Andrea Leadsom MP: The Prime Minister was right to stand against Brussels, and he might need to again

Andrea Leadsom is MP for South Northamptonshire.

Contrary to much of last week's media, the prime minister did not return from the latest EU summit in shame. As sensible Labour MPs like Kate Hoey made clear, there is nothing shameful about standing up for important British interests. And there is no doubt that, while it may not be popular, financial services is a core industry that is vital to our economy.

The sector employs almost two million people, is this country's most successful export, and is worth around £50 billion to the Exchequer - some 11 per cent of total tax take. Chancellor Merkel would rightly be pilloried if she stood by while the EU carried out an assault on the automotive industry. If David Cameron had any concerns about standing alone, he shouldn't have - he was right to use his veto and in his position, any decent political leader would have done the same.

It has been pointed out that the UK can exercise a veto on the imposition of a Financial Transactions Tax. First, that is no cause for complacency. We thought we had an opt-out from the Working Time Directive but it was imposed on us via health and safety legislation - so there is much to be said for drawing a line in the sand.  And anyway, the FTT is just one proposal of many. Another, astonishingly, is a proposal that trade in euro-denominated products should be relocated to the eurozone - blatant in its attempt to steal business from London...

In fact there are now 49 directives and measures coming from the EU that are principally focused on restricting or even banning financial activity rather than smart regulation. These measures would seriously harm Britain's current interests, but would also restrict our ability to compete in the fast growing markets in Brazil, India, China and elsewhere in Asia.  It is in these markets that our growth prospects lie, and we cannot afford to let poor EU legislation hold us back.

Andrea Leadsom: It's vital that the Prime Minister protects the UK's financial services industry at this week's summit

Andrea Leadsom is the Member of Parliament for South Northamptonshire and a member of the Treasury Select Committee. 

Ahead of the crucial European Council meetings, I agree with the Prime Minister's statements that the primary needs are to reach agreement to restore stability in the Eurozone and to defend and promote the UK’s national interest. Stability in the Eurozone is clearly in the UK’s national interest, as are protecting access to the single market and defending the financial services industry in the UK.

Although unpopular with voters for understandable reasons, the financial services industry employs nearly two million people, accounts for 10% of GDP, and generates over £50 billion in tax receipts annually in the UK. It is a vital national interest that must be protected. The UK is a gateway to the EU for financial services, but it is important that we also look to the faster growing markets of the BRIC countries and others around the world. We must not get tied down by EU legislation that would prevent our businesses accessing these markets.

Up until the credit crunch of 2008, EU policy on financial services was generally helpful to the City of London, expanding market access and liberalising financial markets across Europe. London was rightly seen by EU policy makers as a leader in the field and an asset to Europe. Since the crash, the response from UK and EU policy makers has been markedly different. EU policy is generally to restrict the activity of financial markets—the default reaction appears to be: if you don’t like it, ban it. UK policy is to improve regulation and supervision, going further in some cases, such as the Vickers report on banking, than currently allowed under EU law.

Andrea Leadsom MP: The work has begun on how we might repatriate powers from the EU

Andrea Leadsom is MP for South Northamptonshire. Elected yesterday as joint Chairman of the new All-Party Parliamentary Group for European Reform she reviews yesterday's first meeting and its focus on repatriating social policies.
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At a time of existential crisis in the Eurozone, it may seem harsh to some that a new All Party Group was set up yesterday to begin analysis of what and how powers may be repatriated to Britain from the EU.  Eurozone leaders urgently need to shore up their currency with a substantial and solid financial underwriting.  But while they focus on how to rescue their currency, it is vital that we don’t ‘down tools’ in looking at how Britain can get a better deal out of our EU membership.

Europe may not score highly when voters are asked to list their primary concerns, but most understand that the EU impacts on jobs, financial services, healthcare, working practices and immigration, to name but a few.  In fact, the EU colours almost everything and at a time when its future is under the spotlight, it is vital that we are not simply passengers in a journey towards a Eurozone fiscal union, but that we also take a long hard look at what Britain wants out of the almost inevitable treaty changes that lie ahead.

