Business Banking Resolution Service

Tulip Siddiq Excerpts

Tuesday 11th July 2023 Westminster Hall

[Tulip Siddiq (Hampstead and Kilburn) (Lab)]

It is a pleasure to serve with you in the Chair, Mr Pritchard, and I thank the hon. Member for Hazel Grove (Mr Wragg) for securing this timely debate.

Small and medium-sized businesses are the lifeblood of our economy and our communities, as I am sure everyone will agree. The smaller companies driving growth and creating jobs in every part of the UK deserve to be able to fairly resolve disputes with their lenders, and the BBRS was designed to do just that. That is why some of the issues with the BBRS, which we have heard about today from Members across the House, are so concerning and deserve to be looked at by the Treasury.

The BBRS emerged from the Walker review in 2018, after the Government chose not to accept calls from both the Financial Conduct Authority and the Treasury Committee for formal regulation of SME lending. In their 2018 response to the Treasury Committee’s report on SME finance, the Government gave several reasons for not accepting those calls and to justify their view that an ombudsman-style approach to dispute resolution was preferable to a statutory body. First, a statutory body and regulation could negatively impact SMEs’ ability to access finance. Secondly, there would be no real difference in how an ombudsman or a statutory body would make adjudications. Thirdly, an ombudsman would represent a less costly process for SMEs. Fourthly, an ombudsman would be able to arrive at decisions more quickly. Finally, a statutory body would require primary legislation—a response not proportionate to the problems faced by SMEs.

I hope that the Minister will address this question, five years on and in the light of the issues raised today. Does he believe that his Government’s reasoning still holds, that the cost of a statutory body and formal regulation would still outweigh the benefits and that the evidence on the ground suggests a new approach is needed, including for those businesses deemed too large for the Financial Ombudsman Service and which fall under the remit of the BBRS? For example, the Walker review estimated that more than 60,000 cases would be eligible for review by the BBRS, of which 6,000 were expected to register. However, according to the BBRS’s figures as of June 2023, only 28 cases, both historical and contemporary, directly adjudicated by the service, have resulted in financial awards being made.

We have heard numerous concerns about the transparency and accountability of the service in relation to the low number of cases and financial settlements, most notably those raised by Antony Townsend, who said it was too difficult for him to make progress when he resigned as chair of the BBRS SME liaison panel in March. Cat MacLean voiced similar concerns when she resigned last year, as the Minister will know. In 2019, the then Chancellor of the Exchequer, Philip Hammond stated that if the scheme did not bring resolution to a meaningful number of cases, he would expect further discussions about its scope and eligibility. Does the Minister believe his former Chancellor’s threshold for further thought on the effectiveness of the scheme has been reached? In particular, what assessment has the Minister made of the proposal to extend the jurisdiction of the Financial Ombudsman Service to take complaints from businesses with a turnover of up to £10 million?

I understand that the FCA recently concluded a call for input to inform its review of whether the thresholds for SMEs to access the Financial Ombudsman Service remained appropriate. However, since the consultation closed in April, businesses have received no update. Considering the concerns we have heard today, I hope the Minister will set out how the Treasury will work with the FCA to ensure that a timely and satisfactory outcome to the review is brought forward for Britain’s business community.

SMEs are vital to the UK economy. British businesses deserve a tax and payment system, procurement process and dispute resolution service that work for them. That is why I look forward to hearing the Minister talk about how the Treasury will respond to the concerns outlined in today’s debate. In particular, does he think we need a new approach to the resolution of disputes between SMEs and lenders? How will the Government work to ensure there is sufficient transparency and accountability in the resolution process? Finally, does the Minister believe it is time to widen access to the Financial Ombudsman Service?