My Lords, I, too, congratulate the right reverend Prelate the Bishop of St Albans on introducing this debate, which he did by emphasising the most challenging aspect of the world of finance that the nation has to face; that is, a culture that the past decade has revealed to be most difficult to defend. I refer not just to the extraordinary issues surrounding the financial crash in 2007-08 but, subsequent to that, a number of instances where banking behaviour has been far from publicly acceptable.
I welcome the noble Lord, Lord Bethell, to this debate and look forward to his contribution. The number of Ministers that I have had as opposing forces on the Front Bench is almost into double figures. Each one has made a significant contribution, but, like other Members today, I want particularly to thank the noble Lord, Lord Young, for his all-too-brief period as Treasury spokesman. He identified the issues well, defended the Government’s position—often defending the indefensible—and performed with such wit and insight that we all appreciated his contributions.
This is a challenging debate about a very difficult area. The Government have to face up to the failures in the financial system and in the City. That was clearly identified by the noble Baroness, Lady Bowles, who went into considerable detail on just what needs to be corrected. The City of course will be expected by the governing party to provide a fair degree of financial support for the Conservative Party in the general election whenever that occurs, so we have to assume that nothing is imminent as far as a response to the banking problems is concerned; nor is that possible in the long run without a definitive change in government attitude, which has not been apparent during the past decade. We have all seen those instances where banks have been guilty of conduct which is quite indefensible.
After the great crash and the staggeringly expensive bailout by taxpayers of several of our leading banks, the public clearly expected change in both action and —as both right reverend Prelates drew to our attention—culture in the financial system, but they have lost trust not only in the capacity for effective action in many aspects of the financial system but in its morality, wondering whether it is not devoid of morality altogether, other than that of increasing profits for the few.
There has been only disappointment in the decade during which the Conservatives and, before that, the coalition have been in power. The banking commission, which reported in 2013, identified some clear priorities for reform. One substantial demand was for the establishment of a public inquiry, about which we have heard precious little since. The Government have effectively ignored that demand and made only limited responses to the scandal of the Royal Bank of Scotland, which did such damage to small and medium-sized enterprises. Nor was prompt and effective action taken during the HBOS Reading scandal.
Toxic culture is the background to these kinds of activities by major banks. It has persisted and allowed systemic failure to occur. Even Conservative voices in the House of Commons have expressed the view that the City seems to be devoid in many quarters of honour and decency. There is enough evidence for us all to be worried about that. It is of course the backdrop to the shameful episode in British banking which we have seen over the last decade and a half and which the right reverend Prelate the Bishop of Birmingham described so accurately in his opening speech.
It seems that in the past decade, the banking sector has learned little from the 2007-08 financial crash. The noble Baroness, Lady Coussins, identified what it could learn, but there has not been much apparent action on its part. I agree with her that we need to educate our public to improve their defences against action by financial elements which may be seeking on occasion to take advantage of them, but that is quite a long-term problem.
The public have also been shocked by the banks’ reduction of significant services, closing branches and ATMs so that many people in rural areas are many miles from their nearest branch and cannot take advantage of the services which ought to be available to them. On the issue of banking failures, the remedy, as demonstrated by the difficulties of small businesses, is to go to court, but the resources available to the mighty banks seem to triumph over that which a small enterprise can command. There is palpably a need for greater balance in this area.
Today’s debate focuses not only on bank failures but on the wider financial system. One extraordinary thing in recent years has been that the four big accounting firms, which take such a high percentage of the business in finance, are often criticised for failure. It is extraordinary that Deloitte, for instance, having been criticised for its part in inadequate accountancy in crucial areas, is handing out million-pound bonuses to its partners this year—colossal rewards in circumstances where Deloitte has in fact been failing.
One significant proposal of the commission was to set up a public inquiry. My party is fully committed to this proposal and believes the public demand that corruption and immoral practices in the industry should be fully exposed. We have to change the culture which underpins action in the City. This will help to improve not just culture but governance, and will perhaps bring some morality to the levels of remuneration in the industry. We have called on the Government to act and have pledged to do so when we form the next Government, whenever that might be.