Bonuses are a reward for exceptional performance in other industries, so that should be the case in the banking sector as well. However, despite the scandals

25 Feb 2015 : Column 341

that have emerged over the past year, most recently at HSBC, it looks as though this year’s round of bank bonuses will once again be very generous.

There needs to be more accountability in banking, and pay must be more closely aligned with long-term performance, so a Labour Government will embark on a serious and far-reaching programme of reform in the banking sector. We will reintroduce our successful tax on bankers’ bonuses, which generated over £3 billion in 2010, and act to ensure that this tax incorporates role-based pay or any other payments made by banks in an attempt to circumvent the EU bonus cap.

Richard Fuller: Will the hon. Lady give way?

Mr Marcus Jones (Nuneaton) (Con): Will the hon. Lady give way?

Cathy Jamieson: No, I am going to finish this point because it answers a number of questions that hon. Members have put.

We will use the money generated to fund our compulsory jobs guarantee, creating a paid job for every 16 to 24-year-old who has been out of work for over a year, and for those over the age of 25 who have been out of work for more than two years. According to the latest labour force survey, youth unemployment was 740,000 in the three months to December 2014, which was an increase of 3,000 on the previous quarter. We know that being unemployed while young damages people’s prospects years into the future. Research shows that young people who have been unemployed for a year will, on average, be £125,000 worse off over their working lifetime, which means that a person on the average wage would have to work nearly six years longer to make up for the cost of being unemployed while young.

Mr Jones rose—

Cathy Jamieson: I am not going to give way because I am making important and serious points about the future of our young people. I have been very generous in giving way and I want to finish this point. Our bank bonus tax not only will offer a lifeline for thousands of young people, helping them to earn, learn, and get a foot on the career ladder, but will help the economy and mean that the banks give something back to society.

In addition to that and our wider programme of reform, we will extend the deferral and clawback period for bonuses, ensuring that rewards are paid out proportionately and can be recouped when evidence of reckless or inappropriate behaviour is revealed further down the line. As I said, the financial crisis and recent scandals have shown that risky decisions can take up to a decade to have an impact. The next Labour Government will therefore ensure that if bankers have been shown to have acted inappropriately or made reckless decisions, banks will be able to claw back any bonuses awarded. We will act on the recommendations of the Parliamentary Commission on Banking Standards by extending the period for the clawback of bank bonuses that have already been paid to at least 10 years. We will also extend deferral periods for senior managers to at least 10 years, which will help to deter the rash and short-sighted

25 Feb 2015 : Column 342

behaviour that we have seen in the past, and to encourage banks and their employers to have a view of the long term.

Mark Garnier rose—

Cathy Jamieson: I will give way to the hon. Gentleman once more, given his role on the Parliamentary Commission.

Mark Garnier: I am extremely grateful to the hon. Lady; she really is being incredibly generous. Capping bonuses and targeting the bonus with a tax in itself will inevitably drive banks’ behaviour towards the perverse outcomes that none of us in the Chamber wants. If we tax bonuses, the banks will change them into something else. They cannot wriggle out of a balance sheet tax, which this Government have imposed, but they will be able to wriggle out of a bonus tax, and we cannot avoid that.

Cathy Jamieson: I believe that the hon. Gentleman is trying to be helpful by making points that I know have been made before, but I refer him to the previous occasion on which a bankers bonus tax was implemented, when a number of anti-avoidance measures were put in place to deal with such a problem. We do not want any unintended consequences.

I am trying to signal our intent. When we are in government, we intend to make the tax work to change the culture and practice in banking, as well as to ensure that we help our young people. I am sure that any folks listening to my speech who are thinking about devising ways of not paying up or not making a fair contribution will hear the intent in what I am saying and therefore not pursue such a course.

I remind hon. Members who have not already read our “Plan for Banking Reform”, which was published last week, that it sets out a series of wide-ranging reforms to the banking sector. It builds on much of the work done by the commissions and is informed by speaking to people in the industry. It focuses on the four key areas of stability, competition, access to finance, and culture and pay. The one-off tax on bankers bonuses is just one part of the reform process, but it is an important part.

Last week, I hosted a jobs fair in my constituency, as have many hon. Members on both sides of the House. I saw at first hand how much the young unemployed people who came along want to work and to contribute to society. I met people who have been out of work over a fairly lengthy period and are desperate for the opportunity to get back into employment and to contribute to society. They want decent jobs with decent pay; they do not want the instability of being on zero-hours contracts or of working for umbrella companies that are more interested in avoiding paying their taxes than in paying their way in society. We need to ensure that such young people and the long-term unemployed—not just in my constituency, but right across the UK—get the help that they need. These young people need to make the first step on to the careers ladder, and the long-term unemployed need help to get back into real jobs. It is absolutely vital that such support is given to not only our young people, but the long-term unemployed, who are almost at risk of being frozen out of the jobs market.

25 Feb 2015 : Column 343

As I said, Labour’s programme of banking reform is driven by economic imperatives. The motion sets out that banks should make a social contribution as well as an economic one, and that the bonuses they pay should be a reward for exceptional performance, not a compensation for failure. I believe that those are vital steps along the road to restoring fairness, stability and trust to the sector so that banks serve the needs of the wider economy. I hope that the Government see fit on this occasion to support our motion.

1.53 pm

The Economic Secretary to the Treasury (Andrea Leadsom): I have to say that I am extremely disappointed by the remarks of the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson). I find it absolutely astonishing that Labour Members have the courage to raise the issue of bankers’ bonuses. Perhaps they have forgotten that it was under their light-touch regulatory regime that the worst excesses of the banking sector were allowed to flourish. I wonder whether she regrets the fact that the shadow Chancellor is not in the House today. Does she suspect that he regrets saying, as City Minister in June 2006, that

“nothing should be done to put at risk a light-touch, risk-based regulatory regime”?

Does she think that he regrets presiding over a system under which £66 billion was paid out in bonuses on his watch?

Cathy Jamieson: I wonder whether the Minister heard what I said when I was challenged about whether the shadow Chancellor ought to be in the Chamber. I noted that the Chancellor is not present, and I raised the question of what Conservative Members had done on light-touch regulation. Were they not arguing for it? Can she give me an example from that time when her party proposed something different?

Andrea Leadsom: That is just another typical Opposition ploy. At that point, the Conservative party was in opposition and the Labour party was in government. It is absolutely unconscionable for the Labour party to suggest that the Opposition of the day should have saved the Labour Government from their own excesses.

Debbie Abrahams (Oldham East and Saddleworth) (Lab): Will the Minister give way?

Charlie Elphicke: Will the Minister give way?

Andrea Leadsom: I give way to my hon. Friend.

Charlie Elphicke: Does my hon. Friend not think that the last intervention is reminiscent of arsonists throwing rocks at the firefighters who have worked so hard to put out the fire the arsonists started?

Andrea Leadsom: My hon. Friend is quite right. It is extraordinary that Labour Members have the cheek to come to the House and suggest that Conservative Members are somehow responsible.

I want to draw to the House’s attention the very prescient quote from the former Prime Minister when, representing the previous Government, he addressed the City in his Mansion House speech in 2002:

25 Feb 2015 : Column 344

“What you as the City of London have done for financial services, we as a Government aim to do for the economy as a whole.”

And didn’t they just? It is absolutely extraordinary that under the “intensely relaxed” Labour Administration, bankers were rewarded for taking excessive risk, and if they failed, were allowed to get away with it—heads they win, tails the taxpayer loses.

Debbie Abrahams: Will the Minister give way?

Mr Stewart Jackson (Peterborough) (Con): Will the Minister give way?

Andrea Leadsom: I give way to my hon. Friend.

Mr Jackson: Is not this debate a displacement activity for a party that does not have any coherent narrative to deal with jobs, growth and the economy? Is it not reckless of Her Majesty’s Opposition to keep recycling the tax on bankers’ bonuses—10 times over—without ever having to account for where that money will actually go?

Andrea Leadsom: My hon. Friend is exactly right that the Opposition are simply trying to recycle something as a distraction. I am truly delighted that the motion gives me the opportunity to set out the wide-ranging measures that this Government have taken to sort out the appalling legacy of the Labour party on banks and remuneration. We have taken an extraordinarily wide-ranging set of measures to sort out a mess left, once again, by a Labour Government.

Debbie Abrahams: I am grateful to the hon. Lady for ultimately giving way. Will she remind the House how much more the Government are borrowing now compared with 2010?

Andrea Leadsom: The hon. Lady will know that the Government have taken steps to bring down significantly the amount we are borrowing each year to get our economy on the road to recovery after the disaster caused by the Labour party.

To return to the point of this debate, the real fact is that the public are absolutely right to be furious about the behaviour and misconduct of banks. It still feels as though there are fresh examples every day of the shameful practices that went on in the bad old days. The public will want to know what this Government have done to sort out the mess left by the previous Government.

I can tell the House that, under this Government, we have the toughest remuneration regime of any major financial centre in the world; we are making banks raise their standards, rebuild their reputation and get back to the job they used to do prudently and respectably for centuries; and we are making sure that we never go back to the bad old days of banking.

Guy Opperman: Will the Minister give way?

Mr Marcus Jones: Will the Minister give way?

Andrea Leadsom: I will give way in a moment, but I want to be very clear at this point. In such debates, there is always a sense that somehow all bankers are terrible people. The truth is that the vast majority of the up to

25 Feb 2015 : Column 345

2 million people employed in financial services do an honest day’s work and always have done. They would not seek to rip anybody off, or distort anything they do. They are honest, decent people. I want to pay tribute to the work of financial services not just in oiling the wheels of our economy, but in contributing so much to our economy as a whole. Notwithstanding the very real misconduct issues, which have disgusted all of us right across the country, it is true that only a small number of people are responsible for such wrongdoing. I will talk about what we have done to put that right after I have given way.

Guy Opperman: Will my hon. Friend also make the point that this Government have ensured that LIBOR funds, which were not previously given to good causes, have benefited air ambulances—my hon. Friends and I supported them at No. 11 Downing street last night—and 96 military charities? This Government have brought in a magnificent innovation that supports wonderful charities.

Andrea Leadsom: I am very grateful to my hon. Friend for raising that point. The Government are extremely proud that fines for misconduct go to good causes, unlike under the Labour party, when any fines for misconduct were passed straight back into the hands of the people who committed it. The LIBOR fines have gone to military charities and air ambulances, as he pointed out, and the fines for the appalling foreign exchange rigging will support the NHS and GP surgeries in particular.

Helen Goodman (Bishop Auckland) (Lab): The hon. Lady is a well-informed Minister. Will she tell the House what she did in her years as a banker at BZW and Barclays and, latterly, as a head of corporate governance to lobby for tighter financial regulation?

Andrea Leadsom: I am very grateful to the hon. Lady for giving me the opportunity to say that for the last 10 years of my career at Invesco Perpetual, I was responsible for writing a quantitative bonus scheme that measured the performance of fund managers over three, five and 10 years according to the performance of the team, the business and the individual, which involved clawbacks, as appropriate. I started that work in 1999 and finished it in 2009, so I can say with confidence that I did my bit on remuneration.

What have the Government done that we are so proud of? First, we have brought down the quantum of bonuses. City bonuses are now a fifth of what they were under Labour. The banks that were bailed out by the taxpayer have been a key focus for the Government, so let me inform the House about what is happening with bonuses at RBS. We will ensure that the total bonus pool comes down again, both in total and per head. That will continue the reductions that made last year’s bonuses more than two-thirds lower than those in 2009. The bonus pool at the investment bank will come down too in total and per head. We are continuing to restrict cash bonuses to £2,000, and no executive director will receive a bonus.

Let me also tell the House what is happening at Lloyds. This week, we announced that we are getting back another half a billion pounds for taxpayers—money

25 Feb 2015 : Column 346

that they had to put in. We can do that because since the crisis Lloyds has gone from failure to being a strong, profitable bank that is helping to drive the UK recovery and is contributing £230 million a year through the bank levy. We will ensure that Lloyds sees its bonus pool reduce this year and we are continuing to restrict cash bonuses to £2,000.

Let us compare that with the Labour party, which presided over a system that paid Fred Goodwin a cash bonus of £2.9 million in 2007. It is now calling for a 10-year clawback on bonuses—once again asking us to clear up the mess that it left—and has spent its bank tax proposal 10 times over.

The Government have made the link between bonuses and performance crystal clear. Bankers should be in no doubt that their bonuses are at risk should misbehaviour occur. Under this Government, highly paid bankers and those who are liable for big decisions have their bonuses deferred over at least three years, and at least 60% must be deferred for senior managers. Bonuses are now clearly linked to the performance of banks, since 50% of any bonus must be paid in shares or similar instruments. Deferred bonuses can be subject to cancellation in the future. Since the start of this year, bonuses can be clawed back up to seven years after they are paid out when misconduct or serious performance issues come to light. Guaranteed bonuses, which were commonplace under the previous Government, are banned in all but the most exceptional circumstances.

We have taken the lead in ensuring that there is transparency in senior executives’ pay arrangements. We have ensured that all the top 15 banks have signed up to the strengthened code of practice, which is a notable improvement on the two that had signed up when Labour left office. Our reforms to company law mean that shareholders are guaranteed a binding vote on pay policy.

We are not stopping there. The Parliamentary Commission on Banking Standards, which was attended so ably by my hon. Friend the Member for Wyre Forest (Mark Garnier), made strong recommendations on bankers’ pay.

