The Economic Secretary to the Treasury (Andrea Leadsom)
First, I congratulate the hon. Member for Edmonton (Mr Love) on securing this debate and presenting his case so eloquently. He was, of course, one of my partners in crime on the Treasury Committee, during which time together we held the Government to account. Therefore, given that this is our second debate together in as many months, I am very glad that he is doing just as good a job of holding the Government to account now that I am not on the Treasury Committee. I am grateful to him for that. The other thing that he and I share is a huge enthusiasm for greater competition, greater transparency and far greater choice and diversity of financial services for businesses and customers. We have worked together on that agenda for a very long time.
Before I get on to the hon. Gentleman’s specific points, I want to highlight the many measures that the Government are taking to try to improve that competition, choice and diversity. As he will know, we are currently consulting on whether to make the large banks provide referrals to challenger banks when they do not wish to lend to a small or medium-sized business. We are already looking at legislating through the small business Bill to require banks to share credit histories with credit reference agencies so that challenger banks with permission can look at other areas for lending. We are supporting peer-to-peer funding and crowdfunding.
Last week, in our bid to support the credit union movement, and quite apart from the funding from the Department for Work and Pensions, we put out a call for evidence to look at the future of the credit union movement and what is wanted from communities and the credit unions themselves. The Government therefore have a big agenda to promote precisely the transparency and competition on which the hon. Gentleman and I have worked very hard over the past few years.
The hon. Gentleman has raised a number of specific issues, but before turning to them I would like to provide a brief reminder of how far along we are with the work on postcode lending data and why we believe it is so important. As the hon. Gentleman has pointed out, the Government secured an agreement with the major banks last July to publish lending data across nearly 10,000 postcodes. It is worth reminding hon. Members that the measure has made the British banking industry into one of the most transparent in the world.
As the hon. Gentleman well knows, improving competition in banking is a No. 1 priority for many jurisdictions, not least the UK. The publication of the data will therefore play a big role in improving competition by enabling challenger banks, smaller building societies, credit unions and CDFIs to identify and move into areas that are not currently served by the larger banks. It will also mean that our economy is better served by their offering finance to customers who are crying out for support to help their business grow. I certainly believe that the project is vital, and that it will play a key role in improving lending in areas where it is currently lacking. I am sure that he agrees with that overarching sentiment.
I turn now to the specific points made by the hon. Gentleman and the hon. Member for Harrow West (Mr Thomas). On the comments of the hon. Member for Edmonton about expanding coverage across institutions, the Government made a clear commitment during the passage of the Financial Services Bill that the data would initially involve the lending of the seven major lenders. That decision was taken because of their dominance in the market. The Government also made it very clear that we intend to discuss with interested peers and the industry exactly how the data could be extended to cover other types of institutions, including banks, building societies, credit unions and other finance providers. It is, however, important to bear in mind that the cost of such a level of disclosure, particularly for smaller institutions, might be prohibitive and might increase the costs they pass on to their customers. We therefore want to consider the matter very carefully before we act.
With regard to expanding coverage across the country, the hon. Member for Edmonton will know that the first dataset did not include lending in Northern Ireland, due to the differing banking markets and reporting requirements for Northern Ireland banks. However, I assure him that the Government will ensure that any future extension includes the main Northern Ireland banks, and I confirm that the Government, with the British Bankers Association, are discussing with the Northern Ireland banks how the agreement might be extended to them.
I am sure that the hon. Gentleman will agree that it is important that due time is given for discussions to ensure that any agreement is proportionate and that data provided will be beneficial. I am also sure that he will welcome the news that, just yesterday, the BBA published composite bank lending data for Northern Ireland businesses and households for the first time. The Northern Ireland data have been sought after for some time, and their publication has been encouraged and helped by the joint ministerial taskforce on banking and access to finance.
