§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Eyre.]
§ 10.24 p.m.
§ Dr. John Gilbert (Dudley)
I rise to draw the attention of the House to the co-ordinated increase in bank charges recently announced by the clearing banks. This increase is only the latest manifestation in a whole series of manifestations of the cosy little cartel that has been operated by the clearing banks in this country over a great many years.
This latest increase has affected hundreds of thousands of people. It might not be putting it too high to say that millions of people could be affected. There are, according to reports, no fewer than 30,000 people in one firm who have been affected by this increase. Everybody whose firm is in a scheme where the staff have their salaries or wages paid directly into their bank accounts is affected by this latest increase in charges.
These customers of the banks have no redress whatever. They have not even had any individual notification of the increased charges which they are going to have to pay. The customers are unable to take their accounts to any other bank. If they do so they will find the same increases in charges there. The only thing that they can do is to transfer their money and their business to an entirely different section of the banking industry, and until the events of last week, at any rate, these latest increases in bank charges were proving to be the best possible recruiting sergeant for that invaluable institution the Giro; in fact, the best recruiting sergeant it has had since its foundation.
Tonight, however, I am concerned not so much with the amounts of the increases—though these are steep enough in all truth, and plenty of people in the country, as I know full well, are hopping mad on the subject—as with the collusive way in which these increases have been introduced. All the banks, in one announcement, said that they intended raising their charges, by the same amount, on the same services, with all the increases coming into effect on the 1424 same day. One could hardly have a clearer textbook example of the operation of a cartel.
This is not the only recent manifestation of the cartel. During the last couple of months the matter of evening closing and the introduction of charges on cheques backed by cheque cards issued by the banks other than members of the British Bankers Association have all been the subject of the same sort of identical announcement. The cartel operates on the hours of business which the banks transact, and on the rates which they pay for their deposits, and although it has been rumoured that the banks themselves would like to have done away with this aspect of their own cartel, it should be borne in mind that the reason they would like to do away with it is that it would be in their own interests to do so.
They are not hoping to do away with the interest rate aspect of the cartel in order to compete more effectively among themselves. Perish the thought. That is the last thing that they have in their minds. The reason they were talking of doing away with the interest rates side of the cartel was that they hoped to attract more business from other financial institutions.
This cartel operates, moreover, over a whole range of different charges made by the banks for their various services, and until quite recently it sustained a persistent refusal to publish proper statements of account, and even to recognise duly constituted trade union bargaining agents for their staffs.
It is not my purpose tonight to examine all the implications of this cartel: sufficient to say that it is of such an all-embracing nature that it is obvious that its existence could not be hidden if it were tried. This is not just a cartel. It is an open cartel. in fact, it is more than that. It is a brazen, self-flaunting cartel. If we had in this country the sort of effective anti-trust legislation that is known elsewhere, conduct of this sort would have landed the boards of directors of the clearing banks behind bars a long time ago, and quite rightly so. In this country we do not enjoy such protection.
We have the various Monopolies Acts and Restrictive Trade Practices Acts. 1425 They have proved to be puny tools indeed. It is not my purpose tonight to weary the House with citing chapter and verse of the legislation that bears on this matter. Suffice it to say that the Government themselves recognise that the case has been proved.
Towards the end of September I wrote a letter to the then Board of Trade in connection with the introduction of charges on bank cards other than those issued by the clearing banks. I had a reply from the newly-constituted Department of Trade and Industry a couple of weeks ago. I hope that the Minister will forgive me if I do not read the full text of the letter, and that he will accept the following as a fair extract from it:So far as the Monopolies Commission is concerned, it does appear that the clearing banks' action could be made the subject of a limited inquiry under the power to refer to the Commission situations where at least one-third of the supply of a particular service is in the hands of firms who conduct their respective affairs in such a way as to restrict competition.Those are not my words. Those are the Government's words—" as to restrict competition".
The Minister went on to say that he thought it would be more appropriate to see this in the round—I quite agree with him. He says that he wants to look at this action in the wider context of the structure and practice of the banking industry and the various arrangements between the clearing banks. I thoroughly welcome that decision. He said:The Government are looking closely at these in the light of their declared intention of promoting competition in areas where it is not at present effective.Again, those are not my words, but the Government's words. The case is proven beyond doubt.
