Chancellor heads for row over small firms

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The Independent Online
NORMAN LAMONT, the Chancellor, is believed to be sticking to his plan for a small business ombudsman despite alternative proposals from Sir Nicholas Goodison, president of the British Bankers Association, for small claims courts for business, writes Peter Rodgers.

Though Sir Nicholas's proposal has the backing of the Bank of England, the Treasury is expected to respond coolly to the idea.

Sir Nicholas told Mr Lamont in a letter on Monday that a new scheme was needed to resolve disputes by small businesses fast and cheaply.

He suggested an arbitration procedure or a commercial tribunal with the power to make binding decisions on the lines of small claims courts. It would embrace wider issues than banking and would include late payment of bills by suppliers. However, the Treasury continues to favour a limited ombudsman scheme, confined to maladministration in bank dealings with small businesses - rather than interest rates or commercial judgements by bankers.

This puts the Chancellor on a collision course with the BBA, since Sir Nicholas's letter repeated the banks' rejection of an ombudsman scheme.

The Chancellor has received the second report from the Bank of England, which clears the banks of failing to pass on base-rate cuts. His response could be out next week.

While bankers believe the Goodison scheme could be self-financing from fees, money would be needed to set it up. Sir Nicholas has indicated that banks might be willing to discuss financing it, but the BBA said this was not official policy.