Business Banking Resolution Service

Stewart Hosie Excerpts

Tuesday 11th July 2023 Westminster Hall

[Stewart Hosie (Dundee East) (SNP)]

It is a pleasure to serve under your chairmanship, Mr Pritchard. I congratulate the hon. Member for Hazel Grove (Mr Wragg) on bringing this debate before us. He is absolutely right: businesses need access to a proper, functioning dispute resolution service, but I fear that the BBRS is not it. He was also absolutely correct that redress cannot be left only to those with the time, money and patience—or, as he said, the bravery—to sue the banks. The hon. Lady the Member for Rutherglen and Hamilton West (Margaret Ferrier) made the most salient point that barely a few dozen of the 60,000 legacy cases that were potentially liable to be investigated or taken up by the service have been resolved. That is a problem.

[Andy McDonald]

Are we assuming that those legacy cases fit the criteria set out by the hon. Member for Hazel Grove (Mr Wragg)? Many of our constituents will be nowhere near those criteria, but their lives and businesses lie in tatters. Are they not included? Are they not in anybody’s thinking, in terms of the resolution that they deserve?

[Stewart Hosie]

They ought to be in people’s thinking. The figure of 60,000 is commonly used. Of course, the eligibility criteria include that they must not be eligible for the FOS scheme, as was very properly referred to by the hon. Member for Hazel Grove. However, let us assume that it is a big number, in the tens of thousands, and let us hope that, at the very least, businesses do not fall through the cracks between this service and the FOS. It would be a different problem entirely if people were not eligible for any kind of access to at least one of the redress systems.

The hon. Member for Hazelgrove laid out a bit of the background. I want to go through some of that again briefly, given that it is quite important in terms of what the Government may choose to do next. The BBRS was set up in 2018 to help SMEs resolve disputes with their banks free of charge. Many high street banks, including Lloyds, NatWest and HSBC, took part in the scheme, and it has been operating—although I use that word loosely—since 2021. It was created after a spate of banking scandals involving the mistreatment of thousands of companies, including, as we know, the Royal Bank of Scotland’s GRG, and similar operations at other banks in the aftermath of the 2009-10 financial crash.

The eligibility criteria, which have been mentioned, are that the dispute must have occurred after 1 April 2019, and that the SME must have an annual turnover of up to £10 million per annum and a balance sheet of up to £7.5 million, and must not be eligible to take the complaint to the Financial Ombudsman Service. Many stakeholders have noted that the scheme has not been successful in helping SMEs to resolve their disputes, despite costing—as we have heard—tens of millions of pounds to set up, which was paid for by the industry. One of the main issues with the scheme is the narrow eligibility criteria for SMEs to use the service. The recent figure was only 35, but even 50 or 60 would still represent a tiny fraction of the number that could be resolved.

[Margaret Ferrier]

When the Business Banking Resolution Service was introduced, it was marketed as an accessible service. However, data shows that, by March last year, only 776 businesses had registered with the BBRS. Does the right hon. Member agree that this suggests that either the Business Banking Resolution Service was difficult to use or, alternatively, the service was not publicised effectively?

[Stewart Hosie]

It could be a combination of both, although it is instructive that Andy Agathangelou, the founder of the Transparency Task Force, called the BBRS an “abysmal failure” that is not “fit for purpose”, so I certainly think that the opaqueness and lack of advertising might be significant factors in how few businesses have sought to use it and what happened to those that did. He also said that some small businesses are “convinced” that the BBRS is

“a mechanism through which banks have found justification for not making payments”.

Even if that is not true, if the perception among the SME community is that the service, which was put in place to resolve their disputes, is being used for contrary purposes, that alone would be a huge problem for the BBRS.

[Kirsten Oswald]

My right hon. Friend is making a very helpful speech. The point he is making feeds into the wider point about the huge imbalance in power, influence and resources that exists between the banks and those seeking redress. On his point, the behaviour of some banks has been quite shameful—I am speaking from my own casework here—so whatever happens from here on in, it is imperative that new arrangements are fair, genuinely independent and transparent, so that businesses can be confident that they really are going to work.