The Government, through the Coalition Agreement, is committed to a number of potential changes, including examining the balance of the EU’s competences, limiting the application of the Working Time Directive and focusing on defending the UK’s interests in EU budget negotiations.

Andrea Leadsom MP: Is a two speed Europe back on the agenda?

Andrea Leadsom is MP for South Northamptonshire and a member of the Treasury Select Committee.
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The Eurozone crisis seems to be reaching the beginning of the end phase....for too long we’ve limped on with this pretence from European leaders that Greece can somehow survive intact. The reality is that Greece is uncompetitive and has been fiscally utterly irresponsible - Greece does not have the infrastructure to enforce taxes; their retirement age is too young; their public sector is too powerful, and from the action on the streets they don’t in any case have the public appetite for the severe austerity that could save their economy.

I think it’s inevitable that Greece will default. What Greece should do, and what it should have done 18 months ago, is to leave the Euro and renegotiate its debt. The markets can cope with sovereign default - there have been many over the years; what they cannot cope with is uncertainty and lack of transparency.

Andrea Leadsom MP: Cheques remain a vital method of payment and the banks need to clarify their plans for them

Andrea Leadsom is MP for South Northamptonshire and a member of the Treasury Select Committee.

What would we do without cheques? The first one was written on 16th February 1659 and they remain a vital method of payment with well over a billion transactions last year. Yet the Payments Council, originally set up in part to 'defend' the public from the banks' desire to abolish the cheque appears instead to have caused deep confusion and concern over the future for cheques.

The Treasury Select Committee recently took evidence from the Payments Council and Andrew Tyrie, our Chairman, challenged them over their announcement that they would consider whether to abolish cheques in 2018.  He described the announcement as “a colossal error of judgment” leading to many consumers believing that cheques are already on the way out. Astonishingly, the Payments Council claimed to be unaware that Barclays’ standing order mandate already states that cheques are in decline and are to be abolished.

Andrea Leadsom MP: What can Government do to compensate taxpayers for the pain caused by the banks?

Andrea Leadsom is MP for South Northamptonshire, a financial services expert and a member of the Treasury Select Committee provides three suggestions to answer the above question...

1. UK Financial Investments Ltd (UKFI) owns 41% of Lloyds Banking Group, 84% of Royal Bank of Scotland Group and the whole of Northern Rock and Bradford and Bingley. In November 2008 when UKFI was set up, the Labour Government said the aim of the company would be to “protect and create value for the taxpayer as shareholder, with due regard to financial stability and acting in a way that promotes competition.”

In December 2008 Robert Peston of the BBC thought it was no exaggeration to say that the UKFI would be as important to all of us as the Treasury, or the Bank of England or the Financial Services Authority.

Undeniably, two and a half years after it was set up the UKFI has power over a vast amount of taxpayer assets and the difficult responsibility of gaining the best value for the publicly owned shares which it owns. What is the best way to do that? As the financial sector appears determined to get back to ‘business as usual’ proposals are starting to emerge – last week the Centre for Policy Studies suggested that every tax payer in the UK be given £1000 worth of shares.

In my own view, quite apart from making sure taxpayers get their billions back, a key job of UKFI must be to dramatically improve the competitive outlook for UK banking. I wrote a paper recently for the CPS – http//www.cps.org.uk - explaining why competition is key – Britain’s bank lending to small and medium enterprises and in personal current account business is currently concentrated in just five big banks...the competitive incentive to provide a better and cheaper service is just not there.

Andrea Leadsom MP: High Speed Rail 2 is flawed - There are better ways of delivering improved transport links at a lower cost

Andrea Leadsom is MP for South Northamptonshire and a member of the Treasury Select Committee and replies here to the argument made earlier in the week here by Transport Minister Theresa Villiers.

At a feisty debate in Parliament last week there was universal agreement about the need to improve Britain’s transport infrastructure! But that’s where the consensus ends - and I for one am sick and tired of the debate on High Speed Rail being trivialised into a debate on Southern Nimbys versus the poverty stricken North.

The debate should be about how best to deliver badly needed infrastructure and ensure a re-balancing of our economy with a private sector led recovery across the UK.  HS2 would cost each family in Britain more than £1,000, so it must be properly scrutinised to deliver not just extra capacity, but also the value for money that taxpayers are entitled to expect for their money.

