of his hon. Friends. I am making an emergency business statement today because I thought it proper not to wait until Thursday once my right hon. Friend the Home Secretary had made it clear that a debate was in prospect. It is clearly not possible to debate the substance before the Government’s proposals have been fully set out.

Mr Speaker: I think that the hon. Member for Caerphilly (Wayne David) thought momentarily that he was speaking from the Front Bench rather than the Back Benches.

Mr Philip Hollobone (Kettering) (Con): Trusting that the Leader of the House is an honest fellow who is sensitive to the mood of the House at all times and given the comments that have been made today, may I urge him to reconsider his decision and to hold the debate and vote in September? Given that most of Europe, and especially the European Commission, goes on holiday in July, August and early September, I am sure that a delay until our September sittings would do no harm at all to our renegotiation prospects.

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Mr Lansley: I hope that my hon. Friend knows how sensitive I am to the views of the House. I have frequently amended what we have planned to do for that reason. In this instance, the case seems straightforward. When the Government have reached a policy decision and the basis of that decision has been published for the benefit of the House, it is very often in the best interests of the House to have a debate as soon as possible. That will provide a good basis on which Ministers can take forward the negotiations, as I have described. As a consequence of those negotiations, there will of course be a further vote in 2014.

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Post Office - Horizon System

1.38 pm

The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Jo Swinson): Yesterday evening, an interim report into alleged problems with the Post Office’s Horizon computer system was published. The report was commissioned by Post Office Ltd from external forensic accountants, Second Sight. The Horizon system records all transactions conducted at every post office counter across the country. The Government welcome the publication of the interim report and the Post Office’s statement in response.

Although Post Office Ltd is 100% owned by the Government, the company operates at arm’s length as an independent commercial business. The Government do not play any role in operational matters. It is important to note that the issues in the report have no impact on Royal Mail, which is an entirely separate business. It is also important to be clear that, contrary to misleading media reports, the review explicitly confirms that

“we have so far found no evidence of system-wide problems with the Horizon software”.

The very small number of sub-postmasters who have experienced issues with the Horizon system are a minute proportion of the tens of thousands of people who have been successfully using the system across the network of 11,500 branches on a daily basis since 1995. Out of 68,000 users, only 47 cases have been put forward to the review.

I want to emphasise that the interim report makes no comment on the safety or otherwise of any conviction of a sub-postmaster for fraud, theft or false accounting. Equally, even if it had, the Government cannot intervene in the legal process to review or appeal past convictions. These matters can properly be dealt with only by the relevant judicial authorities. The interim report published yesterday analysed four cases. It found that there was scope for the Post Office to improve aspects of its support and training for sub-postmasters, and it has already taken steps to do so. The Post Office has further proposed a number of measures to build on some of the points made in the Second Sight report on support and training for sub-postmasters. I welcome those initiatives as, I understand, does my right hon. Friend the Member for North East Hampshire (Mr Arbuthnot), who has played a key supporting role in identifying cases for examination in the review.

The Post Office statement issued yesterday welcomed the broad thrust of the report’s findings and outlined three initiatives to deal with the issues raised. First, it will set up a working party to complete the review of cases started by Second Sight, and will consider all 47 cases brought forward by the Justice for Subpostmasters Alliance—the JFSA—and MPs. The JFSA has been invited to join the working party. Secondly, an independent figure will chair a review to determine how best to adjudicate disputed cases in future. The JFSA and other stakeholders will also be invited to take part in this process. Finally, a new branch user forum will provide a channel for sub-postmasters and others to raise issues at the highest level on business processes, training and support. The company will take forward the proposals as an urgent priority. I commend this statement to the House.

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1.41 pm

Ian Murray (Edinburgh South) (Lab): I thank the Minister for the advanced copy of the statement and for coming to the House.

This is a disturbing affair. At a time when sub-postmasters’ income is being squeezed, the last thing they need is to lose confidence in the system they use to operate their businesses. The people in the post office network are the lifeblood of our communities and must be supported in every way possible. A recent National Federation of SubPostmasters survey found that operating costs were rising while personal drawings were falling, and that one in four sub-postmasters take no salary from their businesses. Most sub-postmasters earn little or no income from either financial or Government services, the two areas that Ministers identify as having real growth potential for post offices. The NFSP removed its support for the Postal Services Bill on the basis of the abject failure of the Government to deliver the “front office for Government” services they promised at the previous election. That is what makes today’s revelations on the Horizon system all the more worrying.

I welcome the steps taken by Post Office Ltd to investigate the concerns raised by the Justice for Subpostmasters Alliance and the right hon. Member for North East Hampshire (Mr Arbuthnot). Its website has a case-by-case analysis of sub-postmasters who did nothing wrong, but for whom alleged defects in the system had resulted in problems with cash reconciliation and processing payments. Press reports this morning say that the Post Office has admitted to software defects in the Horizon system, but the Post Office press release would have us think that this is a mere training problem.

Second Sight, the independent company employed by the Post Office to investigate these issues, said that while there was no fundamental problem with the Horizon system, there were bugs in the system that resulted in it identifying defects resulting in a shortfall of up to £9000 at 76 branches. The Post Office has recognised, however, that the report raises questions about the training and support being offered to some sub-postmasters. This raises wider questions on the current network transformation programme. Training concerns have been consistently raised by Opposition Members, the Select Committee on Business, Innovation and Skills and Consumer Futures, but the move to a Locals model could result in fewer fully-trained staff in our post offices.

If post office services are merely being administered from the front counter of a newsagent or shop, can we guarantee that the servers will be fully trained to ensure that the issues with the Horizon system do not arise in the future? The Minister did not address that question in her statement, and the National Federation of SubPostmasters has raised this issue time and again. It responded today by welcoming the Post Office statement, but also said

“We are encouraged to see that Post Office Ltd (POL) concedes that there is scope for improvement in its training and support programmes—issues which the NFSP has raised repeatedly with POL.”

This is all at a time when Crown Post Office staff are in industrial action, the transformation programme is struggling to be delivered, sub-postmasters’ incomes are dropping, there is a dispute with Royal Mail on the segregation of mail payments, the future of the inter-

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business agreement is unclear due to Royal Mail privatisation, and Post Office senior management have awarded themselves bonuses of more than £15 million.

What processes will be put in place to compensate sub-postmasters and former sub-postmasters who have been disadvantaged, fined, lost their businesses, homes or even jailed, as a result of the problems with the Horizon system? The Minister said that the interim report makes no comment about any convictions, criminal or otherwise, but will those serious issues be dealt with? When did the Government know about this investigation and the problems with Horizon? How will she ensure that all staff are adequately trained in the transfer to a Locals model? Can she confirm or deny recent reports that there are ongoing talks to change the voluntary Locals network model to a compulsory model, due to the slow take-up of the transformation?

Jo Swinson: I thank the hon. Gentleman for his wide-ranging remarks and questions. He is right to say that it is important for people to have confidence in the post office network. In terms of tone, I understand that the remit of Opposition is to ask questions and to be challenging, but it is important that we do not talk the Post Office down. Members on both sides of the House recognise the vital role that post offices play in our communities, that they are doing an excellent job and that there can be a bright future for the Post Office. This Government have stopped the decline in the numbers in the post office network under the previous Government. The hon. Gentleman will be aware that the Post Office has won 10 out of 10 Government contracts recently. We want more income for Post Office Ltd to come through Government services. It has a good record of winning contracts.

The hon. Gentleman mentioned the bugs in the system that have been reported in the media. It is important for the House to have clarity on this, because there are two separate issues. The Post Office itself identified issues on two occasions: through a routine systems check and as a result of a query from a sub-postmaster. That led to a small number of transactions being queried across 76 branches. Post Office was proactive in identifying and rectifying those problems so that no sub-postmaster was out of pocket. That is a separate matter from the issues considered in the report, and which were raised by the JFSA and Second Sight. No system-wide software issues were found. There were issues relating to the interface for dealing with multiple computer systems. The training on offer, and the helpline that sub-postmasters can call if they have a problem, were identified as areas for improvement.

The hon. Gentleman asked specific questions on compensation. There is no new evidence of further problems. Where the Post Office has identified defects, sub-postmasters have already received compensation to right underpayment. On convictions, it is up to individuals to go through the usual judicial processes if they are concerned about the safety of a conviction, and that can be done through the Court of Appeal. Clearly, if any evidence were to come to light that had an impact on the safety of convictions—I stress that that has not happened as a result of this interim report—Post Office Ltd would have a duty to look further at those issues as a prosecuting authority to ensure that convictions remain safe.

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The report was commissioned by Post Office Ltd, but the Government were aware of it and there have been meetings with MPs in the House at various points in the past couple of years. On the transfer to the Locals model, I confirm that proper training will be in place. Customer satisfaction in the branches that have already gone through network transformation is significantly higher, and the experience that customers have is important. We are looking to ensure that network transformation continues and is successful, but any discussion on its future will be done in conjunction with the National Federation of SubPostmasters to ensure that we move ahead with a plan in which everybody has confidence.

Mr James Arbuthnot (North East Hampshire) (Con): I thank my hon. Friend for making this valuable statement to the House. Does she accept that the Post Office, which has acted highly commendably in commissioning this independent review, has a conflict of interest—or, rather, a conflict of duty—in both looking after its sub-postmasters and protecting public money, and that the review has shown that it has fallen too far on the asset recovery side of that conflict? Does she agree that it is essential that the work that needs to be done is not only independent, but seen to be independent of the Post Office? Does she also agree that some sub-postmasters would never have been prosecuted, sued or disciplined had the new procedures now in place or proposed been in effect earlier, and that we must look after them and try to provide them with redress, perhaps through the Criminal Cases Review Commission?

Jo Swinson: I sincerely thank my right hon. Friend not only for his question and comments, but for his work acting as a collecting point for some of the concerns. Importantly, it ensured that cases could be looked at anonymously and confidentially, meaning that nobody had to fear bringing them forward. That has played an essential role in this process.

Post Office Ltd is the guardian of large amounts of public money, and it is important that it is properly looked after, but that does not mean it cannot also support sub-postmasters in ensuring that their systems work properly and ensure that there is reconciliation and that things tally up. In fact, I would argue that those are complementary duties, because ensuring that sub-postmasters are well supported helps the Post Office with its role in looking after public money.

It is important that any further work is not only independent, but seen to be independent, and clearly the role of Second Sight in that is important, as is the role of the JFSA. I would not go as far as my right hon. Friend, however; there is no evidence to suggest that any convictions would have been different had these processes and training systems been in place, particularly given that in most of the prosecutions dealt with in the report—not all 47 cases in the report resulted in a prosecution—the sub-postmaster pleaded guilty in the first place. It is difficult to second guess when somebody has entered a guilty plea.

Mike Wood (Batley and Spen) (Lab): I thank the Minister for her statement. She stresses the need for independence in the continuing process of looking at the outstanding queries and issues, and no doubt she is

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mindful that when the Post Office talks about Horizon, it does not just mean the software in the computer system; it means the wider issues, including the interface between that system and other systems; training staff how to use it, and so on. Given that she has made a commitment on the need for independence, will she assure the House that if we are to move to a working party to continue the process, Second Sight, which has done such good work up to now, will be part of it?

