Business Banking Resolution Service

Kirsten Oswald Excerpts

Tuesday 11th July 2023 Westminster Hall

[Mr Wragg]

The hon. Lady makes a valid, important and sensible point. I will touch on a suggestion towards the end of my remarks.

In the course of its inquiry, the Treasury Committee considered the long-standing and very large gap in provision of a financial dispute resolution service for SMEs, between those eligible to refer a complaint to the Financial Ombudsman Service and those with access to enough money, appropriate legal representation, and sufficient courage and time to be able to sue their bank. A similar shortfall was identified in the APPG’s “Fair Business Banking for All” report.

[Kirsten Oswald (East Renfrewshire) (SNP)]

We should not underestimate the hon. Member’s point about the unreasonableness of expecting those who find themselves in that situation to have huge amounts of courage. I want to make that point on behalf of my constituents who have huge amounts of patience, courage and grit to right what in their case has been a very significant wrong. They would absolutely like to see an independent tribunal service. They describe the current system as a shambles and I do not disagree with them. Their trust is completely shattered by any measure. All of the resolution processes have failed. Does the hon. Member agree that there are people all over the UK who deserve significantly better?

[Mr Wragg]

Absolutely so. The courage of those small and medium-sized business owners is not to be underestimated. I have dealt with constituents whose cases go back decades. They have had more than patience; they have had the utmost resilience. Many would have given up by now, but such is the injustice—the wrongs that we need to right—that we must, on their behalf, respond with similar courage.

The expansion of the remit of the Financial Ombudsman Service in 2019 to include more SMEs and increase the maximum award level narrowed the gap to some extent, but did not close it. Neither has the gap been plugged successfully by the ad hoc redress schemes established by banks in the years following the 2007 financial crisis for those impacted by scandals such as the interest rate hedging product mis-selling, the mistreatment of small business customers by the Royal Bank of Scotland Global Restructuring Group and the HBOS Reading fraud.

The schemes that have been set up have all been heavily criticised for, among other things, a lack of independence and overly restrictive eligibility criteria. It was against that backdrop that the BBRS was established as a voluntary initiative to the specifications of, and funded by, seven participating UK banks. It was intended to help rebuild trust among the SME community by resolving historical and contemporary disputes between banks and those businesses. It thereby filled a gap in dispute resolution and redress.

--- Later in debate ---

[Kirsten Oswald]

My right hon. Friend is making a very helpful speech. The point he is making feeds into the wider point about the huge imbalance in power, influence and resources that exists between the banks and those seeking redress. On his point, the behaviour of some banks has been quite shameful—I am speaking from my own casework here—so whatever happens from here on in, it is imperative that new arrangements are fair, genuinely independent and transparent, so that businesses can be confident that they really are going to work.

[Stewart Hosie]

My hon. Friend is absolutely right, and that imbalance in power and resources was writ large in the BBRS executive’s unilateral decision in March to dissolve the SME liaison panel, after rejecting its numerous proposals to expand the eligibility criteria. It is a law unto itself. The liaison panel came forward with ideas to make things work better, but instead of them being taken on board and actioned—if they were appropriate—the panel was unilaterally shut down. The voice of SMEs to the panel has effectively disappeared, and that was after the SME liaison panel’s chair resigned because it was “difficult to make progress”.

That short list should be cause for concern enough for the Government, but let us take a look—I give great thanks to the all-party parliamentary group on fair business banking for this—at the list of headlines that this shambles has generated: “Business Banking Resolution Service a ‘real failure’”; “‘Cynical’ closure of bank redress adviser panel prompts anger”; “New £23m Business Banking Resolution Service has yet to pay any compensation”; “Bank redress scheme ‘is completely defective’”; “Lawyer Cat Maclean quits ‘completely defective’ banking compensation scheme”; “Business Banking Resolution Service ‘done on the cheap’”, with £40 million invested and it does not work; and “Banking redress chief earns £1m despite paying only five claims”—at that point.

If I were the Economic Secretary to the Treasury, I would be deeply concerned. The process has failed. Businesses are not getting the service or the redress that they need and deserve. The headlines are absolutely diabolical. It appears that few lessons have been learned from the financial crash, or if they have, they have been forgotten. I will ask the Minister two questions and then make one final brief observation. How will the Government ensure that we widen the criteria for businesses to be able to use the service, and what mechanisms will they put in place to allow SMEs to properly, fairly and quickly settle disputes with the banks?