I think HS2 is flawed in three main areas; the business case, the environmental case and the claims about job creation and the potential for regeneration. HS2 Ltd claims a net benefit ratio that includes the wider economic impacts of 2.0 - this means £2 of benefit for every £1 spent.  This is about the minimum return that could be expected from a rail project and far below the bar set for road projects. Even this modest claim makes enormous assumptions.  Specifically, a core and ludicrous assumption is that all time on train journeys is wasted, and therefore that every minute of a train journey that is saved can be given a value in pounds. This wouldn’t matter so much except that the journey time savings account for over 50% of the £20 billion of total economic benefit expected from the project!

Andrea Leadsom MP: More competition in banking is key to our recovery

Andrea Leadsom is MP for South Northamptonshire, a member of the Treasury Select Committee and author of Boost Bank Competition which is published today by the Centre for Policy Studies and available to download as a pdf here.

A radical upsurge in new business starts and SME expansion is key to turning around Britain’s economic prospects.  Already, 99.9% of enterprises are SMEs who create 60% of private sector employment... and there are half a million new start ups every year.  But for the radical upsurge we want to see happen, the structure of banking needs to become more competitive and responsive to customer needs in this critical segment.

One way to achieve this is by creating a more competitive environment for banks.  As far back as Adam Smith in ‘Wealth of Nations’, he argued that for enterprise to flourish there needs to be free entry and free exit in the market place. 

In the banking market, barriers to entry have increased significantly over the last 15 years as banks have merged and consolidated (Metro Bank is the first bank to be given a full UK banking licence in 100 years!).  And as we know to our eye-watering cost, there are huge barriers to ‘exit’.  Banks have been deemed ‘too big to fail’ and this implicit taxpayer guarantee has been enormously lucrative to the sector.  (A Bank of England research document showed that the implicit guarantee provides a reduced cost of funds to banks amounting to £100 billion pounds a year!)

Andrea Leadsom MP: We need more competition in the banking sector

Andrea Leadsom is MP for South Northamptonshire and a member of the Treasury Select Committee.

I’m a fan of Mervyn King, and in particular I agree with his view that the banks haven’t changed their ways at all, leaving the world vulnerable to another financial crisis. But, his recent comments about the banks raise a significant “philosophical” issue over accountability. Is it for him to be saying what should be done to solve the problem?

In my view the precedent set by the Government last year in granting a veto to the Treasury Select Committee over appointments to, and dismissals from, the Office for Budget Responsibility should be followed for other appointments.

Cross-party Select Committees have the necessary political balance and expertise to evaluate appointments and dismissals and would provide valuable evidence of public scrutiny. In the event that a Minister and a Committee continue to disagree, the final decision should be taken by the House.

The appointment of the Governor of the Bank of England would fall firmly into this category. Mervyn King was appointed in 2003, was Chief Economist and Executive Director of the Bank from 1991-98, founder member of the MPC from 1997 and Chairman of that Committee since 2003. When he appeared before the Treasury Select Committee last week he told us that he was surprised that people are not even angrier with the banks. Now that the size of recently awarded bonuses have been revealed as a result of Project Merlin he can only be even more surprised.

Andrea Leadsom MP: The benefits of onshore wind farms have been hugely exaggerated

Andrea Leadsom is MP for South Northamptonshire and opened a three-hour Commons debate about onshore wind farms and their impact on Britain’s landscape earlier in the month.

The debate about onshore wind farms goes to the very heart of the battle between ‘localism’ and the ‘national interest’. It is true that there are genuine issues of national interest that must be taken into account - the failure of the last Government to plan to meet our future energy needs is second only to their catastrophic economic legacy.

The shocking fact is that between now and 2020, some 35% of British power generating capability through nuclear and conventional power stations will be retired due to old age with nothing yet ready to replace them. The Department for Energy and Climate Change is working flat out to plug the energy gap but it’s a tall order.

The second challenge where national need is battling against local need is in the area of energy security and our dwindling North Sea gas reserves. We are now a net importer of gas and will increasingly rely on potentially unreliable sources for imports, so there is a great need to rebuild our own generating capability.