Jo Swinson: I shall happily give the hon. Gentleman that assurance. The continued input of Second Sight is incredibly important, given its familiarity with the case so far and the fact that it enjoys the confidence of many of those involved. It is also important to recognise, however, that to date this system has handled more than 45 billion transactions and that there have been issues with only a tiny, tiny number of them. As the report itself found, the vast majority of sub-postmasters in branches were at least reasonably happy with the Horizon system. I suspect that Members would say that, where IT systems are concerned, “reasonably happy” is probably as good as we are going to get. Generally, it is working well, but we need to ensure that the further work on cases where there are outstanding queries is independent.

Mr Jonathan Djanogly (Huntingdon) (Con): Clearly, it has now been ascertained that the Horizon system has problems, even if, as the Minister says, they are not systemic. Does she not feel that that is unacceptable, however, given the delays from Post Office Ltd in working out what went wrong? This matter has meandered on for years, resulting in serious reputational damage risks to sub-postmasters. Will she give us her views on whether that is acceptable?

Jo Swinson: It is to the Post Office’s credit that it has commissioned this independent review, which has been transparent and accountable, as my right hon. Friend the Member for North East Hampshire (Mr Arbuthnot) also said. It is easy for organisations to say there is not a problem and to try to sweep these things under the carpet, but Post Office Ltd decided to be open about it and to ensure that the report was published. In fact, its newsletter to all branches contained an article encouraging anyone who had difficulties or queries they wanted to raise to ensure they were put into the Second Sight review.

The Post Office has taken significant steps to ensure that there is transparency and accountability and that people’s concerns are taken forward. Clearly, sometimes these issues take time, and of course there are lessons to be learned. Improvements will be made to ensure that when queries are raised, they can be investigated more thoroughly, but again I highlight the context: we are dealing with a system that processes billions of transactions, so it is very complicated and it cannot be expected that nothing will ever go wrong; what is important is how the organisation responds when things do go wrong.

Mr Kevan Jones (North Durham) (Lab): Being a Minister allows the hon. Lady not only to ask questions but to right wrongs. To dismiss cases such as that affecting a constituent of mine, Mr Tom Brown, as minuscule does not change the fact that he has lost his livelihood, his wife has died, his name has been dragged through the local community and he is stilling awaiting

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an outcome from the Post Office. He was arrested by the police, but they did not take the case forward; the Post Office did. His good name is now being questioned, he has had to sell his house and is still waiting for the Post Office to produce the evidence. I am sorry, but the Minister’s statement has done none of the things she could have done to put right some of these wrongs.

Jo Swinson: I appreciate the situation that the hon. Gentleman’s constituent finds himself in—it is important that he is speaking up for him—and I understand that this has had a massive impact on those involved. When I referred to “minuscule”, I meant the number of transactions queried out of the overall number of 45 billion. I do not know the details of the individual case, so I hope he will appreciate that it is therefore difficult for me to comment. What is important is that we have an independent procedure to get the answers that people such as his constituent are looking for, and everyone involved must have confidence in that procedure. I know that there have been meetings of MPs and that the JFSA is involved; getting those answers is important, but it is also important to stress what the report shows, rather than to suggest that it contains things that it does not.

Mr Robin Walker (Worcester) (Con): I welcome the Minister’s statement, particularly the commitment from the Post Office to improve aspects of its support and training for sub-postmasters. I recently visited St Johns post office in Worcester, which is an enthusiastic early adopter of the network transformation programme. Will she join me in celebrating the fact that the Government are investing in the post office network, rather than running a closure programme, as the last Government did?

Jo Swinson: I very much welcome my hon. Friend’s comments. He is quite right that the Government are investing £1.34 billion in the post office network, and I know from speaking to Members on both sides of the House that where these new models are open and working, they have had a really positive reaction from consumers. The Post Office has a bright future, but part of that is about ensuring that where issues arise, they are properly investigated. That is what this independent process has been doing, and that is why we are discussing it today.

Mr Mike Weir (Angus) (SNP): The number of sub-postmasters affected might be small, but none the less it has led to terrible consequences for many of them. One reason many people pleaded guilty, paid back money or had money taken off them by the Post Office at source might have been the latter’s insistence that there was absolutely nothing wrong with the system. It has now been proved that there is doubt about at least part of the system, so is it not imperative that all these cases be dealt with speedily and that justice be done for these sub-postmasters?

Jo Swinson: The hon. Gentleman is right that it is imperative that these cases be looked at speedily, although I think he would also agree that that needs to be done comprehensively, and clearly when forensic accountancy work is going on, things can take time. We need to be clear about what the report says about the Horizon

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system. It did not find evidence of systemic failures; that is not to say there has never been a bug in the system, but I defy anyone to find an IT system that has never had a bug. What is important is that when bugs are found, they are dealt with and the problems are rectified. What has not been found, however, is any systemic problem leading to the issues faced by sub-postmasters, although there have been issues with the support and training provided alongside Horizon.

Jonathan Lord (Woking) (Con): Like many colleagues, I have a constituent, Mrs Seema Misra, whose life and family life is in ruins after suffering reputational damage and receiving a custodial sentence. I see from the Minister’s statement that an independent figure will chair a review to determine how best to adjudicate disputed cases, but will she assure me that the working party set up to complete the review of current cases will also by chaired by an independent figure? That is important.

Jo Swinson: Yes, I am happy to give my hon. Friend an assurance that the working party will be independent. As I have already confirmed to the House, the continuing involvement of Second Sight, which is independent of the process, is crucial as part of that working group.

Mr Russell Brown (Dumfries and Galloway) (Lab): The Minister has said that the network is working well. Will she share with the House the numbers of sub-post offices that are temporarily closed or have had to move to an alternative, temporary service delivery system?

Jo Swinson: I will certainly ensure that that information is sent to the hon. Gentleman in writing. As he, and I hope the House, will appreciate, these numbers change regularly by their very nature. To ensure accuracy, I will write to him and place a copy in the Library. What is important is that we have a commitment to maintain the network of post offices at 11,800. We are ensuring that we invest in the network, rather than embarking on closure programmes, which, as I know from my constituency and elsewhere, unfortunately had a negative impact on the post office network up and down the country.

Andrew Bridgen (North West Leicestershire) (Con): Having been involved in this issue for some time and having initially been told by Post Office representatives that the Horizon software system was perfect and could not be infiltrated, I am pleased that the Post Office is co-operating with the independent investigation, whose interim report indicates that the system is clearly not perfect. I urge my hon. Friend to ensure that Second Sight continues with its investigations. Does she accept that if the system was perfect, the modifications would not be needed and many—or some—of the historic convictions may well be unsafe?

Jo Swinson: I certainly agree with my hon. Friend that no system is perfect; perhaps it is a bit of a hostage to fortune for anyone to proclaim a system as perfect. I would not agree with the second part of his question—that that therefore means that those convictions are obviously unsafe. The evidence is not there in today’s report, but if evidence emerges to suggest that, there are legal channels that can be followed to ensure that those issues are taken up.

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Huw Irranca-Davies (Ogmore) (Lab): It seems to me that two groups of sub-postmasters fall outside the remit of today’s statement. The 47 past cases brought forward by the Justice for Subpostmasters Alliance will be taken forward by the independent working party, but what about somebody—I have one such case in my patch—who for very good reasons does not feature in those 47 cases? Can that be looked at again? Secondly, what about live cases? The statement refers to “disputed cases in future”, but I have two live cases in my constituency that do not fall within anything that has been described today.

Jo Swinson: Clearly the procedures that the Post Office is putting in place to improve its training and support will, I hope, assist those cases that are live at the moment. On the hon. Gentleman’s first point, I can certainly give an assurance that if there are other cases that need to come forward, we would not want to deny those people the opportunity for that to happen.

David Mowat (Warrington South) (Con): For the purposes of clarity, can the Minister confirm that all the issues we are talking about today are business, process and training-related, and not software-related? Is that what we are saying?

Jo Swinson: Yes. The report mentions a couple of bugs in the Horizon system, which the Post Office proactively found and rectified, but basically what it has found to be lacking in Horizon is not the software, but the support and other issues around the software.

Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op): The Minister has given some full answers to the questions posed, but she was unable to give a direct answer to one of the questions put by my hon. Friend the Member for Edinburgh South (Ian Murray) from the Front Bench. Let me give her another opportunity to confirm whether the Government and Post Office Ltd are considering changing the Locals programme from a voluntary to a compulsory basis. A simple yes or no answer would be adequate.

Jo Swinson: I am always keen to be concise. I think I did answer the question earlier. I pointed out that the transformation programme is an important part of the Post Office’s future. We are making sure that we look at how it will be delivered with the new strategy for the Post Office that will published, and we are working closely with all the stakeholders to ensure we can do that. What is important is that whatever the future system looks like, there will be a choice for sub-postmasters, rather than forcing them down a particular route.

Mr Philip Hollobone (Kettering) (Con): Being a sub-postmaster is a very worthy profession, at the heart of many local communities and helping highly vulnerable people. With respect, I think the Minister dismisses too lightly the devastating impact that the Horizon system has had on a small number of people. The very least that Post Office Ltd should be doing is setting up a legal fund to review each case, because many will have pleaded guilty to false accounting, given the situation with the system and the legal advice they received at the time.

Jo Swinson: I absolutely recognise that the impact on individuals has been intensive and considerable, and I think I have made that point to other Members who have raised this issue. Constituency MPs are absolutely

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representing their constituents in taking forward these proposals, but I think there is a distinction to be drawn before assuming that convictions are therefore unsafe. It is important that we draw that distinction and that we are careful about what we say, particularly when it comes to legal proceedings that have taken place outside this House—and rightly independently of this House—and where people have entered a particular plea.

If individuals are concerned about the quality of the legal advice they received at the time, there are routes for them to challenge that, such as the Legal Services Commission. If evidence comes to light that materially affects the conviction, that would also need to be looked at by Post Office Ltd as the prosecuting authority, as I have said. However, that is not where we are yet. We will of course remain open minded about that as the review process continues. So far, only four of the 47 cases have been looked at in detail. Therefore, we await to see what more will come out of the review.

David Simpson (Upper Bann) (DUP): I thank the Minister for her statement. She will have heard a number of Members putting information before the House about the lives that have been ruined. Injustice has been done, and that needs to be corrected. Will she tell us the exact details of the training that Post Office Ltd intends to carry out?

Jo Swinson: Training is carried out as a matter of course when new postmasters join the network. That can vary between a little over two weeks to three weeks. The Post Office is now ensuring that it visits new sub-postmasters after one month, and again after three months for the new local and main operating models, to deal with any teething issues or further questions that have arisen from their working the process for a few weeks.

Improvements to the helpline are also important, so that it does what it says on the tin and is actually helpful to people who call it. One thing that has improved the helpline is making it available for extended hours. As other Members have mentioned, sub-postmasters work very hard for long hours, so assistance needs to be available to them when they happen to be doing their reconciliation at the end of the day. That is not likely to be within office hours, so the service needs to be available after branches have closed. Those are just some of the improvements that the Post Office has been making.

