24/3/2010
By Neil Ainger
The Chancellor, Alastair Darling, has said in his 2010 Budget report that he intends to ensure that everyone in the UK who wants a bank account can get one. Speaking prior to the impending general election in May, making some of his announcements quite politically motivated and necessarily subject to any change of government, the Chancellor also unveiled plans to force state-owned banks, RBS and Lloyds foremost among them, to lend £94 billion in small business loans to assist the economy. There will be a new service to adjudicate credit disputes and Darling revealed the one-off bank bonus tax had raised £2 billion, double the amount forecast, as institutions paid up, rather than risk staff leaving or moving offshore. He also stated he backs a transaction or 'Tobin' tax to pay for the bank bailouts, but only if it's agreed on an international basis.
Over the next five years following his budget proposals today, the Chancellor says he will force the major High Street banks in the UK to provide basic bank accounts, enabling the more than one million citizens who cannot access an account, to shop online, accept pay cheques or benefits, and fully participate in modern life. Details of the universal service obligation, which are subject to a potential change of government of course, are still to be spelt out but it is not likely to meet with approval by UK retail banks, as making any money back from providing services to these typically poorer customers is difficult. With the recent bank bail outs however, arguing against the measure is likely to be a difficult sell. The banks have actually got quite a good record on helping the so-called 'unbanked' into the system. The British Bankers' Association (BBA) trade body has worked with the government's social inclusion programmes and the Toynbee Hall charity in East London to extend provision voluntarily but the pace of change has obviously not been fast enough for some.
Commenting on the move, the BBA, said: "It is already the case that everybody can have a bank account if they want one, unless (and this is rare) the law says they can't. Every month 40,000 more people open basic accounts. It is unclear whether a legal obligation to provide such accounts would make any difference to this steady trend."
The director general of the Building Societies Association (BSA), Adrian Coles, said he: "Looked forward to seeing the details of the government's proposals, but would have concerns if deposit taking institutions that did not already provide current accounts were forced to join the initiative."
Bank tax
In regard to the proposed bank transaction tax, the BBA was unimpressed, its spokesperson stressing that: "The financial services industry already pays £24 billion annually in tax (direct corporation tax by firms, plus income tax by their employees). Unlike in America, the taxpayer intervention in the UK will be paid back and more so. Ahead are many changes which will add to the operational costs of all banks and so to the cost of borrowing. We know only too well that taxing the banks will bring short-term popularity but the question that the Treasury is failing to answer is what all their additional rules, and now this tax, will mean for the price that people and businesses will pay for their loans and their mortgages."
Dr Richard Reid, research director at the International Centre for Financial Regulation (ICFR) study body, noted approvingly that the Chancellor mentioned in the 2010 Budget the need to work closely with the G20 and IMF in achieving agreement [in regard to any tax]. It is to be hoped this remain true so as to avoid regulatory arbitrage.
In regard to the proposed new credit adjudicator, the BBA again said it lacked specific details at this time, but that it believes banks' scrutiny and decision-making processes are robust: "Any new authority should very quickly find this to be the case".
• For the detailed 2010 budget proposals please click HERE