Just to rub the point home, I wrote again to the Minister on the occasion of the introduction of the new increases in the group charges. I received a reply from him a couple of days ago which said that my letter:… raises similar issues to your earlier letter … and I have nothing to add to my letter …The Government are saying that here is a second clear case for a reference to the Monopolies Commission. We are very glad that the Minister accepts our case. I am quite prepared to sympathise with him in his predicament in this de- 1426 bate. He has clearly agreed that something should be done, and yet he is not apparently in a position to announce that anything will be done. I do not expect this to be the occasion for a major revelation of Government policy, but the Minister has accepted that in the space of less than two months we have had two clear cases for reference to the Monopolies Commission. It is there in black and white. Despite these admissions, the Government, to all outward appearances, are doing nothing more than studying the situation, the facts of which have been an open public scandal for many years.
In conclusion, I hope that the Minister will accept that this matter has been raised tonight in a non-partisan manner, despite what I have said about his inaction. I deeply regret that my own party did nothing about this when they were in a position to do so. Equally, I am confident that most of the sentiments I have expressed tonight will be echoed by hon. Members on both sides of the House. The Minister does not need very much strength or courage. All he has to do is to lean on the banks. If he does so, I am confident that they will yield without a fight in a matter of weeks. If, however, the months roll by and nothing further transpires, he will not expect us to be as gentle with him the next time this matter is raised in the House, as surely it will be.
§ 10.35 p.m.
§ Sir Harmar Nicholls (Peterborough)
The hon. Member for Dudley (Dr. Gilbert) has done a service in raising this matter tonight and in the form in which he has raised it. I am surprised that this move has come from his side of the House and not from this side in view of all that is involved in it, but I am delighted, whichever side has brought it, that it is having an airing tonight.
I do not think that the hon. Member's message is to the Government or to the Treasury Bench. It is to the banks themselves. I believe that they must take a stand in this matter. I want to see private enterprise banks. I want to see the sort of competition which a private enterprise system must have from the banks. I agree with the hon. Member that whatever the reasons, whatever urges from Governments, of both parties, there may have been on the banks in 1427 the past, we do not at present have the competition and the free working of the banking facility that we ought to have. I would urge the banks to pay heed to what the hon. Member has said.
I want to say only a few words, because my hon. Friend the Under-Secretary will have an answer to give from the Treasury Bench. But I do not really want to hear his answer. I want action from the banks themselves. I believe that it is far too easy, perhaps to suit their own ends or, perhaps, because they feel that they have a special responsibility to help Chancellors of the day to overcome their problems—whatever the reasons, the banks seem to have deviated from what I consider to be the sound banking base that the country must have if it is to continue as a free enterprise country.
Too many decisions are made by the joint banks which are blanket decisions covering all. This is dangerous for the country. One recognises the inflationary problems, and they must be dealt with. The Government must restrict inflation by, perhaps, restricting household purchases, but I believe that if they allow it to interfere with the free working of the small and medium-sized businesses, the general economic strength of the country will suffer.
I ask the banks to show a little bit of independence. They showed a little bit about 18 months ago, and I ask them to go further. I join the hon. Member for Dudley in asking them, whether it be a cartel outlook or whatever the other outlook is, to take an independent line on occasions, so that we will feel that one can go from one bank to another, when an honest discretion will be shown instead of their having to work to a rather narrow loyalty within themselves.
I agree with the hon. Member that this is the beginning. Unless the banks themselves—never mind the Government—heed it, they may well put themselves out of business. Free enterprise banking has been the facility which has allowed the country to become one of the leading trading countries, and a wealthy country at that. The banks may be helping to bring about their own demise, and I do not want that to happen.
I ask the banks to heed this Adjournment debate. If my hon. Friend the 1428 Under-Secretary can give them some sort of lead which will allow them to use their own discretion and feel that they do not have to be tied to the edicts which come from the Chancellor of the Exchequer's Department, he will be doing the country and them a good turn. I thank the hon. Member for making the point. I hope that it will be listened to outside. If it is not, I agree with him that this is a subject which will be raised on more than one occasion in the future.
§ 10.37 p.m.
