Joint-Stock Banks (Competition)

HC Deb 15 December 1970 vol 808 cc1100-2

17. Mr. Hordern

asked the Chancellor of the Exchequer if he will seek powers to enable the clearing banks to compete for deposits by offering variable rates of interest.

18. Mr. Loveridge

asked the Chancellor of the Exchequer if he will take steps to increase competition between the joint-stock banks.

38. Mr. Tugendhat

asked the Chancellor of the Exchequer what estimate he has made of the change in interest rates that will follow the end of the cartel arrangements between the joint-stock banks.

Mr. Barber

I do not see the need for any additional powers, but we will continue to keep the question under review. I cannot estimate the effect on interest rates of any such change.

Mr. Hordern

Is my right hon. Friend aware that, while it may not be necessary to seek any extra powers, the clearing banks themselves are unlikely to break their existing arrangements unless my right hon. Friend makes it clear that he would like them to do so? Does he think that the clearing banks should compete with each other in attracting deposits by offering different rates of interest?

Mr. Barber

As my hon. Friend will appreciate, the abolition or retention of the cartel is not merely a question of improving the efficiency of a particular industry. It also has important consequences for credit control which would need to be carefully examined before a decision was reached. This is why I said that we will keep the question under review.

Mr. Loveridge

Will the Chancellor of the Exchequer consider setting up an official inquiry into restrictive practices in banking?

Mr. Barber

I cannot go further than I have done, which is to say that we will keep the question under review.

Mr. Tugendhat

Does my right hon. Friend agree that there is something a little anomalous in the retention of the banks' cartel in view of our policies in various other important fields?

Mr. Barber

That may or may not be so. The simple fact, as I said, is that there are other matters which are relevant in addition to the efficiency of a particular industry and our general competition policy.

Mr. Sheldon

In accepting that a cartel is operating, why does the Chancellor of the Exchequer assume that the source of all wisdom rests with the Treasury? Why does not he submit this matter to the Monopolies Commission, or to the new body which is to take its place?

Mr. Barber

The answer to that question was set out at considerable length by my hon. Friend the Under-Secretary of State for Trade and Industry in the Adjournment debate on 2nd December. He explained why that was not appropriate.

Mr. Proudfoot

Will my right hon. Friend acknowledge that if the market rate were charged by the joint stock banks for overdrafts, some of the big industries would be chased to the market and so leave more money in the joint stock banks for the small business men?

Mr. Barber

That might be one of the consequences. Another consequence might be that building societies would find that their funds were switched to the banks and they might have cause to increase their deposit rates, which would in turn affect their mortgage rates. A variety of consequences could flow from this change, and the matter is under careful consideration.

Mr. Barnett

Has the right hon. Gentleman seen the recent report of the Institute of Economic Affairs which seemed to indicate that the cost of the lack of competition may be as high as £90 million? As the Government regard competition as the solution to all our problems, why is the right hon. Gentleman not asking the Monopolies Commission to look at the question of the lack of competition amongst banks?

Mr. Barber

I hope that the hon. Gentleman will give me credit for saying that we will keep the question under review. This is a little different from the answer which his right hon. Friend the Member for Birmingham, Stechford (Mr. Roy Jenkins) gave to his hon. Friend on 25th July, 1969. I appreciate the points involved in this, just as much as does the right hon. Gentleman, and, therefore, one has to take all these matters into consideration. As I have said, we will keep this under review.