Royal Bank of Scotland — House of Commons, 2015-11-05
Topic: Domestic Commerce
Jonathan Cruddas (Labour, Centre-left): I congratulate my hon. Friend the Member for Edmonton (Kate Osamor) on introducing this important debate and thank the Backbench Business Committee for granting time for it. My take on the motion is fairly simple: what is there not to like? It suggests that the Government should "consider suspending the further sale of its shares in the Royal Bank of Scotland" and calls for "a wider review of the UK’s financial sector", including "the case for establishing new models of banking, including regional banks." That suggests a mixed economy in the banking sector that does not simply result in a massive loss to the taxpayer—some suggest as big a hit to the public purse as £14 billion That does not seem to me to be an especially political suggestion. Indeed, organisations on the right of the political spectrum such as Civitas and ResPublica have suggested turning RBS into a network of local banks, and regulators such as Adam Posen and Martin Taylor have also suggested turning it into smaller challenger banks. The motion therefore appears sensible and not particularly political, so I find talk of abstention quite strange In my brief contribution I want to make a few points about the question of alternative ownership models. As far as I can see—my hon. Friend the Member for Edmonton pointed this out—there appears to be a distinct lack of evidence for the Government’s assertion that banks perform better when located solely within the private sector. I want to point out evidence suggesting that other ownership models—what we might term "stakeholder banks"—should have a role to play in fixing our broken banking system My basic departure point is this: as far as I can see, in justifying their policy on RBS, the Government have leaned heavily on a two-page letter from the Governor of the Bank of England, which states that "all the evidence suggests that commercial organisations are more efficient, more innovative and more effective" in the private sector, and that a privately owned banking system is "best able to allocate capital efficiently and competitively to grow jobs, investment, and income" That is pretty clear and unequivocal, so let us start with some basic questions Where is the evidence for those assertions? Neither the Government, nor the Bank has provided any. When questioned, the Minister has simply pointed back to the Governor’s letter, which appears to be a pretty lazy feedback loop. It is not really good enough when we are talking about the future of a major national asset, one of the UK’s biggest banks, with huge implications for our economy and the resilience of our financial system, and indeed our livelihoods and those of our constituents Were we to listen only to the Government, we would think that there is simply no alternative to an economy dominated by large, privately owned banks, except perhaps some kind of monolithic Government bureaucracy—a simple either/or choice between a big shareholder bank and a big state bank. However, there is a whole range of other ownership models that work in other countries, from local savings banks accountable to local communities, such as the German Sparkassen, to co-operatives, mutuals and state investment banks Actually, as far as I can see, it is the UK that is the odd one out, because it relies exclusively on shareholder-owned banks. For example, research by the New Economics Foundation has found that nearly two thirds of German bank deposits are with so-called "stakeholder banks". In France the proportion is about 50%, and in the Netherlands it is around 40%. In the UK it is just over 10%, the lowest of almost any developed economy.