Mr Peter Bone (Wellingborough) (Con): I thank the Minister for coming to the House and making today’s statement. She is an excellent Minister, but on this occasion she has got it wrong. Indeed, I think she got the mood of the House wrong. The House is concerned about a very small number of people who have had their lives ruined. It is no good saying, “Oh, they can appeal,” or that they can do this or that. We need proactive action from the Government. I suggest that she talk to the Attorney-General to see whether he can look into those cases and review them.

Jo Swinson: I thank my hon. Friend for that question and for his kind words. I accept that this is a serious issue for the individuals involved, and it is absolutely natural that their constituency MPs are putting their cases. However, we have to be careful about going from the understandable sympathy for individuals in a difficult position to an assumption that all these issues are

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therefore unsafe and the result of problems in a way that is not borne out by the evidence in the report. That is why it is important to have a continuing independent review process in which people can have confidence, but it is also important to go by the evidence found in the report.

John Woodcock (Barrow and Furness) (Lab/Co-op): For how long are my constituent and many others going to have this appalling cloud hanging over them? Has the Minister put a time limit on the next stage of the review?

Jo Swinson: The review is independent of the Government and of the Post Office, so it would not be appropriate for me or for the Post Office to put an arbitrary time limit on it. That said, I absolutely understand the hon. Gentleman’s point that there is a need for speed and for the prompt resolution of these issues, but that has to be balanced against ensuring that they are looked at in a comprehensive way. The independent working group, which will include representation from the Justice for Subpostmasters Alliance, will help to ensure that that happens swiftly and without compromising the details that need to be gone into.

Jim Shannon (Strangford) (DUP) rose—

Mr Speaker: The hon. Member for Strangford (Jim Shannon) has bobbed up, as is his common practice, at the last minute. I should not want him to feel excluded.

Jim Shannon: I have bobbed up at the right time.

I thank the Minister for her statement. The Horizon system has been blamed by some sub-postmasters who have been accused of false accounting. Does the Minister agree that red tape makes it difficult to run rural sub-post offices, especially those in isolated locations? What steps is she taking to restore confidence in the system, especially in relation to rural post offices?

Jo Swinson: The hon. Gentleman is quite right to raise the issue of rural sub-postmasters. The communications systems depend on communications technology, which can be more of an issue in rural areas. Many post offices have a main phone line and also a back-up system, perhaps using a mobile telephone. Rural areas often have difficulties with broadband connectivity, which is why the Government are moving ahead with plans to ensure that rural broadband is much better spread out. The support for rural post offices is certainly significant, and we recognise that there are many branches that need subsidy from the Government to continue. That is why the Government are injecting £1.34 billion into the post office network. We also recognise that there will be a continuing need to ensure that rural post offices are supported in providing their excellent services. They might be the last remaining shop in a village, or the only post office serving a large, far-flung area.

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Points of Order

2.11 pm

Huw Irranca-Davies (Ogmore) (Lab): On a point of order, Mr Speaker. I welcome the Minister’s statement, and I think I understood—it might have been my hearing—that she made an offer to look beyond the 47 cases raised by the Justice for Subpostmasters Alliance. I was not clear, however, to whom any further cases should be referred. Perhaps, while the Minister is still in the Chamber, you can guide us on how we might get that clarification.

Mr Speaker: The failure of the hon. Gentleman to hear what was said does not, in itself, constitute a point of order. However, as the Minister is still here and looks happy to come back to the Dispatch Box to clarify the matter, he might be released from his ignorance before very long.

Jo Swinson: I am sure that the hon. Member for Ogmore (Huw Irranca-Davies) would have had the ingenuity to ensure that any such cases received attention in any event, but for the benefit of the House, I should point out that one avenue for highlighting any further cases would be to bring them to the attention of the Justice for Subpostmasters Alliance, which will be part of the independent working group. I hesitate to suggest, although I am probably safe in doing so, that my right hon. Friend the Member for North East Hampshire (Mr Arbuthnot) would also be happy to continue in his role as a recipient for any such cases. He seems to be nodding. So those are two options for the hon. Member for Ogmore.

Mr Speaker: I trust that the hon. Gentleman is now satisfied. He does not have to suggest that his ear is somehow defective. I feel sure that it is not. He might simply not have been paying full attention; I do not know.

Mr Christopher Chope (Christchurch) (Con) rose—

Mr Speaker: A further point of order. It is point of order day!

Mr Chope: On a point of order, Mr Speaker. Is it within your power to require the Government to provide time for the proper scrutiny of Government measures before they are subject to a vote? Command paper 8671, to which the Home Secretary referred in her statement, comprises 155 pages of pretty impenetrable prose, with hardly any explanation. The command paper has considerable policy implications, but there are many ifs and buts among the contents. I cannot see how the House can reasonably be expected to reach a substantive conclusion on whether signing up to the document is in the national interest unless we are given a lot more time for its scrutiny, not only by the House but by the Select Committees, which are appointed specifically to do the job of scrutiny.

Mr Speaker: The short answer is that I do not have the power to which the hon. Gentleman refers. I much appreciate his belief that the Chair ought to be invested with greater powers, and I do not for one moment dissent from that proposition. The reality is that he and

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others will have to use their best endeavours in the coming days—it is literally a matter of days—to ensure that they are furnished with adequate material, and understanding thereof, to enable them to participate to their satisfaction in the debate that the Government have apparently now scheduled. I can operate only within my powers, but I know that the hon. Gentleman is a persistent, indefatigable and skilful Member, and I am sure that he will make the very best fist of this, not only on his own but with others.

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Planning Regulations (Removal of Provisions in Respect of Gypsies and Travellers)

Motion for leave to bring in a Bill (Standing Order No. 23)

2.15 pm

Mr Philip Hollobone (Kettering) (Con): I beg to move,

That leave be given to bring in a Bill to make provision for the removal of provisions in planning regulations relating to Gypsies and Travellers.

It is a huge privilege for me to represent the people of the borough of Kettering in this place, and I would like to extend my thanks to the Under-Secretary of State for Communities and Local Government, my hon. Friend the Member for Great Yarmouth (Brandon Lewis) for showing my constituents the great courtesy of attending the Chamber today to listen to their concerns, which I will do my best to express. He has proved himself to be knowledgeable and sensitive when it comes to the enforcement of planning regulations in relation to Gypsies and Travellers.

The reason for my seeking to introduce the Bill today is that my constituents are undergoing a consultation on where in the borough up to 37 Gypsy and Traveller pitches should be sited by the year 2031. It is no exaggeration to say that many of my constituents have been brought to tears by some of the site proposals. I also have the privilege to be a member of Kettering borough council, which, as the local planning authority, is doing its best within the national planning guidelines to undertake the consultation in the most effective way possible. However, the council has to follow national planning regulations and, by law, it has to identify up to 37 pitches. It has no choice in the matter. It does have some choice about where in the borough they should be located, but it must find those sites, and some of the proposals have been completely outrageous.

The purpose of my Bill is to remove any special provision for Gypsies and Travellers from the national planning regulations. I wanted to call it the “Gypsies and Travellers (The Same Planning rules as Everyone Else) Bill”, because that is really what I am after, but I was told by the parliamentary authorities that that would not accord with parliamentary procedure. That is why the Bill has its present title, but the effect would be the same.

Why should one category of person be treated differently from anyone else under the planning regulations? If one of my constituents from the settled community wanted to establish a mobile home in the middle of a green field in the open countryside, they would not be allowed to do so. However, if a Gypsy, Traveller or travelling showperson—the other term used in the planning documentation—wanted to do so, that would be permissible under the current planning regulations. That is exactly what has happened in the borough of Kettering, causing huge distress to many thousands of my constituents.

Most of the relevant planning regulations are to be found in a document entitled “Planning policy for traveller sites”, which was revised in 2012—unfortunately by a Liberal Democrat member of Her Majesty’s Government. Had there been a Conservative Minister

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in charge of this aspect of policy at the time, I suspect that the guidance would have been far more robust. The document states:

“The Government’s overarching aim is to ensure fair and equal treatment for travellers”.

I agree with that, 100%. Everyone—regardless of their background, ethnicity, age or whatever—should be treated the same. That is fine. It then goes on to say, however,

“in a way that facilitates the traditional and nomadic way of life of travellers while respecting the interests of the settled community.”

I disagree with the last part of that sentence, because I do not see why one category of person should be treated differently from anyone else. The document that such policies

“reduce tensions between settled and traveller communities in plan-making and planning decisions”.

The Minister has kindly agreed to visit Kettering in the near future to listen to my constituents’ concerns about this issue. When he comes, he will be left in no doubt that the consultation exercise being conducted by Kettering borough council has hugely enhanced the tensions between settled and Traveller communities in planning decisions.

Local planning authorities, of which Kettering borough council is one, are obliged under the national guidance to

“set pitch targets for gypsies and travellers…and travelling showpeople which address the likely permanent and transit site accommodation needs of travellers in their area”.

Why should they be treated differently from everyone else? The document goes on to say:

“When assessing the suitability of sites in rural or semi-rural settings, local planning authorities should ensure that the scale of such sites does not dominate the nearest settled community.”

Tell that to my residents in the village of Braybrooke, one of 22 villages in the Kettering constituency where, by fair means and foul, Gypsies and Travellers have set up a very large number of pitches on sites near to the village—and this was allowed to build up under the previous Government in such a way that 100% of the children in Braybrooke primary school were Traveller children. Such was their dominance over the local community that the local settled community decided not to send their children to that school. How can the “ghettoisation” of our countryside have been allowed to take place under national planning regulations? There has to be a balance in this system. That situation has been allowed to develop because Gypsies and Travellers have effectively been given special provision. My belief, however, is that everyone should be treated the same.

Under the consultation exercise that Kettering borough council is undergoing, it has to identify 37 pitches by 2031. Some of the sites—they will be unfamiliar to Members of this House, but very familiar to my

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constituents—are completely inappropriate. One pitch could be sited in Crown street, Kettering, another in Beatrice road, while six or seven could be at the Scott road garages site in Scott road, and another six to seven in the old sewage works in Burton Latimer. Another two could be at the Springfields site, north west of the village of Braybrooke, with two more at the Harrington road in Rothwell.

Many of those sites are within highly built-up areas within my constituency, and some are in the heart of the town of Kettering itself, and residents are rightly concerned that their homes will be devalued by tens of thousands of pounds if permission is given for a Gypsy or Traveller site to be set up nearby. There are understandable concerns, too, about the behaviour of Gypsy and Traveller groups, and these include crime, rubbish and antisocial behaviour.

Members may not realise that local residents have told me, on the basis of police evidence, that many distraction burglaries are undertaken by members of the Gypsy and Traveller community. It is a speciality of theirs. Likewise, farmers and rural dwellers are, frankly, terrorised at the theft of, and damage to, farm equipment and rural properties. The idea that these sites could be set up near to long-established communities both within towns and villages is bringing a huge amount of distress to my local residents.

Kettering borough council goes out of its way to do its best to provide affordable homes for as many as possible and over the last nine or 10 years it has delivered a total of almost 1,300 social rent and intermediate homes. Kettering borough council cares about how its local community is housed. Having to put within its planning system, however, sites for Gypsies and Travellers above or at a higher priority than anyone else is asking the council to do too much.

I congratulate Her Majesty’s Government and my hon. Friend the Under-Secretary on rescinding 186 pages of the equality and diversity in planning guidance brought in by the last Government—186 pages of Whitehall guff that has done tremendous damage to local communities, including mine in the borough of Kettering.

