As ever in these debates, the quality of interventions is superb. The hon. Lady pre-empts exactly what I was going to say. If she will forgive me, I will come on to that in a moment, but her point is perfectly valid.
It may not surprise anyone following the story closely to learn that the BBRS has failed to resolve a meaningful number of complaints. By the former Chancellor’s standards, I think it is fair to say that the BBRS has been an abject failure and has certainly not given UK SMEs confidence to engage with financial service providers.
As just mentioned by the hon. Member for Rutherglen and Hamilton West (Margaret Ferrier), it was estimated by the then chief executive of UK Finance that more than 60,000 historical complaints would be eligible for review. However, by May of this year, the BBRS had made direct adjudications on just 28 cases resulting in financial awards. In that same time, it has been involved—whatever “involved” means—in the award of 56 financial settlements between banks and claimants. That includes cases where the dispute has resulted in a settlement following, but not necessarily because of, the involvement of BBRS. Even being generous, the BBRS has been involved in a maximum of just 84 financial awards in nearly two years out of an estimated potential of 60,000. Plainly, the quantity of resolved cases is very disappointing, to say the least.
Naturally, that raises questions about value for money. The BBRS cost more than £40 million to set up. By May of this year, according to its own data:
“Substantially more than £1 million of financial awards have been made to SMEs as a result of BBRS intervention so far”.
In other words, a maximum of between £1 million and £2 million has been paid out since the launch of the BBRS. Bear in mind that it cost £40 million to set up. Would it not have been easier to simply divide that £40 million and dish it out randomly? The BBRS has proved to be very poor value for money.
The primary issue behind these abysmal figures is the design of the scheme itself. Heavily restrictive eligibility criteria have locked out and timed out almost all credible claims from businesses, and there is no indication of any willingness from the BBRS or the banks to address this. The chair of the BBRS SME liaison panel—an advisory body set up to give SMEs a voice within the service—resigned in March this year, stating:
“The very low numbers of cases resolved by the BBRS and the banks suggest an inflexible system, and I do not detect the necessary willingness and imagination within the existing system to resolve this.”
Another fitting quote from an unnamed source close to the scheme was reported in The Times in May 2022. They eloquently put it as follows:
“Saying BBRS needs an overhaul is like saying that a tank that’s been blown up could do with a service. It’s completely defective.”
The specific concerns about eligibility are fourfold. First, the current point of valuation of turnover is the date at which the complaint was first made by the SME to its bank. This allows the bank to artificially distress companies’ assets to below £1 million, and therefore out of the scope of the BBRS, before the complaint is made to the bank. Instead, the point of valuation of turnover should be made at the point at which the bank’s alleged act or omission initially occurs.
Secondly, complaints eligible for the Financial Ombudsman Service are not eligible for the BBRS. However, the FOS has a wider purpose than strictly to resolve disputes. There may be a peripheral element of a historical SME claim that either qualifies it for consideration by the FOS or has been the recipient of such consideration. In this case, the applicant would be precluded from the BBRS, although it may meet the other criteria.
Thirdly, eligibility regarding size of business thresholds is too strict. Property developers, landlords and others cannot meet the current BBRS eligibility minimum business size criteria, even if they set out to do so. Fourthly, on balance sheet limits, currently businesses are assessed on gross business assets rather than net business assets. This is restricting and illogical, because it is not representative of the true size of the business, as it includes the costs that are due to be deducted from the balance sheet in the short term.
As I have already alluded to, the chair of the advisory SME panel resigned earlier this year after proposals put forward to reform the eligibility criteria were consistently rejected or ignored. This prompted the BBRS to unilaterally dissolve the panel. As I said at the time, this was a rather shocking and cynical move. The BBRS established an advisory panel to feed SME concerns about the service back to the BBRS. The concerns raised were ignored, and the proposals were rejected out of hand. When it appeared that the panel might be publicly critical, the panel was shut down. For those now unrepresented SMEs, that must have felt like a complete stitch-up.
The BBRS is indeed winding down—though I question whether it ever got into swing. The historical complaints process closed in February, and the contemporary complaints process will continue only until the end of this year. The reason that I am here—I surmise that colleagues are here for the same reason—is to put it to parliamentarians that the process has been a failure. We simply cannot make the same mistakes again. As I hope I have illustrated, the BBRS has been a waste of time and money and has certainly not resolved a meaningful number of disputes. If anything, many SMEs’ experiences with the BBRS have served only to further erode their trust in the financial services sector.
As has been suggested in the past, a financial services tribunal, with a statutory footing, could be the solution. I commend the idea to my hon. Friend the Minister. Such a body would be modelled on employment tribunals and be a genuinely independent organisation with legal teeth. The creation of a tribunal would have a dramatic effect on the power imbalance inherent in disputes between businesses and large financial institutions, echoing the transformation in employer-employee relationships brought about by the introduction of employment tribunals. That must be accompanied by an amendment to section 138D of the Financial Services and Markets Act 2000, to enhance the legal rights of SMEs. Those changes will be significant in ensuring that SMEs have access to justice. Indeed, as the Treasury Select Committee stated in 2018:
“Taken together, these changes will ensure that the UK’s small businesses will no longer be denied justice, as so many have been in the past.”
Ultimately, the BBRS has failed to achieve its aim of providing meaningful redress in a fair and independent way. As an alternative, the proposal for a financial services tribunal, endorsed by the Treasury Committee and by the all-party group on fair business banking, which I have the pleasure of co-chairing, must be seriously considered. We owe it to the brilliant SMEs in each of our constituencies to create a lending environment in which they can thrive and drive our national economy forwards.