HC Deb 20 February 1985 vol 73 cc1119-29

Ordered, That, at this day's sitting, the Trustee Savings Banks Bill may be proceeded with, though opposed, until any hour.— [Mr. Peter Lloyd.]

Question again proposed, That the clause be read a Second time.

Mr. Randall

A matter of great concern is how the new TSB will fit into the banking system. My right hon. Friend the Member for Ashton-under-Lyne expressed his concern about a merger, and the Midland bank was keen on developing what it called the cloth cap accounts. It pushed this hard in the late 1960s and early 1970s, and is still interested in that. Similarly, it encourages student accounts, although these are not the cloth caps accounts. These are people whom they hope and expect will have substantial deposits in the future. We do not know what will happen. We do not know whether this ready-made organisation of cloth cap accounts could be sensibly absorbed into the joint stock bank arrangement, particularly bearing in mind the investment that the joint stock banks have made in their technology, networks, terminal systems, data bases and all the other stuff that is needed to provide a payments and other financial systems.

There is a big question mark, and because of the traditional background of the TSB, to which other hon. Members have referred, the people who are employed in the banks should have a say in how the organisation should develop. The only mechanism for this is through the holding of deposits. I am still a little suspicious about the possibility of a merger. I am concerned that the big institutions will come in and buy up substantial shares. There is a tremendous risk, and I know that hon. Members share my concern. Many hon. Members, particularly Labour Members, would be concerned if the Minister were to waste this opportunity to provide a broader share of ownership and decision-making in the TSB group.

The Labour party believes that the original idea that we had at the time when the Page report was produced, of a banking system that exists merely to serve people, is a laudable concept. We know that the clearing banks found it difficult to compete with the TSB group because it did not have to make a profit and did not have any shareholders. The TSB arrangement has valuable attributes and it would be sad to see them go.

I hope that the Minister and the Government will support this new clause, because the opportunity of retaining this important structure, serving the people that it does, could be lost for ever unless we provide a mechanism for sharing the management and the ownership of this group between the employees and the account holders.

Mr. Jim Craigen (Glasgow, Maryhill)

I am in favour of new clause 1 because half a loaf is better than nothing. On Second Reading I took strong objection to the whole Bill. I do not believe in making long speeches at funerals and effectively we are burying the TSB and interring the prospects of transforming it into a mutuality.

Reference has been made to the significance of the 55 per cent. initial controlling interest for depositors and staff of the TSBs. It is important to have that provision, to prevent a merger or a takeover by a domestic or a foreign bank of the trustee savings movement. It will be difficult to prevent the TSB from becoming A N other bank. Although new clause 1 aims to preserve distinctiveness in the operation of the bank, its objective is by its nature limited.

It would be useful to know the probable apportionment of the 55 per cent. shareholding among the top management and the remaining staff of the bank and depositors generally. As my hon. Friend the Member for Thurrock (Dr. McDonald) pointed out, the view of the top brass in the TSB was that it would be too much bother to deal with 7 million or 8 million depositors. This makes me wonder how other organisations and, indeed, the country are run when we consider how large the population is.

It is the view of the Government that, so far as possible, this should be a property-owning democracy and now, apparently, a bank-owning democracy too. I hope the Minister will accept the new clause; otherwise there is a danger that the shareholding possibility that is opening up as an Aladdin's cave will end up as an exclusive club for a few shareholders. I hope the Minister will tell us that he was correct all along in his interpretation that the Government were taking essentially a neutral stance. Those may not be quite his words, but I think they were the sentiments of the Treasury. The Government were distancing themselves from, dare I say, the mechinations of the powers that be in the TSBs. It was the TSB that wanted the Bill. The Government were merely the willing handmaiden in the whole process.

I hope the Minister will tell us that he is accepting the new clause because, as I said, half a loaf will at least guarantee an element — hopefully a controlling element—of depositor and employee shareholding interest in the new PLC. That is very important. I hope the Minister will put his commitment where his brief at Second Reading lay.

Mr. Austin Mitchell (Great Grimsby)

The new clause is fulfilling for the Government the intention that they said that they had in this legislation of trying to turn the Trustee Savings Bank if not into a mutual bank, which the Oppostion would like, at least into something as near a mutual bank as possible within the scope of the legislation. We are taking that intention and attempting to embody it in the legislation.