Question put and agreed to.

Ordered,

That Mr Philip Hollobone, Priti Patel, Mr John Baron, Mr Peter Bone, Mr David Nuttall, Philip Davies, Mr Christopher Chope, Mark Pawsey, Robert Halfon, Mr Stewart Jackson and Andrew Bridgen present the Bill.

Mr Philip Hollobone accordingly presented the Bill.

Bill read the First time; to be read a Second time on Friday 8 November, and to be printed (Bill 87).

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Financial Services (Banking Reform) Bill

[Relevant Documents:First Report from the Parliamentary Commission on Banking Standards, Session 2012-13, HC 848, and the Government response, Cm 8545. Second Report from the Parliamentary Commission on Banking Standards, Session 2012-13, Banking reform: towards the right structure, HC 1012. Third Report from the Parliamentary Commission on Banking Standards, Session 2012-13, Proprietary Trading, HC 1034. Fourth Report from the Parliamentary Commission on Banking Standards, Session 2012-13, ‘An Accident waiting to happen’: The failure of HBOS, HC 705. First Report from the Parliamentary Commission on Banking Standards, Changing banking for good, HC 175-I and II.]

[2nd Allocated Day]

Further consideration of Bill, as amended in the Public Bill Committee

New Clause 8

Competition and Markets Authority review into competitiveness

‘(1) The Chancellor of the Exchequer shall instruct the Competition and Markets Authority to begin a full market study, according to its powers under the Enterprise Act 2002, into UK financial services institutions involved in the provision of core services.

(2) The full market study will consider:

(a) the level of competition among UK institutions involved in the provision of core services.

(b) the obstacles to increasing competition for UK institutions involved in the provision of core services.

(c) possible actions that could be taken to facilitate new UK institutions being competitive in the provision of core services.

(3) The full market study will be published within a year of Royal Assent of this Act.

(4) The review must result in a report to the Treasury.

(5) The Treasury shall lay a copy of the report before both Houses of Parliament.’.—(Chris Leslie.)

Brought up, and read the First time.

2.26 pm

Chris Leslie (Nottingham East) (Lab/Co-op): I beg to move, That the clause be read a Second time.

Mr Speaker: With this it will be convenient to discuss the following:

New clause 10—Sale of state-owned banking assets—

‘(1) Before the sale of banking assets in the ownership of HM Treasury, the Treasury shall lay before Parliament a report setting out—

(a) the manner in which the best interests of the taxpayer are to be protected in connection with such sale,

(b) the expected impact that any sale might have on competition for the provision of core services, customer choice and the rate of economic growth,

(c) an appraisal of the options for potential structural changes in the bank concerned including—

(i) the separation of the provision of core services from the provision of investment activities,

(ii) the retention of a class of assets in the ownership of HM Treasury,

(iii) the impact of any sale on the creation of a regional banking network.

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(2) A copy of the report in subsection (1) shall be laid before Parliament and sufficient time shall be given for the appropriate committees of both Houses of Parliament to consider its findings before any sale decision.’.

Government amendment 5.

New clause 15—Local stakeholder banks—

‘(1) Within three months of Royal Assent of this Act the Secretary of State shall publish for consultation a report setting out proposals for the creation of networks of local stakeholder banks.

(2) This report shall contain an examination of stakeholder banking structures, defined as credit institutions that are not owned by private shareholders, with the with the aim of maximising shareholder returns. The examination should draw on experience in the UK and elsewhere and include—

(a) co-operative banks;

(b) credit unions;

(c) community development finance institutions (CDFIs);

(d) public-interest savings banks.

(3) The report shall examine potential impacts of the creation of networks of local stakeholder banks on—

(a) customer service and product range,

(b) accessibility to banking services for customer underserved by commercial banks,

(c) financial stability,

(d) accountability to local stakeholders.

(4) A copy of this report and the outcome of the full consultation shall be laid before Parliament and sufficient time shall be given for consideration of its findings by members of relevant committees of both Houses before any decisions are taken on the sale of state-owned banking assets.’.

New clause 12—Portable account numbers—

‘(1) Within six months of Royal Assent of this Act, the Treasury shall lay before Parliament a report considering—

(a) the adequacy of voluntary arrangements made by UK ring-fenced bodies to facilitate easier customer switching of bank account services; and

(b) legislative options for the introduction of portable account numbers and sort codes for retail bank accounts provided by UK ring-fenced bodies.

(2) The Chancellor of the Exchequer may, by affirmative order to be approved by both Houses of Parliament, confer powers upon the appropriate regulator to require UK ring-fenced bodies to comply with any specified scheme to establish the use of portable account numbers and sort codes.’.

New clause 14—Portable account numbers (No. 2)—

‘(1) Within 12 months of Royal Assent of this Act, the Treasury shall lay before Parliament a fully independent and comprehensive report detailing the options for introducing portable account numbers for bank accounts within the UK, including a full cost benefit analysis of the available options.

(2) The appropriate regulator may require banks and building societies to comply with any scheme to introduce and facilitate the use of portable account numbers, which is introduced in regulations made by the Treasury.

(3) No regulations may be made by the Treasury under this section unless a draft of the regulations has been laid before Parliament and approved by a resolution of each House.’.

Government new clause 1—Minor amendments.

Government new schedule 1—Minor Amendments.

Chris Leslie: Here we are again—a second bite at the Financial Services (Banking Reform) Bill. Today, we debate a series of amendments and new clauses that have been loosely grouped together under the title “Competition etc.” I shall speak in particular to new clauses 8, 10 and 12 in due course, but I shall start with new clause 8.

9 July 2013 : Column 215

We felt it important to discuss the obstacles in the way of better competition in the banking sector. I am sure that it is not true of you, Madam Deputy Speaker, but many hon. Members have probably been with their retail bank since they were very young—not so long ago in your case, Madam Deputy Speaker. Although an aficionado of switching and looking at different services in banking, I must confess that I have been with the same bank since I was 14, and with no real logic other than the inertia that afflicts many customers: we tend to think that it is inconvenient to change bank accounts; we tend to think, “There is not much choice, so what is the difference or the point of shopping around?” It is this sense of a lack of competition and lack of choice that we want to remedy with the new clause, tabled with other amendments in the group.

There are significant obstacles to competition, particularly to new challenger banks coming into the system, breaking into the business and trying to do something to challenge the absolute dominance of the big five banks. The new clause would require the Treasury to publish a review considering the obstacles to those new challenger banks and ways of increasing the number of new banks coming into play.

Under the new clause,

“The Chancellor of the Exchequer shall instruct the Competition and Markets Authority to begin a full market study…into UK financial services institutions involved in the provision of core services”—

in other words, retail banking. The aim is to provide a structure to support better competition, dealing with obstacles in the way of allowing new institutions to break into the market and to consider what actions could be taken to facilitate the new institutions entering into general competition.

Mr Barry Sheerman (Huddersfield) (Lab/Co-op): Does the Minister accept that help is needed not just for new entrants, but for unusual, smaller players in the present financial system? As a Labour and Co-operative Member of Parliament, I have an interest in the Co-operative bank. When HBOS and RBS got into difficulties, everyone rushed around throwing taxpayers’ money at them, but when the Co-op gets into serious difficulty because of its unique ownership basis and its lack of shareholders, it receives very little help from either the Treasury or the Department for Business, Innovation and Skills.

2.30 pm

Chris Leslie: I hope that the Co-operative bank, and all other institutions, will now be in a position to make secure and stable progress. However, I do not think that there is really a parallel between the Co-operative bank and institutions that would have disappeared had it not been for the intervention of the taxpayer in keeping the cash machines operating. We hear Government Members say that the public deficit was somehow created as a result of ministerial choices. It is sometimes forgotten that the state—the taxpayer—had to intervene to rescue the banks. Thank goodness that happened, but it left us with a phenomenal problem with which we are still struggling years later.

Mr Sheerman: Many of my constituents worked for the Halifax mutual building society, and we saw what really caused the ruination of two banks. Wicked, evil,

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unethical people took over a bank and ran it into the ground. That was not about the Government; it was about greed, and about particular people.

Chris Leslie: Absolutely. Those are the very issues that should be in the Bill, but it is a pretty thin measure. We are still waiting, apparently endlessly, for the Government to decide to populate it at some point with the recommendations of the hon. Member for Chichester (Mr Tyrie) and the Parliamentary Commission on Banking Standards.

We need support for mutuality and greater diversity in the banking sector, and that is why the new clause refers to competition. We do not just want more plcs to enter the market; we want institutions of many different types, including mutuals, to be given a chance to compete for business. My hon. Friend’s Co-op bank, for example, might wish to have that greater choice were it available. The new clause was largely inspired by the recommendations of the parliamentary commission, whose most recent publication made it very clear that the sector suffers from a lack of serious competition.

Which?—formerly the Consumers Association—reported recently that 55% of people had never switched their main personal current account, and that the larger banks had not earned their market share by dint of innovation or the provision of competitive services but simply through “first mover” advantage, because they had been there for such a long time. It also reported that, sadly, customer surveys had indicated that the big five high street banks—Lloyds, RBS, HSBC, Santander and Barclays—consistently gave less satisfaction than others. Those banks have a very large market share, which has increased over the last few years. They control 85% of the current account market as opposed to 71% before the financial crisis, 67% of mortgage gross lending as opposed to 38% before the crisis, and 61% of the savings account market compared with 47% before the crisis. The inertia of their customers enables those large banks to sit on a fairly stable customer base. It has often been said that people are more likely to divorce than switch current account, although I am sure that that does include those who are in the Chamber today. The lack of dynamism and choice in the market is a significant worry, and it is no wonder that it has been criticised by the Office of Fair Trading.

There are major barriers to entry for new banks, which need to establish an infrastructure to have a fair chance of competing more widely. Recent suggestions include the adoption of utility platform sharing, and an extension of the payments system machinery beyond the big banks. I think that such ideas should be given serious and detailed consideration, but they pose a challenge to institutions that own and control payments systems, and we must think carefully about how they can be tackled.

Some of the big banks were supposed to divest themselves of branches. RBS was supposed to float off a number of its branches to Santander, but that did not get very far. Similarly, as my hon. Friend the Member for Huddersfield (Mr Sheerman pointed out), Lloyds was supposed to divest itself of many of its branches to the Co-op, and we all know what happened in that instance. In all, 1,000 branches were supposed to be out there creating a proper challenger bank, or at least mixing it up a little by increasing the number of players

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in the system. That has not happened, and I have to say to the Minister that the Treasury has not exactly covered itself in glory. I am not claiming that it is entirely the Treasury’s fault, but I think that it had a hand in overseeing some of the divestment strategy. I hope that the Minister will update the House, because divestment is very relevant to the issue of proper competition.

John Fingleton, chief executive of the OFT, has said:

“More than a decade on from the Cruickshank report, we still have a banking sector where competition is manifestly not working well for consumers.”

The hon. Member for Chichester, the Chairman of the Parliamentary Commission on Banking Standards, who has left the Chamber—oh, there he is, next to the hon. Member for Caithness, Sutherland and Easter Ross (John Thurso). I apologise to him. He is clearly negotiating away as we speak. He has said:

“The lack of competition in banking has been reinforced by a regulatory regime favouring large incumbents. Customers have lost out as a result. Moves to remove barriers to entry are essential.”

