Draft Small and Medium Sized Business (Credit Information) Regulations 2015 Draft Small and Medium Sized Business (Finance Platforms) Regulations 2015

Joan Ryan Excerpts

Thursday 5th November 2015 General Committees

[Joan Ryan (Enfield North) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Nuttall. I have only three questions, so I am not able to compete with my hon. Friend the Member for Wolverhampton South West on quantity. Nevertheless, I hope the quality will appeal to both him and the Minister.

I agree with my hon. Friend that, overall, the regulations are welcome. We all recognise how important SMEs are in our local areas and to the UK economy, and we want to do anything we can to support them. The Minister mentioned the removal of existing barriers as the reason for the regulations. I presume the main banks do a detailed risk factor analysis. Can he reassure me that in reducing the barriers, presumably through referrals to other lenders with different risk-based analyses, we will not be encouraging SMEs to take an excessive risk and drive themselves to the wall when they might not have done so otherwise?

My other two points are related. The impact assessment says that there has been a voluntary scheme of a similar nature, but it does not seem to have had much success. Will the Minister say why it failed? Was it simply that the main banks were not doing what they had signed up to do, or were there other reasons? If so, how have they been taken into account in the new regulations?

On page 3 of the impact assessment there is a section on improving transparency. In what seems to me a sensible move, it says that the Government have secured

“a voluntary agreement with the major lenders to publish bank-by-bank lending data across 10,000 postcodes, enabling smaller lenders, both banks and non-banks, to see where lending is low and pursue new business in these areas.”

Why is that going to be voluntary if other voluntary schemes on similar matters have had little success? Would it not have been better to make the scheme compulsory?

--- Later in debate ---

[Mr Gauke]

To be clear about interest rates, decisions are of course for the Bank of England’s independent Monetary Policy Committee. None the less, the policy of addressing the need to reduce our deficit, for example, helped to ensure that we did not see a premature increase in market rates, which may well have fed through into bank lending.

I do not intend to digress too much on to the policies on RBS and Lloyds over the past five and a half years, other than to restate my earlier point that RBS and Lloyds had to decide how to achieve the objectives both of ensuring that their finances were on a sound footing, and to some extent deleveraging, and of providing support to small businesses. The Government supported the meeting of both objectives. Those financial institutions found themselves in a difficult situation—I do not suggest that we detain the Committee with a lengthy discussion of why they were in that position, but none the less they were.

The implementation guide, which the hon. Member for Wolverhampton South West mentioned, has been completed by the CRAs, banks and the Treasury. It has not yet been published, but it is being used to help banks and CRAs implement the credit information policies. I believe it should be published shortly, but I cannot be more precise.

On the point about Handelsbanken and designations being based on market share, not being designated will help Handelsbanken to compete more effectively with the largest banks. It will benefit from the regulations; I do not think they will be to its disadvantage.

The definition of a finance platform is in section 7 of the Small Business, Enterprise and Employment Act 2015. As the hon. Member for Wolverhampton South West will of course appreciate, it is normal legislative drafting practice not to repeat such a definition in the regulations made under the Act; but for those studying the debate and scratching their heads, I am happy to clarify that point.

On the question of why the provision of credit data on companies is not a regulated activity, the Government legislate for activities to be regulated under the regime set out in the Financial Services and Markets Act 2000 only when there is evidence that it is required. There is no such evidence in the case of providing data on companies. Regulating the activity under the regime in question would not solve the problems I mentioned earlier, but we believe that the regulations will.

The hon. Member for Enfield North—

[Joan Ryan]

Right hon.

[Mr Gauke]

Apologies; the right hon. Lady raised a point about voluntary and compulsory schemes. The voluntary systems were not 100% effective, which is why we are regulating today for the sharing of data. Other voluntary schemes, such as postcode lending, have been successful and do not require a legislative option. It is a question of being pragmatic as to which voluntary arrangements are working and which are not.

I will check to see whether there are any further points I can add in answer to the questions asked by the hon. Member for Wolverhampton South West.

[Joan Ryan]

Will the Minister say a few words about how monitoring of the voluntary scheme will continue? In relation to the rationale for intervention, there were 50 responses to the consultation on the matters that the Government want to regulate, which does not sound like many when we think how many SMEs there are. Will the Minister go back to SMEs and others to discuss where lending is or is not happening under the voluntary scheme? Will he go to lenders other than the main banks, to assess their view of the information that we get from that scheme?

[Mr Gauke]

I suppose the first point to make is that SMEs understandably, and perhaps rightly, tend to be focused on their business and do not necessarily always respond to Government consultation. That might explain the numbers. All I can say to the right hon. Lady is that all such matters must be kept under review. When voluntary arrangements work, so be it, but when there is evidence that they do not, the Government are willing to take action, as we have seen.

As I said, I will deal in writing with any points that I have inadvertently failed to address in response to questions raised today. I hope that this debate has been productive, that it has provided right hon. and hon. Members with some comfort on any concerns that they have, and that the Committee will join me in supporting the regulations.

Question put and agreed to.

Resolved,

That the Committee has considered the draft Small and Medium Sized Business (Credit Information) Regulations 2015.

DRAFT SMALL AND MEDIUM SIZED BUSINESS (FINANCE PLATFORMS) REGULATIONS 2015

Resolved,

That the Committee has considered the draft Small and Medium Sized Business (Finance Platforms) Regulations 2015.—(Mr Gauke.)