David Mowat: The Minister is right to say that the level of bonuses has reduced hugely in the past few years. However, does she agree that the real issue with banking is not the bonus level, but the level of absolute remuneration, which the Labour party’s policy does not address? Why does she think banks require so many people to earn more than £1 million a year, in a way that oil companies and pharmaceutical companies do not? The issue is the absolute level of remuneration.

Andrea Leadsom: Philosophically, I agree entirely with my hon. Friend. Many people across the country will agree that the absolute level of remuneration in financial services needs to be clearly justified. Although the Conservative party truly believes that wealth creation, which creates jobs, tax revenue for the Exchequer and growth for our economy, should be properly remunerated, we want to give as much power as possible to shareholders to ensure that they can take decisions that make it absolutely clear that remuneration should reflect the contribution of the individual, and not just some norm in the industry.

25 Feb 2015 : Column 347

We have agreed with the recommendations of the Parliamentary Commission on Banking Standards and asked the financial services regulators to look into implementing them, in particular the extension of clawback to 10 years when an investigation into an individual is ongoing and the extension of deferral to seven years for senior managers, which is a significant increase from the current three years. The regulators are due to publish final rules in response to the consultation shortly. I am sure that hon. Members will agree that we want to keep our independent regulators independent, so that they act in the best interests of our economy and not in the interests of a political party.

Mr Marcus Jones: My hon. Friend has mentioned power for shareholders and political interference. Does she agree that it is not right for the Government to intervene in certain situations, such as in the financial crash, when the last Prime Minister effectively pushed Lloyds TSB and RBS into a shotgun marriage?

Andrea Leadsom: I agree with my hon. Friend in principle. We want to see the market working properly, shareholders taking the decisions on remuneration and businesses acting fairly in the interests of all their stakeholders. That is why we have been so determined to sort out transparency, fairness and the binding votes that boards have in regard to the actions of the banks.

Our desire to see a lack of political intervention is why we have opposed and continue to oppose the deeply flawed and politically motivated EU cap on bonuses. My right hon. Friend the Chancellor, the Governor of the Bank of England and the head of the Prudential Regulation Authority agree that it will not control bankers’ pay, but instead push up fixed pay, make it more difficult to claw back earnings when things go wrong, weaken financial stability and make it more likely that the taxpayer, rather than the banker, pays the cost of mistakes. We continue to believe that the cap is fundamentally flawed. Members will know that we have, however, withdrawn our legal challenge to the cap and are instead looking at how else we can build a system of pay in global banking that encourages responsibility, rather than undermines it.

Helen Goodman: Will the hon. Lady explain to the House and the country why it is wrong to cap bankers’ bonuses but right to cap nurses’ pay?

Andrea Leadsom: The point that we have made about the bankers bonus cap is that bankers will find other ways to remunerate themselves in fixed pay, rather than in variable pay. The hon. Lady smiles, but she perhaps fails to understand that the whole point of the regime we have put in place is to ensure that bankers are accountable. The way for them to be accountable is through variable pay, which is performance related, unlike fixed pay. The problem with the cap on bonuses is that it will put up fixed pay.

Helen Goodman rose—

Andrea Leadsom: I will not take another intervention on that point because I have explained it twice and would like to move on.

25 Feb 2015 : Column 348

The cap remains fundamentally flawed, so we are looking at other ways to ensure that there is accountability. We do, however, fear that fixed pay is going up and there is some evidence of that. Last November, the Chancellor wrote to the Governor of the Bank of England to ask him to encourage this work in his role as chairman of the Financial Stability Board. Such methods at a global level might include standards that ensure that non-bonus or fixed pay is also put at risk, maximising clawback or paying senior staff in performance-related bonds. Any such solution must be international in nature to be effective. That is why we are pushing the Financial Stability Board, which is uniquely well placed, to pursue these issues with urgency.

James Morris (Halesowen and Rowley Regis) (Con): I welcome all the action that the Government have taken to clamp down on excessive banking bonuses, but it is not the case that, as my hon. Friend said earlier, more than 2 million people are employed in the financial services industry in Britain, and not all of them are millionaires? It is important that we take into account the fact that there are people in the banking sector on relatively low pay. Not every banker is earning £1 million or more a year.

Andrea Leadsom: I am glad that my hon. Friend has raised that point, and I am happy to reiterate my remark that the financial services sector employs up to 2 million in this country, most of them outside the City and many of them doing regular jobs in banks and call centres, or even in places such as a new dealing room that has been set up outside Birmingham, which I recently had the pleasure of visiting. All those people are as mortified as the rest of us at the behaviour of a few, so it is always important to remember that we are talking about the behaviour of a few, not of the many.

The third thing that the Government have done is to improve the accountability of bankers. I hope hon. Members will agree that the vast majority of people in the financial sector are decent people who have played by the rules and just want to get on with providing a valued and trusted service to their customers. We must have high standards in banking, because that is what will help the UK to continue to thrive as a leading and trusted financial centre. The sector remains a huge asset to the British economy, contributing almost an eighth of the total tax receipts and giving us a trade surplus of £16 billion last year.

Banking oils the wheels of the economy, helps our businesses grow, fosters investment and boosts aspiration. When bankers get it right, it is a driver of this country’s growth. When they get it wrong, the damage is consequentially enormous, because it threatens the livelihood of millions of people in this country, as we saw during the financial crisis.

The public will want to know that this Government have made reckless misconduct leading to bank failure a criminal offence, and overseen banks being fined heavily for their worst excesses. There have been £450 million of fines for the disgraceful rigging of LIBOR and £1.1 billion of fines for the manipulation of foreign exchange rates—disgusting and unacceptable behaviour. I know that all Members will be reassured to know that the Serious Fraud Office has opened investigations into a number of individuals in relation to the manipulation

25 Feb 2015 : Column 349

of LIBOR and forex. Of course, many firms have sacked and dismissed staff found guilty as part of their own internal investigations.

Richard Fuller: My hon. Friend is now stressing one point that the everyday people feel is most important about the reform of our banking system—that when bankers do wrong, they should face criminal prosecution and the prospect of jail. Is she satisfied that we now have the right measures in place—measures that the last Government did not put in place—and will she assure the House that she will ensure that the Government use all their powers to enforce the regulations as far as possible?

Andrea Leadsom: That is an important point. This Government have taken every step we can think of to ensure accountability, prevent future wrongdoing and improve standards in banking. We are always open to new suggestions, but it is our genuine belief that we have fundamentally changed the underlying systems that banks work with. I can certainly reassure my hon. Friend that when I speak to the chief executives of banks, as I do regularly, they assure me that they, too, take the matter extremely seriously and have put in place checks so that they can indentify wrongdoing and punish the offenders under their own steam, as hon. Members will have seen in the press today.

Helen Goodman: Will the Minister give way?

Andrea Leadsom: I will not give way again; I am just coming to the end of my speech, and I want to give other Members the chance to contribute.

Fourthly, in our efforts to rebuild this vital industry, we have put in place the regulatory reforms necessary to improve bankers’ conduct and make banks serve their clients better, whether they are small and medium-sized enterprises or members of the public. We have legislated for a new senior managers and certification regime, to strengthen the accountability of senior management and raise the standards of individual conduct. We also launched an enforcement review, which recommended improvements to how regulators make decisions relating to enforcement.

We have promoted choice and competition in the retail banking sector, putting it at the heart of our regulatory system. By making it easier for customers to switch banks we are incentivising banks to look after their customers better, and by opening the door for new and smaller banks to compete with the established names we are ensuring that the entire sector ups its game, not least in helping our small and medium-sized businesses grow and expand. That is good for the customer, good for the sector and good for the wider economy.

Reforming remuneration for bankers has been a major priority for this Government. We are sorting out the mess left by the Labour party. It is not a pleasant spectacle when you lend someone your car, and they crash it and then criticise you for not repairing it quickly enough. I totally reject the proposals for changes that the hon. Member for Kilmarnock and Loudoun made. This Government are doing the work needed to

25 Feb 2015 : Column 350

ensure that the UK’s financial services are fit for the 21st century and that we put the bad old days of banking behind us.

2.16 pm

Mr William Bain (Glasgow North East) (Lab): I think it is fair to say that many of us have been speaking to ever-rising numbers of constituents in the past few weeks, and I am confident that that will continue in the weeks to come. Members will acknowledge that the sense on the doorstep and on high streets is that there will be a recovery that genuinely touches every part of our country only when the talent that is wasting away in each of our communities can find fulfilment again in the dignity of decent work.

Welcome though the recent falls in unemployment are—although, worryingly, youth unemployment rose in the last quarter—they conceal the scale of long-term unemployment, particularly among young people. In my constituency, some 520 people have been out of work for either a year or more in the case of 18 to 24-year-olds, or two years or more in the case of over-25s. That accounts for one fifth of the jobseeker’s allowance claimant count in my constituency.

I have met the families of many young people, who have told me exactly the same story: those young people have gone to college and undertaken good vocational training, but ended up in long-term unemployment at the end of it. They have done the right thing but ended up without work for long periods, so now the Government must do the right thing by them and act to restore their right to a decent job. They are people with ambition, aspiration and great prospects, but they are currently denied the right to work by a way of running the economy that lets inequality rip, with the majority of the gains from growth going to people at the top of society, while low pay, insecure hours and increasingly insecure terms and conditions at work leave a persistent gap between rich and poor.

Mr Iain McKenzie (Inverclyde) (Lab): My hon. Friend has started exactly where this debate should start—with who needs to benefit, which is young people who are looking for work but have been out of work for some time. Does he agree that it is not only about giving them jobs, but about giving them the opportunity for careers and long-term employment? The Conservative party says that it is the party of opportunity, after all.

Mr Bain: My hon. Friend’s point will have as much salience in Inverclyde as it does in Glasgow North East and, I believe, in every constituency. When the maximum number of people in this country are involved in the economy, we have a broader tax base and more tax revenue coming in. That is the only credible plan for reducing the deficit in a fair way in the next Parliament. Any Chancellor who wants to have a credible deficit reduction plan has to have a credible plan for abolishing long-term and youth unemployment.

Ian Swales (Redcar) (LD): I am aware that the hon. Gentleman was not here during the last Parliament—at least, I do not think he was—but how does he feel about the fact that his party was in government for 13 years to

25 Feb 2015 : Column 351

deliver its vision, yet youth unemployment rose and inequality widened? Why should we believe that it will be different in the future?

Mr Bain: I was here for four months of the previous Parliament, when a tax on bankers’ bonuses brought in £3.4 billion in revenue and we introduced a 50p top rate of tax for people earning £150,000 a year or more. The next Parliament should reintroduce that to ensure that the wealthiest in society make a fairer contribution to getting our deficit down, and so that we bring back opportunities for young people who have been denied them during this Parliament.

Mr Stewart Jackson: I admire the hon. Gentleman’s sincerity, but his argument would carry more weight were it not for the fact that under the previous Government—run by the party of which he is a member and supports—during a period of economic growth 5.2 million people were left on out-of-work benefits and youth unemployment doubled. The gap between the richest and poorest 10% widened. That is his Government’s record, and it ill behoves him to lecture our Government who have done a lot to address those key issues.

Mr Bain: The Government whom the previous Labour Government replaced were content to leave a wages structure in place in this country in which security guards earned less than £1 an hour. That inequality had to be tackled, and that gap reduced during the previous Parliament. People will want to hear during this debate about the next Parliament, and about our vision for the future of a high-skill, higher wage, higher investment economy. I believe that the Labour party has the more convincing vision.

Guy Opperman: I have here the House of Commons unemployment statistics for February 2015 for Glasgow North East. Surely this Government’s long-term economic plan has done something when the number of total claimants has reduced by 19.6% in the hon. Gentleman’s constituency, youth unemployment for 18 to 24-year-olds has reduced by 27%, and those unemployed for more than 12 months—a more difficult area—have reduced by 37%. Are we doing something right?

Mr Bain: The hon. Gentleman cites figures that demonstrate that in the last month—[Interruption.] Well, I will give him figures from the Office for National Statistics. In the past month, unemployment in my constituency rose by nearly 50 people. He does not cite the International Labour Organisation figures. If he genuinely believes that unemployment of 2,500 people in my constituency should be tolerated by any Government, he misjudges not just the attitude of my constituents, but the good sense of the British people.

Charlie Elphicke: Does the hon. Gentleman agree that welfare reforms, the long-term economic plan, and the jobs revolution that we have seen have been great at getting people back into work so that they can fulfil and achieve their potential? Does he not welcome that?

Mr Bain: I welcome any reduction in unemployment, but our communities have a severe problem with long-term unemployment that this Government’s employment policies are simply not reaching.

25 Feb 2015 : Column 352

Helen Goodman: Is my hon. Friend aware that the Government have manipulated the jobseeker’s allowance figures by increasing the number of sanctions, which are now affecting some 25% of people who go to the jobcentre?

Mr Bain: I agree with my hon. Friend. In this country people want targets for abolishing long-term youth and adult unemployment, not targets in jobcentres for sanctions. We see that in our constituency offices when people arrive in a desperate state having been sanctioned because of edicts from the office of the Secretary of State for Work and Pensions.

The vision of a different economy was picked up by the OECD yesterday in its report. It stated that future growth and rises in living standards in this country will come only if our economy sees increases in productivity, exports and levels of investment. We must improve our skills record and, importantly, sort out more secure and long-term pathways to finance for business and industry in this country—real structural reform for our banks must happen in the next Parliament.