We all agree with that.

We constructed new clause 8 very much along the lines of the commission’s recommendation of

“a market study of the retail and SME banking sector, with a full public consultation on the extent of competition and its impact on consumers. We make this recommendation to ensure that the market study is completed on a timetable consistent with making a market investigation reference, should it so decide, before the end of 2015.”

The time scale is very important, because the issue has drifted on year after year.

John Thurso (Caithness, Sutherland and Easter Ross) (LD): The hon. Gentleman has gone to the heart of one of our key recommendations, but what we had in mind was that the Government should just get on and do it. We did not envisage a need for legislation. Am I not right in thinking that, if properly instructed, the relevant authorities could undertake the work themselves?

Chris Leslie: I hoped that legislation would not be necessary, but I think it worth while for the House to express its view, particularly in response to the commission’s recommendation. Heaven knows, we have been here before. We have heard plenty of warm words from Ministers. They have said “We will certainly consider this, because there is a strong case in favour of it”. When it comes to the crunch, however, if the House of Commons is to do anything through this Bill—and we shall not be doing a lot, because so much is being left to the other place—I think that it is worth our trying to insert the new clause, just to keep the Minister’s feet to the fire. All that we are asking for is a market study in preparation for the proper market investigation reference before the end of 2015.

When the Vickers report was published in 2011, Labour Members felt that specifying 2013 would allow an appropriate time in which to assess the issue, and, two years on from Vickers, I do not think that anything has changed our minds in that regard. Getting that market study under way is the very least that should be done, and the Minister needs to commit to doing that. This is a critical point. When Members listen to what

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the Minister has to say, they must read between the lines. He will make all sorts of warm noises and say, “The OFT has started this process for SME customers”, but it has not done so for retail customers. That is the crucial difference; focusing merely on SMEs is not sufficient.

The Government have already claimed in their response to the commission’s recommendations that they will be fulfilling the commission’s proposal, but that is not the case. They are not putting in place that retail review, and I do not understand why they are so resistant to doing that. The Minister must explicitly set out why they are holding back from having a market study and investigation of the issues in respect of retail banking.

The Government response is full of warm words—they say they are in discussions and they are engaging with the problem—but it is not strong enough. It is too piecemeal and not sufficiently transparent, and they are not giving the commitment consumers, let alone commission members, would like. If the Government can at least acknowledge that they will not accept the commission’s recommendation, that will give us a clear choice when we come to consider what to do in respect of new clause 8.

The hon. Member for Brighton, Pavilion (Caroline Lucas) has tabled new clause 15, which focuses on local stakeholder banks and local banking. I agree that we should look at sub-national financial provision, particularly for customers, who can feel that they have very little choice at all. She will know that in new clause 10 we say that if state-owned banking assets are to be sold, options for a regional banking network ought to be fully considered. That is a very important proposal from the Opposition. There are some very plucky and hard-working institutions across the country—the credit unions, the community development financial institutions and other smaller building societies and mutuals—that do a lot of very worthwhile work at regional and local basis.

Mr Sheerman: Would my hon. Friend add to that list crowd funding and crowd sourcing, which many people think is the basis of a new, democratic capitalism in our country? It allows people to bypass the banks, which have so often failed us, and gives to our communities the power to regenerate businesses and communities.

Chris Leslie: As some have said in the past, the magic of the “interweb” will ensure that customers can avoid that intermediation—that middle-management step—and access finance. That may well develop very rapidly, although we need to make sure the regulators can keep an eye on how it develops.

Mr Sheerman: That must not be too heavy.

Chris Leslie: Well, I think it is important that we make sure the foundations are put in place to allow those new forms of finance to come to fruition in a safe environment.

My hon. Friend makes that point well, and I also want to give a name-check to the Community Investment Coalition: a number of financial institutions at local and regional level have come together to campaign on some of these issues, and in particular to call for greater transparency in the provision of financial services from

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community to community on a postcode-level basis, although that is anonymised as we do not need to know which organisations have been lending to which individuals.

2.45 pm

We are supposed to have had a commitment from the Government that they would try to get that level of data from the big banks so we could see where there were deserts in terms of financial provision. In some communities access to finance is a real problem, as is access to basic bank account services and other services which people have a right to these days as part of the warp and weft of modern lifestyles. Credit is really a modern utility, and we need to make sure that, as the CIC has campaigned for, the Government press the banks to be more transparent and to come forward with more data so we can decide what further local provision may be required.

Jonathan Edwards (Carmarthen East and Dinefwr) (PC): Does the shadow Minister therefore believe we should follow what the US has done? It has a community reinvestment Act, which ensures that the major banks are investing equitably on an area basis. The major problem in the UK is that investment is directed towards London, of course.

Chris Leslie: And not just towards London, as a lot of the major banks have had their appetites whetted to make big profits by focusing on overseas. That disconnect with locality has been part of the problem. One issue for debate—on another day, perhaps—is the idea of having a regional banking network. The German Sparkassen system has a geographic mandate that requires those banks to do business within a particular locality. That is a dynamic for making sure there is a direct relationship between the banker and the customer, particularly for small businesses, but on a retail basis as well. That is a very good idea whose time has probably come.

Caroline Lucas (Brighton, Pavilion) (Green): May I interpret the hon. Gentleman’s warm words to mean that Labour would support my new clause 15 if there were a vote on it?

Chris Leslie: Well, personally I prefer our new clause 10, but that is a good try by the hon. Lady. She has raised this issue in the spirit of trying to generate consensus on it, but I hope that in the limited time available to us we focus on the principle of making sure we get those commitments from the Government, which we all want in order to help get this transparency about what is happening in localities, as well as making sure we look at the state-owned assets and think about how they might be applicable to a regional banking network.

Government amendment 5 looks at some issues to do with competition, although they are mostly to do with the nature of ring-fencing and changes that might happen to the ownership of ring-fencing. I want to ask the Minister a question about the tensions between some of the objectives in the Bill. Government amendment 5 inserts a new requirement to consider competition issues, which seems to be slightly in tension with the existing provision to make sure there is no significant adverse effect from changing the ring-fencing arrangements. Can he clarify that that tension is resolvable, and confirm that the duty to consider competition will take effect subject to clause 4(3)?

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On Government new clause 1 and new schedule 1, can the Minister help us by talking about the practical implications of the amendment to the Companies Act 1985 omitting disclosures to the regulators, done for the purposes of helping them fulfil their functions under part VI of the Financial Services and Markets Act 2000? In particular, this appears to stop such disclosures being exempt from section 449 of the Companies Act, which criminalises disclosure of information obtained in certain circumstances. What is the reasoning behind that change? Also, paragraph 2 of new schedule 1 amends section 376 of FISMA, changing “PRA-authorised” bodies to “PRA-regulated” bodies. Is that a significant change? Are there any bodies that are classed as PRA-regulated but which are not PRA-authorised? If so, which are they?

Our new clause 12 addresses the portability of bank accounts. I know that the hon. Member for South Northamptonshire (Andrea Leadsom) has been very active on this, and that she has tabled similar amendments. She has been vocal in favour of some of these changes, and has tabled a sensible set of proposals. I hope she would agree that we are mirroring each other on this question.

Our new clause 12 would mandate the Chancellor to publish a report on the adequacy of the current account redirection service and on a possible change in the law to compel all ring-fenced banks to introduce a current account redirection service that might include portability. The banks themselves have made proposals for a seven-day switching arrangement from this September. The Minister claimed in the Government’s response that they had secured that commitment, but that might be a little bit of exaggeration and spin; I suspect that the banks were heading in that direction, but I will let him off on this occasion. This all comes down to whether that seven-day switching will radically transform the convenience for the customer. It is all very well saying that there will be a year or so when some transactions from the existing current account will automatically be made into the new account, but I do not understand why that provision has been time-limited. Some people will forget that that provision expires after a certain number of months.

Andrea Leadsom (South Northamptonshire) (Con): Interestingly, when we get into the nitty-gritty of how the seven-day switching process will work, we find that it seems to be more string and Sellotape—on top of the string and Sellotape currently holding the legacy systems together—so it is hardly a 21st century technological solution.

Chris Leslie: That is the worry, and we want to see how it is going to work. It is all very well if direct debits and standing orders—the sums leaving someone’s bank account—may be switched in that way, without the aggro and hassle of having to fill in new forms and so forth, but one of my anxieties is about payments into an account. For example, even the little step of someone having to tell their employer that they have a new account number and sort code is an inconvenient step too far. Apparently the banks are saying that they might deal with that as well, but this does not feel adequate and sufficient.

Andrea Leadsom: Is the hon. Gentleman aware that he is more likely to get divorced than to change his bank account?

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Chris Leslie: Funnily enough, divorce has already come up a couple of times in our proceedings, and I am sure that Mrs Leslie will be watching them.

Mr Andrew Love (Edmonton) (Lab/Co-op): The reality is that the seven-day switching service must be matched against increases in the level of switching of current accounts if we are to increase competition. All the evidence from countries like the Netherlands, where such a service has been introduced, shows that it has the trust of customers but does not increase switching levels, although that is the rationale for account portability.

Chris Leslie: Absolutely. Sir John Vickers pointed out in his report that a typical customer is likely to move current accounts every 26 years, on average, and it is estimated that about 6% of personal current accounts will be switched this year. All sorts of statistics prove that this is not a particularly active area, although there is a growing consensus among members of the commission, and even some of the banks, that portability might be an idea whose time has come.

Mr Sheerman: I switched a business account to HBOS, without knowing that anything was going to happen, because I thought that with KPMG as its auditors and with an auditor process in place my investment and my savings would be safe. What are we going to do to ensure that when people switch there is a guarantee that, at last, the accountants in this country and the auditors actually do their job?

Chris Leslie: That broadens things out into a whole new terrain, but suffice it to say, we should be able to trust our banks. We should be able to know that all these issues will be going on safely. To be fair to the banks—I do not say that often—some of their systems are able to cope, and complaints mechanisms are in place to deal with these things.

This is just about the customer being able to grasp and understand what is going on. The grey mist descends on many constituents—and, heaven knows, on many hon. Members, as we can see—at the mention of financial services, and that is without getting into pensions and some of those issues. Basic bank account services are incredibly important and we need the Government to say a little more than warm words in their response on this issue. I commend the hon. Member for South Northamptonshire on her campaign and we are very much behind the spirit of the changes she suggests, hence our new clause 12.

Finally, I wish to deal with new clause 10, which relates to the sale of state-owned bank assets. We feel that before a sale takes place of assets in the ownership of Her Majesty’s Treasury—we are very much focused on the Royal Bank of Scotland and Lloyds at the moment —the Treasury ought to set out clearly a report discussing the manner in which the best interests of the taxpayer will be protected in the sale, and the expected impact that any sale might have on competition for customers and on the rate of economic growth. That should be accompanied by a proper appraisal of the options for potential structural change in the banks concerned, including: whether there should be any changes to the division between retail banking and investment banking in those institutions; whether some asset classes need to

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be held back—this is sometimes characterised as a good bank/bad bank split; and, crucially, the impact of the sale on the creation of a regional banking network. We think that is essential.

