Financial Services Bill

The debates on new clause 9 and new clause 15, which was tabled by the hon. Member for Edmonton (Mr. Love), have been thoughtful. I do not wish to speak for too long, because much that needs to be said about the proposals has been said. There is a superficial appeal to new clause 9, and to guaranteeing that there will be a free bank account for those who keep their account in credit and those who have a savings account that is in credit. However, the reality is that such accounts would not be free—there is a cost, as the hon. Member for South-East Cornwall (Mr. Breed) has indicated, and the question is who will bear it. In recent years, the cost has been borne by people who have been charged for having an unauthorised overdraft, perhaps with a significant penalty attached, but banks have also sought to build their margins on the sale of other products. All that happened because people use services in relation to their bank accounts that incur costs, which must be met from somewhere. There is a need to be open and for people to recognise that there are many ways to skin a cat—an account may appear to be free, but the bank will earn income from the account holder to cover the cost from other sources. For example, the interest that a person earns when their current account is in credit might be collected and retained by the bank—the interest that most people get on credit balances is fairly small, even when interest rates are higher than they are now. The challenge that we face is ensuring that there is transparency about the cost of people's bank accounts—my hon. Friend the Member for Chichester (Mr. Tyrie) made some important points on that. If we are much clearer about the cost of bank accounts, we will move closer to genuine competition between banks for current accounts. In that case, people would move away from the false perception that their account is free and begin to look at what charges they might incur if, for example, they were to move their account from Lloyds to HSBC. That is a helpful position. We want increased competition in the banking market, as we said in proposals published in July last year. However, we recognise that for there to be competition, people need to be prepared to switch suppliers. The barriers to switching suppliers need to be reduced, and people need to know just how much they are paying in charges. If the right hon. Member for Birkenhead had tabled an amendment that would have increased transparency, I might have been tempted to support it, but I cannot support new clause 9, despite its superficial appeal. As the hon. Members for Edmonton and for South-East Cornwall have suggested, we have been around the track on new clause 15 before. The Supreme Court's decision on the case brought by the OFT against some representative banks left us in an uncertain position. It did not really resolve the question whether the charges were unfair. There were three routes available to the OFT—to pursue another court case on some different grounds, as suggested in the judgment; to change statute, which the new clause would provide an opportunity to do; and to reach a voluntary agreement with the banks about the future level of bank charges, which appears to be the one that the OFT has opted for. No one should be in any doubt that if the voluntary agreement does not work, legislation is an available route. I am not as sceptical as the hon. Member for Edmonton about the prospect of voluntary agreement on this issue—perhaps I am by nature an optimist, or perhaps he is more pessimistic or cynical. It is interesting to note that in the run-up to the Supreme Court judgment at least one bank started to shift its position on bank charges and proposed some lower charges for unauthorised overdrafts, and it also differentiated between cases in which someone had received a service—if a cheque presented had been honoured—and those in which the bank rejected a cheque, which incurred a lower fee because no service had been received. That suggests that the banks may be interested in reaching a voluntary agreement, and we should maintain the pressure on them.