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Banking in Scotland

I should perhaps start by assuring hon. Members that, unlike some of my hon. Friends, I have never been led astray by bad boys. Indeed, I have made a career of challenging bad boys' behaviour and threatening that all sorts of awful things would happen to them if they continued to misbehave. With those opening remarks, I should perhaps move quickly on to the start of my brief comments. I begin with the place that to me is perhaps the centre of the universe—Auchinleck, in my constituency. A few weeks ago, during an unexpected lull in the excitement of the football match at Beechwood Park, which for the uninitiated is the home of Auchinleck Talbot football club, I felt a tap on my shoulder and a constituent asked whether he could have a quiet word with me. I am not unused to that sort of thing happening. Usually it is about a particular problem, and I am usually able to tell the constituent that he can call me at the office, or we have a chat about it. However, in that instance, the constituent prefaced his remarks by saying, ““Before you say anything else, I have to tell you that I am a banker.”” He went on to make the serious point that often he cannot now tell people what his employment is. He is not one of the high fliers, one of the big bonus earners. He is simply someone in the middle management sections, or rather he was before he was let go—I think that those are the words used these days. He finds the situation very difficult because he personally has faced some of the opprobrium that has been heaped on the banking community as a result of what happened with the banks. I place on the record my thanks to the previous members of the Scottish Affairs Committee for this thorough report. I will refer to some of its conclusions and recommendations. It was a thorough piece of work, and timely. We can think back to just how awful things were when some of the major banks in Scotland and, indeed, elsewhere were on the brink of extinction. I hope that no matter what side of the House hon. Members sit on, they will understand that Government intervention was necessary at that stage and had to take the form that it took in order to ensure that those banks survived. I shall focus on a couple of the recommendations in the report. My hon. Friend the Member for Glasgow South West (Mr Davidson) has already talked about bankers' bonuses. It is clear when we talk to ordinary people on the doorstep that that issue is now in the public psyche. I am referring to the fact that many people in the banking system were simply paid far too much, very unfairly, and people did not see what those bankers had done to justify those very large amounts of money, when many of them were struggling to get by, whether on the minimum wage or on very low incomes, and were taking what they felt was the brunt of the crisis. We still have some way to go to convince people that that whole area has been evened out and that we have moved towards a fairer system. My hon. Friend also referred to another point in the report—recommendation 5 in relation to viewing repossession as the last resort, saying that the banks and building societies should perhaps view matters differently. It took legislation, particularly in the Scottish Parliament, to ensure that that happened, because there were fears that, despite all the exhortations, the banks were still not looking at repossession as the last resort. Many people, particularly sole traders in small or medium-sized businesses, had been required to put their homes up as security in order for the businesses to continue and they found themselves in danger not only of losing their business for lack of finance, but of losing the roof over their head. Some of the most awful experiences that I have had as an elected politician have involved seeing business men whom I knew to be pillars of my local community and who had contributed a huge amount in the local area suddenly finding themselves in very difficult times, coming to my surgery and breaking down in tears in my office because they felt that they had literally no one else to turn to. I hope that we shall not see any more of those situations and that people will be more sympathetic. In my role in the Scottish Parliament, I was one of the people who pushed for the relevant legislation. I want to focus on the issue of fair treatment of customers, which has been mentioned and was the subject of recommendation 7. I think that my hon. Friend the Member for Glasgow South West has already referred to the wording:"““We conclude that banks continue to use aggressive tactics towards customers who have fallen into debt.””" Citizens Advice has given us an update on what that means for real people living in our communities. It states that, in 2009-10, 135,032 new debt issues were brought to Scotland's advice bureaux, which helped people to deal with those issues. It states that more than 4,200 problems with bank accounts were brought to its bureaux in 2009-10 and that a number of those issues were connected with the interest and charges associated with the account, while a high number were connected with the difficulties of opening accounts. There are still situations in which that occurs, despite all that has happened. We may talk about high finance and the economic impact of what is happening with the banks on a global scale, but many people living in our communities still cannot get a bank account that they can afford