A high-skill, high-investment, higher-wage economy cannot be built when thousands of people are locked outside the labour market for long periods, with skills going to waste and promise left unfulfilled. In 10 weeks’ time—10 weeks tomorrow—my constituents and the rest of the country will go to the polling stations in the hope that change is on the way with a new Government. However, the House does not have to wait that long. By passing the motion today, it can send a powerful message to the Chancellor that a Budget that will command support in the country in a few weeks’ time must have the purpose of abolishing the scourge of long-term unemployment that is so destructive of long-term income prospects, and corrosive of the human spirit.

The House should do more. We must restore fairness to our taxation system and reintroduce that tax on highly paid financiers who have pocketed some of the biggest gains from this Government over the past five years. With the 50p tax cut, for the last few years they have had a Government who have been on their side. Now the British people, who are meeting the burden of high long-term unemployment costs through our social security system, need a new Government who are on their side instead.

With as much as £34 billion a year in taxes going uncollected under this Government, we need policies that maximise revenues and encourage excluded parts of our society back into the labour market. Sweden’s equivalent of the jobs guarantee policy was first introduced in 1983 under a social democratic Government, and it helped balance the books there in the mid-1990s while restoring the right to work to thousands of people. That jobs guarantee was followed in Norway, Finland and Denmark. We should match that ambition in this country by having more people in work and paying into the system, and becoming better off and improving our public finances at the same time.

With bonuses paid by the financial sector since the onset of the financial crisis in 2007 having reached £100 billion this year, and with a few at the top pocketing the biggest gains, the case for asking for a greater contribution from those people—given the taxpayer assistance that has been provided to the banks and financial sector since 2008—is unanswerable. With the

25 Feb 2015 : Column 353

Office for Budget Responsibility having revised down by £48 billion at the autumn statement the levels of revenue from income tax and national insurance from the next financial year until 2018-19, the case for more people being in work, and for the super-rich to pay their fair share, makes best economic sense. That is why it is right to increase the clawback period for bonuses paid to people guilty of misconduct in the financial sector from seven years to 10 years, and—crucially—to introduce penalties in law for breaches of the general anti-abuse rule on avoidance.

As the High Pay Centre has shown in recent months, the link between company performance and executive remuneration and bonuses at the very top is tenuous at best. Reform of corporate governance so as to have an employee representative on remuneration committees would help secure greater accountability over what highly rewarded executives receive, and the wider commercial and social obligations that they should have in mind.

Too often, pay structures reward failure when instead there must be a greater relationship with long-term performance. That can be dealt with by the Financial Conduct Authority and greater legal transparency on bonuses, and secured by reform of the laws and corporate governance. Through the taxation system, we in this House can do a great deal more to discourage irresponsibility in the financial sector, and secure justice for the disadvantaged by raising £1.5 billion to £2 billion through a repeat of the bank bonus tax, to fund the jobs guarantee policy that will help so many long-term and young unemployed people. But as has also come up in this debate, we also need to deal with the structural reforms in the banking system which are needed to restore proper channels of finance to small and medium businesses.

A British investment bank, constructed for the purpose and capitalised by some of the revenues we can expect from 3G and 4G licences in the future, is the best way to deal with the gap in the British economy and ensure stable finance for small businesses. As the OECD pointed out yesterday, ensuring consistent lending for businesses is vital for future growth, and policies such as funding for lending have not bridged the gap. They have not delivered the necessary impetus to net lending and the next Parliament and Government need to be much more ambitious on that front.

Mr Stewart Jackson: The hon. Gentleman is elucidating another straw man, which was articulated by the shadow Minister—that we somehow have a crisis in lending. The fact is that businesses of all sizes hold unprecedented levels of cash reserves and they will spend if we have a benign macro-economic policy framework. That is not what is being offered by his party, so any accusations of missing lending targets obscures the bigger picture.

Mr Bain: I am citing evidence—I hope that the hon. Gentleman has been listening carefully—from the OECD and Bank of England reports that net lending to business has continued to fall. The OECD said yesterday that weak lending is a structural problem in the British economy. He might think that I am raising a straw man, but I hope that he is not accusing those organisations of doing so. It is their argument that this Government have

25 Feb 2015 : Column 354

left unsolved that structural weakness in the past five years. Tougher action is needed in the next Parliament to secure stable finance for our businesses, because that is how we will get the jobs and growth that will generate the tax revenues and lower the deficit.

Helen Goodman: If it is the case that some firms have high cash balances and others face shortages in investment, it is far from being an example of the success of the current banking system: it is a demonstration of its failure.

Mr Bain: Businesses have told me that the absence of a strong investment bank, such as they have in Germany, France, and South Korea and as the Federal Reserve acts in the US economy, is equivalent to our business having one hand tied behind its back. It is that structural flaw that must be addressed in the next Parliament, but it is absent from the Government’s thinking, given what the Minister said.

The OECD also raised a further problem—the risks that the shadow banking sector could cause to our banking sector. We heard nothing from the Minister about closing loopholes that hedge funds have been able to exploit or about strengthening the tools to oversee the shadow banking sector, given the potential risk to financial stability that the OECD mentioned.

The debate is important because the Government have the perfect opportunity in the coming weeks to aim for fairness, with a proper jobs guarantee policy, and a bank bonus tax that would extend opportunity as well as responsibility. If they fail to take that opportunity, Labour will take our case for change to the country and the British people. I am confident that they will vote for change and vote for a new Government on 7 May.

2.34 pm

Guy Opperman (Hexham) (Con): It is a pleasure to speak in this debate. I must first mention the Register of Members’ Financial Interests and point out that I am attempting to create two banks in the north-east at present. My life savings, virtually, are in the Atom bank, which is an internet start-up that has been set up by individuals just outside Durham. We are also attempting to merge the Tynedale community bank with the Prince Bishops bank in Stanley in County Durham, with a view to creating an enhanced credit union.

Having made that declaration, I would like to take the House on a journey. The very first constituent who came to me after I had been elected in 2010 had had his bank finance taken away and, for that reason, his business had failed. It was not through any fault of the business, but because of the bank lending provisions at the time. The bank was local, in Newcastle and then London, and was one of the large banks. That case made it patently clear to me that we needed greater competition. To that end, we have spent much time in this Parliament, both as the Government and individually, trying to create that greater competition.

When we assess the quality of the Labour proposals—I confess that I have not had the great joy and pleasure of reading the shadow Chancellor’s proposals for banking reform, to which the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) referred, but I have glanced at some of the issues—we must look at the record over

25 Feb 2015 : Column 355

the last few years. That must start—and I twice raised this with the hon. Lady and did not get a reply—with the Financial Services Act 2012. On 23 April 2012, I spoke in the debate on the Bill. To the Labour party’s eternal shame, it tabled amendment 28, which sought to delete clause 5 of the Act. That would have removed “The competition objective”. Labour claims to be in favour of competition, but I find it utterly illogical and wrong that it should have sought to vote down the specific proposals in the Act that encourage competition. The proposals are simple and I would have thought that those who profess to want competition in banking would be in favour of them. They include

“the ease with which consumers who obtain those services can change the person from whom they obtain them”—

bank switching, and

“the ease with which new entrants can enter the market”.

That is challenger banks and local banks. The clause also includes

“the ease with which consumers who may wish to use those services…can access them”.

I could go on.

I refer to clause 5 because the House and the country will have to judge Labour on what it has done in the past. I have looked briefly at the grave and weighty tome—I speak ironically, I am afraid—published by the shadow Chancellor and the shadow Financial Secretary on proposed banking reform. It says that Labour wants to see

“At least two new challenger banks”.

I hate to say it, but over the last four years some 20-plus new challenger banks have been created under this Government. I have met many of them, including Metro, which is the biggest and the best, Aldermore and Virgin. Those of us who have been trying to increase competition would view the hon. Lady’s argument—which is, presumably, that 20 is good but we want two more—as illogical. I want an awful lot more than two more. Why she chose two, rather than one or 10, I am at a loss to understand, but doubtless when I read the grave and weighty tome, all will become clear.

We need to assess the way in which the Government have addressed the creation of greater competition. The creation of a new bank faces four fundamental challenges—I know because I have attempted to navigate my way through them over the last four and three quarter years. The first was a lack of legislation to facilitate such change. My hon. Friend the Member for Chichester (Mr Tyrie) and I went to see Sir Hector Sants, the then chairman of the regulatory authority, and he agreed and changed the rules. Previously, if I wished to create a challenger bank or new local bank, I would have been judged on the same basis as Barclays or the other big banks. I would have to have capital up front massively in excess of £50 million and my board would have to be set up years in advance—to say it was bureaucratic would be an understatement.

The point I was trying to make to the hon. Member for Kilmarnock and Loudoun was that, in some respects, for the creation of local challenger banks, regulation had to be tweaked slightly so that it was not light-touch—to return to the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) who, as usual, is not in his place—but different and better. First, we introduced the Financial Services Act 2012, which provides the framework

25 Feb 2015 : Column 356

for the regulatory authorities to encourage greater competition. Secondly, having passed that legislation, notwithstanding Labour opposition, we tackled the length and complexity of the authorisation process. Setting up a new bank traditionally took years and a huge amount of money. We all want greater competition, and for the FSA to abbreviate the process—in planning, this is done through a pre-authorisation process—and help a potential new bank through it. The long and short of it is that the FSA has dramatically reduced the bureaucratic process and the number of years it took to set up a new bank. As a result, some extraordinarily successful new banks—for example, the Hampshire Trust and the Cambridge and Counties bank, which is effectively a local authority utilising its pension fund to do LEP-style investments in local businesses and communities—have come forward in the past few years.

The third big change was the reduction in the capital requirement. Huge amounts of money were needed to create a local or any kind of bank, but local banks are not now being judged on the scale of Barclays, because they do not want to be like Barclays or any other high street bank. Finally, the scale and complexity of the infrastructure and the information exchange between all the bank authorities was changed, as it needed to be.

I will be nice to the hon. Member for Kilmarnock and Loudoun: of course I would welcome two more new challenger banks. The consequence, however, of the past four and three quarter years of change in the regulatory, legal and bureaucratic process and in the general climate of FSA behaviour is that we have in excess of 20 new start-ups. For the first time, we have new banks taking people on in the high street. I see that myself, because not only am I able to play a tiny part in the creation of a significant new bank in the north-east based in County Durham, but we are trying to fill a gap in the high street in my community in Northumberland.

The Government have changed the rules on credit unions to make it possible to have two types of credit union. You and I, Mr Deputy Speaker, will know that the traditional credit union model requires people to borrow for a very long period of time. The credit union is a very laudable and good thing and we should continue to support it, but there is a gap in the market. That gap has been filled, in my community and up and down the country, by payday lenders. As a result of high street banks not being able to lend in one way and credit unions being relatively restricted, there is a gap. The gap can be filled by community banks, which would effectively be bulked-up credit unions. There is a fantastic number of examples. Several are in large Labour areas, such as Glasgow. The Salford credit union is going from strength to strength. I have spent considerable time getting to know the Prince Bishops bank, which is based literally on the high street in Stanley in County Durham. It competes with what we would think of as high street banks and is, effectively, a bulked-up credit union. That surely shows that the Government are taking things in the right direction.

Chris Evans (Islwyn) (Lab/Co-op): Many credit unions, which are run mainly by volunteers, are the victims of their own success, as they become too large and usually disband because they cannot handle the administration, the back-office work, that comes with it. How does the hon. Gentleman envisage credit unions being able to

25 Feb 2015 : Column 357

manage themselves as community banks and, potentially, as building societies? What legislation would help with that?

Guy Opperman: The legislation is already there. The hon. Gentleman should speak to the hon. Member for North Durham (Mr Jones), who is doing a fantastic job on the board of the Prince Bishops bank. I happily praise him for the work he is doing with the local community—with the church, the local authority and the housing association. To improve the quality of a credit union and make it viable, one has to, for example, ensure that payments to local authorities and housing associations go through the credit union, so it becomes a clearing bank in the normal way. There must be a greater degree of lending on a long-term basis. To put it bluntly, the credit union needs to go after middle-class lenders, because they are the ones who will make the deposits.

In Northumberland, a large proportion of my constituents are off-grid and have to purchase 500 litres of oil at a time. That costs approximately £350, now about £275. Banks will not give the lending facility to many unbanked people, because the number is too low, but if they were to save with a bulked-up credit union or community bank, that community bank could be the lender of choice for that specific purpose. Such people would, because they are mostly homeowners, be the sort of new lenders and new depositors who can provide the critical mass and the clout for the enhanced credit union-community bank to be more viable. The traditional problem with a credit union is that it does not have the deposit savings unless it has a white knight or a very strong church or trade union backing it.

We can discuss this another time—Mr Deputy Speaker will say that I am straying from the substance of the motion—but opportunities are out there. The point goes to the substance of the motion, which is competition. A credit union should provide competition on the high street to high street banks. Traditionally, credit unions have struggled. The Government’s changes have made it easier for them.

