HC Deb 25 July 1968 vol 769 cc990-4
The President of the Board of Trade (Mr. Anthony Crosland)

With permission, I should like to make a statement about the proposed mergers between Barclays, Lloyds and Martins Banks.

I announced on 9th July that I received the Report of the Monopolies Commission on these proposals, and that the Commission had found against them by a majority of six to four.

The Government have now received representations from the banks, and, in the light of these and other comments and representations, have studied carefully both the conclusions of the majority and the note of dissent by the minority.

The Government accept the conclusion of the majority. The consider that the proposed mergers between Barclays and Lloyds, or between Barclays and Lloyds and Martins together, would be contrary to the public interest, and therefore, should not proceed. The Government see no objection, however, to Martins joining with another bank.

The Government believe it essential to maintain a sufficient number of sources of finance for small and medium-sized businesses, including, in particular, the fast-growing innovating companies, and they consider that the structure of banking which would result if the mergers went through would lead to a less satisfactory competitive situation.

These disadvantages outweigh, in the Government's view, the cost savings to be expected from the merger, especially in the light of the majority's doubts about the likely size and speed of these savings in a less competitive situation.

Moreover, there is a danger that the mergers might lead to pressure for still further concentration and hence eventually to a two-bank system. The Government believe that this pressure would be stronger than the Commission suggests, and they share the view, expressed both by the majority and minority, that a two-bank system would be clearly undesirable.

The Government have noted the criticism, expressed by both majority and minority, of the agreements between the banks on deposit and lending rates. In the light of this criticism, we shall again review the arguments which have hitherto led to the conclusion that these agreements are not, on balance, against the public interest.

The Government have communicated their views on the proposed mergers to the banks concerned, and I am glad to announce that they have informed the Governor of the Bank of England that in these circumstances they do not intend to proceed with the mergers.

Sir K. Joseph

What have the Government decided on the recommendation of the Monopolies Commission that there should be publication of accounts?

Mr. Crosland

The position on disclosure, as the right hon. Gentleman will know, is that the Companies Act, 1967 gave the Board of Trade power to withdraw the exemption from disclosure that had traditionally been granted to the banks and the discount houses. After considering the position, the Government decided not to move direct to full disclosure, but, as I announced to the House on 20th December last year, to require the banks and the discount companies to submit to the Bank of England for transmission to the Board of Trade their full accounts, including their allocations to hidden reserves. We said that we would review these over a period before deciding whether full disclosure would or would not be desirable.

Mr. Macdonald

Is my right hon. Friend aware that his announcement will be received with incredulous astonishment and dismay? Does he regard with equanimity the way in which the banks follow one another in opening branches simply because another bank has opened a branch in a particular area, giving the appearance of spurious competition? Does he pay no regard to the potential savings which could have been effected by this merger?

Mr. Crosland

That was an unexpectedly robust contribution from my hon. Friend. I do not detect from the Press comment generally that this announcement will be greeted with either incredulity or dismay.

As to competition, the Report made it clear, as did the Report of the Prices and Incomes Board, that there was an element of wasteful competition in the opening of new branches, but the Commission and the Government regard that element of waste as infinitely less important to the country than the principle of maintaining a sufficient number of independent and competing sources of credit.

Mr. Lubbock

Will the right hon. Gentleman give us an assurance that this detail will not in any way inhibit the introduction of integrated data processing systems by the banks? Will he also say what further steps he thinks it is necessary to take to stimulate competition by the banks, which do not appear to be indulging in it very successfully at the moment?

Mr. Crosland

The question of stimulating more competition is covered by what I said about the Government being prepared to review the considerations that have led successive Governments to approve what has been called the interest rate cartel. As I said in my answer to the previous question on disclosure, if the arguments appear to point to speeding up the timetable that I announced on 20th December, I would be very ready to consider them.

Mr. Sheldon

Is my right hon. Friend not aware that my hon. Friend the Member for Chislehurst (Mr. Macdonald) pointed out that there is very little competition between these banks and other banks, and that a change in the arrangements might have led to an increase in competition? Will he press further the question of disclosure? The privileged position of the banks about disclosure is something which we cannot accept for much longer. Will he also say what outline he has given to the banks as to the kind of mergers he would be prepared to accept?

Mr. Crosland

On the latter part of my hon. Friend's question, the only thing that has been made clear is that the Government, as I have announced, have no objection to Martins joining with another bank.

Mr. Sheldon

What about the others?

Mr. Crosland

They have made no indication. I am making a statement on a particular Monopolies Commission Report on a particular proposed merger, and I am not called upon to give my opinion on any hypothetical actions that might take place.

In reply to the question on disclosure, my hon. Friend will know the details of my announcement of 20th December last. I repeat what I have said in answer to another hon. Member that, if it became clear that it was desirable to remove the exemption from any particular class of banks before the review of all the bank accounts had been completed, I would certainly be willing to consider it.

Mr. Barnett

Is my right hon. Friend aware that there will be disappointment that he has not taken the opportunity to deal with the more serious criticism in the Monopolies Commission's Report and in the Report on bank charges on the question of genuine competition in the matter of charges, interest rates and deposits and on other matters, in which the banks are evading the real issue of competition?

Mr. Crosland

I do not want to repeat myself. I have already replied to questions on the two main items involved, the question of interest rates, on the one hand, and full disclosure of profits, on the other.

Mr. Rankin

In view of the fact that my right hon. Friend has rejected this merger on the ground that it represents an over-concentration of financial power, am I to understand that the idea of nationalising the banks now disappears from our programme?

Mr. Crosland

As far as I know, it is about 30 years since nationalisation of the banks actually appeared in our programme.

Mr. Hugh Jenkins

Is my right hon. Friend aware that it is very much less than 30 years ago, it being almost 14 years ago, when we reaffirmed our policy in favour of bank nationalisation? Does he agree that the degree of concentration of banking has reached a point when it cannot go much further without public ownership coming into consideration?

Mr. Crosland

I take note of what my hon. Friend says, but I am prepared to stand by the Labour election manifesto of 1966.

Several Hon. Members

rose—

Mr. Speaker

Order. Mr. Richard Marsh. Statement.