Financial Services Sector Must Regain The Trust Of The British People

Stephen Kinnock (Aberavon) (Lab): It is a pleasure to serve under your chairmanship, Mr Stringer. I congratulate my hon. Friend the Member for Ealing North (Stephen Pound) on his inspiring and passionate speech. The image he gave towards the end of his speech of Al Pacino playing Arthur Scargill will live with me for the rest of the day.

 

Westminster Hall

Stephen Kinnock (Aberavon) (Lab): It is a pleasure to serve under your chairmanship, Mr Stringer. I congratulate my hon. Friend the Member for Ealing North (Stephen Pound) on his inspiring and passionate speech. The image he gave towards the end of his speech of Al Pacino playing Arthur Scargill will live with me for the rest of the day.

Before I start, I must declare two interests: I am the Parliamentary Private Secretary to the shadow Secretary of State for Business, Innovation and Skills, my hon. Friend the Member for Wallasey (Ms Eagle), and in a previous life I worked for the World Economic Forum, many of whose members were FTSE 500 companies. In fact, my experience should reassure the City and our friends in the financial services sector that I am not here to attack them; on the contrary I come here today with their best interests at heart.

We all remember the events that led up to the collapse of Lehman Brothers and the tumultuous events of the ensuing months and years—events that changed the course of history and caused many of the troubles that the world faces today: the sovereign debt crisis, chaos in the eurozone and the freezing of public and private sector investment. A sluggish economy with an uncertain future means that many who have been worst hit want to see “the bankers”, as they are characterised, punished. People feel that the law is broken and that those who broke it have been let off scot-free.

Cool heads have prevailed and blanket retribution has not been applied, which is a good thing, but the Government now seem to have swung far too far in the other direction, towards total and complete inaction, with the odd knighthood stripped but little more to show than that.

The City and the financial services sector need to be held accountable, for their own good as much as for the public’s, and our common interest should now be to rebuild trust. Right now, trust levels are at rock bottom. According to the Edelman Trust Barometer, financial services is the least trusted industry worldwide. Almost 60% of the British public rates the banking industry’s performance as poor or very poor. That is not sustainable if we want the City to carry on thriving. In fact, if we break the figures down, we see that the City’s trust score is artificially inflated by higher levels of trust in retail banks, while of those polled only 18% trust investment bankers and only 12% trust fund managers.

In the light of such a fundamental breakdown in confidence, hon. Members can imagine how pleased I was to read the following paragraph in the Conservative party’s 2015 manifesto:

“We are also making it a crime if companies fail to put in place measures to stop economic crime, such as tax evasion, in their organisations and making sure that the penalties are large enough to punish and deter.”

To Labour Members, that was music to our ears, so the Government’s recent decision to backtrack on corporate liability was all the more disappointing and puzzling. I am concerned that, in backtracking on that vital manifesto pledge, Ministers will have opened themselves up to suggestions—totally unfounded, of course—that they are acting on the demands of a number of those who donate large sums of money to the Conservative party. I urge the Minister to dispel those nasty rumours.

The Conservatives’ courageous and correct manifesto commitment had teeth and was a wholly proportionate response to the fact that fraudulent activity increased by 22% in the first half of 2015 compared with the first half of 2014. That is not good for our financial security or for the future of an industry that fundamentally requires public trust and backing more than ever before. Despite promises to the contrary, there have been no criminal sanctions for reckless management, nor have we seen any sign of the much touted rule that bars managers of failed banks from running other companies.

I want the City to succeed, because it is vital to our economy, but I am concerned that the Government are too short-sighted to see what real, long-term, sustainable success means. Success means rebuilding trust and changing how the City is perceived. In closing, therefore, I would like to make a number of recommendations on smart regulation.

First, the Government must act on their own manifesto and enforce corporate liability. Criminal sanctions for bad management are almost universally supported by the public and are key to establishing a new corporate culture based on transparency. Secondly, the Government must act on the Treasury’s “UK national risk assessment of money laundering and terrorist financing” by cracking down on professional enablers in the legal and accountancy sector. Thirdly, they must get serious about investing in the tools and technology necessary to keep pace with these criminals.

Labour Members want only to see a thriving financial services sector. For the sector to thrive and prosper, it must regain the trust of the British people and reclaim its licence to operate. That is why the measures in the Conservative party manifesto were so welcome, and why it is vital that they are urgently incorporated into law. It is absolutely right to be pro-business, but it is wrong to be pro-business as usual.