I will touch on two further points and then bring my remarks to a close. The sins of the bad, all of which we deprecate, are now paying for the good works of the good. We cannot have this debate without talking about LIBOR and about the terrible things that happen. However, the Government have done a wonderful thing in saying that the 96 military charities should receive the funds of the LIBOR fines and that air ambulances should receive a considerable amount of money. Last night, I was at No. 11 Downing street with the Chancellor. Representatives of many of the air ambulances throughout the country, including from Essex, were there. They are receiving significant sums of money by reason of the Chancellor’s decision on LIBOR funds. That is a fantastic thing. It was first announced in the 2012 autumn statement, originally for just military charities. It has now developed into other areas—the Minister spoke of GPs and other health services. The great work done by the air ambulances should be noted. The support we are giving to them is crucial.

I want to make one final point on the motion, which refers to tackling unemployment and youth unemployment as the purpose behind everything that it proposes. It

25 Feb 2015 : Column 358

is hard to read the House of Commons Library unemployment statistics and find a single Member of Parliament who has not benefited from a dramatic reduction in unemployment.

Helen Goodman: That’s not true.

Guy Opperman: I know the hon. Lady reasonably well and presumed she would be quite chirpy in her usual fashion. The House of Commons’ “Unemployment by Constituency” research paper 1509, published on 18 February 2015, shows that there has been a 34% reduction in unemployment in her constituency of Bishop Auckland. The reduction for those aged 50 and over is 24%. The 12-month unemployment figure, which of course is the very difficult area to address, has seen a 45% reduction in the past year. Youth unemployment is often prayed in aid by the Opposition—and understandably so, as we all agree that we need to address it.

Helen Goodman: Will the hon. Gentleman give way?

Guy Opperman: No, let me provide the figures—

Helen Goodman: The hon. Gentleman is talking about my constituency.

Mr Deputy Speaker (Mr Lindsay Hoyle): Order. Whether or not the hon. Gentleman is talking about the hon. Lady’s constituency is not the question. It is a question of whether Mr Opperman wishes to give way.

Guy Opperman: I am afraid that I will not give way—first, because I have already gone on too long and, secondly, because I want to enlighten the hon. Member for Bishop Auckland (Helen Goodman), who would surely welcome the fact that unemployment for 18 to 24-year-olds in her constituency has reduced over this last year by 40.2%. I could say much more, Mr Deputy Speaker, but I think you would stop me doing so.

2.50 pm

Liz McInnes (Heywood and Middleton) (Lab): As the motion states, we believe bonuses should be a reward “for exceptional performance” and not a compensation for failure. This applies in other industries and it should in banking, too. Many industries, particularly those in the public sector, manage to get by without awarding bonuses. In industries such as banking, where the bonus culture does exist, there needs to be more accountability. Pay must be more closely linked with long-term performance.

Chris Evans: Does my hon. Friend have sympathy for the high-street bank worker, who has had nothing to do with the scandals, but has often had to take abuse from customers for them? As someone who worked in a bank, my hon. Friend will know that these same high street workers are under strong pressure to achieve sales targets and that when they do not, they often face disciplinary action. Does she think that is fair, particularly when the senior executives are taking such massive bonuses?

25 Feb 2015 : Column 359

Liz McInnes: I thank my hon. Friend for his series of questions. I will try to answer them in the order he asked them. I think my hon. Friend alluded to my having worked in a bank—

Chris Evans: I worked in a bank.

Liz McInnes: It was my hon. Friend who worked in a bank; now I understand. My two elder sisters both worked in banks and both were forced out because of the selling culture overtaking the “service to the customer” side of banking, so I fully understand the plight of the ordinary bank worker and the pressure they are under, not to mention the abuse they sometimes suffer because of misunderstanding on the part of the general public about the role of ordinary workers in banking. I thus fully appreciate my hon. Friend’s points, and I hope that answers his questions adequately.

I was referring to the scandals over the last year, most recently, as we are all aware, at HSBC. Regrettably, it looks like this year’s round of bank bonuses will be very generous once again. That is why Labour is determined to repeat its tax on bankers’ bonuses in order to fund a paid starter job for every young person out of work for more than a year. We will also extend clawback of bank bonuses that have already been paid, where inappropriate behaviour has come to light, to at least 10 years.

This Government have not done nearly enough to rein in excessive pay and bonuses. They have refused to repeat Labour’s tax on bankers’ bonuses and they have stopped short of implementing all the recommendations of the Parliamentary Commission on Banking Standards. Instead of repeating Labour’s tax on bankers’ bonuses, the Chancellor of the Exchequer has instead wasted taxpayers’ money by mounting a misguided and ill-fated legal challenge to the EU cap, which limits bonuses to 100% of salary—or even up to 200%, with shareholder approval.

The next Labour Government will guarantee a job for all young people on unemployment benefits for over a year and also for all adults aged 25 and over who are on unemployment benefit for over two years. This is the only policy we will fund with the proceeds of the bank bonus tax.

Being unemployed when young really damages prospects years into the future, so this is an important policy for Labour to champion. According to the latest labour force survey, youth unemployment stood at 740,000 in the three months to December 2014—an increase of 3,000 in comparison with the last quarter. Research shows that young people unemployed for a year will, on average, be £125,000 worse off over their working lifetimes. That means someone on the average wage would have to work nearly six years longer to make up for the cost of being unemployed when young.

The performance of the banking sector is vital to the health of the UK economy. The finance and insurance sector makes up around 8% of the total UK economy, employing more than 1 million people who carry out essential roles working with businesses and consumers to manage their money and ensure that they are able to invest, make profits and plan for the future. Too often in recent times, however, banks have continued to pay high bonuses in the face of falling profits and falling standards.

25 Feb 2015 : Column 360

This has led to a level of pay and bonuses to some highly paid bankers that has become disconnected from banks’ performance and their wider economic contribution.

Last year saw a marked increase in the level of bonuses paid by banks, with three out of four major high-street banks increasing their bonus pool in comparison with the previous year. While thousands of bank employees, along with millions of other taxpayers, are struggling by on modest salaries and face a rise in the cost of living, those at the top are benefiting from high bonuses, reinforced by the Government’s tax cuts for the top 1%.

Bonuses have remained high in the face of a series of high-profile scandals. Barclays, HSBC, RBS and Lloyds have paid £1.5 billion in compensation for mis-selling interest rate hedging products. Other recent scandals include HSBC’s role in facilitating tax avoidance, the LIBOR fixing scandal and the mis-selling of payment protection insurance. At the same time, however, many banks are failing to fulfil their core functions. Lending for businesses has fallen by £55 billion since 2010, with several Government lending schemes having little impact. Labour believes that action is needed to ensure that banks act with greater restraint, that pay mirrors performance and that bonuses can be clawed back for up to 10 years in cases where malpractice has come to light.

Following the LIBOR scandal, the Parliamentary Commission on Banking Standards examined how the culture of the banking sector should be reformed. Although this led to some important reforms, such as the introduction of a ring fence between investment and retail banking, the Government’s implementation of the recommendations has too often fallen short. The Government have also failed to implement the institutional reform we need around access to finance, such as the setting up of a proper British investment bank, which could provide vital financing to small and medium-sized businesses and start-ups.

The banking sector plays a vital role in the UK economy. As the global financial crisis showed, the dislocation of the banking sector undermines the whole economy. Financial incentives for bank employees need to be better linked to the long-term stability and performance of their banks.

2.58 pm

Ian Swales (Redcar) (LD): It is interesting to take part in another Opposition day debate on this subject. The Opposition had 13 years to deliver their dream for the financial services and banking sector, but what they left us was, of course, a nightmare, and we have had to do a lot to tidy it up. Without wanting to threaten coalition entente cordiale, I should say that people who examine this subject trace some of the problems back to the deregulation that took place in 1986. It was so drastic that it has been called the big bang. It is certainly true that my coalition partners were still calling for lighter regulation as late as 2007.

However, between us, we recognised that there was a nightmare to sort out, and a great deal has happened, principally the Financial Services (Banking Reform) Act 2013. Let me pick out three items. First, there is a new criminal offence that covers those who run banks and building societies and have engaged in reckless misconduct. The penalty is a maximum sentence of

25 Feb 2015 : Column 361

seven years in prison, or an unlimited fine. Secondly, we have worked closely with other countries to tackle risk by introducing strict requirements in relation to the capital that banks must hold. Thirdly, we have prevented banks from engaging in or promoting tax avoidance by making the 15 biggest banks sign up to a code of practice. My party wants more to be done about that: we think that there is room for a new offence of corporate failure to prevent economic crime. We believe that not just those who evade taxes but those who advise or enable them should be prosecuted.

We are still seeing scandal after scandal, and it is notable that most of the scandals that are still hitting the news arose on the last Government’s watch—or the seeds were sown then—so we have had a great deal to do. We introduced the banking levy, and we have kept it going. My party wants it to continue, so that banks go on contributing to the process of rebalancing our budget and helping our economy.

As we have heard from several Members today, bankers are paid a lot. I think that there is a fundamental cultural problem. When an organisation has money to allocate, it has to think about its stakeholders. It has to think about its customers in terms of services and pricing, and it has to think about its shareholders in terms of the reward on the capital that they have invested. It also has to think about investing in its own business. About 10 years ago, my daughter worked in a branch of Barclays bank that was still using punch card machines that I thought had gone out in the late 1970s.

Staff are, of course, part of the balance, but I think most of us feel that the balance between the various stakeholders in some of the big banks has been tipped too far towards senior staff. However, bonuses are a great deal lower than they were. They have fallen from nearly £11 billion, or £33,000 a head, in 2007 to less than £2 billion, or £6,000 a head, in 2013. They are rising a little as banks are getting their act together, but they are nowhere near as high as they once were.

As so often happens with Labour motions, the Opposition have tried to connect two completely disconnected issues. We can have a debate about banking and we can have a debate about youth unemployment, but it is not logical or correct to suggest that the one either depends on the other or is solved by the other.

Of course I support moves to reduce youth unemployment. For me, however, unemployment is not about percentages but about people, and 830 fewer people in my constituency have been out of work in the last year. Unemployment remains far too high, and it is particularly high in the north-east, but it has fallen by an average of about 1,000 people per constituency in the north-east over the past year. In my constituency, youth unemployment has fallen by 43% since the 2010 election, when I inherited my legacy.

The motion asks us to consider the issue of youth unemployment, and also to consider the proposition that the bankers’ bonus tax will help to sort it out. The bonus tax has become the magic porridge pot of Labour policy making. I have a list of nine uses to which Labour Members have put it so far, and I think that my hon. Friends could raise the number to about 11. The last occasion on which we discussed the subject was quite remarkable. The shadow Minister who opened the debate referred to one use for the tax while the Minister

25 Feb 2015 : Column 362

who closed it referred to a different one, so they obviously had not shared notes. Perhaps, given that we are so near to a general election, they will finally settle on a use for it.

Let us now think about what will actually happen. If I understand the Opposition’s policy correctly, they want individuals to pay 50% tax on their bonuses, and they want banks to pay 50% tax on those bonuses. Of course, banks have other employment costs, particularly national insurance. Barclays has calculated that, when all that is added together, it will be paying 115% tax on its bonuses. Is it really likely that a bank will continue to declare £1 of bonuses to ensure that a Labour Government receive £1.15?

Matt, the famous cartoonist, must have been very prescient when he prepared his 2015 calendar. The cartoon for this very month shows a banker sitting behind a desk and someone else standing some distance away from him. The banker is saying “I cannot give you a bonus, but there is a £2 million reward for the person who finds my umbrella”—and there is an umbrella on the floor between them. In other words, banks will find ways around this.

It is not just Matt who has made the point. Referring to Labour’s bankers’ bonus tax, the right hon. Member for Edinburgh South West (Mr Darling) said:

“I think it will be a one-off thing because, frankly, the very people you are after here are very good at getting out of these things and...will find all sorts of imaginative ways of avoiding it in the future.”

David Mowat: The Opposition’s policy would result in avoidance of the tax through increased fixed-level pay and reduced variable-level pay. A much better way of taxing banks is to tax their balance sheets, which is what the Government have done, because taxation of that kind cannot be avoided in the same way.

Ian Swales: My hon. Friend has made an extremely good point, and his words stand on the record. In fact, I was about to mention an aspect of what he has said. It is interesting to note that the motion itself refers to an avoidance method, and tries to close the loophole. As for the clawback proposal, the more we disincentivise banks from paying bonuses, the lower will be the amount that is available for clawback purposes. So, as my hon. Friend has just suggested, the policy is self-defeating.

The banks say that high pay and large bonuses are necessary for competition, but new competition is already emerging. I recommend all Members to visit their local branch of Handelsbanken, which has no targets and does not pay bonuses. It is an incredibly successful bank, and is growing very fast in this country. Competition has already started to undermine the business models of the large banks. My hon. Friend the Member for Hexham (Guy Opperman) mentioned Atom bank. I too have visited its offices, and I am trying to support it as much as I can. Banks of that kind will disrupt existing business models, because they have a much lower cost base than traditional banks. We will see movement: the banks that think life will continue unchanged will find themselves pursued by competition.

One aspect of new funding that needs to be examined is crowdfunding. I think that the next Government will find that they need to consider regulation in that area. We are just starting to hear about some of the scandals involving a practice that is, at present, largely unregulated.

25 Feb 2015 : Column 363

In general, we need to encourage competition, we need disruptive business models, and we need to recognise that, in the private sector, competition should be allowed to beat down bad practice and encourage good practice. We need a successful financial services sector, and we need it to be well regulated. The sector has made it very clear that it does not want a Government who are either anti-Europe or anti-business.

