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Banking Bill

Although this amendment appears to be somewhat prescriptive, it is, I assure my noble friend, essentially probing. There may be arguments as to whether it is in the right part of the Bill, but it seems to me that it is because we need to mention the impact of all this on consumers and competition, and we need to mention it before we come to the next part of the Bill, entitled ““Incidental functions””. This is not incidental; it is a central consequence of the measures that would follow the use of any of the three special provisions outlined in the Bill. I am strongly in favour of the majority of the provisions in the Bill and indeed of the announcements that my noble friends Lord Mandelson and the Minister have made in relation to loans to business. However, whichever way we look at it, it is inevitable that these prospective interventions will cause major changes in the structure of one of our most important industries. Essentially, it is an industry on which the rest of the economy is dependent. It is also a service or industry on which ordinary people and small businesses depend very heavily. If we use the part-nationalisation or temporary nationalisation provisions, we create new state-owned companies. If we use the provisions for transfer into merged companies, the state is intervening to create a large company. If we use the bridge proceedings—at least, for a time—again, the Bank of England is using its leverage to create a substantially large banking company. All these changes occur in an industry in which, so far as concerns most people who seek deposit facilities, mortgages, loans and other credit facilities, the range of options is already relatively small. It is already an oligopolistic industry, and that is why many of the regulations administered by the Bank of England and the FSA exist. I declare my interest as chair of Consumer Focus. Looking after the interests of those who rely every day on retail banking, mortgages and credit from the banking system for their livelihoods and their very quality of life must be an essential part of the Bill. Objective 3 refers to the interests of depositors. However, the issue goes wider than that because we all depend on the banking system to work efficiently. The service provided by the banking system benefits from competition, but the interventions under each of these three headings will almost inevitably restrict competition, at least temporarily. When we came to my noble friend Lord Mandelson’s first debate in this House, on the issue of Lloyds/HBOS, I asked him whether there was an opportunity to revisit what effectively was the exemption under that order for the merger. We were creating a retail banker which has 30 per cent of the market and a mortgage provider which has 30 per cent of the market. In any other circumstances, there would have been a reference to the competition authorities to see whether this was operating in the interests of the consumer. This amendment says that, where any of the interventions creates the largest company in the particular sub-market which I suggest definitions for and has more than 25 per cent of the market, there is an a priori reason for referring that to the competition authorities within 18 months—one may argue about the timescale—if that structure still exists. The consumers, both business and individual, require some assurance that a reference will at some point occur to the competition authorities. I also suggest that, because we are creating either a state bank or a merger sponsored by the state, some institutional provisions should be provided. The suggestion here is that if such a dominant bank were created in any of the markets I identify then that bank—which in many cases will be a state or part-state bank—should create within its structure a small business panel and a consumer panel. That may not be enough to create an institutional form but it recognises that a banking system and those who control, manage and direct banks are in a relationship not only with the whole economy but with millions of individuals. Their interests need to be reflected within that structure. In earlier debates the Government by and large rejected the view that, although banking in some sense is special, the directors appointed by the state—I do not want to reopen this argument—or the Bank of England are no different from any other directors. We are not using the public interest at the director level to look after the wider interests of the consumer and of the taxpayer; I am suggesting we need some other measure so to do. The suggestion here is that we should establish two panels in consultation with those who represent small business and consumers. Those are the two measures: an automatic reference, or one that is more automatic after a certain time, to the competition authorities; and the creation of some structure which represents the key dependence of the banking system on small business and individual consumers. I do not expect the Government to accept this tonight—maybe they will later on; I would be delighted if they did—but at least the issues which underline this amendment need to be addressed by the Government in the interests of wider society and the wider economy. I beg to move.