[Stewart Hosie]

My hon. Friend is absolutely right, and that imbalance in power and resources was writ large in the BBRS executive’s unilateral decision in March to dissolve the SME liaison panel, after rejecting its numerous proposals to expand the eligibility criteria. It is a law unto itself. The liaison panel came forward with ideas to make things work better, but instead of them being taken on board and actioned—if they were appropriate—the panel was unilaterally shut down. The voice of SMEs to the panel has effectively disappeared, and that was after the SME liaison panel’s chair resigned because it was “difficult to make progress”.

That short list should be cause for concern enough for the Government, but let us take a look—I give great thanks to the all-party parliamentary group on fair business banking for this—at the list of headlines that this shambles has generated: “Business Banking Resolution Service a ‘real failure’”; “‘Cynical’ closure of bank redress adviser panel prompts anger”; “New £23m Business Banking Resolution Service has yet to pay any compensation”; “Bank redress scheme ‘is completely defective’”; “Lawyer Cat Maclean quits ‘completely defective’ banking compensation scheme”; “Business Banking Resolution Service ‘done on the cheap’”, with £40 million invested and it does not work; and “Banking redress chief earns £1m despite paying only five claims”—at that point.

If I were the Economic Secretary to the Treasury, I would be deeply concerned. The process has failed. Businesses are not getting the service or the redress that they need and deserve. The headlines are absolutely diabolical. It appears that few lessons have been learned from the financial crash, or if they have, they have been forgotten. I will ask the Minister two questions and then make one final brief observation. How will the Government ensure that we widen the criteria for businesses to be able to use the service, and what mechanisms will they put in place to allow SMEs to properly, fairly and quickly settle disputes with the banks?

My final observation goes back to the financial crash. We remember the actions of RBS, GRG and a variety of comparable outfits. Instead of restructuring those businesses to allow them to thrive, prosper, trade and grow again in the future, there was a perception—backed by some fact—that the banks were looking at asset-rich, cash-poor businesses to raid and pillage. From my time on the Treasury Committee, I am happy and confident to say that. The perception among the business community is that businesses were there to be raided by the banks, rather than helped. Trust between businesses, particularly small ones, and the mainstream banks broke down entirely. If I were the Government, I would be deeply concerned, looking at the headlines that have already been generated and the self-evident failure and lack of transparency within the BBRS, that it may not take an awful lot more for businesses to once again lose trust in the high street banks. I hope that the Minister will comment on that in his response.

--- Later in debate ---

[Andrew Griffith]

I want to be a listening Minister and am of course very happy to do that, but in so doing I do not want to hold out a false expectation. These matters are not directly the subject of ministerial interventions, so while I am very happy to meet the hon. Lady, and, again, use those examples to inform the wider policy area, in fairness it is important for people in the Public Gallery or who might be following the debate that I do not raise false expectations, because some of these matters have involved great trauma to individuals and have been going on for a long period of time. I would be grateful if the hon. Lady could frame things in that important context, but of course I would be happy to meet her and, lest I receive more interventions, that is a general point for Members of this House. It is right that I approach my responsibility diligently as we try to formulate policy.

As we go forward, whatever past decisions have been made in this respect, I am very keen to understand—the hon. Member for Hampstead and Kilburn (Tulip Siddiq) talked about this—the role of the Financial Ombudsman Service, which successfully deals with tens of thousands of complaints each year now, including SMEs up to the threshold of £6.5 million. The Financial Conduct Authority—whose decision it must be, but with the support of Ministers—has looked to extend that upper threshold, and it is consulting; perhaps Members have responded, like the APPG has.

I spoke to the chief executive of the FCA and gave him great encouragement that, the consultation having been closed in April of this year, we will shortly hear the response. I hope the House will await that, because it is my belief that one should look again at the merits of this versus a statutory tribunal, which I believe still has some of the disadvantages that the hon. Member for Hampstead and Kilburn outlined, particularly in terms of the need for primary legislation but also the non-material differences between an ombudsman service which exists, is seen to work generally in practice—although I am always open to representations—versus yet another novel intervention in the form of a new statutory tribunal.

[Stewart Hosie]

Can I just get a guarantee that there will be no gap between the removal of the BBRS and the decision taken on the thresholds that can be reached and potentially another body, statutory or voluntary—that there will be no gaps or black hole that businesses might fall into at some point in the near future, whether in months or years?