Greg Wright: We must not forget lessons of banking crash

Not my words, but those of the philosopher George Santayana, who had a gift for coining pithy phrases that packed a punch. His words came back to me this week, when it seemed that steps might finally be taken to stop the big four banks dominating our lives. The banking crash was only six years ago, but it seems the world is keen to forget the whole episode, without implementing the changes needed to stop it happening again. The big banks’ relationship with small businesses has left plenty to be desired, as any entrepreneur who was mis-sold interest rate hedging products will tell you. Last week, I chatted to Lawrence Tomlinson, the former Government adviser, who compiled a dossier which contained scathing criticisms of the way state-backed RBS treated some of its small business clients. Although Mr Tomlinson applauded the work being done by the Government to give more power to the regulators, he fears the same mistakes could be made again. Without Government intervention, I believe there’s no reason why we couldn’t witness a financial implosion in say, 2018, on a similar scale to that experienced in 2008. Despite the emergence of challenger banks, such as Handelsbanken, the big four - Lloyds, HSBC, Barclays and RBS still reign supreme. In fact, there’s less competition now than there was in 2008, because of the flurry of mergers and bail-outs that followed the crash. Mr Tomlinson would like to see an environment in which the banks focus on backing viable businesses, instead of devising “fancy new products” that contributed to the crisis. It’s now emerged that the Competition and Markets Authority has not ruled out ordering a break-up of the big four, after it found that customers and small businesses are getting a raw deal. Options on the table include banning complex fees, capping overdraft charges and forcing banks to allow smaller rivals to use their branch networks or payment systems. It is still difficult for new banks to enter the market, and there has been little change in banks’ market share. The largest four banks account for 77 per cent of personal current accounts, 85 per cent of business current accounts and 90 per cent of business loans in the UK.

Anthony Browne, chief executive of the British Bankers’ Association, said “substantial changes” were underway in the sector to increase competition, and the association has published ideas to help the smaller players grow. The CMA has started a consultation process which could lead to further action. Only the boldest step - a full-scale break up of the big players - will create the competition needed to ensure the banks serve the best interests of consumers and businesses.

At this point, dear readers, I was tempted to provide a detailed account of my wardrobe, so you could make an informed judgement about my ability to do this job. Stunning revelations about my choice of jacket and tie could mean that you decline to read on, because you cannot take me seriously.

The sexist comments made by sections of the national media about the rising female stars of the Tory party as they approached the “Downing Street catwalk” have taken attention away from the areas of policy they will play a role in shaping. For example, Esther McVey, the Employment Minister, will have to make a number of tough decisions that could affect every business in Yorkshire. As John Robinson of law firm Clarion, told me, there are contentious European judgments pending that could cost British business millions of pounds in increased holiday and overtime payments, as well as a significant liability for retrospective claims. He added: “This could cause serious damage to the economic recovery, particularly as the impact will be indiscriminate, affecting businesses large and small.” Perhaps we should focus on these, rather than Ms McVey’s choice of shoes?