§ Mr. Eric Deakins (Walthamstow, West)
I should like to thank my hon. Friend the Member for Dudley (Dr. Gilbert) and the Minister for allowing me to intervene in this Adjournment debate, since basically both my hon. Friend and I have been at one in writing to the Department on various occasions concerning the collusive raising of bank charges and the business of charging other bank customers 4s. for cashing cheques at the clearing banks.
I certainly do not want to inject a partisan note into the debate, because I am very pleased with the contribution of the hon. Member for Peterborough (Sir Harmar Nicholls). I think we are all at one tonight in this Chamber in wishing to promote further competition within banking. I wonder, however, why the Government should appear to be a little bit reluctant to enforce competition on the clearing banks by the very fact that they are rather reluctant to refer the whole issue to the Monopolies Commission, which, one would have thought, was the statutory authority for dealing with monopoly circumstances of this kind.
Could it be, perhaps, that competition in bank charges might well become competition in other aspects of the clearing banks' operations, such as competition in attracting deposit accounts, possibly in paying higher interest rates for deposits? The clearing banks get their money remarkably cheaply in view of the long-term trend in interest rates. It might even be that the clearing banks would be forced, if there was a system of real competition, to pay interest rates, albeit rather small ones, on current accounts, from which they at present get a fair amount of money from their customers which they are able to put to good use but for which they give little in return. There is no doubt that competition could reduce the charges which the banks make 1429 to their customers, and not only in the I.C.I. type of scheme.
The recent collusive raising of charges is not in the public interest and, like my hon. Friend the Member for Dudley, I should have thought that it represented a full justification for a reference to the Monopolies Commission and not merely to an inter-departmental inquiry.
It is stated Government policy to promote competition throughout all sectors of British industry and commerce. The test of the Government's intentions will be seen by their attitude to competition in the monopoly position of the clearing banks. This is a time for action rather than words and I endorse the sentiments expressed by my hon. Friend the Member for Dudley when he said that we do not want to wait for several months and find that little is done in this respect.
It is up to the Government tonight to show, even if they cannot promise immediate action, that they have the courage of their convictions, that they really believe in competition and that they will take the first tentative steps to enforce competition in a sphere of British financial operations which hitherto has not been subject to this very important principle.
§ 10.42 p.m.
§ The Under-Secretary of State for Trade and Industry (Mr. Nicholas Ridley)
The hon. Member for Dudley (Mr. Gilbert), the hon. Member for Walthamstow, West (Mr. Deakins) and my hon. Friend the Member for Peterborough (Sir Harmar Nicholls) have raised a matter which I agree is of the greatest importance.
The co-ordinated increases in bank charges to which reference has been made are, I take it, the increases announced by the Committee of London Clearing Banks in the special terms made available under group schemes to employees of large firms and Government Departments—the so-called "I.C.I. terms". The essence of these arrangements is that they are, in general, more favourable to individual account holders who are employees of those organisations.
These terms have remained unchanged for the last 10 years. Individual banks are, I understand, reviewing other charges made to account holders but are not, as far as I know, taking concerted action in this sphere.
1430 There has also been much reference to the decision of the clearing banks to impose a 4s. charge for the cashing of cheques against Co-operative Bank cheque guarantee cards. These are credit cards, as the hon. Member for Dudley pointed out.
These are, first and foremost, matters for the clearing banks and their customers, and it would be out of place for the Government to deliver an "instant" opinion on the justification or otherwise of the banks' actions.
§ Dr. Gilbert
This is not a question of the clearing banks' customers paying this 4s. It is the customers of the other banks.
§ Mr. Ridley
In connection with the points to which I have referred, I simply said that it would be wrong for the Government to make an instant judgment in these matters, whether they apply directly to the customers of the clearing banks or, as the hon. Gentleman said, to the other banks in question. At least one of the organisations affected by the proposed increase is reported to have taken the matter up direct with the clearing banks.
The clearing banks are doubtless well aware of the public criticism of a number of their recent actions and will, presumably, be considering whether any action on their part, individual or collective, is called for to meet this criticism. No doubt also the directors of the banks will read in the OFFICIAL REPORT what hon. Members have said in this debate.