The third issue comes from the binding EU target that Labour signed us up to, requiring that we achieve 15% of our total energy from renewables by 2015. It’s not clear that this is achievable even with the massive ‘race for onshore wind’ begun by Labour. A more realistic option would be to measure ‘net’ carbon emissions thereby taking into account measures to insulate and otherwise reduce energy usage.

At present Britain has around 350 operational wind farms, 260 either under construction or awaiting construction and 250 at the planning stage. That means that there are already 3,000 turbines in the country, with another 6,500 either awaiting construction or planning permission. To meet the 10,000 turbines needed to ensure that we hit our 15% renewable target by 2020, the rush over the last decade has been for onshore wind.

Andrea Leadsom MP: A breath of fresh air on banking reform

Andrea Leadsom is MP for South Northamptonshire and a member of the Treasury Select Committee.

Refreshingly, there was an enlightened and interesting discussion last week when the Treasury Select Committee took evidence from two prominent women Chief Executives of UK banks. First from Jayne-Anne Gadhia the Chief Executive of Virgin Money and second from Ana Botin, the recently appointed Chief Executive of Santander UK. Both gave frank insights into their internal banking processes and it was one of the most constructive sessions yet in our Inquiry into Choice and Competition in banking.

I want to mention two specific areas that came up again during the session. First, the issue of enabling customers to take their bank account with them if they switch bank was raised as it has been in a number of previous sessions. It is a surprisingly controversial topic which I wrote about recently on ConHome.

Jayne was keen on the idea of current account portability. She said that providing each customer with the choice of having an individual bank account number easily capable of transfer between competing banks “should not be beyond the wit of man”. Like me she believes that choice increases competition - we can all now transfer our telephone numbers between properties and it should be possible to take our individual bank account numbers with us when we move banks, if we want to (choice, not compulsion). Jayne pointed out the sheer frustration experienced by many trying to switch bank accounts under the current system and having to sort out the mess caused by direct debits and standing orders gone astray.

I feel sure that more competition in the Personal Current Account (PCA) product would result in a much improved service for the customer and increased efficiency within the industry. If we were able to switch banks more readily we would be more inclined to shop around for the best deals and best current account terms.

Andrea Leadsom MP: Allowing people to have a personal bank account number for life would let them switch banks easily and spark a revolution in retail banking

Andrea Leadsom is MP for South Northamptonshire and a member of the Treasury Select Committee.

For roughly ten years you have been able to take your telephone number with you when you change phone provider – imagine if you could take your bank account number with you if you decide to change your banker?

Oftel, under the leadership of Sir Don Cruickshank from 1993-98, saw through legislation that forced telephone companies to allow customers to transfer their telephone number from one company to another with ease. Now the Treasury Select Committee, of which I am a member, has discussed the possibility of requiring banks to do the same.

The Committee is in the middle of an inquiry into competition and choice in banking and it seems to me that such a change could spark a revolution in retail banking in the UK.

The evidence given to the Committee suggests customer inertia is a huge feature of retail banking – as anyone with a mortgage, utility bills and a few charitable donations will know, the thought of having to cancel all those standing orders and direct debits leaves you unlikely to ever change banks.

My own office manager told me how speechless with rage she is with the inefficiencies of the bank she has been with for twelve years, but still the prospect of moving banks is too much bother...

For SMEs the position is even worse.  They become ‘trapped’ by a bank because they deposit the day’s takings with them, have overdrafts and other banking arrangements that are complicated and expensive to move.

Imagine how much easier it would be to transfer your bank accounts if you could take your account number with you, just changing the sort code, so all your banking arrangements moved with you.

Andrea Leadsom: Why Vince Cable's vengeful tax on bank profits would benefit nobody - and what we should be doing about the banks

Andrea Leadsom is the Conservative prospective parliamentary candidate for South Northamptonshire and former head of Barclays' Investment Banks team.

Vince Cable thinks that banks should be forced to cough up 10% of their profits to the Inland Revenue to help plug the hole in public finances. He is right in part - the taxpayer deserves compensation for saving the banks. 

But contrast the fate of the banks with that of the employees of Woolworths.  Woolies' staff paid the full cost of business failure with their jobs at the beginning of the year. No taxpayer bailout for them.