It was the intention of the Page report that the TSB should be a third force in British banking. It was the assumption that prevailed throughout the 1970s, the assumption that was dominant in the TSB itself and the assumption embodied in Labour's own legislation in 1976 that the TSB should be a mutual bank. The Government have decided that we cannot fulfil that intention with the totality that we would like, but that we can come somewhere near it, and this new clause reserving 55 per cent. of the shares for the customers and employees of the TSB, comes as near as we think we can get.

It is important to come that near, because the TSB was different, is different and should be different from the other high street banks. It is a bank run in mutual fashion, the profits of whose operation go to those who provide them—the customers. This is as near as we can get to that. It is a novel principle. It is an important principle to maintain, because the TSB has been much more like a people's bank than any other bank. It is part of the community, and that is how our amendment tries to keep it.

I also speak not only out of concern for that principle but on the basis of another very basic human emotion. I am motivated by the purest altruism and concern for my fellow man. That motive is pure, simple and unadulterated hatred of the commercial banks. They provide us at our expense with their marble halls and their sanctimonious lectures from bank managers to customers burdened by a crippling rate of interest that the banks choose to impose. They spend enormous sums to put self-congratulatory advertisements on television telling us what a marvelous job they are doing, whether the advertisements come from inside the cupboard or from the soaring spaces that the NatWest chooses to embody in its commercials. They go in for endless public relations to tell us what a marvellous job they are doing. They support Tory Members of Parliament as consultants. They provide endless sermons for customers. All these are paid for by the crippling interest rates that customers are having to carry.

The banks have been the only beneficiaries of this Government's policy of high interest rates. They have encouraged those rates to go ever higher for their own benefit and enrichment and not that of their customers. Every time there has been a threat or even a minor stirring on the exchanges against the pound sterling, there has been a Gadarene rush of banks, usually led by Barclays, to hike up interest rates and impose even more crippling burdens on their customers.

Since 1979, there have been four occasions when the banks have brought about high interest rates subsequently endorsed by the authorities, so one assumes that the banks are acting with some nod or wink from the authorities in response to exchange rate pressures. The first was in autumn 1981, the second in autumn 1982, the third in July of last year and the fourth this January. On each occasion, the use of interest rates by the banks prompted the dominant impression that they were being used not simply to convey concern about the state of the money supply or of the interest market but to shore up the pound sterling, and to do so for their own benefit.

The only beneficiaries of high interest rates are the banks themselves. They determine the high interest rates from which they are the only substantial beneficiaries. That is the approach, in a market economy, of the high street banks. There was a classic example on 7 January, when the December money supply figures were announced. The authorities were clearly relieved that sterling M3 had fallen by 0.5 per cent., bringing the annual growth rate down to the top end of the target. There was no reason for interest rates to rise. However, the clearing banks took the initiative once again and there was a Gadarene rush to raise interest rates.

That is the approach of the high street banks to our economy and the people who pay for it are their customers. The banks act directly against the interests of the nation, of anyone with an overdraft and of anyone who borrows. That is what their concern for the community amounts to. It is important that the TSB should not become just another of that crew of condottieri who are doing well out of high interest rates at the expense of their own customers.

10.15 pm

Furthermore, without the safeguards embodied in new clause 1, the TSB, as a high street bank, would be a prey to inevitable takeover bids. There are now four high street banks. The TSB would be a fifth. The competition is so intense that the TSB would be bound to be sat on or taken over. There would be bound to be some onslaught on its integrity and independence.

The TSB is in acute danger or becoming just another high street bank, pushing up interest rates and ruining British industry. The banks are notorious for their lack of concern for the basic productive capacity of this country. They lend umbrellas to people when the sun is shining —driving up the inflationary pressures by enormously increasing borrowing capacity—and then screw up the economy by taking the umbrellas back as soon as it begins to rain. We do not want the TSB to become another such bank. We want it to continue to be run in the interests of its own customers.

The banks take the people's credit and use it for the profit of the plutocrats who own them. That profit should be used, for the people who helped create it by using the bank's credit and providing it with the opportunity to extend that credit. Only if the profit returns to the customers of the bank is the principle legitimately fulfilled. We cannot keep the TSB mutual — that pass was sold by the Government, though it should have been defended—but we want to keep it as mutual as it can be within the framework of the legislation.

