HL Deb 20 December 2004 vol 667 cc118-9WA
Lord Harrison

asked Her Majesty's Government:

Whether they will instruct the Office of Fair Trading to review high street banks' account charges to small firms, in light of two recent studies published by the University of Nottingham. [HL390]

Lord McIntosh of Haringey

Under the Enterprise Act 2002, the Office of Fair Trading was given the responsibility to keep markets under review to ensure they are working well for consumers.

Following the publication of the Cruickshank review in 2000, the Government have embarked on a series of measures to tackle the identified competition problems in SME banking. The Chancellor and the Secretary of State for the DTI referred SME banking to the Competition Commission and an inquiry was launched. This reported in March 2002 and proposed several changes to how the SME market should operate.

Following on from this, the OFT reported on the Competition Commission proposals in December 2002. It published an agreement negotiated between the banks, DTI and H MT. The relevant section of the undertakings reads:

"2.1 The four main clearing groups are required to offer their SME customers in England and Wales:

  • A business current account that pays interest of at least the Bank of England base rate minus 2.5 per cent, or,
  • A business current account free of money transmission charges on the core money transmission services (as outlined below), or,
  • A choice between the two".

The Office of Fair Trading will be reviewing the situation in 2006. It may choose to consider the Nottingham research as part of its review.