Banking

Thérèse Coffey Excerpts

Wednesday 15th January 2014 Commons Chamber

[Dr Thérèse Coffey (Suffolk Coastal) (Con)]

It has been widely trailed today that a future Labour Government, if elected, would try to force banks to sell off branches. That will cause great concern, particularly in rural areas, because it is their branches that would be most likely to be disposed of. How would his proposals help create competition for our high street businesses?

[Chris Leslie]

This is not about shutting branches; it is about making a more competitive sector. Time after time, we have tabled amendments to financial services Bills calling for more competition in the banking sector. The Independent Commission on Banking, chaired by Sir John Vickers, called for action to diversify the banking sector, but the Treasury’s approach to divestments of branches from NatWest and Lloyds was not exactly a raging success. It would have been better if the Government had taken our advice and gone for a competition review of the retail sector and not just the business banking sector. They often say “We are looking at competition”, but it is usually only in business banking. They need a more comprehensive approach; the customer needs better service and competition to bring down fees and charges.

There is still no obligation on banks to provide a basic bank account for all customers, even though we know it helps people on low incomes to save money and plan their budgets. The jury is out on whether the seven-day current account switching service will be enough or whether steps should be taken towards full portability of bank accounts for customers. The Government could introduce a fiduciary duty of care, explicitly putting the best interests of customers first and foremost in the financial services sector.

Today, banks are an essential utility; they are supposed to be there to help customers, not to hinder the economy or act like untouchable vested interests. We need to clean up the behaviour of the banks and end the culture of excessive risk and reward. Those are the traits of the old economy; the new economy that we need demands a more modern banking sector—more competitive and diverse, accountable to its customers, supporting long-term investment at home and delivering the sustained growth that we need. That will be the task of the next Labour Government.

--- Later in debate ---

[Sajid Javid]

What I do accept is that badly structured and badly designed bonuses will lead to bad behaviour. I am sure that the hon. Lady herself accepts that if an arbitrary cap is imposed on bonuses and it leads to an increase in fixed pay but no overall fall in overall pay, the bad behaviour will actually worsen.

We are putting our house in order. We are learning from the huge mistakes of the last Government, and are ensuring that we create a country in which the public can trust that their money is secure and our banking sector can flourish.

[Dr Coffey]

My hon. Friend is making great progress in the debate. Will he also mention the fact that taxpayers are now benefiting from the fines that have been levied on the industry, and that the Chancellor has extended the arrangement to ensure that military charities and others benefit?

[Sajid Javid]

I am glad that my hon. Friend has referred to that. It was the right thing to do, and it demonstrates that we can take some of the money that is coming from the banking sector and use it for good causes.