Bankers’ Bonuses and the Banking Industry — House of Commons, 2015-02-25
Topic: Domestic Commerce
Shabana Mahmood (Labour, Centre-left): 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 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—