My conclusion is this. If the question is “How do we make our economy stronger and society fairer?”, nothing that we have heard from the Opposition today makes me feel confident that they are the answer.

3.8 pm

Helen Goodman (Bishop Auckland) (Lab): I am very pleased to follow the hon. Member for Redcar (Ian Swales), and to have listened to the hon. Member for Hexham (Guy Opperman). It is clear that Members representing constituencies in the north-east are extremely interested in the debate, and that in itself is significant. The fact is that the banking system is currently not serving our region well. What the hon. Member for Redcar said about the Handeslbanken was absolutely right, and the work that the hon. Member for Hexham has been doing with Atom bank is necessary because of the failure of the current banking system. I would almost go so far as to say that his concern about finance for small and medium-sized enterprises and about tackling financial exclusion would make him a far better junior Minister in the Treasury dealing with this industry than the complacent former banker who currently seems to fulfil the role.

I agree with what the hon. Member for Redcar said about the need to regulate crowdfunding. He is absolutely right: it is a fashionable new thing, and people just leap into it, just as—as he pointed out—they leapt into the free market in 1986, without thinking about the consequences. Both hon. Gentlemen pointed up the inadequacies of banking in this country, but neither of them defended bonus levels and the method of paying them that we can see in most of the financial sector. I do not understand why they will not come into the Lobby with Labour Members at 4 o’clock, because that is where the logic of their position should take them.

In the north-east it is true that unemployment is down—we had the highest unemployment in the country at 10%—but cuts and the depression in the economy of the north-east mean that earnings are down between 4% and 9%. It is not a thriving region, and no one is happy about that.

Guy Opperman: Clearly more needs to be done in the north-east—no one disputes that—but does the hon. Lady not agree that the autumn purchasing managers index survey showed that we had the fastest private sector growth? We have the largest exports, and the largest export growth of any part of the country. After London, the north-east has more tech start-ups than any region in the country. There is more to be done, but I would not want her to paint a picture of doom and gloom for a second.

Helen Goodman: The hon. Gentleman is absolutely right: we are indeed a successful exporting region, but the Government are spending 520 times as much on the

25 Feb 2015 : Column 364

transport industry in London as they are in our region, which does not make sense. That is one reason why the Opposition want to set up a business investment bank.

Julie Hilling (Bolton West) (Lab): Low wages are a problem not just in the north-east but in the north-west and across the country. A third of hourly paid workers in my constituency are paid less than the living wage, and 57% of part-time workers are paid less than the living wage, which means that they depend on other taxpayers to support them so that they can get to a point where they receive a living wage.

Helen Goodman: My hon. Friend makes a powerful point. That is why people watching the debate will find it absolutely incredible that millions of pounds have been paid to bankers in bonuses.

I should like to come back to the central points in the motion. Pay should be a reward for good performance, but we have seen a disconnect between bank performance and the pay of many senior executives and traders. We have discussed whether or not there is improved accountability in the banking system. At the Dispatch Box, the Minister tried to persuade us that that was all sorted and that everything was fine and good. However, the argument that it was right for the Government to resist the EU cap on bonuses because if bankers did not receive bonuses they would just receive higher pay reveals that accountability mechanisms have completely failed. If those mechanisms were working properly, shareholders would be able to prevent that abuse and something that is in effect a loophole. [Interruption.] I thought that the hon. Member for Warrington South (David Mowat) would intervene, as that was a point that he made.

David Mowat: I thank the hon. Lady for encouraging me to speak. I agree with her. The issue is not about whether to have bonuses or not; it is about absolute levels of remuneration in banks. I do not understand why the Labour party is not trying to address that. There is a good point to be made about why Barclays needs 1,000 people who earn £1 million a year while other organisations do not. The only explanation in the end is that the market is not working properly, which is why we must have more challenger banks to compete that away.

Helen Goodman: The hon. Gentleman, if I may say so, makes a fair point. One of the regrets of Opposition Members is that not all the recommendations of the Parliamentary Commission on Banking Standards have been implemented. The weakness of the arrangements set up by the Government was illustrated only this week in the statement by Mr Gulliver, who now heads up HSBC. He said that he could not possibly be expected to know what his many thousands of staff were doing. If we are to have a proper accountability mechanism looking from the outside in at what the banks are doing, we need proper internal management systems; otherwise, the whole thing becomes meaningless. Mr Gulliver is therefore hoist by his own petard.

Ian Swales: I used to work in a large global organisation, and does the hon. Lady accept that part of the problem is culture? It is true that someone cannot be expected to know what every employee is doing at their desk

25 Feb 2015 : Column 365

at any moment, but if people do not have the right culture down the management chain those sorts of things happen.

Helen Goodman: That is common sense, and that is why the right culture was not encouraged when the Chancellor toddled off to Brussels to defend high bonuses. That did not engender the kind of attitude that we want to see.

David Mowat: The hon. Lady made an important point about Gulliver and the management philosophy that he appeared to espouse. We could call it something pretty close to plausible deniability: “I don’t know what they’re doing in Mexico—it’s a long way away. I don’t know what they’re doing in Switzerland—we’ve only just bought it.” If that is the management model, that is a better advert for the banks being split up than the retail/investment dichotomy that we have spent so long discussing.

Helen Goodman: That is another good point from the hon. Gentleman.

What will our constituents think of the fact that last year we saw an increase in the level of bonuses paid by the banks? What is happening at the top of the banks is not the same as what is happening for the ordinary people whom we meet behind the counter. It does not seem reasonable that bonuses are high when we have had high-profile scandals with LIBOR and forex fixing and with the revelations about tax avoidance through Switzerland.

One thing that particularly concerns me about HSBC is the disconnect between the amount of time and energy the bank is clearly prepared to put into setting up special arrangements for its private clients overseas, turning a blind eye to aggressive tax avoidance, and its attitude to my constituents when it wanted to close the branch in Shildon. We have a serious problem with financial exclusion and the major banks are taking themselves out of the poorest communities, leaving them prey to the Wongas of this world. When I wrote to HSBC saying that that was very regrettable and would mean that there was no longer anywhere for people even to access cash in a town with nearly 10,000 citizens, it would not even give a contribution to the local credit union. That shows a degree of arrogance and a lack of social responsibility that I am sure every Member of the House would deplore. I see that even the Exchequer Secretary is shaking her head in disappointment at hearing that.

We need a banking system that provides banking facilities for everybody in this country and for the whole community. Speaking as the Member of this House who was responsible for handling financial exclusion at the end of the previous Government, I think that it is fine to encourage credit unions, which are very nice institutions, but I do not believe that it is credible to believe that they could set up the kind of national network needed to fill the gaps. That is why, once upon a time, we had a more effective post office banking arrangement. We already have an infrastructure, and we already have institutional arrangements. We would do much better to build on them.

25 Feb 2015 : Column 366

Cathy Jamieson: While my hon. Friend is on the point of credit unions, does she support our proposal to increase the levy on payday lenders to support various ethical alternatives, including the expansion of credit unions? I am sure that she will, as she has a great deal of expertise in this matter.

Helen Goodman: My hon. Friend is absolutely right. The extortionate charges put on the most vulnerable have been a total disgrace and there is something interesting to say about why a significant proportion of people in this country are unbanked. That is generally put down to being about the high lending risk in that community. It is partly about that, but it is also about the costs of having the institutional infrastructure to reach that community. That is one area where the main high street banks have failed disastrously in this country.

Chris Evans: My hon. Friend might know about the basic bank account, which was introduced when I worked in a bank. It allowed people on benefits to pay in their jobseeker’s allowance. There was no credit scoring for overdrafts, credit cards or anything like that. People would pay in their benefits and they would be largely forgotten about by the banks. There would be no account management, and if those people needed to borrow, they would fall into the hands of the payday lenders. They were completely ignored. How do we ensure that banks manage these people into mainstream banking as their needs change—as they get a job, look for a house or something similar?

Helen Goodman: Gosh, I am not sure that I have an instant answer to that complex question. This is the kind of thing that we need to think about more. When we hear that in the middle of the financial crash bankers phoned Treasury Ministers from New York worrying about their bonuses and not about the kind of people my hon. Friend has just described, we are bound to say that there is a culture problem in this industry. I also want to say something about the problems that—[Interruption.] The hon. Member for Dover (Charlie Elphicke) needs to show a little more respect.

I want to say something about the need to provide more finance to manufacturing. One thing I am really puzzled by is what performance these bonuses are for. I have a lot of metal-bashers in my constituency and in the middle of the crash they had a lot of problems with their banks. I am sure that other hon. Members will have experienced this. They thought it was absolutely dreadful because they had to drive all the way down to Leeds, and blah-di-blah-di-blah.

The problem with that is that the assessments were being made by people with no scientific understanding and with very little understanding of industry. We are seeing phenomenally high bonuses for people who are no doubt absolutely brilliant and a whizz at the latest hedge fund hoojimaflip and at how to make four more basis points, but who are not very good at what they really need to be good at, which is understanding the financial needs of British industry. That is what we want, but that is not what we are getting. That is why the Opposition are proposing a British investment bank with regional arms and regional focus. The industrial base in the north-east is clearly different from that in

25 Feb 2015 : Column 367

London, so we need different expertise in different places. We are just not seeing that in the banks at the moment.

It is alarming that Lloyds, which is 24% owned by the taxpayer, is expected to have a bonus pool of £375 million this year. I could not understand the remarks made by the Economic Secretary. I think she said that no one at Lloyds was going to get a bonus of more than £2,000 this year, but my understanding is that the chief executive could receive more than £7 million in a three-year pay deal. I hope that the Exchequer Secretary will explain whether people will be getting £2,000, several hundred thousand pounds or millions of pounds. RBS, which is 79% owned by the taxpayer, was fined £400 million for its part in the forex fixing scandal, yet it is reported to be considering a bonus pool of around £500 million. There is a general problem with the culture of the banks and the level of bonuses being paid, but there is a specific problem with banks in which we the taxpayers have large equity stakes. Treasury Ministers have a particular responsibility to look at what is going on in those banks and to think about how they are going to control it, in our interests as shareholders as well as our interests as taxpayers.

I wonder what Ministers think about the report in the Financial Times yesterday, headlined “Rothschild eyes early bonus round to avoid possible windfall tax”. It stated:

“Rothschild, the boutique investment bank,”—

for those of us who had never heard of Rothschild—

“is considering paying its 2014 bonuses early to avoid the extra taxes Labour has vowed to introduced if it returns to power, two sources familiar with the bank’s thinking said. The deliberations show how seriously businesses are taking the prospect of Labour winning the May 7 election”.

Those people are good at assessing risk, and it is clear that they are expecting a Labour Government.

It is worth thinking about the purpose of the banking system. It is a shame that the Economic Secretary is no longer here, because I am sure that she has seen the book produced by the Church of England, “On Rock or Sand”, in which the Archbishop of Canterbury writes an extremely interesting essay about economic purpose. He says that there are three criteria against which economic institutions should be judged. The first is fairness, and we can see the problem in the banking sector in that regard. The second is generosity, but that does not mean that banks should be generous to those who have the most. The third is sustainability. Judging by what is happening at the moment, the institutions seem to be failing on all three counts. However, taxing bankers’ bonuses and rechanneling the money towards providing employment for young people would help banks to meet those criteria, and that is what we are proposing to do. I believe that that is what people in this country expect from the financial institutions.

3.28 pm

Charlie Elphicke (Dover) (Con): It is a pleasure to follow the hon. Member for Bishop Auckland (Helen Goodman), as I did last week. I hope that there will also be sufficient time to allow my hon. Friend the Member for Warrington South (David Mowat) to follow me. I shall therefore try to ensure that my remarks are more to the point than they might otherwise have been.

25 Feb 2015 : Column 368

I have always been a strong believer in having diversity and competition in the banking system, and I share the concern expressed by many that we have an oligopoly in our system. That is not healthy; there is not enough choice or competition. We need more competition, and I personally would be quite radical and ensure that the banks were separated up to a greater extent than they are today. It is also a concern that the establishment of the banking system in this country has meant that the banks are too big to fail. We could cure that by having depositor preference, because it would then be a matter for the bondholders, who would be much more interested in ensuring that the banks behaved and did not overpay bonuses.

What will not work is Members of this House pontificating about bonuses and what the bonus levels should be; waving a magic wand and saying that they should be this, that and the other; and trying to micro-manage banking business from afar. What makes it even worse is the way the previous Government carried on and the shameless hypocrisy of the Labour party that we have heard today. Let us not forget that the forex and LIBOR scandals happened under the previous Labour Government. Our Government have sorted out the regulatory system and have been cleaning up the mess. Under the previous Government bonuses tripled in four years and £66 billion of bonuses were paid out. The Labour party wishes to forget that. Fred Goodwin became Sir Frederick Goodwin then, and honours, baubles, bonuses and bag slaps were scattered around happily in those days. Labour now wishes to forget that. Under our Government bonuses are now a fifth of what they were then.

Chris Evans: Does the hon. Gentleman think the Conservative party is being wise after the event? Was it not the Conservative leader, the current Prime Minister, who argued in 2007 for less red tape and less regulation for the banking industry?

Charlie Elphicke: The issue is not the extent of regulation, but the format of regulation and the fact that the previous Government took the Bank of England out of the picture. The one organisation that understands the prudential nature of risk management was pushed to one side. That, together with the failure to police risk, was at the heart of what went wrong with our banking system, so I completely reject the hon. Gentleman’s point.

