First Day

Part of Debate on the Address – in the House of Commons at 7:02 pm on 6th May 1992.

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Photo of Frank Cook Frank Cook , Stockton North 7:02 pm, 6th May 1992

I must make it plain to the hon. Gentleman: I have just said that I will not give way. Is that understood?

I have already had the considerable pleasure of offering you, Mr. Deputy Speaker, congratulations personally. I should like to place on record my very best wishes for your future success and efficacy in the post that you occupy. I hope that you have a long and effective period of tenure.

The Gracious Speech contains many matters with which we can take issue, and we have a further five and a bit days to discuss it. Besides thanking you, Mr. Deputy Speaker, for allowing me to catch your eye this evening, I should like to express my regret that I cannot be here when we divide on the Gracious Speech. Sadly, the hardships of the office that we hold in this House require me to be in Italy from Sunday to Wednesday of next week and then to pass on rapidly to Canada. I beg the sympathy of the House when I undergo those tests of tenacity.

I could be here for a fortnight discussing many of the issues raised, but I wish to raise specifically the statement in the Gracious Speech that Her Majesty's Government will promote sound finance and budgetary discipline. I shall make two references under this heading.

The first subject has already been introduced by my hon. Friend the Member for Barnsley, West and Penistone (Mr. Clapham), who made an excellent maiden speech, and was touched on by the hon. Member for Bedfordshire, South-West (Mr. Madel). I refer to the question of pension funds. No one would disagree with the statement that Mirror Group employees and those retired from Mirror Group employment have suffered a hideous form of treachery. It is a source of regret to me that no comment is made in the Gracious Speech on the Government's intention to take an active interest in resolving that pension fund problem.

The matter goes further than that. The whole question of property rights with regard to surplus funds generated by pension funds causes great concern. In the past, several pension funds have assessed the surplus moneys generated by their activities and decided to cream them off and apply them in ways as yet unspecified. We have been unable to determine the manner in which they have been disposed of.

As a member of the national executive of my union I often took part in negotiations on behalf of my fellow members when pension conditions and improvements to pension schemes were negotiated, discussed and settled as a form of deferred wage increase. The maturation of the moneys that were agreed and set aside on those occasions form the property of the members and other beneficiaries under the scheme. To take the moneys and apply them in any other way is a serious form of defalcation. This major question needs resolution. If the Government are not prepared to state an opinion of their own volition, the matter should be subject to judicial review. I hope that the Government will treat the matter seriously and hand it over expeditiously to a judicial inquiry.

My second question bears on yet another form of moral credit rating for finance houses, but in this instance I am referring to banking. It is not only the instance of BCCI which questions the whole trustworthiness of banks at this stage in the 20th century. Other serious questions need to be asked and effectively answered. I am talking about whose interests the banks serve. Does a bank serve the interests of its customers or those of its shareholders? In a wide range of instances the interests of the one do not coincide with the interests of the other. Let me give the House an example and I shall try not to be too long with it.

I shall describe a scenario in which a bank engages in business with another two companies, one of which is a major oil company and the other an electronics company. The three companies form a joint independent company, which does not stand on its own but is funded by the three partners in equal amounts. In competition with other companies, that joint company secures a licence from the Department of Trade and Industry allowing it to operate a telecom network. As that telecom network is not well known, it engages the services of an advertising agency. The advertising agency is given a fixed-term contract with fixed fees, to terminate in 1993. It is required to produce a logo and a registered mark to help the marketing and a marketing strategy so that the operation of the telecom network will be successful.

The relationship continues for some time until the three partners—the bank, the oil company and the electronics company—tire of the toil that they have created and decide that they want to sell it on, together with the DTI telepoint licence. However, while they are looking for a buyer they stop paying the bills to the advertising agency contracted to look after their affairs. That period of default lasts for four months, during which time the advertising agency finds that it must reduce by 50 per cent. the number of its staff, which it had enhanced to service the contract. It loses its credit rating, has to increase its borrowing and reduce the salaries of all its employees. In the meanwhile, its bank reduces its overdraft facilities by a half.

After that four months period of hardship, a foreign buyer is found for the independent company. It is a Hong KongLi Ka Shing—buyer, which decides not to honour the contract with the advertising agency. It now has the intellectual property in the form of a logo, a registered mark and a marketing strategy, but refuses to pay the outstanding moneys. In the meantime, the advertising agency is still suffering considerable hardship and is being charged premium interest by its bank on the borrowing needed to keep it afloat. The outstanding money is finally paid, but no question is made of the intellectual property and no settlement is offered for the consequential loss to the advertising agency as a result of all the additional financial charges made by the bank.

The matter is complex and I apologise to the House for having gone on for so long. But the nub of the question is the matter of the bank. Not only was it a third partner in the independent company but it was also the bank offering overdraft facilities to the advertising agency. It therefore had a contractual relationship with the advertising agency while the agency was its customer. Having placed the agency in financial jeopardy, it was also charging premium rates of interest to fund that position of jeopardy. That is a serious abuse of a position of trust and it renders the bank susceptible to being termed "untrustworthy". Any bank that can conduct its affairs in that way must be questioned. I do not refer to its legal operation because I know that the legal niceties of a case can be argued and would have to be settled in court. Rather, I refer to the moral consideration and obligations, and whether banks take full regard of their responsibility to their customers as well as shareholders.

The House will appreciate that the bank, in seeking to gag its customer, which is still fighting for survival, by demanding security of £30,000 on any hearing, was engaging in practices akin to blackmail. It is rather like people entering a game of blind brag with a partner whom they know can, at any time, buy the pot and render them penniless. I remind the House that blind brag, under any rules, is illegal in this country.

What do I suggest is a sensible way to handle such a problem? I have already suggested a judicial review to examine pension funds and the disposal of their surplus cash. In this issue, nothing less than a royal commission would suffice, because the bank in question is Barclays, the oil company is Shell and the electronics company is Philips. If such highly respected companies can behave in that way with an advertising agency like Hook—not only the company but its directors' houses and the jobs of its staff were placed in severe jeopardy—it is about time that the Government put their money where their mouth lived up to their commitment on a citizens charter, and announced a royal commission on those matters.