Neil Parish, MP for Tiverton and Honiton, attended the Backbench Business Debate on the 24th October which considered the lack of progress made by banks and the Financial Conduct Authority on the redress scheme adopted as a result of the mis-selling of complex interest rate derivatives to small and medium businesses to be unacceptable and made the point that this lack of progress is costly and has caused further undue distress to the businesses involved.
Speaking during the debate Neil Parish said:
It is a great pleasure to see you in the Chair, Madam Deputy Speaker. I congratulate you. I also congratulate my hon. Friend Guto Bebb on opening the debate, and congratulate him and his Committee on all the work they have done.
In mythology, David felled Goliath. [Hon. Members: “It is in the Bible!”] It is in the Bible, but it is also slightly mythological. [Hon. Members: “It happened!”] If Members have absolute proof, that is fine. Anyway, I want to make a serious point. We have seen a banking sector that has used corporate lawyers and all its muscle and might to ensure that it can take on small businesses.
This is what small business is up against. People can call me cynical if they like, but much of this selling of swaps was going on in 2006 and 2007, when interest rates were 5.5%, but by 2009 they had dropped to 0.5%, and I believe that many of those banks knew that interest rates were going to fall. Why were they so keen to go out and get everybody tied up in these swaps? Under the terms of the swaps, the higher interest rate could probably be capped at around 6.9%, but if they started to fall below 4% or 3%, people immediately got clobbered for huge amounts of money. It was therefore very much in the banks’ interests to get people into these schemes. That is where I do actually say that what went on was criminal. That is why we expect our great Minister, along with the FCA, to do something about this. The fact that only 32 or 33 cases in the whole country have been dealt with is an absolute scandal.
Bob Stewart (Beckenham, Conservative): My hon. Friend referred to the Bible. Does he agree that this would be called usury or robbery in the Bible?
Neil Parish (Tiverton and Honiton, Conservative): I certainly do, and there is another word for it: theft. That is exactly what it is, because people entered into these agreements in good faith, and that brings me to another point I want to make. Throughout my business and farming career, I had a good relationship with my bank. I trusted my bank manager, and when I spoke to him or her, I expected them to give me good advice. That trust in our banks has been broken by this affair. If people in small businesses and in business generally cannot trust their bank when they want to raise finance to build up their company and employ more people, where on earth are we going to build a recovery? We are building a recovery, of course, but we could build it so much better if we could restore that trust. The FCA must do much more, so businesses can recover from this.
I have many affected businesses in my constituency, and two businesses in particular, both of which are with the Clydesdale bank. One of them is a large successful farm and the other is a hotel. They have all been put under enormous pressure and have paid enormous amounts of money, and this is stopping them expanding. One of the businesses was not given much choice about whether to take out the deal. Basically, they were told, “You either take the money with a swap, or you don’t have the money at all.” That is the kind of coercion that went on. We need to deal with this issue, because we need these businesses to prosper.
Some companies who have been sold a swap and have therefore come under enormous financial pressure have been driven into liquidation, and I suspect that, because of the wonderful financial institutions we have in this country—I am being sarcastic here—they will be snapped up at rock-bottom prices. That is all wrong, because we are talking about businesses that have worked hard for years and family businesses that have been established for generations being destroyed by this system.
It is great that we have got this second debate, and, in respect of the banks, it is great that the snail is beginning to turn into a hare, but I suspect, if we are not careful, that as soon as this debate is over it will transform back into a snail. That is why I say to the Minister that it is absolutely essential that he, along with the FCA, gets hold of the banks and makes them compensate people for what they have mis-sold and what they have done. Until that is done—until we have rectified the situation and compensated these businesses—we will not restore confidence in the banking system, which we badly need to be restored in this country. We must ensure that we move forward at an even quicker pace so that people have confidence to invest and know that if they approach their bank, they will be sold a good deal, not a pup, which is exactly what people were sold in this instance.
I look forward to hearing the Minister’s comments because I have great confidence in him and he has great experience in this sector. I have had more pain from banks than anything else. If we do not get the banking sector right, we will not get the economy right.