The Opposition say, “Let’s have a bankers’ bonus tax, so we can raise some money.” Yet again, we have heard that the Opposition want to spend it, this time on

“a guaranteed paid starter job for young people who have been out of work for over a year”.

That is what they say today but that is the 12th time over that they have spent it; I hate to correct my hon. Friend the Member for Redcar (Ian Swales), who thought it was only the 10th time and had lost count. That is understandable, because previously the Opposition have spent this on: the youth jobs guarantee; reversing the VAT increase; more capital spending; reversing the child benefit savings; reversing tax credit savings; more money for the regional growth fund; cutting the deficit; turning empty shops into community centres; spending more on public services; building 25,000 new houses; and free child care. Now it is being spent on starter jobs for

25 Feb 2015 : Column 369

young people, but perhaps next week it might be spent on houses again—who knows? It just depends on the thing of the moment, does it not? That underlines the ludicrousness of the Opposition’s position: they simply cannot add up and cannot spend their various banking bonus tax ideas in any competent way at all.

Leaving that aside, the permanent bank levy introduced by this Government is expected to raise £2.9 billion in 2015-16 and then £2.8 billion each year thereafter. That is more than was raised by the one-off bonus tax introduced by the previous Government. I suspect what will happen is that the Labour party will end up with its madcap plans raising less money and the party then being in a quandary as to where to spend it, because it has committed it on multiple occasions. That goes to the heart of the massive contradictions of Labour policy making.

The one thing I want to touch on is the idea that we should have the European Union decide on the levels of pay, bonuses or indeed anything in this country. Let me gently remind the Opposition of a couple of things. First, we are an independent nation. Secondly, we have an independent currency—we are not part of the eurozone. I do not understand why the Opposition think it is a good idea to have the European Union tell us how to manage our banking system. We are competent enough as a country—goodness knows, we have run our own affairs for the past 1,000 years—to decide how we should organise our banking system, and pay, bonuses and bonus taxes in our banking system, without needing help from the European Union.

Helen Goodman: I do not think every last detail of the running of these things should be handed over to the European Union, as the hon. Gentleman describes it, but the fact is that all the time we hear from the bankers that they will whizz off to Geneva—some of them do seem to be whizzing off there—to Paris or to Frankfurt. The purpose of having a European-wide approach on bonuses is to avoid exactly that kind of behaviour.

Charlie Elphicke: I hear what the hon. Lady is saying, but we are not in the euro. The only time that we would need some measure of control from the European Union is if we were in the euro. I simply do not accept the argument. Our objection to the European Union trying to tell us how to run our banking system and our bank bonuses is that we do not want to see pay rise and rocket in the banking system, which is what would happen—permanent fixed pay would rise. That is what we are most concerned about and why we have put up such resistance. There is also the principle that we can manage our own affairs in the City of London and in the financial services market, and we do not need any assistance from Brussels. I say shame on the Labour party for thinking that it is better to accept diktat from Brussels than decisions made in this Chamber.

3.35 pm

David Mowat (Warrington South) (Con): I thank my hon. Friend the Member for Dover (Charlie Elphicke) for curtailing his remarks so well. I wish to make two points at the end of this debate. First, the thrust of the

25 Feb 2015 : Column 370

motion is to replace a levy on the balance sheet, which is not avoidable or evadable, with a tax on bonuses, which is both those things. It is a bizarre policy. The Opposition seem to have mixed up the real issue, which is the overly high level of remuneration in banks, with the fact that it is split between variable and fixed pay. They appear to think that it is fine to pay someone £3 million a year, but that they should not be paid £2 million with a £1 million bonus, and that the extra bit needs to be taxed much more. That is just wrong. Apart from anything else, that £1 million can be clawed back under our current proposals, and indeed even under the Opposition’s proposals.

The real issue to consider is: what is so unique about the structure of the banking industry that means that banks have to pay so many of their employees so much? The same does not happen in the oil or the pharmaceuticals industries—those companies are worth more than big banks. Earlier, I cited the example of Barclays, which feels the need to pay 1,000 people more than £1 million a year. I am sure that those people work extremely hard, but people in Shell, BP, Glaxo and AstraZeneca work hard, too, and those companies are also world class and world-beating organisations, but they do not have that salary structure. The only explanation is that the market is not working, which is something that both sides of the House should consider when drawing up banking reforms. There is something in the way that investment banks work that stops new entrants coming into the market. I have reflected on this and feel that that is almost certainly the case.

If the chief executive officer of a company is hiring an investment bank, they would not get fired for hiring Goldman Sachs—in the same way that someone in IT would not get fired for hiring IBM. Typically, a CEO will last for only two years in a new company—they do not last long and they do not get many chances. If Goldman Sachs comes along with a big transaction, it bases the price of that transaction not on how much effort it takes to do it but on the 1% increased value in the company. Well, if I am the CEO of Apple and I increase by 1% the value of Apple, which is worth £500 billion a year, and Goldman Sachs gets a slight percentage of that, there is an awful lot of money swilling around. That makes it very hard for new entrants to enter that market.

We all have to address the matter of why it is so hard to get challenger banks into that market, because that is where the abuses occur. The problems do not often occur in the retail sector. We should also address the matter of why it is that so many people need to earn so much, when the shareholders in those organisations do not earn much.

Secondly, I want to reflect on what has happened in HSBC over the last little while. HSBC has been running a management structure that is based on plausible deniability. In Mexico, it has been trading with drug cartels, and it has been involved in evasion in Switzerland and it is saying, “We just did not know that our guys were doing that.” The question is: if its management structure is based on plausible deniability, what is the point of the board and the chief executive? We should think about that, because it provides a better argument for splitting up banks than this dichotomy between retail and investment, because it is, prima facie, a bank that is too big to manage.

25 Feb 2015 : Column 371

Here is the truth of it. The guy who was running the operation in Mexico was told, “This is your target. We don’t really care what you have to do to make it. If you can’t make it, the next guy will.” That is how these banks operate. That is the structure of plausible deniability. That is why we need the cultural change that Ministers on the Front Bench are trying to achieve.

3.40 pm

Shabana Mahmood (Birmingham, Ladywood) (Lab): It is a pleasure to wind up the debate and speak in favour of the Opposition’s motion. We have had a very good debate and heard some excellent contributions. My hon. Friend the Member for Glasgow North East (Mr Bain) spoke powerfully about youth unemployment and the danger of insecure employment. I think that Government Members are too often unwilling to engage with the difficulties posed by insecure employment, and not only for those individuals working on zero-hours contracts, but for the economy as a whole.

My hon. Friend the Member for Heywood and Middleton (Liz McInnes) made an interesting point about the experiences of members of her family who have worked in banks and the pressures put on ordinary bank workers to meet selling targets. It is the ordinary workers in banks who are often first in line for abuse when a scandal hits, rather than the small number of individuals at the top of those institutions who might have engaged in the reckless behaviour.

My hon. Friend the Member for Bishop Auckland (Helen Goodman) made a speech that was a tour de force. She spoke about how banking has not served her region, the north-east, particularly well. She made an interesting point about the dangers of crowdfunding, which the hon. Member for Redcar (Ian Swales) also mentioned. Her points about financial exclusion and the failures of regular banking to serve all our communities, particularly those at the lower end of the economic spectrum, were very well made, and they had not been picked up by others in the debate.

As my hon. Friend the shadow Financial Secretary set out in her opening remarks, the time has come for bonuses to be a reward for exceptional performance, not compensation for failure. With the bonus season upon us, this debate is a timely reminder that the public remain rightly angry about the many banking scandals we have seen and that they will be astonished if they see failure continue to be rewarded with sums of money so far out of the reach of working people on lower and middle incomes.

Our banking sector is vital to the UK economy. Banking and insurance make up 8% of the UK economy and provide employment for up to 2 million people. Without the banks, individual consumers would be unable to save and borrow and businesses would not have access to the finance they need in order to grow and create high-quality, well-paid jobs. The importance of banking for individuals, businesses and UK plc means that it is vital that our banking system is underpinned by the principles of fairness, trust and transparency. The next Labour Government will restore those principles to the banking sector.

Too often fundamental trust in the system has been shaken by behaviour that has been unfair, reckless, unethical or a combination of all three, and 2014 was a

25 Feb 2015 : Column 372

record year for fines in the City of London. The FCA levied £1.1 billion on five banks, including HSBC and RBS, for their part in the forex fixing scandal, and four UK banks—Barclays, HSBC, RBS and Lloyds—have paid £1.5 billion in compensation for mis-selling interest rate hedging products, which we have debated on a number of occasions in the Chamber. We have also had the LIBOR and PPI mis-selling scandals. Trust and confidence have been fundamentally shaken by the recent revelations about the Swiss arm of HSBC helping its customers to avoid and evade tax. On the one hand customers have been exploited, and on the other hand the taxpayer has been ripped off.

That unacceptable state of affairs is made worse by the fact that the sector has not fulfilled some of its core functions. Banks must provide basic borrowing and saving facilities for consumers and finance for businesses so that they can either start up or grow. However, we know that net lending to business has fallen by over £55 billion since 2010. A couple of Government Members made the point that of course we do not want to see irresponsible lending and suggested that businesses are actually sitting on large cash reserves and somehow the lack of lending from banks is not a big problem.

That is clearly not the Government’s view, because they keep coming up with different schemes to try and encourage lending by banks—schemes which have, unfortunately, failed to turn the situation around in any meaningful way. I am sure Members across the House regularly meet business people in their constituency advice surgeries, who come to us with complaints that they have viable businesses looking to grow and employ more people, but they cannot get access to finance from banks. This remains a key problem, which the Government’s various schemes to try to get net lending up have unfortunately failed to resolve.

So there are huge fines for breaking rules and a failure to fulfil the core functions of the sector. Despite all this, senior employees continue to receive huge bonuses. We can all see that the current state of affairs is difficult to justify. We know that last year’s bonus round exposed the gap between pay and performance. Barclays and RBS increased their bonus pool, despite falling profits. Indeed, at Barclays we saw a fall in profits of 32%, yet the bonus pool increased by 10%. We now learn that at HSBC the chief executive will receive £7.6 million and 330 staff will receive more than €1 million each, at a time when profits are down and the tax avoidance and evasion scandal continues to rage. What are the public supposed to make of all this? Not much, I would say.

The Government for their part have failed to act fully on proposals for reform and have failed to provide answers on HSBC—

Ian Swales: Will the hon. Lady give way?

Shabana Mahmood: I am sorry, I will not because of time.

The Government have failed to provide answers on HSBC in a way that would inspire confidence and they have wasted money challenging the EU bank bonus cap. What can we do to turn this situation around? It is clear that we need to reconnect the level of pay and bonuses of some highly paid bankers with the wider performance of the banks and their wider economic contribution.

25 Feb 2015 : Column 373

A Labour Government would repeat the tax on bankers’ bonuses, which we introduced in 2009, to raise £1.5 billion to £2 billion. This tax—[Interruption.] I will come to that point in a moment for Government Members. This tax, alongside a restriction on—[Interruption.]

Madam Deputy Speaker (Mrs Eleanor Laing): Order. The hon. Lady must be allowed to finish her speech.

Shabana Mahmood: Thank you, Madam Deputy Speaker.

This tax, alongside a restriction on pension tax relief, would fund a compulsory jobs guarantee. Let me deal with the point made by hon. Members chuntering from a sedentary position. The tax would be spent only once and only for one measure—that is, our compulsory jobs guarantee. That has been the case for as long as we have had our compulsory jobs guarantee policy. I find it interesting that the only line of attack that Government Members have on the compulsory jobs guarantee is to imply, incorrectly, that the bank bonus tax is being spent more than once. It is a weak line of attack from Government Members who do not want to engage with the substance of the policy—a compulsory jobs guarantee for the long-term youth unemployed.

Only one point was made about the substance of our policy, which was about the potential scope for tax avoidance. The first outing of the bank bonus tax introduced by the Labour Government had stringent anti-avoidance measures attached to it, and we would repeat those measures to make sure that the tax was not aggressively avoided and that all the revenue that we expect to be raised will be realised in order to fund our proposals for a compulsory jobs guarantee.

Mr Graham Stuart (Beverley and Holderness) (Con): Will the hon. Lady give way?

Shabana Mahmood: Certainly not to a Member who has just come in for the winding-up speeches, if I may say so.

A measure such as I have described is clearly needed because we know that the latest labour force survey data show that youth unemployment was at 740,000 in the three months to December 2014. To Government Members who try to take comfort from some of the welcome decreases that we have seen in constituencies across the country, as though that means that everything is hunky-dory, I would say that 740,000 young people unemployed are 740,000 too many. There is nothing to be complacent about. We need a rocket booster under our approach to long-term youth unemployment. That rocket booster will be provided by a tax on bank bonuses to fund a compulsory jobs guarantee. Government Members should examine their consciences to decide whether they think that we do in fact need strong measures to tackle the scourge of youth unemployment, and join us in the Lobby to support our motion.

We need to restore trust and accountability to the sector. I call on the House to support the motion and the need to take meaningful action to ensure that bonuses reward exceptional performance, and that where bonuses are given, they are taxed and the revenue is used to deliver the much-needed compulsory jobs guarantee.