Mr. Peter Pike (Burnley)

Accepting new clause 1 is the only way of safeguarding the future of the TSB. I reluctantly accept that the Bill is likely to be given its Third Reading later tonight. I shall certainly vote against it, but one must face facts. Because of the majority on the Government's side, the Bill is likely to be passed.

That being so, we can only protect the future of the TSB and respect its history and traditions by ensuring that, at least in the initial stages, the staff and account holders have a majority shareholding.

The Government tell us that it is really the TSB—not the Government — that wants the Bill. Whom, at the TSB, have the Government consulted? Have the staff, down to the cashier at the local branch, been given an opportunity to express their views? Have customers been consulted? I am fairly certain that the answer to both of those questions is no, as I have seen nothing to that effect in branches in my constituency.

I worked in a bank for the first 10 years of my working life and I know something about joint stock banks. There were the big five in the 1950s and the mergers of the 1960s. I have no doubt that, if the Bill goes through and there are no safeguards to protect the TSB, it will soon be taken over. If the staff have been consulted and said that they support the Bill, my comment must be that they have not looked to their future job security. If there is a merger or a takeover, whatever the assurances, there will be branch closures and changes. In many parts of the country there are too many building societies fighting for customers in the high street, and the same is true for banks. With increasing mechanisation and changes, there will be closures.

When the Burnley building society was taken over by the Provincial building society to become the National and Provincial, assurances were given about job security for at least two years. The merger is not two years old and yet there are rumours this week that 300 jobs are to go in the Burnley area because dual head offices are no longer to be kept. I have no doubt that the same will happen with the TSB. The only way in which to protect its identity, to respect that identity and to respect local traditions is to allow staff and customers to have a majority shareholding. That will ensure that the TSB remains the TSB and does not become just another clearing bank.

10.22 pm
The Economic Secretary to the Treasury (Mr. Ian Stewart)

I welcome the opportunity for this debate. The hon. Member for Yeovil (Mr. Ashdown) referred to what I said on Second Reading. He noted, and others have accepted, that I expressed myself then, as I did in Committee, as being favourable to the idea that customers and staff of the TSBs should have the greatest practical possibility of becoming shareholders in the new public limited company. I still hold that view.

The hon. Member for Thurrock (Dr. McDonald) spoke of the history and traditions of the TSBs, which she respects, and which the hon. Member for Burnley (Mr. Pike) has just endorsed. All of us who have been involved with the Bill feel strongly about that. She drew attention to the long tradition of TSBs attending to the needs of personal customers. I am not sure that the joint stock banks should be regarded as such financial ogres as the hon. Member for Great Grimsby (Mr. Mitchell) painted them to be.

I am sure that the manner of business of TSBs is appreciated by those who have used them. They are valued and respected in the financial community as having a special place because they have a wide spread of depositors among many groups who might otherwise not have bank accounts.

The hon. Member for Great Grimsby said that the trustee savings banks were and should be different from other high street banks. I hope that they will retain a great deal of their individuality. The hon. Member for Kingston upon Hull, West (Mr. Randall) said that the trustee savings banks serve the people. I am sure that that is one of the reasons why they have been so successful. The changes that the Bill will bring about will increase, not hinder that development. A few years ago the trustee savings banks found it difficult to maintain their customer base. They were unable to offer the kind of facilities that were provided by other high street banks, but they have been successful in providing for their customers the facilities that they need. The proposals contained in the Bill should enable the trustee savings banks to improve the facilities that they offer to their customers. I accept that employees and depositors should be encouraged to hold a substantial part of the share capital when the new TSB group becomes a public limited company.

I draw the attention of hon. Members to paragraphs 7, 8, 9 and 13 of Sir John Read's letter to my right hon. Friend the Chancellor of the Exchequer which is included as an annexe to the White Paper. In his letter of 6 December Sir John Read emphasises that the issue of shares to the public would be made in a manner which will achieve wide ownership of the new TSB group among our customers and staff. He goes on to say: We are firmly set on the principle of wide ownership of our shares, with priority for our customers and staff. The question is whether it would be right to put into statutory form the specific figure of 55 per cent. Although I am in sympathy with the spirit of the new clause, I do not believe that it would be in the interests of the trustee savings banks or of a successful flotation for that figure to be spelled out.

