Banks: Profits

– in the House of Lords at 3:01 pm on 8th March 2005.

Alert me about debates like this

Photo of Lord Dykes Lord Dykes Spokesperson in the Lords, Foreign & Commonwealth Affairs 3:01 pm, 8th March 2005

asked Her Majesty's Government:

What is their response to recent reported profits in the United Kingdom banking sector in terms of the overall interest of customers and the wider public.

Photo of Lord McIntosh of Haringey Lord McIntosh of Haringey Parliamentary Under-Secretary, Department for Culture, Media & Sport, Parliamentary Under-Secretary (Department for Culture, Media and Sport) (Media and Heritage)

My Lords, the banking sector plays a key role in the United Kingdom's economy and is important to economic growth and to our prosperity. The Government's objective is to ensure that the financial services market works well for consumers. Several measures have been introduced over the past few years that improve competition in the banking industry. These have given consumers greater opportunities to take advantage of the wide choice of financial products available to them.

Photo of Lord Dykes Lord Dykes Spokesperson in the Lords, Foreign & Commonwealth Affairs

My Lords, I thank the Minister for that Answer. With interest rates to lenders ranging from the nearly invisible to merely miniscule and rates to borrowers going from 9 per cent to 39 per cent, we see the fate of hapless, ordinary, private customers of the British retail and clearing banks. Will the Minister and the Government overcome their natural laissez-faire feelings and initiate discussions with the extremely well paid chairmen and chief executives of such banks to get a better deal for ordinary customers?

Photo of Lord McIntosh of Haringey Lord McIntosh of Haringey Parliamentary Under-Secretary, Department for Culture, Media & Sport, Parliamentary Under-Secretary (Department for Culture, Media and Sport) (Media and Heritage)

My Lords, the measure of the difference between lending interest rates and borrowing interest rates is well known; it is called the spread. It has been decreasing in recent years. I can, with pleasure, set out the figures in a letter to the noble Lord, Lord Dykes. It has been decreasing for all banks. The problem is that the spread is not the same for all banks and my bank is particularly bad at it. But that is my problem; perhaps I should change banks.

Photo of Baroness Seccombe Baroness Seccombe Deputy Chief Whip, Parliament, Deputy Chief Whip, Whips, Spokespersons In the Lords, Education

My Lords, will the Minister tell the House whether there is any level of profit that the Government consider excessive in any business sector? If so, what is it and why?

Photo of Lord Harrison Lord Harrison Labour

My Lords, will my noble friend comment on an important group of customers of the banks; namely, small businesses? Is the Chancellor of the Exchequer being successful in trying to encourage banks to be more helpful towards small businesses, who often experience great difficulties in maintaining their prosperity because the banks are so unhelpful?

Photo of Lord McIntosh of Haringey Lord McIntosh of Haringey Parliamentary Under-Secretary, Department for Culture, Media & Sport, Parliamentary Under-Secretary (Department for Culture, Media and Sport) (Media and Heritage)

My Lords, some time ago—some would say too long ago—Don Cruickshank made recommendations to the Government about the banks' treatment of small businesses. The Government referred his report to the Competition Commission, which reported in June 2002. All, I think, of the recommendations of the Competition Commission have been implemented. In particular, I draw attention to the agreement made by the Office of Fair Trading with the banks that they should offer a current account at base minus 2.5 per cent, or an account free of transmission charges, or a choice between the two. There are also other options.

Photo of Baroness O'Cathain Baroness O'Cathain Conservative

My Lords, can the Minister inform the House whether any study is being done by the Treasury on the amount of the profits of the clearing banks that is directly related to delays in payments of cheques? The delay of four or five working days from when money is deposited is a disgrace in view of the huge developments in transmission technology.

Photo of Lord McIntosh of Haringey Lord McIntosh of Haringey Parliamentary Under-Secretary, Department for Culture, Media & Sport, Parliamentary Under-Secretary (Department for Culture, Media and Sport) (Media and Heritage)

My Lords, the Chancellor announced in the Pre-Budget Report 2003 that he would give an enhanced role to the Office of Fair Trading to tackle this problem. I acknowledge that it is a problem. The Office of Fair Trading has set up a payment system task force that will report very shortly. I hope that the noble Baroness, Lady O'Cathain, will be pleased with the outcome.

Photo of Lord Pearson of Rannoch Lord Pearson of Rannoch Conservative

My Lords, does the Minister agree that it is largely the profits of the banks—and commerce and industry generally—and those who work for them which pay the taxes that support the public sector in this country, which has burgeoned under the present Government?

Photo of Lord McIntosh of Haringey Lord McIntosh of Haringey Parliamentary Under-Secretary, Department for Culture, Media & Sport, Parliamentary Under-Secretary (Department for Culture, Media and Sport) (Media and Heritage)

My Lords, of course, banks pay taxes on their activities in this country, but I must point out that our major banks earn a great deal of their income overseas. For example, less than 30 per cent of HBOS's profits arise in Europe—I should not have said that word to the noble Lord, Lord Pearson. I am sorry; I hope that he will pardon the expression.

Photo of Lord Davies of Coity Lord Davies of Coity Labour

My Lords, while I recognise the profits made by banks, can my noble friend advise the House, and particularly me, of the extent to which the banks contribute to the well-being of the British economy?

Photo of Lord McIntosh of Haringey Lord McIntosh of Haringey Parliamentary Under-Secretary, Department for Culture, Media & Sport, Parliamentary Under-Secretary (Department for Culture, Media and Sport) (Media and Heritage)

My Lords, I addressed that in the first part of my original Answer. Whatever, aesthetically, we think about the banks, they are an essential part of any economy. They contribute to our economic growth and prosperity.