25 Feb 2015 : Column 374

3.50 pm

The Exchequer Secretary to the Treasury (Priti Patel): I thank all Members who have contributed to this debate, which has been quite wide-ranging; it even became a debate on the north-east region at one point. I commend my hon. Friends the Members for Hexham (Guy Opperman), for Redcar (Ian Swales), for Dover (Charlie Elphicke) and for Warrington South (David Mowat) for their speeches. I particularly commend my hon. Friend the Member for Hexham, who made a very thoughtful and considered speech about the changes made by the Government through the banking reforms. He also highlighted the role of challenger banks and his own commitment to that through his work locally. He is clearly a champion not just for his constituency and region but for challenger banks, and that is to be commended.

I think it is fair to say that we all agree that the banking scandals that have emerged in the past years have been disgraceful, and we have shown that consensus during this debate. They have, without a doubt, shaken public trust in a proud British banking history, and revealed pockets of rottenness at the heart of the banking system. The country is understandably angry about the reports of practices, behaviour and conduct that have become legendary in the banking scandals of recent years.

Mr Graham Stuart: Will my hon. Friend give way?

Priti Patel: I will not because of the time, if my hon. Friend will accept that.

We can never go back to the bad old contaminated days when the culture in the banking sector was so wrong. That is why the actions taken by this Government, which were long overdue, and neglected by the previous Government, will ensure that the system and the sector never go back to those bad old days. The core action that has been undertaken to tackle misconduct has been pure reform on misconduct and clearing up remuneration. The reforms have ensured that we have the toughest remuneration regime of any major financial sector. Through the Government’s reforms, we have ensured that rotten behaviour in the sector will be punished. We have heard about criminal sanctions today.

The overall contribution of the sector is hugely important to the country’s economy, but we must ensure that we reform its reputation and conduct, and change the culture to bring probity and integrity back into a system that was challenged and flawed. Back in 2010, we had a banking system that had no connection between performance and remuneration, and that rewarded, and was dominated by, excessive risk taking. There was no accountability for losses. It was a sector where wrong practices and the wrong culture had become institutionalised, and, more disgracefully, where people who should have known better turned a blind eye and looked the other way.

Like any responsible Government, our job is to bring back measures and laws, and a regulatory framework, that were sorely lacking in the past to ensure that the financial sector regains its reputation, while stamping down on the reprehensible behaviours of the culture that the country witnessed in the past. This Government have brought in reforms, transparency, a regulatory

25 Feb 2015 : Column 375

framework, and the ability to make sure that those who did wrong would not go unpunished. We have made reckless misconduct leading to bank failure a criminal offence. We have strengthened the accountability of senior management and the powers of the regulators. We have increased choice and competition in the retail banking sector to help create a sector that genuinely puts consumers first and brings through the regulatory changes that are required.

That also means clamping down on unacceptable pay practices. We have heard plenty of references to that throughout the debate. Hon. Members spoke about remuneration in two banks in particular: RBS and Lloyds. The hon. Member for Bishop Auckland (Helen Goodman) asked for clarity on Lloyds. This week, we announced that we are getting another £500 million back for the taxpayer, which is money that we have put in and are now taking out. We can do that because, since the crisis, Lloyds has gone from failure to being a strong and profitable bank that is helping to drive the recovery. The bank contributes £238 million per year through the bank levy. It will have its bonus pool reduced this year, and we are continuing to restrict its cash bonuses to £2,000. It is absolutely right to ensure that the culture is completely reformed.

Both the hon. Lady and my hon. Friend the Member for Hexham mentioned not only challenger banks, but the issue of financial exclusion. I want to pay tribute to organisations such as challenger banks and credit unions. I spend a lot of time in my constituency of Witham at the Holdfast credit union, which does so much for those who are excluded.

Through our reforms, we are ensuring that banks that need to be punished are punished. The reforms have led to greater disclosure and transparency, and we have also reformed bonuses. We are consulting on the recommendations of the Parliamentary Commission on Banking Standards to strengthen the rules further. There is no doubt that actions speak louder than words, and we have taken action.

The EU bonus cap, which has been mentioned, would not control bankers’ pay. It would push up fixed pay, and make it difficult to claw back bankers’ earnings when things go wrong. It would weaken financial stability and ultimately make it more likely that the taxpayer, rather than the banker, paid the cost of any mistakes. Unfortunately, that has already started to happen and the cap remains fundamentally flawed, but we are willing to draw a line under the issue, and the legal challenge has been withdrawn. Instead, we are looking at other ways of building a system of pay in global banking that encourages rather than undermines responsibility.

It is fair to say that bankers got it very wrong over a number of years. Regrettably, they are still getting it wrong, and several Members mentioned HSBC. Its chief executive, who is in front of the Treasury Committee this afternoon, has apologised for the failures and errors, which have been pushed out into the public domain. However, the reality is that the Government have taken action to sort out the mess.

The job is not over. We must continue to be firm in working with the regulators to stamp out malpractice. We should continue down the path we have set: linking pay and performance; making sure that failure is not rewarded; and ensuring accountability by our most senior managers. We should be proud of being the toughest major financial centre in the world on remuneration,

25 Feb 2015 : Column 376

but we should also be careful not to get carried away with the rhetoric and damage the competitiveness of one of this country’s most prized economic assets.

This Government have set the sector back on the right path, so I urge hon. Members to reject the Labour party’s motion. As Opposition Members have pointed out, the motion refers to job guarantees, but the best guarantee for jobs is to stick to the Government’s long- term economic plan, under which youth unemployment and unemployment have declined.

Question put.

The House divided:

Ayes 234, Noes 308.

Division No. 163]


3.58 pm


Abbott, Ms Diane

Abrahams, Debbie

Ainsworth, rh Mr Bob

Alexander, rh Mr Douglas

Alexander, Heidi

Ali, Rushanara

Allen, Mr Graham

Anderson, Mr David

Ashworth, Jonathan

Austin, Ian

Bailey, Mr Adrian

Bain, Mr William

Balls, rh Ed

Banks, Gordon

Barron, rh Kevin

Beckett, rh Margaret

Begg, Dame Anne

Benn, rh Hilary

Benton, Mr Joe

Berger, Luciana

Betts, Mr Clive

Blears, rh Hazel

Blenkinsop, Tom

Blomfield, Paul

Blunkett, rh Mr David

Bradshaw, rh Mr Ben

Brennan, Kevin

Brown, rh Mr Gordon

Brown, Lyn

Brown, Mr Russell

Buck, Ms Karen

Burden, Richard

Burnham, rh Andy

Byrne, rh Mr Liam

Campbell, rh Mr Alan

Campbell, Mr Ronnie

Caton, Martin

Champion, Sarah

Clark, Katy

Clarke, rh Mr Tom

Coffey, Ann

Connarty, Michael

Cooper, Rosie

Corbyn, Jeremy

Crausby, Mr David

Creagh, Mary

Creasy, Stella

Cryer, John

Cunningham, Alex

Cunningham, Mr Jim

Cunningham, Sir Tony

Curran, Margaret

Dakin, Nic

Danczuk, Simon

Darling, rh Mr Alistair

Davidson, Mr Ian

Davies, Geraint

De Piero, Gloria

Denham, rh Mr John

Dobson, rh Frank

Dodds, rh Mr Nigel

Donaldson, rh Mr Jeffrey M.

Donohoe, Mr Brian H.

Doran, Mr Frank

Doughty, Stephen

Dowd, Jim

Doyle, Gemma

Dromey, Jack

Dugher, Michael

Durkan, Mark

Eagle, Ms Angela

Eagle, Maria

Edwards, Jonathan

Efford, Clive

Ellman, Mrs Louise

Esterson, Bill

Evans, Chris

Farrelly, Paul

Field, rh Mr Frank

Fitzpatrick, Jim

Flello, Robert

Flint, rh Caroline

Flynn, Paul

Fovargue, Yvonne

Francis, Dr Hywel

Gardiner, Barry

Gilmore, Sheila

Glindon, Mrs Mary

Godsiff, Mr Roger

Goodman, Helen

Greatrex, Tom

Green, Kate

Greenwood, Lilian

Gwynne, Andrew

Hamilton, Mr David

Hamilton, Fabian

Hancock, Mr Mike

Hanson, rh Mr David

Harman, rh Ms Harriet

Harris, Mr Tom

Havard, Mr Dai

Healey, rh John

Hendrick, Mark

Hepburn, Mr Stephen

Hermon, Lady

Hillier, Meg

Hilling, Julie

Hodge, rh Margaret

Hodgson, Mrs Sharon

Hoey, Kate

Hood, Mr Jim

Hopkins, Kelvin

Hosie, Stewart

Howarth, rh Mr George

Hunt, Tristram

Jackson, Glenda

James, Mrs Siân C.

Jamieson, Cathy

Jarvis, Dan

Johnson, rh Alan

Johnson, Diana

Jones, Graham

Jones, Mr Kevan

Kane, Mike

Kaufman, rh Sir Gerald

Keeley, Barbara

Kendall, Liz

Khan, rh Sadiq

Lammy, rh Mr David

Lavery, Ian

Lewell-Buck, Mrs Emma

Long, Naomi

Love, Mr Andrew

Lucas, Caroline

Lucas, Ian

MacNeil, Mr Angus Brendan

Mactaggart, Fiona

Mahmood, Mr Khalid

Mahmood, Shabana

Malhotra, Seema

Mann, John

Marsden, Mr Gordon

McCann, Mr Michael

McCarthy, Kerry

McClymont, Gregg

McDonagh, Siobhain

McDonald, Andy

McDonnell, Dr Alasdair

McDonnell, John

McFadden, rh Mr Pat

McGovern, Alison

McGovern, Jim

McGuire, rh Dame Anne

McInnes, Liz

McKechin, Ann

McKenzie, Mr Iain

Meacher, rh Mr Michael

Meale, Sir Alan

Mearns, Ian

Miliband, rh Edward

Mitchell, Austin

Moon, Mrs Madeleine

Morden, Jessica

Morrice, Graeme


Morris, Grahame M.


Mudie, Mr George

Munn, Meg

Murphy, rh Mr Jim

Murray, Ian

Nash, Pamela

O'Donnell, Fiona

Onwurah, Chi

Osborne, Sandra

Owen, Albert

Paisley, Ian

Pearce, Teresa

Pound, Stephen

Powell, Lucy

Qureshi, Yasmin

Raynsford, rh Mr Nick

Reed, Mr Jamie

Reed, Mr Steve

Reeves, Rachel

Reynolds, Emma

Ritchie, Ms Margaret

Robertson, Angus

Robertson, John

Robinson, Mr Geoffrey

Rotheram, Steve

Roy, Mr Frank

Roy, Lindsay

Ruane, Chris

Ruddock, rh Dame Joan

Sarwar, Anas

Sawford, Andy

Seabeck, Alison

Shannon, Jim

Sharma, Mr Virendra

Sheerman, Mr Barry

Sheridan, Jim

Shuker, Gavin

Skinner, Mr Dennis

Slaughter, Mr Andy

Smith, Angela

Smith, Owen

Spellar, rh Mr John

Straw, rh Mr Jack

Stringer, Graham

Sutcliffe, Mr Gerry

Tami, Mark

Thomas, Mr Gareth

Thornberry, Emily

Timms, rh Stephen

Trickett, Jon

Turner, Karl

Twigg, Derek

Twigg, Stephen

Umunna, Mr Chuka

Vaz, rh Keith

Vaz, Valerie

Walley, Joan

Weir, Mr Mike

Whiteford, Dr Eilidh

Whitehead, Dr Alan

Williams, Hywel

Williamson, Chris

Wilson, Phil

Wilson, Sammy

Winterton, rh Ms Rosie

Wishart, Pete

Woodcock, John

Woodward, rh Mr Shaun

Wright, David

Wright, Mr Iain

Tellers for the Ayes:

Bridget Phillipson


Susan Elan Jones


Adams, Nigel

Afriyie, Adam

Aldous, Peter

Amess, Sir David

Andrew, Stuart

Arbuthnot, rh Mr James

Bacon, Mr Richard

Baker, rh Norman

Baker, Steve

Baldry, rh Sir Tony

Baldwin, Harriett

Barclay, Stephen

Barker, rh Gregory

Baron, Mr John

Barwell, Gavin

Bebb, Guto

Beith, rh Sir Alan

Bellingham, Mr Henry

Benyon, Richard

Beresford, Sir Paul

Bingham, Andrew

Binley, Mr Brian

Blackman, Bob

Blackwood, Nicola

Blunt, Crispin

Boles, Nick

Bone, Mr Peter

Bradley, Karen

Brady, Mr Graham

Brake, rh Tom

Bray, Angie

Brazier, Mr Julian

Bridgen, Andrew

Brine, Steve

Brokenshire, James

Brooke, rh Annette

Browne, Mr Jeremy

Bruce, rh Sir Malcolm

Buckland, Mr Robert

Burley, Mr Aidan

Burns, Conor

Burrowes, Mr David

Burstow, rh Paul

Burt, rh Alistair

Byles, Dan

Carmichael, rh Mr Alistair

Carmichael, Neil

Cash, Sir William

Chishti, Rehman

Chope, Mr Christopher

Clappison, Mr James

Clark, rh Greg

Clifton-Brown, Geoffrey

Coffey, Dr Thérèse

Collins, Damian

Cox, Mr Geoffrey

Crabb, rh Stephen

Crockart, Mike

Crouch, Tracey

Davies, David T. C.


