Question to the HM Treasury:

To ask Her Majesty’s Government what steps they are taking to help small lenders to compete effectively with the larger banks, in the light of the new bank corporation tax surcharge.

The banking tax roadmap set out at the Summer Budget means that banks will end up paying a corporation tax rate which is the lowest in the G7 and lower than at any time under the last Labour government. There is also an allowance in the surcharge for the first £25 million of a banking group’s profits, reducing the impact on smaller banks and excluding many altogether.

The Government is committed to improving competition in banking to improve outcomes for consumers. Challenger banks play a crucial role in providing consumers with more choice on the high street.

The Government has already taken significant action to improve competition in banking and create an environment that reduces barriers to entry and incentivises new banks to enter the market. This includes:

• driving the delivery and supporting the continued success of the Current Account Switch Service and Midata, so customers can compare personal current accounts and switch banks where they see a better deal – simply, quickly and reliably;

• committing at Budget 2015 to deliver an open standard to Application Programming Interfaces (APIs) in UK banking – as well as helping customers engage more with their bank, it will drive innovation and increase competitive intensity by supporting the growth of technology that can be used by banks and non-bank providers to offer new products;

• improving competition in the small and medium sized enterprise (SME) lending market by requiring the major banks to share SME credit data with other lenders through designated credit reference agencies, and to offer any SMEs they turn down for finance the chance to have their details passed to online platforms that can help match them with alternative finance providers;

• announcing at Summer Budget 2015 that the Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) will establish a joint New Bank Unit to help prospective new banks enter the market and through the early days of authorisation – the PRA and FCA will also produce annual reports on how they are delivering against their respective competition objectives;

• putting competition at the heart of the regulatory system by creating the new Payments System Regulator to ensure challenger banks can access payment systems on fair and equal terms – the Government has also created a single, stronger competition regulator: the Competition and Markets Authority.