Mr. Craigen

If the Minister is turning down the inclusion of the 55 per cent. provision in the Bill, why was Sir John Read's letter so convincing? It would be far better if Sir John Read's proposal were enshrined in the Bill rather than that one should have to interpret a letter from the chairman of the Central Board of the Trustee Savings Bank.

Mr. Stewart

I take the hon. Gentleman's point. It is one that not only he but other hon. Members have raised and I shall try to answer it. The hon. Member for Yeovil said that if I did not think that 55 per cent. was right I ought to suggest another figure. The hon. Member suggested that a figure ought to be included in the Bill as evidence of the Government's commitment to that principle.

I have considered the matter most carefully. The question falls into two parts. First, is it right that the Government should specify details relating to the issue of shares? I have come to the conclusion that it would not be right for the Government to do so. One of the reasons for that conclusion is the nature of the provisions that would have to be made. I accept what Sir John Read said in the letter. I take those assurances at face value. It is a subject which I have discussed with him at considerable length. I am sorry that the hon. Member for Thurrock received a worrying impression. It certainly is not the impression that I have received from discussions with the TSBs. It is for that reason that I said that I particularly welcome this debate.

10.30 pm

We had a lively debate in Committee on the same point. I said at the time that I thought that it was helpful that it should be on the record that there was a strong wish by those who were dealing with the Bill in Parliament that Sir John Read's expressed intentions should be carried into effect by means of the share issue. I endorse that today in the wider forum of the Floor of the House of Commons.

When we consider the provision that 55 per cent. of the shares of the group should be offered to employees and depositors in TSBs we come up against exactly the sort of problem which has convinced me that it would not be right for the Government to try to set out the precise details of the proposed issue.

Mr. Ashdown

rose—

Mr. Stewart

I shall give way, but would it not be better if I were to continue the argument?

Mr. Ashdown

I want to intervene on that particular point. The hon. Gentleman has said that he does not think it right for the Government to give figures. In Committee he said: Although it is impossible now to mention figures". — [Official Report, Standing Committee D, 31 January 1985; c. 91.] Is there not an implication there that it would be possible some day to mention figures? If he cannot honour that commitment at this point, will he tell us when he will mention figures?

Mr. Stewart

No, the hon. Gentleman has misunderstood what I said in Committee. He assumes that when I said that it was not possible a few weeks ago to state a precise figure that I might be able to do so today. The point that I made in that debate in Committee, which I readily repeat now, is that it is not possible in advance of the circumstances of the issue to establish the exact arithmetic.

Perhaps I was unwise to give way because I was about to come to the reasons why it is difficult and would not be helpful to insert a precise figure. Before I come to those points let me make a further general remark which may help the hon. Gentleman. I think that I quoted half and half in Committee as being the sort of figure that I would like to see. I shall not quibble whether it is 45, 50 or 55—something of that kind. I should like to see a substantial proportion of the shares of the issue being so allocated. I have given the range of the sort of figures that would be acceptable. But it is not right to pick on a single figure here and now regardless of the circumstances of the market, the demand for this type of share and the amount that depositors and staff will be able to provide at the time in the light of those conditions to apply for shares. If one tried to introduce a provision of the kind set out in new clause 1 the terms of the issue would be made so rigid that they could hardly be carried out.

I shall not fall back on the well-tried method of Treasury Ministers in turning down an amendment or new clause on the grounds of drafting. That would not be in the spirit of the Bill and the way in which we have discussed it. But sometimes drafting questions contain the essence of the difficulty. In this case the essence of the difficulty is contained in the fact that the way in which shares will be offered will not be that a precise number of shares will be available, neither more nor less, for depositors and staff, but that priority in application will be given to employees and staff for a certain proportion of the shareholding. The amount allocated to them will depend on the amount for which they apply and on the amount for which other potential shareholders apply.

It is possible—indeed, I should like to see this—that if a certain percentage were allocated for depositors and staff, they might also get some of the remainder. It is because we cannot determine the circumstances of the issue that I concluded that it would be wrong for the Government to set out precise conditions for the issue.