Davies, Glyn

Davies, Philip

Davis, rh Mr David

de Bois, Nick

Dinenage, Caroline

Djanogly, Mr Jonathan

Dorries, Nadine

Doyle-Price, Jackie

Drax, Richard

Duncan, rh Sir Alan

Duncan Smith, rh Mr Iain

Dunne, Mr Philip

Ellis, Michael

Ellison, Jane

Ellwood, Mr Tobias

Elphicke, Charlie

Evans, Graham

Evans, Jonathan

Evans, Mr Nigel

Evennett, Mr David

Fabricant, Michael

Fallon, rh Michael

Farron, Tim

Featherstone, rh Lynne

Field, Mark

Foster, rh Mr Don

Fox, rh Dr Liam

Francois, rh Mr Mark

Freer, Mike

Fullbrook, Lorraine

Fuller, Richard

Gale, Sir Roger

Garnier, Sir Edward

Garnier, Mark

Gauke, Mr David

George, Andrew

Gibb, Mr Nick

Gillan, rh Mrs Cheryl

Glen, John

Goodwill, Mr Robert

Gove, rh Michael

Graham, Richard

Grant, Mrs Helen

Gray, Mr James

Grayling, rh Chris

Green, rh Damian

Grieve, rh Mr Dominic

Griffiths, Andrew

Gummer, Ben

Gyimah, Mr Sam

Hague, rh Mr William

Halfon, Robert

Hames, Duncan

Hammond, Stephen

Hancock, rh Matthew

Hands, rh Greg

Harper, Mr Mark

Harris, Rebecca

Hart, Simon

Harvey, Sir Nick

Haselhurst, rh Sir Alan

Hayes, rh Mr John

Heald, Sir Oliver

Heaton-Harris, Chris

Hemming, John

Henderson, Gordon

Hendry, Charles

Herbert, rh Nick

Hoban, Mr Mark

Hollingbery, George

Hollobone, Mr Philip

Holloway, Mr Adam

Hopkins, Kris

Horwood, Martin

Howarth, Sir Gerald

Howell, John

Hughes, rh Simon

Hunt, rh Mr Jeremy

Hunter, Mark

Jackson, Mr Stewart

James, Margot

Javid, rh Sajid

Jenkin, Mr Bernard

Jenrick, Robert

Johnson, Gareth

Jones, Andrew

Jones, rh Mr David

Jones, Mr Marcus

Kawczynski, Daniel

Kelly, Chris

Kennedy, rh Mr Charles

Kirby, Simon

Kwarteng, Kwasi

Lamb, rh Norman

Lancaster, Mark

Lansley, rh Mr Andrew

Latham, Pauline

Laws, rh Mr David

Leadsom, Andrea

Lee, Jessica

Lee, Dr Phillip

Leech, Mr John

Leigh, Sir Edward

Leslie, Charlotte

Letwin, rh Mr Oliver

Lewis, Brandon

Lewis, Dr Julian

Liddell-Grainger, Mr Ian

Lilley, rh Mr Peter

Lloyd, Stephen

Lopresti, Jack

Loughton, Tim

Luff, Sir Peter

Lumley, Karen

Macleod, Mary

Main, Mrs Anne

Maynard, Paul

McCartney, Jason

McCartney, Karl

McIntosh, Miss Anne

McLoughlin, rh Mr Patrick

McVey, rh Esther

Menzies, Mark

Metcalfe, Stephen

Miller, rh Maria

Mills, Nigel

Milton, Anne

Mitchell, rh Mr Andrew

Moore, rh Michael

Mordaunt, Penny

Morgan, rh Nicky

Morris, Anne Marie

Morris, David

Morris, James

Mosley, Stephen

Mowat, David

Mulholland, Greg

Mundell, rh David

Munt, Tessa

Murray, Sheryll

Murrison, Dr Andrew

Neill, Robert

Newmark, Mr Brooks

Nokes, Caroline

Norman, Jesse

Nuttall, Mr David

O'Brien, rh Mr Stephen

Offord, Dr Matthew

Ollerenshaw, Eric

Opperman, Guy

Ottaway, rh Sir Richard

Parish, Neil

Patel, Priti

Paterson, rh Mr Owen

Pawsey, Mark

Penning, rh Mike

Penrose, John

Percy, Andrew

Perry, Claire

Phillips, Stephen

Pickles, rh Mr Eric

Pincher, Christopher

Prisk, Mr Mark

Pritchard, Mark

Pugh, John

Raab, Mr Dominic

Randall, rh Sir John

Redwood, rh Mr John

Rees-Mogg, Jacob

Reevell, Simon

Reid, Mr Alan

Rifkind, rh Sir Malcolm

Robathan, rh Mr Andrew

Robertson, rh Sir Hugh

Robertson, Mr Laurence

Rosindell, Andrew

Rudd, Amber

Ruffley, Mr David

Russell, Sir Bob

Sandys, Laura

Scott, Mr Lee

Selous, Andrew

Sharma, Alok

Shelbrooke, Alec

Shepherd, Sir Richard

Simmonds, rh Mark

Simpson, Mr Keith

Skidmore, Chris

Smith, Chloe

Smith, Henry

Smith, Sir Robert

Soames, rh Sir Nicholas

Soubry, Anna

Spelman, rh Mrs Caroline

Spencer, Mr Mark

Stanley, rh Sir John

Stephenson, Andrew

Stevenson, John

Stewart, Bob

Stewart, Iain

Stewart, Rory

Streeter, Mr Gary

Stride, Mel

Stuart, Mr Graham

Stunell, rh Sir Andrew

Sturdy, Julian

Swales, Ian

Swayne, rh Mr Desmond

Swinson, Jo

Syms, Mr Robert

Tapsell, rh Sir Peter

Thornton, Mike

Timpson, Mr Edward

Tomlinson, Justin

Tredinnick, David

Truss, rh Elizabeth

Turner, Mr Andrew

Tyrie, Mr Andrew

Uppal, Paul

Vaizey, Mr Edward

Vara, Mr Shailesh

Vickers, Martin

Walker, Mr Charles

Walker, Mr Robin

Wallace, Mr Ben

Walter, Mr Robert

Ward, Mr David

Watkinson, Dame Angela

Weatherley, Mike

Webb, rh Steve

Wharton, James

Wheeler, Heather

White, Chris

Whittaker, Craig

Whittingdale, Mr John

Willetts, rh Mr David

Williams, Mr Mark

Williams, Roger

Williams, Stephen

Williamson, Gavin

Willott, rh Jenny

Wilson, Mr Rob

Wollaston, Dr Sarah

Wright, rh Jeremy

Wright, Simon

Yeo, Mr Tim

Young, rh Sir George

Zahawi, Nadhim

Tellers for the Noes:

Damian Hinds


Lorely Burt

Question accordingly negatived.

25 Feb 2015 : Column 377

25 Feb 2015 : Column 378

25 Feb 2015 : Column 379

25 Feb 2015 : Column 380

David T. C. Davies (Monmouth) (Con): On a point of order, Mr Speaker. On 3 February, during the debate on mitochondrial DNA, I deliberately abstained from the vote because I did not feel that I fully understood all the arguments, yet I was recorded as having been in the Aye Lobby. I took the matter up afterwards with the officials, and received a full apology and explanation. I said that I was quite happy to let the matter rest there, despite the fact that some of my constituents had contacted me and questioned the veracity of what I had said to them.

I was therefore perturbed when on Monday, in an equally controversial and free vote on abortion during the Serious Crime Bill, I acted as one of the Tellers for the Ayes, being a strong supporter of the amendment, yet I was recorded as having voted in the No Lobby on Division 157. I took the matter up again and have been furnished with an explanation that I have forwarded to you, Mr Speaker, since it is a slightly more complicated scenario. As constituents have contacted me, I first wish to put on the record the way that I voted. Secondly, with the greatest of respect, I wish to say that it is very important that every single vote by Members in this House is recorded correctly.

Mr Speaker: I am grateful to the hon. Gentleman for his point of order and for his characteristic courtesy in giving me advance notice of its likely content. I understand his frustration. He has placed the facts on the record and I am informed that the Hansard record has also now been corrected. He correctly pointed out that he has received a comprehensive explanation, which he understands—also correctly—has been copied to me. That explanation, very properly, is comprehensive, and occupies a page and a half of A4. The House will be relieved to know that I do not intend to read it out, but suffice it to say that I believe confidence can be placed in it. Officials of this place put great importance on recording and publishing Divisions accurately, and I am informed that they will redouble their efforts to minimise such errors. The hon. Gentleman has properly drawn attention to this matter. He is also a reasonable man and I hope that he will accept that explanation. We will leave it there for now.

25 Feb 2015 : Column 381

Members’ Paid Directorships and Consultancies

4.15 pm

Mr Speaker: I inform the House that I have selected the amendment in the name of the Prime Minister. A manuscript amendment to the Opposition motion on paid directorships and consultancies and hon. Members has been tabled by the hon. Member for Leyton and Wanstead (John Cryer) to add at the end of the motion the words, “or be paid trade union officials.”

As I have said, I have already selected the amendment in the name of the Prime Minister. Under Standing Order No. 31, when a Minister moves an amendment on an Opposition day, the question before the House is that the original words stand part of the question. It is on that motion that debate proceeds and, at the end, the House is invited to vote on it. If the Opposition motion is agreed to by the House, it becomes a resolution of the House. If the Opposition motion is disagreed to by the House, the Standing Order obliges the Chair to put forthwith the question on the amendment moved by a Minister. If that is agreed to, the Chair will declare the main question, as amended, to be agreed to.

The situation is, therefore, that once a Minister has moved an amendment to an Opposition motion on an Opposition day, it is not possible for a second amendment, whether manuscript or not, to the Opposition motion to be put to the House. Assuming that the Leader of the House will move his amendment, I cannot therefore select the manuscript amendment.

Ms Angela Eagle (Wallasey) (Lab): On a point of order, Mr Speaker, in the light of your ruling. The manuscript amendment was tabled by my hon. Friend the Member for Leyton and Wanstead (John Cryer) in response to something that the Prime Minister said, in Prime Minister’s questions, that he wanted to happen. If the Leader of the House were to withdraw or not move his amendment to the motion, would it then be possible under Standing Order No. 31 for the manuscript amendment tabled by my hon. Friend to be moved?

Mr Speaker: I can confirm that if the Leader of the House were to decide not to move his amendment, it would be open to me to decide whether to select the manuscript amendment. That is indeed the factual position. We should now proceed with the debate.

4.18 pm

Ms Angela Eagle: I beg to move,

That this House believes that, as part of a wider regulatory framework for hon. Members’ second jobs, from the start of the next Parliament no hon. Members should be permitted to hold paid directorships or consultancies.

I wonder whether the Leader of the House could indicate—he could even shout over the Dispatch Box—before I begin my speech whether, in the light of the attempts by the new chair of the parliamentary Labour party to give the Prime Minister what he said he wanted at Prime Minister’s questions today, it is his intention not to move his amendment to today’s motion.

The First Secretary of State and Leader of the House of Commons (Mr William Hague): I will most certainly move the Government amendment today. It is an excellent

25 Feb 2015 : Column 382

amendment. It is not my role to facilitate the Opposition’s making up their policy as they go along throughout the afternoon.

Ms Eagle: I want to make it clear that we are actually trying to facilitate what the Prime Minister said he wanted during Prime Minister’s questions. We are not making up our policy as we go along; we are trying to include all views in it. It is in that spirit that I want to open the debate and move the motion in the name of the Leader of the Opposition, which proposes that this House bans MPs from holding paid directorships or consultancies.

Philip Davies (Shipley) (Con): Will the hon. Lady give way?

Ms Eagle: Let me finish my first sentence. If our manuscript amendment is accepted, the motion would also ban paid trade union officials. The public deserve to be safe in the knowledge that every Member of Parliament works and acts in the interests of their local constituents, and not in the interests of anyone paying them.

Gregory Barker (Bexhill and Battle) (Con): Will the hon. Lady give way?

Ms Eagle: Let me make a little bit of progress and then I will give way.

I note that, unusually, the Government have tabled an amendment that simply restates the status quo and would completely obliterate the Opposition motion. I intend to deal with all that, but first I want to take a few minutes to deal with the circumstances in which the House of Commons finds itself, and argue that the time has come to make a decisive break with the status quo on Members’ remunerated interests. I believe the current situation has become untenable.

I do not intend to talk about the detail of what was revealed in the “Dispatches” programme on Monday. I think we should concentrate in this debate on developing a solution to this recurring problem. Those events are being dealt with by the independent Parliamentary Commissioner for Standards, and that investigatory process must take its course, although that I note that the court of public opinion has already pretty firmly made up its mind. If the rules were clear and easy to follow, rather than riddled with grey areas and open to endless convenient interpretation, perhaps we would not find ourselves repeatedly having to deal with newspaper headlines such as the ones we have witnessed once more this week. It is undeniably true that these headlines bring this place into disrepute, as far as voters are concerned. Theirs is the opinion, I believe, that we must take the most seriously. They are, after all, the people we have been sent here to represent.

Philip Davies: I just wondered on what basis the Leader of the Opposition thought he was an authority on being a world-leading constituency MP. He happens to be my mum’s MP and the MP for the area in which I was born and brought up. It happens to be the consensus of opinion there that he does not really care about Doncaster. He is hardly ever there. In fact, he is known locally as Ed Moribund. Why should those of us who work hard in our constituencies week in, week out take any lessons from the Leader of the Opposition on what it takes to be an effective constituency MP?