Mr Pat McFadden (Wolverhampton South East) (Lab): My hon. Friend will know that the banking commission recommended having a proper study of the good bank/bad bank option for RBS. Does he think that in advance of that study it might help if the Government exercised a little more care in their stewardship of RBS, given that their disastrous political meddling of the past month has resulted in a fall in the share price of some 20%, the bank losing a chief executive without a plan being put in place for replacing him, and confidence among investors being lost by the Government’s handling of the bank?

Chris Leslie: My right hon. Friend is completely correct about that. If the British public realised what has happened to the value of that taxpayer stake in RBS, they would be appalled. Today’s figures show that £2 billion-plus has been taken off the value of RBS since the botched handling of the departure of the chief executive, Stephen Hester. That mishandling forced the Chancellor to back down from a foolhardy dash towards a fire sale, which we know was part of the plan from the conversations that Sir Philip Hampton, the chairman of RBS, let slip in comments to journalists around that time. Labour Members, however, are absolutely focused on the need for the taxpayer to get good value for money, to get our money back. That is entirely possible. Stephen Hester revealed the flaw in the Chancellor’s strategy for a hasty sale driven by the electoral timetable when he gave an interview to the BBC last month. When asked whether taxpayers would get back their £45.6 billion, he answered:

“RBS is capable of being worth more than what the government paid for the shares”.

When asked again whether it is possible for us to get our money back, he said:

“RBS is capable of that and I would be disappointed if over the passage of time that that won’t be the case.”

Stewart Hosie (Dundee East) (SNP): I am very supportive of new clause 10, particularly the notion that the Government describe how the taxpayer will get the money back. However, has the hon. Gentleman given any thought to the timing of such a report and what information may need to be omitted, particularly in relation to asset clauses the Government may continue to hold, because it might be market-sensitive in the run-up to the re-privatisation of the bank?

Chris Leslie: I would have thought that before the Government considered a sale they would decide what they want to sell and what they do not want to sell. I do not think that what the hon. Gentleman suggests should be a particular problem, particularly given the taxpayer interests involved, in terms of having that report before a sale. However, I accept that there could be circumstances in which commercial confidentiality might apply and a line might need to be considered. I would be happy to examine whether some aspects of that need to be built into this concept. There is an opacity about the Government’s strategy, and the fog engulfing the Treasury, perhaps hiding the chaos within, is extremely thick—a real pea-souper. I am amazed that once the Chancellor

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of the Exchequer had defenestrated the chief executive of RBS—let us be honest, that is essentially what happened, and although the Chancellor of the Exchequer might have protested, “It’s nothing to do with me, guv,” with his 82% shareholding he clearly had a hand in the decision —the Government were surprised when the markets reacted so adversely. It is amazing that they went down that route without thinking through who would replace Stephen Hester as chief executive of RBS, creating a massive amount of uncertainty about the future of the institution. We are glad that they changed their minds and were forced to back down from the rush to the fire sale, but what on earth are we left with and where is the situation going?

3 pm

The commission managed to eke out of the Government a vague commitment that they would consider the good bank/bad bank issue, possibly in September. We need the Minister to elaborate on that commitment today, and it is very important we get that. Why have the Government ruled out some of the other considerations needed at this time? The Chancellor, itching as ever to achieve his political ends, has turned his focus on Lloyds and getting that stake out of the door. It might be easier to do that with Lloyds, but we need some reassurance that the taxpayers’ best interests will come first, not the political game playing and political timetable—whether it is about the timing of the general election or something else—that is driving the process. It should be done in the best interests of the economy and of the taxpayer.

Apparently sovereign wealth funds—in other words, other countries—might well buy stakes in Lloyds and British banks. I am told that apparently LIBOR will be run by the New York stock exchange, so there is a theme developing of other countries getting involved in historically British institutions. I will leave that issue to one side, however. I merely want us to have a clear and comprehensive strategy not just on better competition for the banking sector but so that the Chancellor can prove that he is adept at thinking through properly what to do with the Government’s stake—the taxpayers’ stake—in these institutions. They are fundamental to the British economy; they are massive institutions with a great footprint on our economy and worldwide. That is why we feel that new clause 10 is the least we should have—we should have that level of reporting, of availability of information and of options appraisal. We need a comprehensive assessment that is evidence-led and considers all options. That is an important matter of principle as, ultimately, this must be all about getting best value for the taxpayer.

Andrea Leadsom: I am delighted to be able to speak about this Bill on banking reform, which is so crucial to the future success of the British economy. All that time ago, Adam Smith said in “The Wealth of Nations” that for free enterprise to exist one needed both free entry and free exit of market players. Over the past 20 years, we have had neither in banking. Failing banks have certainly not been allowed to exit the market, hence all the problems with “too big to fail” and the massive taxpayer bail-outs. New players have also not been able to enter the market, as there have been enormous barriers to entry, and my new clause is an attempt to establish a real game-changer once and for all for the fate of competition in our banking sector, to enable new entrants to come into the market.

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I know that the Government have already done a huge amount of work to change the plight for would-be banks. For example, we already know that the new Prudential Regulation Authority and the Financial Conduct Authority have made it easier for new banks to apply for a banking licence. Previously, there were enormous regulatory hurdles to entering the market for new banks, but now it has become slightly easier because they can get a banking licence that is conditional on their being able to recruit the right people and so on. They do not have to spend millions of pounds up front to evidence the fact that they can be competent as a bank.

The regulatory barriers to entry are gradually coming down, but an incredibly significant point that has not been addressed until now concerns the competition barriers to entry for new players in the market. The Government have made great strides in that regard, not just through the Vickers commission and the recommendations on seven-day switching, which will be a game-changer in enabling individuals and businesses to switch between banks, creating the competition that has been so lacking, but through some of the structural reforms they have announced more recently and the amendments to this Bill.

When I was elected to Parliament in 2010, one of the first things that my colleagues on the Treasury Committee —who are almost all in the Chamber today—and I did was consider the proposal from the Payments Council to get rid of cheques. We discovered in our evidence sessions that the proposal came purely from the banks. It was convenient only for them and absolutely was not convenient for the millions of people in this country who rely on cheques to settle bills, to pay their window cleaner or newsagent or to pay the neighbour who picked up their shopping for them. Millions of people still needed cheques, but it was very clear that the Payments Council planned to get rid of them for the convenience of the banks that owned and ran it. For me, that was the road to Damascus moment; I realised that the banking sector is the last great closed shop. The Payments Council, owned and run by the banks, governs the payments system, the big banks are the clearing banks through which every new challenger bank must go, and the payments infrastructure, VocaLink, is also owned and governed by the big banks.

For decades, the Payments Council has been able to permit or deny innovation in the payments industry. The big banks have been able not to allow challenger banks direct access to the payments system and have required them to go through the clearers, charging them up to 10 times more for accessing the payments system than they have been paying themselves. The first significant decision on which I want to congratulate the Government is that to consult on a new independent payments regulator. That is key to breaking open the banking sector and enabling new competition and transparency. It will be interesting to see just what has changed after the new regulator’s first few months of operation; it will be fundamentally transforming.

Importantly—this is where my new clause comes in—and as the hon. Member for Nottingham East (Chris Leslie) has said, for decades there has been a key barrier to competition in the banking system: the inability to move bank accounts freely and easily. People might be sick and tired of their bank. The Treasury Committee took evidence on opinion polls that suggested that

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certain banks had negative values when it came to whether customers would recommend them to a friend. People would say, “No, whatever you do, don’t go to my bank.” It is unusual to have such utterly negative recommendation levels between friends for a supplier. Even the energy sector fails to achieve such low levels of recommendations between friends. Something is clearly desperately lacking in customer service.

The Committee also heard some pretty shocking statistics about the failure of certain key banks to respond to customer service inquiries, to manage their call centres properly and to deal with complaints when they happen. It has taken all these banking scandals—payment protection insurance mis-selling, the bank swaps mis-selling and various other scandals—before the weight of evidence became enough for regulators to take action. Clearly the banks have not been good at policing themselves, and clearly it has been extraordinarily difficult for individuals and businesses to vote with their feet and move.

The difficulty is not only the decision to move bank; the person making that decision also faces having to make arrangements as regards their online shopping, their contract with the milkman and newspaper man, and their standing orders for, say, their television licence or their car insurance. If they change bank account, they have to change all those things, because they change bank account number.

The issue is not just whether a person can be bothered to change and go through all that hassle; very often, because of the consolidation that has taken place over the past 20 years, banks will force that situation on a consumer. A colleague told me in the Lobby the other day that their bank had just notified them that they have to change their bank account number, credit cards, debit cards, and cheque-books—everything—regardless of the fact that they do not want to do that, because the bank decided, off its own bat, to send them to another brand name. Of course, there is no compensation, or any way to get the bank to help the person to make all the notifications that they need to make.

Many people, particularly the elderly, have a real concern that if they change bank account things might just not happen; their regular payments might not be made, and everything might go horribly wrong. That puts them in a very difficult position. Of course, there is plenty of evidence of things having gone wrong. Perhaps the seven-day switching process will solve the problem of switching simply going wrong.

It would be a far better solution if, when a person moved bank, they took all their bank details with them. A similar thing happens in the case of mobile telephones.

Jonathan Edwards: The hon. Lady alluded to the allegedly competitive market in the energy sector, where there is a right to switch, although it can be difficult to do so, as I found out. Switching in itself does not stop companies from acting as a cartel. How confident is she that switching in banking would lead to greater competition in the market?

Andrea Leadsom: I will come on to that, and that will become clearer in the course of my comments. Certainly, in terms of barriers to entry, the lack of competition and switching—in other words, people’s inertia—has

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meant that banks simply have not had to compete on customer service. They have not had to fight to keep their customers. As those of us who have been in business know, there are times when we have lain awake at night, wondering how to stop our customers from leaving us tomorrow; that is the big motivator, whereas in the past it was how to nick a tiny bit of market share from one of the big players. The fundamental point is: “How do I hang on to my customers?” Customer retention is always the biggest challenge for every business, where there is free and open competition. That is what bank account portability would ensure.

If a person was switching between banks, instead of having to change all their bank details and cards, and having to remember the new numbers and notify all their suppliers, they would simply take their bank details with them, just as a person who changes mobile telephone provider takes their telephone number with them. That is what the amendment proposes.

I am delighted that the Government have said the following, in a press release responding to the work of the Parliamentary Commission on Banking Standards:

“On top of introducing 7-day account switching from September this year the government will ask the new payments regulator, once established, to urgently examine account portability and whether the big banks should give up ownership of the payments systems.”

I take that as a warm move towards the idea of bank account number portability.

Bank account number portability is a game-changer, but it is no surprise that the big banks, when asked about this back in 2010, virtually told us that it would cost so much that the entire world would end. That comes as no surprise to us; they would say that. However, if we scratch beneath the surface and talk to the likes of VocaLink, which provides the payments infrastructure, we find that many of the technological requirements of bank number portability already exist.

