Latest / THE DAILY BRIEF / Lloyds boss warns against tax raid on banks and impact of motor finance comp scheme

Transcript

Lloyds boss warns against tax raid on banks and impact of motor finance comp scheme · THE DAILY BRIEF

• 0:00
  Speaker 1: The chief executive of Lloyd's Banking Group, has warned that
• 0:02
  Speaker 1: a tax raid on the banks in the forthcoming budget
• 0:05
  Speaker 1: could harm lending to households and businesses. In an exclusive
• 0:09
  Speaker 1: interview with Sky News, Charlie Nunn urged the Chancellor to
• 0:12
  Speaker 1: ignore calls for a windfall tax on commercial banks. He
• 0:16
  Speaker 1: also said the proposals for a motor finance compensation scheme
• 0:19
  Speaker 1: being planned could cost the industry twenty years of profitability.
• 0:24
  Speaker 1: Charlie Nunn was talking exclusively to our Business and Economics
• 0:27
  Speaker 1: correspondent gerprig Darwen on the sidelines of the government's Regional
• 0:30
  Speaker 1: Investment summit in Birmingham today.
• 0:33
  Speaker 2: So you're the boss of one of Britain's biggest banks,
• 0:35
  Speaker 2: so you have this rare insight into how people are
• 0:39
  Speaker 2: feeling about money. So how are we doing as a country?
• 0:42
  Speaker 2: Are things really that bad?
• 0:43
  Speaker 3: Well?
• 0:44
  Speaker 4: At the macro view is we're in a very resilient
• 0:46
  Speaker 4: but slower growth economy. We see real strength in many households,
• 0:50
  Speaker 4: in many businesses. In fact, the data would tell you
• 0:53
  Speaker 4: that savings, real wages and the capacity of households to
• 0:56
  Speaker 4: spend on discretionary items is at one of the highest
• 0:58
  Speaker 4: levels since the financial crisis, and the same for businesses
• 1:01
  Speaker 4: as well. But at the moment, people aren't confident to
• 1:04
  Speaker 4: invest and they're not confident to spend.
• 1:06
  Speaker 2: We look at the state of things persistent inflation, slow growth,
• 1:11
  Speaker 2: arising tax burden. Some have described it as an economic
• 1:14
  Speaker 2: doom loop. Can you see where they're coming from.
• 1:17
  Speaker 4: That's not what we see on the ground. As I say,
• 1:19
  Speaker 4: when you look at the average household in the UK,
• 1:21
  Speaker 4: we've seen now two years of real wage growth. There's
• 1:23
  Speaker 4: definitely households struggling to make ends meet, but the majority
• 1:26
  Speaker 4: of seeing a significant increase in their spending. We're seeing
• 1:29
  Speaker 4: saving rates we haven't seen for a while. Debt levels
• 1:31
  Speaker 4: are at low levels, and the same is true for businesses.
• 1:35
  Speaker 4: What we're missing is a confidence in the future.
• 1:38
  Speaker 3: And so how do you build that confidence.
• 1:39
  Speaker 2: Say you're the Chancellor, you're delivering the budget next month,
• 1:42
  Speaker 2: what policy leavers would you be pulling.
• 1:44
  Speaker 4: We think growth is at the heart of it. Now
• 1:46
  Speaker 4: that's going to be a multifasted set of tasks. One
• 1:49
  Speaker 4: part is going to be the longer term activity around infrastructure,
• 1:53
  Speaker 4: building out the future of housing, regulatory reform and the
• 1:56
  Speaker 4: agenda of the government's put together and that's hugely important
• 2:00
  Speaker 4: for the economy and the medium to long term, but
• 2:01
  Speaker 4: also households today and starting to get some investment going.
• 2:04
  Speaker 4: The other part, which I think is very much in
• 2:06
  Speaker 4: front of us, is to try and create this confidence
• 2:09
  Speaker 4: to invest more, especially in businesses and SMEs across the UK.
• 2:13
  Speaker 2: Some would say that the banks could actually be contributing more.
• 2:16
  Speaker 2: As you know, the sector has been making stellar profits
• 2:19
  Speaker 2: thanks to high interest rates. If we increase the bank's
• 2:22
  Speaker 2: surcharge returned it back to its twenty twenty three level
• 2:25
  Speaker 2: of eight percent, that could raise two billion pounds. It's
• 2:28
  Speaker 2: money that would go a long way, wouldn't it.
• 2:31
  Speaker 4: We do make a massive difference to economy. We have
• 2:33
  Speaker 4: about nine hundred billion pounds invested largely in the UK.