Some Opposition Members may not be convinced that that is an obstacle to accepting the new clause. The issue was raised in Committee and I have thought about it carefully. It would undoubtedly limit the freedom of action of the TSBs if a specific formula were included in the Bill. I am keen that a substantial percentage of the shareholding should go to depositors and staff, and I hope that the TSBs will encourage that. They have undertaken to grant priority and we expect that undertaking to be fulfilled.

However, to say that a certain percentage of shares—neither more nor less—shall be allocated to depositors and staff, regardless of how many they wish to apply for and regardless of how many other potential shareholders wish to apply for would make it more difficult, rather than easier, to achieve the objectives that I believe are shared on both sides of the House.

Question put, That the clause be read a Second time:—

The House divided: Ayes 82, Noes 183.

Division No. 119] [10.37 pm
AYES
Alton, David Clwyd, Mrs Ann
Archer, Rt Hon Peter Cocks, Rt Hon M. (Bristol S.)
Ashdown, Paddy Cohen, Harry
Bagier, Gordon A. T. Cook, Frank (Stockton North)
Barnett, Guy Cook, Robin F. (Livingston)
Barron, Kevin Cowans, Harry
Beckett, Mrs Margaret Craigen, J. M.
Beith, A. J. Cunliffe, Lawrence
Bennett, A. (Dent'n & Red'sh) Davies, Ronald (Caerphilly)
Bidwell, Sydney Davis, Terry (B'ham, H'ge H'l)
Blair, Anthony Deakins, Eric
Boyes, Roland Dewar, Donald
Bruce, Malcolm Dormand, Jack
Buchan, Norman Dubs, Alfred
Campbell-Savours, Dale Duffy, A. E. P.
Canavan, Dennis Eastham, Ken
Carlile, Alexander (Montg'y) Evans, John (St. Helens N)
Clarke, Thomas Fatchett, Derek
Clay, Robert Fields, T. (L'pool Broad Gn)
Fisher, Mark Millan, Rt Hon Bruce
Godman, Dr Norman Nellist, David
Hamilton, James (M'well N) Park, George
Hattersley, Rt Hon Roy Parry, Robert
Haynes, Frank Penhaligon, David
Hogg, N. (C'nauld & Kilsyth) Pike, Peter
Holland, Stuart (Vauxhall) Prescott, John
Home Robertson, John Randall, Stuart
Hughes, Simon (Southwark) Redmond, M.
John, Brynmor Short, Ms Clare (Ladywood)
Kennedy, Charles Skinner, Dennis
Kirkwood, Archy Snape, Peter
Leadbitter, Ted Stewart, Rt Hon D. (W Isles)
Lewis, Ron (Carlisle) Thomas, Dr R. (Carmarthen)
Lewis, Terence (Worsley) Thompson, J. (Wansbeck)
Lloyd, Tony (Stretford) Wardell, Gareth (Gower)
Loyden, Edward Wareing, Robert
McDonald, Dr Oonagh Welsh, Michael
McWilliam, John Wilson, Gordon
Marek, Dr John Winnick, David
Mason, Rt Hon Roy
Maxton, John Tellers for the Ayes:
Maynard, Miss Joan Mr. Allen McKay and
Meadowcroft, Michael Mr. Austin Mitchell.
NOES
Alexander, Richard Hamilton, Neil (Tatton)
Baker, Nicholas (N Dorset) Hampson, Dr Keith
Baldry, Tony Hanley, Jeremy
Beaumont-Dark, Anthony Hargreaves, Kenneth
Boscawen, Hon Robert Haselhurst, Alan
Bottomley, Mrs Virginia Havers, Rt Hon Sir Michael
Brandon-Bravo, Martin Hayes, J.
Bright, Graham Hayward, Robert
Brooke, Hon Peter Heddle, John
Brown, M. (Brigg & Cl'thpes) Henderson, Barry
Bruinvels, Peter Hickmet, Richard
Budgen, Nick Hicks, Robert
Burt, Alistair Hind, Kenneth
