My Lords, I add my welcome to the noble Lord, Lord Bethell, in his new role and I look forward to working with him.
I begin by acknowledging that the banks have an important role in our society today. They do many good things—they employ more than 1 million people and pay more than £60 billion in tax annually—but, despite the many good things they do, we are also aware of the history of recent years. We are now 11 years on from the financial crash and six years on from the publication of the report by the Parliamentary Commission on Banking Standards, and it is almost three years to the day since I last secured a debate on this topic.
As I did then, I approach this subject with a certain reticence. I do not approach it as a banker and I do not pretend to understand all the technical issues; I am going to leave those to others speaking in this debate who have far more knowledge, insight and experience than I do. I sought this debate because I have witnessed first-hand some of the long-term costs of the banking crisis in communities across Bedfordshire and Hertfordshire which lie within my diocese. I have heard more than one banker say, “We’ve moved on from the crisis. We’re in a new era”. Some bankers may think that we have moved on—indeed, they may have moved on—but the effects are still being felt in many of our poorer communities, especially in the north of England and some parts of Scotland and Wales. We owe it to those who are still feeling the effects of the crisis to remember the damning indictment of the banking crisis in Changing Banking for Good:
“Banks in the UK have failed in many respects. They have failed taxpayers, who had to bail out a number of banks including some major institutions, with a cash outlay peaking at £133 billion, equivalent to more than £2,000 for every person in the UK. They have failed many retail customers, with widespread product mis-selling. They have failed their own shareholders, by delivering poor long-term returns and destroying shareholder value. They have failed in their basic function to finance economic growth, with businesses unable to obtain the loans that they need at an acceptable price”.
This was a classic case of an industry which presumed it had the right to privatise profits and nationalise losses. Since the report was published six years ago many of its recommendations have been implemented, but others have been dropped or watered down.
As we stand on the brink of Brexit, I know there are many people who will see it as an opportunity further to weaken regulation of the banking industry. I therefore believe there is an even greater need for us to explore what progress has really been made and, in particular, how we can know whether the necessary changes in culture have really been embedded across the industry. Culture is the last aspect of any organisation to change, and that is particularly true when it comes to the culture around the three most powerful of human motivations, usually summarised as money, sex and power.
With regard to money, the Christian scriptures are quite clear: the love of money is the root of all evil. In other words, money itself is neutral, but when money becomes the focus of our lives and our aspirations, we are entering dangerous territory. It is not just scripture which testifies to this. The seminal book by Professor Michael Sandel, What Money Can’t Buy: The Moral Limits of Markets, should be required reading for all who work in finance. As the most reverend Primate the Archbishop of Canterbury has said, financial services are called that for a reason: they are here to serve. They are here to enable individuals, communities and nations to flourish and thrive, but they are not an end in themselves. This resonates with the social teaching encyclicals from the Roman Catholic Church, which argue that the maximisation of shareholder value should never be the only aim of any company.
It is because money should be a servant not a master that the Church of England has been actively involved in setting up credit unions. One in my city of St Albans visits schools regularly to encourage financial literacy from the very earliest stages. As a church, we run debt advice centres all around the country. At a national and international level, the Church of England’s Ethical Investment Advisory Group has helped the Church Commissioners, the Church of England Pensions Board and the CBF Church of England Funds to engage with large companies on levels of remuneration. Nevertheless, we cannot leave it to all sorts of people and charities to deal with this alone: there is still a vital role for government to play if we are to ensure that we do not have another financial crisis. We need to ensure that we have the right laws and regulations in place to protect the most vulnerable and we should not be complacent. As recently as last January, Mark Carney, Governor of the Bank of England, warned about the high levels of leveraged loans, suggesting that they are at the same level as in 2008.
I want to ask the Minister four questions—I have given him warning of these. First, what evidence do Her Majesty’s Government have to show that the industry has indeed changed and is now regulating itself effectively? Secondly, are the rules around whistleblowing working? Will he give us the number of cases over each of the past five years? Thirdly, how can we be assured that there has, in fact, been a change in the culture of banks? How do we get hold of that most difficult and nebulous of topics? Fourthly and finally, what is the evidence that banking executives and managers are actually being held to account for their decisions? I am aware that a number of noble Lords have huge experience in this area, and I thank them for agreeing to speak in this short debate.
I look forward, as I did three years ago, to learning a great deal. I hope that this debate might be a modest contribution as we think about this vital area for our nation and our economy and look to the future during these turbulent times.