The hon. Gentleman suggested that the framework in question should be managed by an independent organisation, such as the Office for National Statistics, but the BBA already collects and publishes a range of comprehensive data on lending to individuals, households and businesses, so it is very well positioned to agree the necessary standards on data release and accessibility. However, as he would expect, the Government will keep the situation under review.
Andrea Leadsom
Yes, the Government are keeping the matter under review, and we will discuss exactly that with the BBA.
The hon. Gentleman expressed concern that postcode lending data do not give a full picture of lending in the UK, and suggested that a wider set of lenders and products might be included. For example, he noted that SME figures represent about 60% of the national market, covering loans and overdrafts only. Other forms of finance, such as business credit cards and asset-based finance, are not included at this stage. He is therefore right that it is important for public data to be as broad as possible, but as I have mentioned, we must bear in mind that, particularly for smaller institutions, the cost of making such disclosure might be prohibitive and might increase the costs passed on to customers and businesses. It is important to see postcode data as part of a wide range of data to which the Government, banks and businesses have access, on top of data from the Bank of England, the BBA and other surveys.
Those other surveys, including the SME Finance Monitor and the new Business Banking Insight, can also be of real importance. The latter, which the Government announced in the Budget and I launched just over a month ago, is a really useful tool for UK businesses, as it lets them see which banks are in a good place to offer them the products and services they need at the right prices and will give them a decent service in their area and their particular market.
Finally, the hon. Gentleman asked what use the Government are making of the data on bank lending and whether we have a clear strategy for tackling any credit deserts in UK communities; the hon. Member for Harrow West also raised that issue. I reassure them both that the Government regularly interrogate these data as part of our wider analysis of bank lending conditions across the UK. However, the full usefulness of the data will only really be known once we have been able to identify longer-term series and trends.
At the current time, the data do not appear to show any regional imbalances, but we will continue to monitor that. As the dataset grows and trends become more readily identifiable, we plan to make increasing use of the data. We will of course take action on the issue if we think it is needed.
Mr Thomas
Will the Minister give us a little more clarity on who is analysing the trends? I ask, having asked the Financial Inclusion Centre specifically to give me a sense of the bank lending data for London; its analysis suggested that there was a wide disparity among different postcodes—potentially 50% to 300% of the average per capita lending per postcode. As my hon. Friend the Member for Edmonton mentioned, my sense was that there was a need for one particular organisation to analyse those data.
Andrea Leadsom
As I have said, at the current time the data do not seem to show any major regional imbalances, but my officials, the Bank of England, the BBA and the banks themselves are looking at the data. If the hon. Gentleman wants to write to me on a specific point where he believes that there may be evidence of a distinct imbalance I would be delighted to look into it and respond to him. We will continue to monitor the data and ensure that as trends become more identifiable we can make more use of the data to assess potential areas where there is a lack of banking facilities.
In conclusion—
Mr Love
I apologise—when the Minister said, “In conclusion,” I thought I had missed my opportunity. The Financial Conduct Authority has an objective of looking at particular areas, specifically for the purpose of researching into credit deserts. Have Treasury Ministers had any discussions with the FCA on that?
Andrea Leadsom
I assure the hon. Gentleman that officials meet the FCA on a regular basis, as do I. If it will make him feel better, I shall make a point of raising that issue with the FCA the next time we meet to ensure that it is looking at it carefully.
I thank the hon. Members for Edmonton and for Harrow West again for raising this important issue. As they know—the hon. Member for Edmonton certainly knows this—transparency and competition are central to the Government’s work on financial services. My interest lies very much in that area, so the hon. Member for Edmonton and I are aligned on that. Although I am sorry that I cannot give him the answers that he wants right now, because the new policy has not been in place for long and we do not have enough material as yet and because of our natural reticence to increase the costs for smaller institutions in the early days, I hope that I have reassured him that we will continue to monitor the data and look for ways to improve the service. Ultimately, I am confident that we will end up with a banking system that better serves people and businesses up and down the country.
Question put and agreed to.