Butcher, John Holt, Richard
Cash, William Howard, Michael
Chope, Christopher Howarth, Alan (Stratf'd-on-A)
Cockeram, Eric Howarth, Gerald (Cannock)
Conway, Derek Howell, Ralph (N Norfolk)
Cranborne, Viscount Hubbard-Miles, Peter
Dorrell, Stephen Hunt, David (Wirral)
Douglas-Hamilton, Lord J. Hunter, Andrew
Dunn, Robert Jackson, Robert
Fairbairn, Nicholas Jones, Gwilym (Cardiff N)
Favell, Anthony Jones, Robert (W Herts)
Forsyth, Michael (Stirling) Jopling, Rt Hon Michael
Forth, Eric Kellett-Bowman, Mrs Elaine
Franks, Cecil Key, Robert
Freeman, Roger King, Roger (B'ham N'field)
Gale, Roger Knight, Gregory (Derby N)
Galley, Roy Knight, Mrs Jill (Edgbaston)
Garel-Jones, Tristan Knowles, Michael
Greenway, Harry Knox, David
Gregory, Conal Lang, Ian
Griffiths, Peter (Portsm'th N) Latham, Michael
Ground, Patrick Lawrence, Ivan
Hamilton, Hon A. (Epsom) Leigh, Edward (Gainsbor'gh)
Lennox-Boyd, Hon Mark Robinson, Mark (Nport W)
Lester, Jim Ross, Wm. (Londonderry)
Lightbown, David Rowe, Andrew
Lilley, Peter Sayeed, Jonathan
Lloyd, Peter, (Fareham) Shaw, Giles (Pudsey)
Lord, Michael Shaw, Sir Michael (Scarb')
Luce, Richard Shepherd, Colin (Hereford)
Lyell, Nicholas Silvester, Fred
McCrindle, Robert Skeet, T. H. H.
McCurley, Mrs Anna Smith, Tim (Beaconsfield)
Macfarlane, Neil Soames, Hon Nicholas
MacGregor, John Speed, Keith
MacKay, Andrew (Berkshire) Speller, Tony
Major, John Spencer, Derek
Malins, Humfrey Stanbrook, Ivor
Malone, Gerald Steen, Anthony
Maples, John Stevens, Lewis (Nuneaton)
Marland, Paul Stevens, Martin (Fulham)
Marlow, Antony Stewart, Allan (Eastwood)
Mates, Michael Stewart, Andrew (Sherwood)
Mather, Carol Stewart, Ian (N Hertf'dshire)
Mawhinney, Dr Brian Stradling Thomas, J.
Maxwell-Hyslop, Robin Sumberg, David
Mayhew, Sir Patrick Taylor, John (Solihull)
Mellor, David Taylor, Teddy (S'end E)
Merchant, Piers Terlezki, Stefan
Meyer, Sir Anthony Thomas, Rt Hon Peter
Miller, Hal (B'grove) Thompson, Donald (Calder V)
Mills, Iain (Meriden) Thompson, Patrick (N'ich N)
Mills, Sir Peter (West Devon) Thornton, Malcolm
Mitchell, David (NW Hants) Thurnham, Peter
Moate, Roger Townend, John (Bridlington)
Montgomery, Sir Fergus Tracey, Richard
Morris, M. (N'hampton, S) Trippier, David
Moyninan, Hon C. Trotter, Neville
Murphy, Christopher Twinn, Dr Ian
Neale, Gerrard van Straubenzee, Sir W.
Needham, Richard Viggers, Peter
Nelson, Anthony Waddington, David
Newton, Tony Walden, George
Nicholls, Patrick Waller, Gary
Normanton, Tom Wardle, C. (Bexhill)
Norris, Steven Watson, John
Onslow, Cranley Wells, Bowen (Hertford)
Oppenheim, Phillip Wheeler, John
Ottaway, Richard Whitfield, John
Page, Richard (Herts SW) Whitney, Raymond
Patten, J. (Oxf W & Abdgn) Wilkinson, John
Pawsey, James Winterton, Mrs Ann
Portillo, Michael Winterton, Nicholas
Powell, William (Corby) Wolfson, Mark
Powley, John Wood, Timothy
Proctor, K. Harvey Yeo, Tim
Raffan, Keith
Rhodes James, Robert Tellers for the Noes:
Rhys Williams, Sir Brandon Mr. Tony Durant and
Ridsdale, Sir Julian Mr. Tim Sainsbury.
Roberts, Wyn (Conwy)

Question accordingly negatived.

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