Banking Bill

It is a great pleasure to follow the hon. Member for Leyton and Wanstead (Harry Cohen). He made his case with typical honesty and straightforwardness and I have a lot of sympathy with his remarks. I was in business before I came into the House and, at one time, we were expanding the company with an investment of £100,000 from the Treasury into preference shares. Under that agreement, there were strict restrictions on our emoluments while those preference shares were being held. Until we had repaid them, we had to comply with those conditions. That seemed absolutely fair to me. We were receiving an investment from the Government, and it would have been unwise and unfair for the directors of the company to settle their own salaries. When looking at new clause 1, we need briefly to refer back to what has happened with the recapitalisation of the three banks, in which £37 billion of taxpayers' money is being invested this month and next month. I have one of the offer documents here; this one happens to be the one that pertains to HBOS. It is quite extraordinary that it contains very limited discussion on bonuses. It states:"““For the company, no bonuses for 2008. If part of contractual arrangement, directors relinquish these voluntarily””." That is the condition that applies to HBOS. The document goes on:"““For Lloyds TSB, no cash bonuses for 2008””." That sounds quite good, but it goes on to say:"““If part of contractual arrangement, board directors relinquish these voluntarily. Instead, Lloyds TSB's directors may receive their 2008 bonus entitlement in stock, subject to a restriction on sale until December 2009””." So there is effectively no restriction whatever on the bonuses. If this £37 billion of investment were such a superb deal for the taxpayer, I might have had some sympathy with the lack of a requirement to control directors' salaries and emoluments. However, there will be no return to the taxpayer on that £37 billion for a minimum of five years. The Minister might want to pop up and say that the £9 billion of preference shares will mean a 12 per cent. return, but that is not true. They are non-cumulative preference shares, so that the directors of the company can waive that dividend every year until the preference shares are repaid. They cannot be repaid for five years, and I would argue that the directors have a duty to waive that dividend, because they have to look after the interests of the whole company. Taxpayers have therefore invested £37 billion in banks with no return for five years, and we have not bothered to say anything about the bonuses or salaries of the directors. We cannot do anything about that in this Bill, but it is an issue that we should address. I sat in Committee for many an hour and we briefly discussed this issue, but it did not get the airing that it deserved. We hope that the special resolution mechanism will never be needed, but if it is, we have been lax in failing to control the salaries of directors who, after all, put the banks in that situation. I have much sympathy with the hon. Member for Leyton and Wanstead and what he is trying to achieve. As he rightly points out, we are copying what has happened in the US. Unfortunately, the Government have spent £37 billion of our money with no real restrictions on the bonuses of directors. I notice that the Minister has not jumped up to contradict me.