At the same time, the recent publicity will have drawn the attention of the public to the fact that some of the range of facilities provided by the clearing banks are also provided by other institutions. There may well be a number of individual customers of the clearing banks who would be well advised to investigate whether their own particular requirements could be met more satisfactorily, and perhaps more cheaply, by one of these other institutions. Indeed, it must not be assumed that charges for services which the banks make to individuals or firms are necessarily uniform either as between different clearing banks or even different branches of the same bank. Individual managers have a good deal of discretion, and there is therefore scope for shopping around and bargaining. The charges actually 1431 made may reflect the extent and range of services used by the account holder, and the balance maintained in the account.
The hon. Member has suggested that the activities of the clearing banks should be referred to the Monopolies Commission. Before dealing with this suggestion specifically, I should like to confirm that the Government attach the greatest importance to competition and to rooting out restrictive practices as a means of ensuring the best allocation of resources and of safeguarding the interests of the consumer, and financial institutions are in no different position from any other bodies in this matter. My right hon. Friend the Secretary of State will shortly be announcing the Government's proposals for improving the effectiveness of the machinery now available for promoting competition.
Because we attach such importance to the promotion of competition, the Government naturally give serious consideration to suggestions from hon. Members, and from outside the House, that particular industries in which competition appears to them to be ineffective should be examined by the Monopolies Commission. When we receive such suggestions we see, first of all, whether the statutory criteria for reference to the Commission are satisfied; that is, whether one third of the supply of the product or service concerned is in the hands of one firm or of several firms which conduct their respective affairs in such a way that competition is restricted.
If these statutory criteria are satisfied, we go on to consider whether there is any evidence of abuse of a monopoly position, whether by unfair action against competitors or exploitation of customers; and we also take account of any evidence that the absence of competition has led to unnecessarily high costs or the misallocation of economic resources. Finally, we consider any elements peculiar to the industry concerned which may be relevant to a decision on whether to refer it to the Monopolies Commission.
The hon. Member wrote asking me to refer to the Commission the action of the clearing banks in relation to the charges they make for cashing Co-operative Bank cheques. In my reply, I pointed out that 1432 this action appeared to fall within the statutory criteria of the monopolies legislation, and that a reference was therefore technically possible. I said that I was considering the matter. This is indeed the invariable practice when suggestions for reference are made.
I have now considered all aspects of this suggestion very carefully, in the light of the criteria I have already mentioned, and have decided that I should not be justified in making a reference to the Monopolies Commission in the immediate future. I have listened carefully to all that hon. Members said this evening, but I do not think that they have raised any new considerations which have not been in my mind. I realise that this decision may be disappointing to the hon. Member and his hon. Friend, and perhaps to others, but I welcome the opportunity which this debate provides to make the position abundantly clear.
§ 10.48 p.m.
§ Mr. Edmund Dell (Birkenhead)
I know that my hon. Friends will be a little disappointed with that reply. The hon. Gentleman has announced a decision on their suggestion that a reference to the Monopolies Commission should be made, but has given no reason for that decision. He has indicated the considerations he bore in mind, and those considerations are well known to the House. The House has been told many times what type of conisderation Governments have in mind in deciding whether such reference should be made. What he has not told us is why a Government which claims to be dedicated to the promotion of competition have decided, when faced with circumstances such as my hon. Friends have described, not to make the reference. It would have been interesting to hear the reasons which led the Government to their conclusion.
The hon. Member for Peterborough (Sir Harmar Nicholls) expressed surprise that this matter should have been raised from this side of the House, but it is not at all surprising. In my view, it is this side which has from the beginning shown the greatest interest in promoting competition. The powers under which this reference could have been made are powers given to the Government by the Monopolies and Mergers Act passed when the Labour Government were in office in 1965.
§ Mr. Ridley
Will the right hon. Gentleman say why he did not use those powers to do what he is now advocating should be done?
§ Mr. Dell
My hon. Friend has criticised the Labour Government for not making a reference, but he is referring to certain current facts which, in his view, call forth a reference. The Labour Government produced greater revelation by the banks of their financial position, something which was never done by previous Governments.
1434 I am sorry that the Minister has not felt able to tell us the reasons for his decision. We are afraid that this decision may be indicative of the realities of the competition policy which the Government propose to put forward in the next few weeks. I assure the hon. Gentleman that, in the light of his decision, we shall look at those proposals a great deal more critically.
§ Question put and agreed to.
§ Adjourned accordingly at ten minutes to Eleven o'clock.