At the moment, the big banks own a person’s sort code and account number, and give the payments instructions that they hold for that person to VocaLink, so that it can make that payment. Instead of having that two-step process, in which a person instructs their bank, the bank instructs VocaLink, and VocaLink makes the payment, with bank number portability the consumer’s bank account number, sort code and payment instructions would be held within VocaLink. Instead of a two-step process with the bank at the front end, there would be a one-step process, in which the consumer communicated with VocaLink, and the bank instead provided the customer service front end and the customer proposition. That would completely streamline the system.

3.15 pm

Mr Love: Is not one of the problems—this was certainly highlighted in our investigations—the ownership of the infrastructure by the banks, and the difficulty in getting them to change? Is not a payments regulator the ideal way to twist their arm, so that they do the right thing?

Andrea Leadsom: Yes. The hon. Gentleman is absolutely right, and he has certainly been a keen supporter of bank number portability, as have many hon. Members in the Chamber today. The payments regulator that the Government are consulting on is the first step to achieving

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transparency. The next step is empowering that regulator to do something to enforce bank number portability when it finds, as I am sure that it will, that to date there has been a completely deliberate attempt to restrict competition in the banking system.

The big banks have said that bank account number portability would cost an absolute fortune, yet the technology already exists. Some people have asked whether it would not be an enormous risk to data integrity if the consumer’s bank account number, sort code and payments instructions were held by VocaLink, but in reality, all the consumer’s details are held by the bank, which passes them all on to VocaLink, so there are double risks to data integrity at the moment. Holding those account details in VocaLink would reduce, rather than increase, the risk.

People also say that other banks cannot access VocaLink’s payments infrastructure directly, because all the banks that clear direct have mutually to underwrite each other’s payments. The smaller challenger banks cannot possibly afford to underwrite the payments of the bigger banks. However, we could easily solve that; already, in various exchanges, banks pre-fund payments. If a bank’s balance were too low, and it was running short of cash with which to meet its outgoing payments, it would be called, intra-day, for more cash. That problem is easily solvable, and the reason why it has not been solved is that that is simply not in the big banks’ interests.

It has also been said that the proposal would surely be incredibly complicated from an IT point of view, but VocaLink has already set up bank accounts for the Department for Work and Pensions, because a lot of the Department’s benefits customers do not have bank accounts. VocaLink is already able to manage customer account details for DWP customers, so the technology already exists. I simply do not accept the idea that there would be eye-watering costs. Chief executives of big banks have literally said it would cost trillions—absolutely vast sums—but I challenge them to provide any scrap of evidence that shows that is the case, and that their refusal is not down to their desire to restrict access to new players.

The advantages of bank account number portability are, of course, the elimination of barriers to entry, and increased competition as a result. One of the big problems for new entrants is that it is so difficult to gain customer share, because people will not move bank accounts. With bank account number portability, if I, as a customer, was sick and tired of my bank, I could move tomorrow, the day after, and the day after that, if I was not getting good service, and it would not be any skin off my nose; it would be perfectly easy to do, and it would be the banks’ problem. That would be an enormous change in the competitive environment.

Likewise, there would be far greater consumer choice. Bank account number portability would encourage the likes of Tesco Bank and Marks & Spencer Financial Services—any big, multinational conglomerate—to go into the money business; it would become yet another product line. That in itself would eliminate some of the problems of “too big to fail”, because there would be many more smaller players, which would have many product lines, and therefore would not have all their eggs in one basket.

For small businesses the change would be revolutionary. At present one of the biggest problems for small businesses is that the big banks require that as well as their company

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accounts, small business people have their personal accounts and mortgage with the same big bank and do all their foreign exchange, overdraft, loans and other transactions through that bank. It is incredibly difficult for a small business to move accounts because of the complexity of all their suppliers and all the people they are trying to trade with. The barriers to entry for them are perhaps even greater than they are for us as individuals. Again, being able to take their bank account number with them would change the position dramatically.

Another huge advantage that is not often talked about is that since the 1990s, when I was running Barclays bank’s team, an enormous consolidation has taken place. There used to be 44 big banks in the UK; there are now about 22 banks of any size. The consolidation meant that during the 1990s many banks took over other banks, broker- dealers, small fund managers and so on, so they have an enormous number of legacy systems. They have managed to string them together over the years, but bank fraud in this country alone is huge. Changing the payment system would dramatically reduce the incidence of bank fraud. Intellect, the IT trade body, has said that the change could reduce the incidence of bank fraud by up to £30 billion a year.

Finally, another key advantage of bank account number portability is resolution. Andy Haldane, the Deputy Governor of the Bank of England, has gone on record as saying that it would be the solution when the day comes that a big bank fails again. We have, of course, put in as many steps as we can. Basel III will make great strides towards ensuring that banks cannot fail again. We have created our new regulators. We have ensured that banks have proper leverage and proper capital. All those measures are designed to ensure that banks cannot fail again, but we know that banks will always fail. That is the reality in a western developed market economy such as ours. We saw only too recently the problems with Northern Rock, when people were desperate to take their money out. The answer to resolution is for the Bank of England to be able to say, “You have failed. We are now taking all your accounts and putting them with survivor banks.”

There is a huge amount going for bank account number portability, above and beyond the seven-day switching process. My new clause calls for the Government to ensure, within 12 months of Royal Assent, a full cost-benefit analysis of bank account number portability. Should the findings be that this is a good idea, and should it produce the kind of benefits that I have just described, the regulator should be empowered to implement bank account number portability. I welcome the Government’s assurances that they will move in that direction. On that basis I will not press my new clause to a Division, but I urge the Government to keep up the momentum and ensure that before too long we have full account number portability.

Caroline Lucas: Thank you, Madam Deputy Speaker, for the opportunity to speak to my new clause 15. It is a modest proposal for a full Government consultation on the potential for local stakeholder banks to be carried out before we sell off RBS or any other taxpayer-owned banking assets.

I was interested to hear the Minister mention yesterday his trip to Germany and how he saw in the pages of the Handelsblatt a big headline saying, “City of shame”,

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referring to the City of London. I agree that this is a stark illustration of the impact of financial mismanagement and of our current banking system on people’s views of the City. However, although I also agree that this highlights the need for improved standards in banking, I think it highlights, too, the need for a radical reappraisal of ownership and accountability structures, if we want to have a banking system that we can be proud of, not ashamed of.

I hope that during the Minister’s trip to Germany he also found time to look at the savings banks, the Sparkassen, that we have spoken about this afternoon and which make up about one third of the German banking system. They are run commercially with dual financial and social objectives, to make a profit and to support the local economy. Professional bankers take responsibility for day-to-day running of the banks and if they make incompetent lending decisions, they are more likely to get sacked than their counterparts in giant commercial banks. Local stakeholders, including local politicians, business leaders, employees and customer representatives, sit on a supervisory board. That is just one example of the sort of local stakeholder bank that my new clause seeks to promote.

The New Economics Foundation analysed data from 65 countries where such alternatives thrive. They include co-operative banks, credit unions, community development finance institutions and public interest saving banks. The common characteristic is the goal of creating value for stakeholders, not just for shareholders, and some exciting and incredibly positive trends emerge. First, a greater focus on the needs of customers, including more competitive products, better service and longer-term lending; secondly, provision for customers who are currently under-served by regular banks; thirdly, a boost to local economic development through lending to small and medium-sized businesses, preventing capital drain from the regions and maintaining branch networks; and finally, a positive impact on financial stability through less volatile returns, high levels of capital, prudent balance sheets and expansion of credit provision after the financial crash.

Jonathan Edwards: To what extent has the hon. Lady been influenced by the system in the US, where there is a strong network of local credit unions, that provide an economic function for the local business community, not merely banking for the poor?

Caroline Lucas: The hon. Gentleman cites one of the few examples in the United States and its economic system that I would want to emulate. Credit unions set an interesting example that we could learn from.

Although I welcome the findings of the Parliamentary Commission on Banking Standards, I worry that the commission was somewhat seduced by the assumption that RBS should be returned to the private sector in one form or another, without a sufficiently full and proper examination of the merits of publicly-owned alternatives. It is important to underline that “publicly-owned” does not mean state-run. The German public saving banks are managed by bankers, not politicians, but they are run to serve the interests of the local economy and of citizens, rather than those of remote shareholders. Managers

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are held much more accountable for incompetent lending than are private sector managers who drove their businesses to bankruptcy while exploiting their customers with mis-sold products.

It is important to understand also that local stakeholder banks are not unprofessional. The banks studied by the New Economics Foundation make a solid profit to ensure their own viability, and their first priority is always to make sure that the loan is repaid. Because they are not trying to make 22% return on equity, which is RBS’s current profitability on UK retail business, they are quite happy with 8%, so they can afford to meet their social purpose. If the Government are serious about becoming a champion of SMEs and regional prosperity, at the very least they need to look into the pros and cons of a network of regional banks.

What if best value for the British taxpayer is the long-term ownership of a successful bank or banks that support the British economy? An obsession with privatisation on either side of the House should not blind us to that possibility. My amendment simply proposes a full examination of various forms of local stakeholder banks to ensure that we take decisions about the future shape of RBS and our banking sector more widely on the basis of practical economics and evidence, not just ideology.

I support new clause 10 that was tabled by the Labour Opposition. Sub-paragraph (iii) refers to

“the impact of any sale on the creation of a regional banking network.”

What I set out in new clause 15 is exactly the kind of positive impacts that we would want to see. Rather than simply guarding against negative impacts on any regional banking network, I would like to see us actively, explicitly and energetically promoting the alternative of greater local and regional banking. I hope very much that there might be some chance that the Minister will look favourably upon my new clause.

3.30 pm

Mark Garnier (Wyre Forest) (Con): I wish to speak substantially to new clause 14, which stands in the name of my hon. Friend the Member for South Northamptonshire (Andrea Leadsom). She has waged a Boadicea-like war to bring about account portability, and I have been happy to follow that banner—certainly over the past two years—when trying to increase competition. Between the two of us, my hon. Friend has led on account portability, while I have looked closely at barriers to entry and regulation.

I repeat my hon. Friend’s point about how the regulator has given way a bit on regulatory barriers to entry. Although I would not say it has moved substantially, it has made it easier for challenger banks to enter the marketplace. Two or three years ago, any potential challenger coming to the marketplace looked to spend between £300,000 and a potential £25 million just to get to the regulator’s front door and open a formal dialogue to get a banking licence. That is now changing, and the regulator has come up with a new process that makes it a great deal easier. None the less, smaller banks have certain problems due to ongoing expectations that give an advantage to the bigger banks. Those bigger banks have greater granularity with their account holders, and can therefore consider more sophisticated risk-weighting

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models for their assets. Smaller banks do not have those IT advantages and the cost of their asset book rises with greater capital requirements, which is still a problem.

Before I get to the substantial points, when considering effective competition within the marketplace we must remember the importance of a well-educated consumer. I am pleased that the Government have already responded on that—yesterday the Secretary of State for Education announced the new curriculum, which includes financial literacy, and I pay tribute to his wisdom in realising that that is one of the greatest engines of social mobility. In any sophisticated society such as ours, it is important that those we are educating can deal with the most basic measure of the economy we live in—looking after their own money. That has been achieved through the hard work of organisations such as the Personal Finance Education Group and the all-party group on financial education for young people, and it is a very good thing.