My final observation goes back to the financial crash. We remember the actions of RBS, GRG and a variety of comparable outfits. Instead of restructuring those businesses to allow them to thrive, prosper, trade and grow again in the future, there was a perception—backed by some fact—that the banks were looking at asset-rich, cash-poor businesses to raid and pillage. From my time on the Treasury Committee, I am happy and confident to say that. The perception among the business community is that businesses were there to be raided by the banks, rather than helped. Trust between businesses, particularly small ones, and the mainstream banks broke down entirely. If I were the Government, I would be deeply concerned, looking at the headlines that have already been generated and the self-evident failure and lack of transparency within the BBRS, that it may not take an awful lot more for businesses to once again lose trust in the high street banks. I hope that the Minister will comment on that in his response.

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[The Economic Secretary to the Treasury (Andrew Griffith)]

It is a pleasure to serve with you in the Chair, Mr Pritchard. I congratulate my hon. Friend the Member for Hazel Grove (Mr Wragg) on securing the debate on his behalf and that of the all-party parliamentary group on fair business banking. In my short time in this role, I have seen that the APPG does a significant job and gives a voice to our all-important small businesses.

We are a nation of small businesses. They employ a vast number of people in the economy and make a huge contribution and, as other speakers have said, it is vital that they secure access to the finance and capital that they need to grow, expand and do the wonderful things they do to help the UK economy. As part of that, it is critical when things go wrong—regrettably, they sometimes do—and businesses face issues with their bank, they can access efficient and unbiased dispute resolution. We all aspire to a quick, efficient and affordable process in that regard, which allows for unbiased outcomes for those businesses. Those are the higher-order objectives that we seek.

For context, it is not my role today to defend the BBRS. It is an independent body and is not a part of Government or the Treasury. I will share the same context about it being set up following a number of interventions by Parliament. We will not truthfully know whether the deficiency was in the overestimate of the number of cases or the effectiveness of the BBRS system. Given that we know that the BBRS is effectively headed for the exit in all circumstances, that is moot, although the question of how individuals and businesses get redress is not. That, I absolutely accept, is a responsibility of the Treasury; it is how we can ensure good order on this.

The more generous in spirit among us might accept that the BBRS was set up with good intentions, but as we have heard from Members here today, that has not perhaps been the experience. I understand that and have listened very closely to today’s debate, and perhaps my hon. Friend the Member for Hazel Grove would care to meet me to share his own particular constituent experience. I understand that is a long-standing piece of casework, and sometimes such specific examples illustrate the more general point that we have heard from Members today given that there are clearly a number of cases.

[Kirsten Oswald]

The Minister has offered to meet the hon. Member for Hazel Grove (Mr Wragg), who secured the debate, which I am sure is very welcome, but might he feel able to extend that offer to others of us who have long-standing cases in this field that are difficult to resolve?

[Andrew Griffith]

I want to be a listening Minister and am of course very happy to do that, but in so doing I do not want to hold out a false expectation. These matters are not directly the subject of ministerial interventions, so while I am very happy to meet the hon. Lady, and, again, use those examples to inform the wider policy area, in fairness it is important for people in the Public Gallery or who might be following the debate that I do not raise false expectations, because some of these matters have involved great trauma to individuals and have been going on for a long period of time. I would be grateful if the hon. Lady could frame things in that important context, but of course I would be happy to meet her and, lest I receive more interventions, that is a general point for Members of this House. It is right that I approach my responsibility diligently as we try to formulate policy.

As we go forward, whatever past decisions have been made in this respect, I am very keen to understand—the hon. Member for Hampstead and Kilburn (Tulip Siddiq) talked about this—the role of the Financial Ombudsman Service, which successfully deals with tens of thousands of complaints each year now, including SMEs up to the threshold of £6.5 million. The Financial Conduct Authority—whose decision it must be, but with the support of Ministers—has looked to extend that upper threshold, and it is consulting; perhaps Members have responded, like the APPG has.

I spoke to the chief executive of the FCA and gave him great encouragement that, the consultation having been closed in April of this year, we will shortly hear the response. I hope the House will await that, because it is my belief that one should look again at the merits of this versus a statutory tribunal, which I believe still has some of the disadvantages that the hon. Member for Hampstead and Kilburn outlined, particularly in terms of the need for primary legislation but also the non-material differences between an ombudsman service which exists, is seen to work generally in practice—although I am always open to representations—versus yet another novel intervention in the form of a new statutory tribunal.