George Osborne has vowed to increase retail banking competition by proposing a target to issue at least 15 new licences in the next five years.
At the International Monetary Fund spring meetings in Washington, the UK chancellor also announced on Friday that a new Conservative government would review financial consumer protection. The move is part of a Conservative strategy to persuade voters at the May 7 general election that the party is on their side and does not simply represent the interests of big businesses in the financial sector.
Mr Osborne announced that Ros Altmann, a prominent lobbyist on pensions and financial services, would become a Conservative peer and be made a minister for financial consumer protection if the Tories won the election.
The “financial fairness” review would examine the possibility of caps on charges for pensions, improve rights for older consumers in the mortgage market, promote competition for savers and develop the Pension Wise advice service, Mr Osborne said.
“This reinforces the broader Conservative commitment to fairer financial services for all,” he said.
A Tory government would work with the Bank of England to ensure that its Prudential Regulation Authority fulfilled its objective of increasing competition in the banking market.
He proposed a target for the BoE to issue at least 15 new banking licences over the next five years. This compares with eight new licences created since 2010, including GE Capital Bank, Virgin Money and Paragon.
Chris Leslie, Labour’s shadow chief secretary to the Treasury, said: “This is too little, too late, from a chancellor who has failed to increase competition in our banking industry and has seen lending to business fall by more than £50bn.”
The UK’s watchdog launched an investigation into current accounts and business banking at the end of last year over concerns about lack of competition in the market.
The Competition and Markets Authority found low levels of customers shopping around and a lack of transparency, making it tough to compare banks and products.
It also found that the four largest lenders in the UK — Barclays, HSBC, Royal Bank of Scotland and Lloyds — still dominated the market, providing more than three-quarters of personal and business current accounts.
Mr Osborne also backed plans to let customers take account numbers with them when transferring their accounts to a new bank, in order to promote competition.
People have been slow to move current accounts, despite the government introducing rules that ensure they can be switched to another bank in seven days.
Ms Altmann said: “For too many years, consumer rights have played second fiddle to the interests of large financial firms but the new pension freedoms show that the Conservatives have put the interests of British savers first and that is a real game-changer.”
Additional reporting by Emma Dunkley
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