Financial education, understanding and literacy are core to driving competition. It is no good giving people a multiple choice of banks they can use if they do not understand the products being presented. When considering standards within banks, it is important that the marketplace, as well as the regulator, holds those banks’ feet to the fire to ensure they are performing well, providing a good service and delivering trust, which is crucial to restoring a properly functioning banking market in the UK.

On account number portability, in September this year seven-day switching will start. The banks have come to us proudly and said that they have spent £700 million implementing that system, but in essence it is less a switching service and more a redirection service that lasts a year—more of the chewing gum and Sellotape we heard about earlier. The measure of success for the seven-day switching service is expected to be how many people switch, but I do not think it will pass that test because I do not expect many people to switch their accounts. It comes down to the fundamental problem that there are still barriers to entry for new entrants, which leaves a small number of banks in the marketplace. Most people cannot see the difference between one bank and another, and even if they can, they do not necessarily understand what it is. In their mind, the risk of an uncertain future with a different bank far outweighs the benefits of finding a better service and challenging the bank to be more efficient.

The proposals for account number portability in new clause 14, which the Government have already agreed is a good thing, are important and will make it simple for new banks to enter the marketplace and steal market share from existing banks. The provision has the advantage of being pro-competition—we have already heard strong discussions about that—and there are number of other important issues alongside that. First, in this world where we would like a lot more transparency, the new Financial Policy Committee is considering the state of the financial system. That will help it understand what is going on in terms of transparency, and bring the visible part of the system within the auspices of VocaLink. As a result, the FPC will be able to head off any disasters if it sees anything going on.

We also heard that resolution of failing banks is incredibly important. Part of the Bill’s raison d’être, and indeed that of all the work done by Vickers and

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everyone who has worked on this since the crisis of 2007-08, is to try to ensure that people affected by failing banks do not lose their livelihood or face a financial crisis, so a simple resolution of a failing bank is incredibly important. Under the proposals, although an individual might see on television that there has been a run on their bank and that it is collapsing, the next morning they would simply wake up to discover that their bank account had automatically been transferred to another bank. The systems would continue to work, so their pay would be received on their behalf, their standing orders would still be paid and their house would not be repossessed because they had not paid their mortgage. More importantly, if they do not like the new bank they had been sent to, a couple of days later they could move to a better bank that they felt more comfortable with. Resolution is therefore incredibly important.

The other incredibly important point is that some banks have legacy IT systems that have been around for a huge number of years. Parts of these IT systems can date back to the punch cards of the 1950s and 1960s. In a recent conversation with someone who has done a certain amount of work in one of the larger state-owned banks, I happened to make a throwaway comment about the old IT systems. He responded, “Oh yeah, absolutely.” He explained that he had been looking at some of the software surrounding the small and medium-sized enterprise accounts and had noted that one of the software models had a converter sitting alongside it for converting pounds, shillings and pence into decimals. That must be at least 42 years old, as decimalisation was in 1971.

We know for a fact that there are a lot of old and incompatible systems being held together with string and chewing gum. Andy Haldane at the Bank of England has done a study and estimated that 80% of banks’ IT spend is on holding old systems together. If we take into account the fact that it is timely because at some point all the banks will need to update their systems, and if we consider resolution, transparency and competition, we will come up with a pretty convincing set of arguments that now is as good a time as any to introduce what will amount to fairly substantial IT investment, and there are a number of reasons that come together to make it worth while.

VocaLink, which runs a payments system, has already done a great deal of work on that. I have heard from a number of the larger banks that it could cost £10 billion, but they are dead against any sort of account number portability, so I suspect that it would be a lot cheaper. That is why it is incredibly important that the Government come forward as soon as possible to get the cost-benefit analysis on moving to full account number portability and, importantly, not be distracted by looking at the seven-day switching service in a year’s time.

Mr David Ruffley (Bury St Edmunds) (Con): I congratulate my hon. Friend, and I congratulate my hon. Friend the Member for South Northamptonshire (Andrea Leadsom) on introducing new clause 14, which I call the Leadsom clause. Before concluding will my hon. Friend share with us the work he has done in speaking over the past two years to potential new entrants, new challenger banks, that have said that they would consider entering the market if bank account number portability came to pass?

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Mark Garnier: Yes, without a shadow of a doubt. A great many of the smaller banks that are looking to enter the marketplace have to use a piggyback system with the big clearers. For example, C. Hoare & Co., which has been around for 341 years and is still a private bank, uses RBS for its clearing. To that extent, the larger banks are providing a service, but ultimately it is causing a great problem for them. Over the past two years I have met about 20 potential challengers looking to enter the marketplace, and certainly it is largely the regulatory barriers to entry that have caused the problem.

Ultimately, the challenger banks are going to be running current accounts. Some of the larger ones, such as Metro Bank and Virgin Money, are 100% behind having full account number portability and recognise—I think that this is one tribute to them—not only that that will be an opportunity for them to attract accounts from existing banks, but that they will have to work incredibly hard to meet the challenge of a more sophisticated consumer in order to keep those accounts once they have them. That is crucial to one of the key points of the Parliamentary Commission’s report, which is the need to ensure that we drive better standards.

I return to the fundamental point that the best way to drive better standards is to have a very discerning and demanding consumer in order to ensure that those banks provide a service, and for that discerning consumer, once we have taught them how to do it, to hold the banks’ feet to the fire, so they need to be able to move their account very simply and overnight.

Mr McFadden: I want to make a few points about new clauses 10, 12 and 14.

New clause 10 deals with securing the best interests of the taxpayer as regards the state-owned banks and their future. If the best interests of the taxpayer were in the Government’s mind in recent weeks in their stewardship of RBS, that has been shown in a very peculiar way. This story does not begin with the departure of the chief executive. It begins before that with a briefing from the Minister’s Department about the share price in which it said that the previous Government had overpaid for the shares, and the briefing tried to set the scene for a pre-election fire sale of the bank that would have short-changed the taxpayer. I am glad to say that despite that briefing, the Government seem to be edging away from that strategy. If they were holding out hope that the banking commission would have given them comfort on that front, it did not turn out like that, and rightly so, because it would have been wrong to give a running commentary on the share price for an institution. An institution’s share price should be determined by the market, based on its future prospects.

After the briefing, we then had the unseemly departure of the chief executive at the Government’s hands. Most people saw him as doing a good job of reducing the risks on the bank’s grossly overblown balance sheet and trying to get it back into a healthier position, in the best interests of the taxpayer. Not only was he bundled out before he had completed that task, but this was done without any proper succession plan being put in place. Over the period of a month, we have had political briefing about the bank’s share price and the announced departure of the chief executive with no successor in place, and, as a result, a loss of investor confidence in the Government’s future strategy for the bank. That is

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no way to exercise stewardship of arguably one of the most important banks in the country. It has undermined the Government’s reputation as regards these state-owned assets and done harm and damage to the bank. I hope that in future the best interests of, and best value for, the taxpayer will be uppermost in the Minister’s mind rather than the politically motivated dabbling that we have seen in recent weeks.

On a happier and more bipartisan note, I turn to the new clause tabled by the hon. Member for South Northamptonshire (Andrea Leadsom) and the very similar new clause tabled by my hon. Friend the Member for Nottingham East (Chris Leslie). At the heart of this is how much banks care about reputational loss; the hon. Lady referred to that. If the banks were in a normal business environment and there were a big IT failure or another failure of conduct such as mis-selling or LIBOR interest rate fixing, they would care because they would worry that their customers would walk, but they are not in a normal business environment. Banks seem to be immune to, and careless about, reputational damage that would really matter in another business environment.

During the banking commission’s deliberations, a parallel was drawn with the car industry. When a fault appears in a model of one of the big-brand car makers, they will very quickly issue a recall notice to ask the customer to come in and have the fault fixed at no expense and at a time that is convenient to them. Car companies do that because they care about their reputation and want that customer to buy a car from them the next time they get one. The same logic does not apply in banking, because the same forces of easy departure do not apply. There are two sides to this story. It is not all about the easy transfer of accounts, although that is important; it is also about what one would be transferring to and from. There is little point in creating a perfect exit system if the choice is merely between three or four offers that are all much the same anyway. There is inertia on both sides. We need more competition among the banks as well as an easier system of transferring accounts.

The seven-day switching process that will come into play in September is an advance, and it should be given a chance to work; we should test it properly. At the same time, the new clauses tabled by the hon. Member for South Northamptonshire and by my hon. Friend the Member for Nottingham East call for proper reports to be produced on full account portability. The hon. Lady set out very well the reasons why we need a proper report, one of which is the issue of cost. The incumbents say, typically, that this will cost a fortune and that it will have to be passed on to the consumer, so let us explore the cost properly and get to the bottom of whether that argument is valid.

3.45 pm

There is another reason why we need a study. Ultimately, I do not think that the banks’ argument that this will cost too much carries weight and I think they know that. If I got out my crystal ball and peered into the future, I think I would see that the key argument will be about IT and privacy, not cost.

Andrea Leadsom: The right hon. Gentleman may recall a meeting we had with senior bankers in which they said that, although they were reluctant about bank

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account number portability, if it is going to happen let us make sure that we will be the first country in the world to do it and not wait until somebody else does it. That would give us first-mover advantage and it could provide a huge business opportunity for UK plc. What does the right hon. Gentleman think of that idea?

Mr McFadden: The hon. Lady may be right and that is another reason that we should have a proper report to drill into the issue.

On privacy, in addition to the cost argument I think that customers could also be discouraged by the argument that all their account details could be held in a single black box to which all the banks in the country have access.

Mark Garnier: The right hon. Gentleman raises an incredibly important point. I think that the vast majority of consumers would be very fearful of a central database holding their bank details. The beauty of the system proposed by VocaLink is that, although the payment system and the central infrastructure will hold the sort code and account number, the identity of the holder of the account number will be held by the bank. Therefore, the customer’s relationship will be with the bank, not with the payment system.

Mr McFadden: I thank the hon. Gentleman for making that important point. If consumers are going to have confidence in a system of speedy switching such as that being advocated by the hon. Members for South Northamptonshire and for Wyre Forest (Mark Garnier), these questions about privacy and security of information will have to be bottomed out to the public’s satisfaction. My view is that that will be a more important argument than the one about the cost to the banks of whatever IT changes will be necessary to put this system in place.

In conclusion, it is important that we give the seven-day switching service a chance to operate, but the report that the hon. Member for South Northamptonshire and my hon. Friend the Member for Nottingham East are asking for is also important, because it would bottom out theses issues and others that I have not mentioned. It is a shame that the hon. Lady does not intend to put her new clause to the vote. After all, it only asks for a report; it does not seek to mandate a change before we have done the work and got the proper evidence. I hope that the Minister will respond positively to her suggestion and that of my hon. Friend. It is really important that there is proper competition between providers in this sector to attract consumers and that the kinds of free choices that enable consumers to walk away and get another product from another provider are available in practice, not just in theory.

John Thurso: I also rise to support new clause 14 tabled by my hon. Friend the Member for South Northamptonshire (Andrea Leadsom) and to which I have added my name.

The right hon. Member for Wolverhampton South East (Mr McFadden) chaired a panel of the banking commission and one of the first visits we undertook was to Birmingham, where we had a number of sessions, one of which was with representatives from small and medium-sized enterprises who were very vocal about the importance of securing a fair deal from the banks.