Yes, the taxpayer deserves compensation, but not in the form of a vengeful windfall tax seen by the banks as punishing success and potentially driving them offshore. That will benefit nobody, particularly as the British economy until two years ago received billions in tax revenues from the sector, and we hope it will do so again the future.

What banks should be paying is a one off compensation payment to the taxpayer in recognition that it is only our munificence that has ensured their survival, and allowed banks like Barclays to return to £4.5 billion of profit this year.   A 10% tax is just about right as a one-off compensatory payment to the taxpayer.
And banks should be paying an insurance premium in future to the Government in return for the implicit taxpayer guarantee.  These premia can be adjusted to reflect the risk at different economic periods. 

Such fees would encourage banks to rearrange their businesses so that they would only pay a fee for those parts of the group that would necessarily be bailed out in the event of another banking crisis.  And it is this rearrangement within banks that is critical in the battle to avoid another devastating crisis in future.
Banking groups must be split up.  Over the last decade, mergers and takeovers have led to vast financial institutions – often to the benefit of board member incentives, rather than showing any benefit to the customer.  The poor perception of customer service in the banking sector is testament to the failure of the supposed economies of scale.

Andrea Leadsom: We must focus on encouraging NEETs into self-employment

Andrea Leadsom is prospective parliamentary candidate for South Northamptonshire.

The media is full of the need for cuts in public expenditure, and an end to the growing divide between public and private sector job security.

Currently public sector employment is still growing while the private sector has faced over a million job cuts and there are more being announced every week. Some parts of the public sector are enjoying pay rises while many in the private sector are invited to take pay cuts rather than lose their jobs. And, of course, public sector employees are still receiving up to 60% of their final salary per annum for life by way of pension whilst the private sector has almost given up on the final salary scheme. 

The few employees at the ‘top’ of banking and business who earn vast bonuses are obscuring the true picture where in fact often private sector (and charity sector) employees earn lower salaries and have far less generous packages than equivalent roles in the public sector.

Following over 12 years of enormous and often badly managed investment in the public sector by the Labour Government, we now face the inevitable fact that our public services cannot continue to grow. In fact, the current economic situation and our record levels of debt mean that the public sector will have to be cut, and in places cut significantly. While essential services must be maintained, all other aspects of government expenditure must be reduced. It is better to make these cuts now as the sooner they are implemented the less severe the result will be for us all.

Andrea Leadsom: The lessons about banking regulation which stay with me from the collapse of Barings

Andrea Leadsom is the parliamentary candidate for South Northamptonshire and former head of Barclays' Investment Banks team, which gave her a ringside seat at the collapse of Barings Bank. Read more from Andrea on her blog.

In 1995, one month before Barings Bank collapsed as a result of rogue trading and fraud in the Far East, I was invited over to lunch with my boss at their smart London HQ. In those days I was running Barclays’ Investment Banks team and Barclays was a principal banker to Barings, doing much of their clearing banking, providing billions of trading lines and also a key lender to their global activities.

I was just 30 and had joined Barclays from the investment banking arm, BZW. Unusually for a banker, I was very familiar with treasury products, derivatives, trading etc. Also unusually for a banker, I had no formal credit or risk control background. Lunch was fabulous, cooked in-house and served in a beautiful dining room with stunning art on the walls.

My boss (Head of Barclays’ Financial Institutions Group and a traditional banker) and I were then shown round Barings’ state of the art treasury/dealing room and settlements office. The FD and Treasurer explained how their ‘world class’ treasury systems enable them to know exactly what is borrowed in each global location, what the leverage is on trading positions and where their risks are. The system could show, for example, aggregate open futures positions, their margin requirement and the source of funding from the relevant global treasury. A very interesting and convincing afternoon.

Two weeks later, there were murmurs through the markets of huge derivative losses in Barings’ Singapore office. I asked Barclays’ dealers if they could find out more and called Barings’ FD. He was unavailable, but later that day called me to ask for a large drawdown on a standby loan facility we had for them. I asked him outright – was there any truth in the rumours we were hearing - he answered outright – no, absolutely none. So after much discussion with Barclays’ credit department, we lent the money.