Clause 7
5:15 pm
Mark Hoban (Shadow Minister, Treasury; Fareham, Conservative)
I agree. The argument against transferability is quite strong on the grounds of competition. One could argue that the best way for banks and other providers to compete is on the sign-up process. Before someone takes out a saving gateway account, they could shop around among a range of providers to find out what the conditions are, what is offered in these accounts, whether or not they offer interest and what it is, and what is the default option when the account matures in two years. In that way, we could have all competition taking place up front before someone signs up to an account. However, as the hon. Member for South Thanet rightly pointed out, that means that once someone has been enticed into saving in that account they are locked in for two years, and it also prevents people switching to take advantage of a better rate.
There is a debate to be had on the extent to which people will transfer from one account to another and whether we are prepared to accept the trade-off between reducing the cost base of operating the accounts on the one hand, thereby potentially increasing their availability and the number of people prepared to offer them, and the anti-competitive element that that includes on the other. I am mindful of that debate, and those were the two arguments I considered when writing my notes.
As one who fervently believes in the importance of competition, I want to see as many account providers as possible. Indeed, I would like people to be able to switch between accounts, but if the costs of the transfer option are such that that restricts the number of providers, are consumers best served by that smaller number of providers even though they have the option of transferability? There is a tension between the number of providers and the question of whether they will be attracted to a system that will leave them to incur additional costs if people transfer from account to account, and it is important to explore that.
When potential account providers look at whether to enter the market, they will need to understand the cost base—we will talk about statements later—and clearly they will have to bear in mind some of those parameters and whether it is economically viable for them to run the account. We need to have that on one side and the consumer interest on the other. I have tabled the new clause to stimulate that debate: we heard the view of potential account providers and it would be helpful to hear the Minster’s view.
I have included one proviso, because the one case in which we need to be able to transfer accounts from provider to provider occurs when a bank becomes insolvent. It could be forced into administration or the Government could take it over and transfer the accounts to another bank, as was the case with Bradford & Bingley. I am very conscious that next week Members will consider Lords amendments to the Banking Bill, but in lieu of that Bill being on the statute book, I have incorporated in new clause 1 a provision relating to the Banking (Special Provisions) Act 2008. As the Minister will know, many of the actions that have been taken to solve the banking crisis over the past few months have been taken under the ambit of powers in that Act, so it seemed a convenient reference to include for the purpose of the debate.
The new clause is intended to be probing and to tease out the issues relating to transferability and to how it could help consumer interests once someone has taken on an account by encouraging or enabling transferability. Equally, however, transferability might reduce the number of providers who come forward to provide the saving gateway accounts if it leads to additional costs. If there are fewer providers, that might impair the competition in the marketplace and make the accounts less attractive.