Allow the challengers to flourish
COMPETITION is good. Monopolies and oligopolies are bad. Nasty, abhorrent. A pretty black and white statement, I accept, but it’s what I was taught while studying economics at university in the late 1970s and to echo the words of my heroine, the late Margaret Thatcher, I’m not for turning.
It’s also irrefutably true, especially in financial services where a concentration of power in key markets such as personal banking and energy supply has led to widespread consumer detriment over the years.
These bloated suppliers have often abused their market dominance to deliver a mix of appalling customer service (take a bow Scottish Power and npower) and unappetising products.
It’s why we at The Mail on Sunday are ardent supporters of the new challenger banks – the likes of Aldermore, Metro and soon to launch Atom – and emerging energy suppliers such as Ecotricity and Ovo. These new businesses are now chipping away at oligopolistic markets by delivering quality customer service and value for money. Long may they challenge. A Conservative Government, you would think, should be a supporter of greater competition in financial services. Yet not everything it is doing indicates that it wants challengers to flourish.
Admittedly, a number of regulatory changes since the 2008 financial crisis have made it easier for new banks to establish themselves. New banks are now not required to hold as much capital as they used to while easier account switching procedures have empowered many dissatisfied customers to seek pastures new. Many have ended up at the doors of the new banking kids on the block.
Yet, frustratingly, fresh obstacles have emerged to thwart this much needed competition. The latest impediment is the impending introduction of a new 8 per cent surcharge on bank profits above £25million – a tax that formed part of George Osborne’s summer Budget package.
The tax has been roundly condemned by a number of challenger banks and building societies – both new (Metro) and long established (Nationwide). They argue that it will eat into their profits, compromising their ability to lend and compete against the big battalions.
On Friday, Andrew Tyrie, the longstanding chairman of the influential Treasury Select Committee, added his two pennyworth. In a letter to the Bank of England, he said it was ‘essential’ that the surcharge did not ‘obstruct’ competition in the banking sector.
‘Millions of consumers and small businesses have been getting a poor deal for decades because of inadequate competition and choice in banking,’ he said. ‘It is crucial that competition from new and smaller banks is not unnecessarily impeded.’
No government likes to do U-turns – and this one is in no mood to compromise as evidenced by its refusal to tamper with the impending cuts to tax credits. But at the very least, Osborne should review his decision to introduce the 8 per cent bank surcharge. Does he really want to stifle the competitive forces that financial services and customers are crying out for?
Does Mr Osborne really want to stifle competition that customers are crying out for?
TODAY, providing the alarm goes off, I will be participating in a ten kilometre run in Hemel Hempstead. My fourth such run (waddle) since an Australian cattle dog decided to take a chunk out of my right leg in January this year. The ‘race’ is organised by Rennie Grove Hospice Care, a charity that supports people in Hertfordshire and Buckinghamshire who are terminally ill. It’s the second ‘hospice’ run I will have done in the past month, having competed in a race organised by Hospice in the Weald, in Tunbridge Wells, Kent.
Hospices such as Rennie Grove and Hospice in the Weald do a fantastic job in delivering palliative care. I know this for a fact because I have seen at first hand the tender care they deliver.
My late father-in-law was looked after with great compassion by Huddersfieldbased Kirkwood Hospice in his last days as he battled asbestosis.
The work of the UK’s hospices was acknowledged last week by the Economist Intelligence Unit, which ranked end-of-life care in Britain as the best in the world. Hospices are only able to deliver their care because of donations from the likes of you and me.
With Hospice Care Week ending today, I will be doing my bit. I would be delighted if you joined me by making a donation via hospiceuk.org.