Banks reject claims by Labour team of profiteering

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The Independent Online
Banks yesterday rejected Labour claims that they were profiteering at the expense of high street customers. They are to ask for meetings with the team that prepared what they say were the ``ill-informed'' claims about bank charges and profits mad e by Gordon Brown, the shadow Chancellor.

Although some banks said they were ready to discuss Mr Brown's proposals to control banks - including a statutory Ombudsman - the clearers took exception to the figures he used to back the new banking policy.

Mr Brown claimed bank charges had risen 50 per cent during the recession while bank profits rose 50 per cent last year to £10bn.

Lloyds Bank said: ``We felt we briefed Labour pretty extensively in September about where our profits came from. It is hard to say where these figure come from. They are not based on any research we recognise.''

The bank said it planned to ask Mr Brown how he arrived at the numbers. Midland Bank also said it was ``baffled'' by the figures used by Mr Brown.

Lloyds said its increased profits were made not in the branches but from a fall in bad debts and from international trading. And far from bank charges rising by 50 per cent, Lloyds had held or withdrawn the vast majority of charges over the last couple of years.

``We survey 400,000 small business and personal customers every quarter and they say our service is improving all the time'' a bank spokesman added.

Tim Sweeney, an official of the British Bankers Association, accused Labour of out of date thinking. He said: ``The Labour Party press release shows they are still working to a 1960s agenda with 1960s solutions.''

And the BBA added: ``Anybody who equates a 50 per cent increase in profits with a 50 per cent increase in charges paid by the small minority of personal customers who do pay bank charges is guilty of a gross simplification.''

According to BBA figures, only 25 per cent of personal customers pay charges. The rest have accounts that are in credit and so pay no charges.

Barclays Bank was more conciliatory, disputing Mr Brown's numbers but saying it was interested in his suggestions and hoped to discuss them with him in greater detail.

It rejected Mr Brown's claim that there is not enough competition in the clearing system, which Labour wants opened to new entrants. The bank said that for the last 10 years the system has been open to other banks and building societies to join, and members already include Citibank of the US, Credit Lyonnais and Deutsche Bank as well as Halifax and Nationwide building societies.

Norrie Morrison, a banking specialist at Kleinwort Benson, said that far from being profiteers, banks' return on equity over the last 30 years had been completely inadequate. Richard Coleman, of Smith New Court, said bank shares already reflected some political risk. And he pointed out that there had been two attacks on the banks by the Tories in the 1980s - a windfall tax and an abolition of leasing tax privileges.

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