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Incoming City regulator questioned by MPs after investing in a 'tax avoidance' scheme

Iain Withers
Financial Conduct Authority - © Jonathan Goldberg / Alamy Stock Photo

MPs have questioned the incoming chairman of the City watchdog for his past investment in a “tax avoidance” scheme and published a scathing report into RBS’s mistreatment of small businesses.

The Treasury committee today grilled the appointed chairman of the Financial Conduct Authority (FCA), Charles Randell, over his past investment in a tax avoidance scheme.

It published correspondence between itself, HMRC and Mr Randell regarding his past investment in a firm called Ingenious Film Partners.

Nicky Morgan, who chairs the committee, told Mr Randell that HMRC had confirmed to her that a firm he had ­invested in was a “tax avoidance” scheme.

Mr Randell said it was an “error of judgment” and he “regretted failing to independently investigate” assurances he said he had at the time that HMRC was content with the firm’s tax arrangements. He said he had since settled his tax affairs in full with HMRC.

Earlier in the committee session Mr Randell told MPs that he was taking up his role at the FCA with an “open mind” as to “how could things be done differently”.

Mr Randell said he would not comment directly on the watchdog’s handling of the report into RBS's now defunct turnaround unit GRG, which the Treasury committee voted to publish today, just days after the FCA refused to do so as it said it would be breaking the law.

“I do think it must be my first priority when I arrive to conduct my own assessment of not just the RBS GRG report but the background to all of the cases where there has been this very obvious tension between public expectations, the committee and what the FCA has felt able to deliver.”

Nicky Morgan, chair of the Treasury committee Credit: John Nguyen/JNVisuals

He said he had sympathy with victims of misconduct who felt “justice delayed is justice denied”.

The committee had used parliamentary powers to publish the report into GRG and uploaded it to its website.

The report, which had already been leaked online, blames former RBS bosses for chasing profits at the expense of distressed firms, leading to “widespread” mistreatment of struggling companies.

Its official publication piles further pressure on senior figures including Santander UK’s chief executive Nathan Bostock.

It is understood that Santander UK chairman Baroness Vadera is reviewing Mr Bostock’s involvement in the scandal from his time at previous employer RBS and has spoken with regulators and the Spanish parent company about the issue, as first reported by The Daily Mail.

Mr Bostock – who was head of restructuring and risk at RBS before joining its rival – is understood to have the full confidence of Santander UK’s chairman, the board and the Spanish head office. Santander and Mr Bostock declined to comment.

Mike Cherry, chairman of the Federation of Small Businesses, said the scandal had damaged companies' trust in high street banks.

“Ten years on from the crash and we’re still seeing a very low proportion of small firms accessing new finance," Mr Cherry said. 

"One reason for weak demand is undoubtedly a lack of trust in major lenders among small businesses in the wake of scandals like GRG."

Nathan Bostock, chief executive of Santander UK, has been put under pressure over what he knew about GRG when he was at RBS

Commenting on publication of the GRG report, Treasury committee chairman Nicky Morgan said: “The findings in the report are disgraceful. The overarching priority at all levels of GRG was not the health and strength of customers, but the generation of income for RBS, through made-up fees, high interest rates, and the acquisition of equity and property.

“The committee has not taken the decision to publish lightly. But there is overwhelming public interest in bringing transparency to what happened at GRG.”

An RBS spokesman said: "The report makes for very difficult reading and some of the language used by our staff in the past was clearly unacceptable.

"We are deeply sorry that customers did not receive the experience they should have done while in GRG."

An FCA spokesman said: “The FCA fully supports the Treasury committee and BEIS committee inquiries into the issues facing SMEs.

"The FCA feels that it is important for everyone, including financial services firms, that there is an effective dispute resolution mechanism for businesses.”