Thank you, Sir Christopher, for calling me to respond to this debate for the Opposition.
I also thank Kevin Hollinrake for securing the debate and for his work in chairing the all-party parliamentary group on fair business banking and finance, as well as for all the APPG’s continued efforts on this matter; its commitment to securing justice for victims of banking fraud is commendable and important.
The hon. Gentleman, along with some other Members—especially my hon. Friend Martin Whitfield and Jim Shannon—outlined clearly the challenges that people face in making sure that the victims of this scandal receive the redress they deserve through the current compensation scheme.
The actions of HBOS Reading and the then head of the impaired assets division and its corrupt partners were absolutely disgusting. I have read the accounts several times, but each time I reread the testimonies of the victims in advance of a debate such as this one it gives me a sense of rage. I find the injustices and the cynical destruction of other people’s lives unconscionable.
At a minimum, we must offer proper redress to those affected. It should not have been down to those victims to force action to be taken, but unfortunately that is not what we have heard today. Instead, we have heard about the difficulty in appealing against compensation decisions; about the lack of clarity and transparency over decisions; about documents that underpin judgments being hidden from victims; and about a fundamental lack of accountability and independence. Lloyds must explain how it plans to address those ongoing and legitimate concerns. I would like that response to be sent to the hon. Member for Thirsk and Malton and for Members present today to be copied in.
The number of contributions today, as well as their depth and detail, shows how pertinent and urgent the matter continues to be. It is important that it does not fall off the agenda, given the political situation, but I do not think it will, looking at the Members present today. We all have a responsibility to keep up the pressure to ensure that victims’ voices are heard. We are talking about much more than financial losses. Victims lost entire livelihoods, their health and, in some cases, their relationships on the basis of what happened to them.
Ten years on from the financial crisis, it is widely agreed that too many people were able to walk away from the serious damage they caused without any form of personal censure. It is clearly a good thing that the perpetrators of the fraud were brought to justice, and Thames Valley police deserves quite a lot of credit for that, as do Paul and Nikki Turner. Without securing a fair outcome for the victims, however, we have no hope of properly rebuilding trust between businesses and their banks in the long term.
Research shows that frighteningly low numbers of small businesses trust their banks to do the right thing by them, and we have to look at how we can improve that trust. We need to restore confidence that there is a level playing field for businesses when they find themselves in conflict with their banks, especially if those working at the bank have committed fraud, as was true in this case. All that makes it even more important that we agree a comprehensive package to properly address the legacy banking scandals that this country faces.
We can rebuild trust in business banking. We need a full public inquiry into all the scandals. We need an independent tribunal system for SMEs. Lastly, we need a much better and more robust system to protect and enable whistleblowing. I will briefly reiterate the case for each of those.
The first step has to be securing proper redress for SMEs that have been mistreated by their banks. Scandals such as this and RBS GRG, which we have all been present to debate in the past, have seriously dented confidence in our banking sector. That is why we have always called for a full public inquiry so that victims can get proper redress. Many colleagues in this room have argued for the same. It is not just about getting to the bottom of who was responsible for such scandals; it is about examining the wider systemic issues that allowed these events to take place. I was struck by Mr Vaizey making the point that he raised these issues 10 years ago. It is simply too important for us to sweep them under the carpet without securing the ability to say to people, “This will never happen again.”
In terms of disputes, part of the problem is definitely that the gap is too big between the Financial Ombudsman Service for individuals and the full legal process for very big firms. We have all seen the recent report from Simon Walker, alongside the response from UK Finance, arguing that an expanded Financial Ombudsman Service would be sufficient to meet that need. As the Opposition, we believe that given the severity of the damage done in such cases, we need to go further.
We support the proposals from the all-party group on fair business banking and finance to establish an independent tribunal to help create that level playing field between businesses and their banks. That is also supported by the Treasury Committee, as outlined in its report on SME finance published on
Lastly, a potential answer could lie in exploring our approach to whistleblowing in financial services in this country. We have to look at why the fraud took so long to uncover and how we can improve internal systems and processes to stop such things ever happening again. The hon. Member for Thirsk and Malton raised a specific example of how a whistleblower was treated in this case. In the US, the Dodd-Frank Act, introduced as a central piece of post-financial crisis legislation in 2010, is a demonstration of how much more robust the whistleblower protection framework could be. Whistleblowers are entitled to awards if their information leads to enforcement action. It is structured in such a way as to disincentivise false reports and to provide protection in the event of dismissal. The UK legislation, on the other hand, is much thinner. While the Financial Conduct Authority can assist whistleblowers under the Public Interest Disclosure Act 1998, that has not been enshrined in financial regulation in the way Dodd-Frank has been used in the US. There is a case for examining whether specific financial services whistleblower protection could be a starting point in seriously improving conduct in banking from the inside out.
In conclusion, if we are to restore trust in UK business banking, two outcomes must be achieved. First, we must ensure that the victims of the HBOS scandal get proper redress for the damage done to their businesses and livelihoods as a result of the appalling conduct by individuals who worked in the bank. The same is obviously true for victims of the RBS GRG scandal. The second responsibility we all share is to ensure that such a flagrant abuse of the bank and business relationship can never happen again on such a scale. The combination of a full, comprehensive public inquiry with a broad enough scope to capture the full breadth of victims, the establishment of an independent financial services tribunal and a radical rethink of how we treat whistleblowers could begin that process. The victims of this scandal were badly let down. I want to be able to stand here and say that they will all get justice and that this can never happen again.