A rare collegial moment for the Chamber, perhaps. I agree entirely, and I was just about to come on to that issue.
When I met with Santander management last week to discuss the closure of the Springburn branch, I made the observation, “I recognise exactly why you’re doing this.” They did not deny it. I also said, “Yes, there needs to be total visibility about the economic impact and the disparity in terms of the demographics of where these bank closures are happening, because there is no visibility of that pattern.” This was recognised long ago: in the 1970s in America, there was a practice called red-lining, which involved American banks deliberately blacklisting poorer communities and withdrawing banking services.
In 1977, the Carter Administration passed the Community Reinvestment Act. As a result, commercial banks in America are obliged to redistribute their profits into sponsoring co-operative banking services and mutuals, and to promote credit unions. There is therefore a much more diverse range of banking services as a result of direct Government intervention to redistribute those services, which dates back to the 1970s. As a result of the Community Reinvestment Act, Santander will invest £11 billion in sponsoring co-operative banking, mutuals and other sustainable banking activity. That is a hefty redistribution and is in stark contrast with what happens in the United Kingdom, where there is no legislative imperative for banks to do it. We need to address that yawning chasm in legislation.
I made the point to the Santander management that the root cause of a lot of these problems is the increasing monopolisation of the banking sector in the UK. We have five major clearing banks, which hold 85% of all current accounts. By comparison, in Germany there are 400 local Sparkassen banks and over 1,000 co-operative banks. Clearly the picture there is very different, because there is legislation in place to redistribute the holding of capital in the banking system, so it is done more sustainably and is more responsive to local communities and to sectors of industry. As a result, Germany has a much healthier and more balanced economy.
I also made the point that Santander’s origins lie in the Abbey National, which was demutualised in 1989, the year I was born. We have seen a pattern of demutualisation across the banking sector, which has been negative for the UK economy. I would seek legislation to reverse the demutualisation of the British banking system.