The main theme of my speech will be a common theme today: the banks and the problems that many of their customers in small and medium-sized businesses face.
In a short space of time, the banks seem to have gone from one extreme to the other-from excessive risk-taking to excessive caution. We all have companies in our constituencies coming to us with the same story. They have a good sound business, a good track record and plenty of orders, but when they try to raise money from the banks to see themselves through the recession, they are either turned down flat or, if money is offered, it is offered at a very high interest rate with a large arrangement fee and often demands for high levels of security for any loans that are offered.
Another common theme is complaints from small businesses that the cuts in the base rate are not passed on by the banks to individuals or to business customers. Getting lending moving again at reasonable interest rates is important, because although we are, I hope, starting to come out of the recession, there will still be difficult times ahead for businesses. For example, the Government's plans are to reverse the VAT cut shortly and many of the other schemes to help businesses will also come to an end.
I remind the Government that when they reduced VAT last year, two sectors did not benefit from that cut because fuel duty and alcohol duty were put up to cancel it out. Both sectors are of importance in my constituency. Fuel duty increases penalise my constituency because we must, out of necessity, drive long distances. I shall return to a theme that I have raised often in Finance Bill debates and urge the Treasury yet again to consider making use of the EU derogation that allows countries to levy lower rates of fuel duty in remote rural areas. If the Treasury could take advantage of that EU derogation and levy a lower rate of fuel duty at filling stations in the remote parts of the highlands and islands, that would contribute greatly to the local economy. It is important to remember that people in the highlands and islands face higher fuel costs as well as having to travel long distances, so the price of fuel is very important.
As far as alcohol duty is concerned, I much preferred the policy of the previous Chancellor to that of the present Chancellor. The previous Chancellor, during his long tenure in the post, had a policy of freezing the duty on spirits while allowing that on beers and wines to go up in line with inflation. The alcohol duty on spirits is far higher per unit of alcohol than that on beers and wines. Surely, if alcohol is taxed for health reasons, the only logic is that it should be taxed at the same rate per unit of alcohol. I urge the Chancellor to revert to the policy of his predecessor and freeze the duty on spirits. Whisky distilleries are major employers in my constituency, providing jobs on remote islands where other work is hard to find. I therefore hope that the Chancellor will listen to that advice.
As I said earlier, small businesses still face a difficult time. The banks that were bailed out by the taxpayer with eye-wateringly large sums of money should have a duty to help small businesses through these difficult times. Nationally owned banks should act in the national interest, and the Chancellor is the main shareholder in several banks, having a controlling interest in some and a substantial holding in others. When the Minister sums up the debate, I hope that he will tell the House what instructions the Government have given to the banks in which they are the main shareholder.
I sincerely hope that those banks have not been told by the Government that their sole duty is to maximise their profits, and that they have also been given a duty to help solvent British businesses through the recession. I do not mean by that that they should encourage risky lending, but there are solvent companies with good prospects and good track records that need loans to help them through these difficult times. Banks with a substantial Government shareholding should consider the needs of the entire economy, and not just focus on maximising profits.
I shall give an example from my constituency that involves the Bank of Scotland, which is now part of Lloyds Banking Group and is 43 per cent. owned by the Government. The bank decided recently to withdraw all but one of the business relationship managers from its branches in my constituency, even though local managers living in the remote communities know them in a way that business management teams located in Edinburgh, for example, could never match.
One of the affected branches was on the island of Islay. The decision to remove the business manager there has caused great outrage and concern among the island's business community, which will now be served by a manager in a business team based on the mainland. I am in full agreement with the members of that community that a manager and a team based on the mainland will never understand the special circumstances of Islay's economy as well as a manager who lived there would, and I back their campaign to reinstate the post on the island.
To the bank's credit, it has amended its plans in response to the campaign, and there will now be a dedicated team for business customers in the highlands and islands. That is a welcome step forward and an improvement on the original proposals, but I still think that the mainland-based team will not have the same knowledge of Islay's economy as a manager living there would. That is an example of how banks with the taxpayer as their main shareholder should look to support local communities. I hope that Ministers will take this issue up with the Bank of Scotland and urge it to reinstate the post.
Another way for the Government to help both individuals and small businesses would be to establish a post bank, which would have 10,000 branches throughout the country. I was pleased with the announcement about the post bank that the Prime Minister made at the Labour party conference, but I have been disappointed with the slow progress since then.
Post offices are still closing, and two have shut in my constituency since the end of the planned closure programme. As well as helping individuals and small businesses with their banking, a post bank would also help to rescue the rural post office network. I hope that the Minister summing up the debate will have progress to report on the post bank proposal.
As well as supporting businesses through the recession, the Government should also be looking at investing in the infrastructure that the country needs so badly. Infrastructure investment is needed in school buildings, public transport, broadband provision, the national grid and so on. We need a mechanism for reducing the cost of capital through Government guarantees, while at the same time tapping into private savers' demands for long-term investment. That is why I support a UK national infrastructure bank, and I hope that that it is an idea that the Government will also support.
I was very disappointed by the Supreme Court decision yesterday that the banking practice of imposing unfair overdraft charges on individuals was within the law. I was disappointed that the court sided with the banks in that judgment and I hope that the Government will soon introduce legislation to outlaw those unfair charges.
I endorse what the Chairman of the Business, Innovation and Skills Committee said earlier about the need for a supermarket ombudsman. Such a post is badly needed to help small businesses and consumers, particularly in the dairy industry where there is a huge gap between the farm-gate price for milk and the price the consumer pays at the supermarket. I hope the Government will accept the Competition Commission recommendation and set up the post as soon as possible.
I look forward to the Minister's response. I hope he will tell us what instructions the Government have given the banks in which they have a major shareholding, so that banks can help British businesses through the recession, rather than simply maximising profits.
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