to operate, and of course they rely on that to be able to manage their business. Basic bank accounts are very important, but we should not underestimate the difficulty that people encounter if they do not have a credit history, if they have not been in employment or if they are a young person leaving the care system. In those circumstances, trying to open a bank account is extremely difficult, and there is much more to be done in that respect. The report mentioned overdraft charges and, again, Citizens Advice Scotland has given us an update on some of the problems that people face. It says that clients report incurring overdraft charges due to mistakes often made by others, including the banks themselves, benefit agencies and companies failing to cancel direct debits. People will be aware of the case that was taken up by the Office of Fair Trading and pursued very ably by Mike Dailly, the principal solicitor at Govan law centre, in the constituency of my hon. Friend the Member for Glasgow South West. He will know it very well. People still face real difficulties as a result of what are seen by the banks' customers as unfair charges. Let me give a couple of illustrations, because it is worth having on the record what Citizens Advice tells us. It says that one client"““accumulated over £1,000 in bank charges over a three month period while his bank refused his application for an approved overdraft limit.””" The client was overdrawn by £270 and simply wanted an overdraft facility so that he could make arrangements to pay off the money that he owed without facing multiple charges. A single mother was being charged £5 by her bank for every day that she was overdrawn and £25 for every transaction that she made during that period. That woman was living on income support with a five-year-old daughter. Incurring bank charge after bank charge after bank charge, with no assistance to get out of those problems, is no way forward for people in those circumstances. Again, my hon. Friend was right to highlight the problems in relation to set-off. If anyone has ever lived in a situation in which every penny is a prisoner, they have to budget and know exactly where their money is coming from and where it is going week to week, they will know that they can manage in many instances because they have a degree of certainty. What is impossible for people on very low incomes to cope with is the unexpected. For some people, the right of set-off means that earnings that were paid into the bank were taken without their knowledge and without any discussion with them beforehand and were used to pay their debts. I am not suggesting for a moment that people should not pay their debts or should not be helped to budget where that is appropriate, but many people on low incomes are very good at budgeting. What is happening is simply not acceptable. Citizens Advice gives the example of a lone parent's bank taking £400 from her account to repay debts without her permission. After her wages had been paid in, that money was taken out and she had literally no money at all to live on. In another case, a client's bank used the right of set-off to put the client's wages towards arrears on a loan. That individual was working only 10 hours a week and receiving £11 a week in benefits. When they were paid, the bank took the full amount towards the arrears, leaving the individual with no funds whatever. There is more to look at on that. The banks are saying in their responses that it is now easier for businesses to borrow, but I think that there are still difficulties. I regularly hear from start-up businesses that they have to use personal loans or continue to use their homes or other security. They are not able to access funding that would help to match the start-up funding that may be available for the business, so there is a disjoint in those contexts. There are still difficulties for businesses suffering temporary cash-flow problems. A reputable business in my area with lots of orders coming through contacted me recently. Simply due to delays in receiving payment owed for contracts, they are in a difficult cash-flow situation and looking to their bank to give flexibility, but they are not getting it. In conclusion, I want to return to where I started in Auchinleck, which is not a bad place to return to, and talk about financial education. The hon. Member for Milton Keynes South (Iain Stewart) mentioned the days when there was a bank book and one could pay in money; in my school days it was into the Trustee Savings bank, and in my constituency it is the Cumnock and Doon Valley Credit Union, which goes in to schools and has a junior credit union in Auchinleck primary school. Ironically, in the same week that some bailed-out banks sent letters advising me that I could go along and hear what they were doing about financial education in schools, I paid a visit to the young people who run the junior savers scheme in Auchinleck primary school. They seem to have got the message pretty clearly. They were involved in taking the money, keeping the accounts and looking at what they were responsible for, which was highlighted when the photographer who came to look at what we were doing asked whether he could have a pound coin out of the cashbox to illustrate what was happening. The young people said no, because he was not a member of the credit union, and it was not his money or their money to give away. I will finish on that very salient point. Others should perhaps take note.