HC Deb 22 October 1973 vol 861 cc674-5
9. Mr. R. C. Mitchell

asked the Secretary of State for Trade and Industry whether, in the light of the profits recently announced by most of the commercial banks, he will refer to the Monopolies Commission the charges made by the banks to their customers.

Sir G. Howe

No, Sir.

Mr. Mitchell

Is the Minister aware that most of the banks made enormous profits last year? Does he not think that some of these profits should be returned to the consumer in the form of lower charges? If the Minister will not refer the matter to the Monopolies Commission, will he refer it to either the Price Commission or the Director of Fair Trading, or take action of some other kind?

Sir G. Howe

The Government have taken action relating to banks' profits, as was made clear in the White Paper on stage 3 and in the debate last week. The amount of profits remaining available to them in relation to interest-bearing business is being reduced, because no interest is being paid on a proportion of the special deposits that each bank makes to the Bank of England. In addition, some banks have reduced their charges under stage 2 and they will continue to be subject to the price code under stage 3.

Miss Joan Hall

Is my right hon. and learned Friend aware that a number of people would like to know why the ordinary depositor with the banks seems to have no choice about the rate of interest he receives, and that anyone who has a current account receives no interest because the banks are extremely quick to put on charges as soon as a current account is in the red?

Sir G. Howe

I appreciate my hon. Friend's concern. The position is that the banks do not agree about charges, except in respect of a few services which do not normally affect the ordinary customer. Indeed, there has been growing evidence of competition between the banks in relation to matters of that kind.

Mr. Benn

Will the Minister explain why the Government have chosen the method that is, in effect, a tax on depositors, instead of using the powers they have to ask the banks to reduce the charges so as to make it possible for depositors to benefit from the increased profitability that has come by chance, as a result of rising interest rates?

Sir G. Howe

The control has been clearly and sensibly divided into two halves. The price code applies to non-interest-bearing business, and the banks are complying with that. They have reduced some charges, and will continue to be subject to the code. In relation to interest-bearing business, there is obviously a limit to what changes can be made in likely current rates of interest. That is why the Government have acted as they have done directly to affect bank profits by limiting the interest paid on a proportion of the special deposits.