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Labour’s three objectives for banking reform

With the UK parliamentary elections only a year away, the shadow Financial Secretary to the Treasury Cathy Jamieson MP has set out Labour’s views on retail banking and the payments market in particular. 

Speaking at a payments industry dinner last week at the Armourer’s Hall, she couldn’t resist pointing out that as a Labour politician locked in a room full of bankers she should probably hop into one of the suits of armour hanging from the walls.

The protection wasn’t needed – far from it.  She was honest about the challenges facing the industry, but recognised the progress that has been made and understood the importance of banking, and payments in particular, to the economy.

She set out Labour’s three objectives for banking reform. 

The first objective is to better serve customers.  She acknowledged that progress has been made by the new Current Account Switching Service, but argued that there is plenty of scope for improvement, and  pointed out that this alone would not deliver the higher levels of competition needed in retail banking.

She was very supportive of opening up access to challenger banks but pointed out that this isn’t just a market for banks.  There is a strong building society presence and now Credit Unions are starting to offer current accounts and even mortgages.  She also highlighted the growth of peer-to-peer lenders as an alternative to traditional offerings for both borrowers and savers.

Cathy also spoke about Labour’s plans to introduce a British Investment Bank, a new force in banking that would support a regional banking network, all of which would be fully integrated into the payments system.

The second objective is to support the growth of small business.  She focused on the £19 billion fall in lending to SMEs over the past three years and said that there needs to be greater transparency and flexibility in lending.  In particular she said that small businesses should be able  to use banking data from one of the established lenders, for example, HSBC or Barclays, to get a business loan from another provider.   Given that it is the businesses’ own data, she believes it is only right that they should be able to use it to get better credit terms if their existing bank does not want to lend.

The third and final objective is to improve the efficiency of the welfare state and facilitate greater financial inclusion.  She spoke passionately about the challenges facing people on low incomes and the need for everyone to have access to a bank account, but said that one in five holders of basic bank accounts had closed them because they were afraid of incurring bank charges.

She wants to see fairer and more transparent charges on accounts, saying that this is still a source of much resentment against banks.  She also said that whilst some people she knows on low incomes are phenomenally good at managing their money, there is a clear need for better personal financial management tools, including budgeting accounts.

It was all sensible, practical stuff and it will be interesting to see how this develops as we count down to the General Election.


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