The Treasury has gently placed its foot on the neck of the banking sector.
Last November, the government announced a review of banking services under the chairmanship of Don Cruikshank.
The grounds of the review, in the words of the chancellor, were that ‘access to finance is critical to the success of small business’.
The review, however, is not independent, and it is the Treasury which is providing the Secretariat; there are no independent members of any review body, since no such body exists, and the only independent element turns out to be the chairman.
The chancellor instituted the review because he was concerned at the low levels of productivity when compared to our industrial competitors in Europe and the US.
But the chancellor’s remit was soon broadened to cover all manner of banking services – money transmission, interest, credit cards and joint supply.
The accounting standards of banks and the effects of regulation and insolvency policy are not part of the review, but it has reserved the right to include these in the competition analysis that it proposes to undertake should it be ‘appropriate to do so’.
The review has no legal basis, but the Treasury is using the information provided to get into every nook and cranny of the banking sector – with the help of the banks themselves, who are fully responding to the consultation exercise.
This Treasury fact-finding mission will not result in more regulation, but any weaknesses thrown up will lead to the Treasury using its persuasive authority with banks to rectify such them in the interests of consumers.
For while the review began by placing greater emphasis on lending to small business, it has since rapidly branched into more areas of straightforward consumer protection.
Any recommendations flowing from the review – which is likely to be completed by the end of the year – are unlikely to create any impact prior to the next election, but the information now being gathered may well lead to more radical proposals for banking as part of New Labour’s ‘permanent revolution’ should the government be re-elected.
Stuart Bell is Labour MP for Middlesbrough and adviser to Ernst & Young.