• 2:37
  Speaker 4: What we think we need to get a healthy economy,
• 2:39
  Speaker 4: You definitely need a healthy financial services sector. And if
• 2:42
  Speaker 4: we're going to have the ability and the confidence to
• 2:44
  Speaker 4: continue to lend into the real economy to help households
• 2:46
  Speaker 4: and businesses invest, we need to make sure that the
• 2:49
  Speaker 4: financial services system and Lloyd's Banking Group really remains healthy
• 2:53
  Speaker 4: in that context and committed to that growth.
• 2:55
  Speaker 3: So higher taxes on the banks would stop you from
• 2:57
  Speaker 3: doing that.
• 2:58
  Speaker 4: Yeah, And I mean, obviously tax is a matter for
• 2:59
  Speaker 4: the government to look at, but it's definitely one of
• 3:01
  Speaker 4: the factors that impacts our ability to support the real
• 3:04
  Speaker 4: economy in the UK.
• 3:06
  Speaker 2: Look, you're already facing substantial costs because of the car
• 3:09
  Speaker 2: finance scandal. Noise Banking Group has set side two billion
• 3:13
  Speaker 2: pounds to deal with potential compensation claims that come through
• 3:16
  Speaker 2: the FAA's for redress scheme. You're one of the most
• 3:19
  Speaker 2: exposed banks, but you're not alone. Can the sector handle this?
• 3:24
  Speaker 4: Yeah, Look, it's a really important question. The first thing
• 3:26
  Speaker 4: to say is for our customers, as you say, we're
• 3:28
  Speaker 4: well provisioned and for our millions of shaholders in the UK.
• 3:31
  Speaker 4: We think we've covered the financial implications of this largely
• 3:34
  Speaker 4: and we can focus that whatever scheme the regulator puts
• 3:37
  Speaker 4: in place comes to bear to support our customers as
• 3:39
  Speaker 4: we need. But the critical thing is when we look
• 3:42
  Speaker 4: at the scheme that's been proposed for by the Finite
• 3:44
  Speaker 4: Financial Conduct Authority, we don't think it's proportionate and we
• 3:48
  Speaker 4: do think it's a very broad scheme. And why is
• 3:50
  Speaker 4: that important? It's important for the reason you say, firstly,
• 3:55
  Speaker 4: providing car finance to people who haunt to buy and
• 3:57
  Speaker 4: sell cars is critical. Eighty percent of families in the
• 4:00
  Speaker 4: UK buy and sell a car need some form of finance,
• 4:03
  Speaker 4: certainly new cars, and we are worried about the burden
• 4:06
  Speaker 4: on the broader finance industry, and actually fifty percent of
• 4:09
  Speaker 4: that is car manufacturers, not actually financial services companies or banks.
• 4:12
  Speaker 4: So that's the first thing. The second thing is just
• 4:15
  Speaker 4: the investibility of the UK when you look at the
• 4:18
  Speaker 4: implication of what's been proposed by the FCA, it's going
• 4:21
  Speaker 4: to potentially take twenty years of profitability of the car
• 4:25
  Speaker 4: finance industry and what does that mean for investability in
• 4:29
  Speaker 4: that industry and for other investors and businesses looking to
• 4:32
  Speaker 4: invest in the UK. There's real concern that this is
• 4:34
  Speaker 4: going to create an investability issue.
• 4:35
  Speaker 3: So what will happen? Will lenders exit the.
• 4:38
  Speaker 4: Market, but that would be our concern, and what does.
• 4:40
  Speaker 3: That mean for customers?
• 4:41
  Speaker 2: So if you're looking to buy a car, or you
• 4:43
  Speaker 2: need to buy a car to go to work or
• 4:45
  Speaker 2: to take your kids to.
• 4:45
  Speaker 3: School, will you be able to afford alone? Are your
• 4:48
  Speaker 3: prices or your costs going to go up?
• 4:51
  Speaker 4: Look, that's what we're concerned about. It's unclear for now
• 4:53
  Speaker 4: that the industry is working fine. There's a consultation the
• 4:56
  Speaker 4: Financial Conduct Authority is engaging on and we're going to
• 4:59
  Speaker 4: engage construction with that and let's see where we get
• 5:02
  Speaker 4: to at the end of it. But our concern would
• 5:03
  Speaker 4: be we need a well functioning finance market.
• 5:06
  Speaker 2: But are you prepared to take it back to the
• 5:07
  Speaker 2: courts if necessary?
• 5:09
  Speaker 4: Definitely too early to be talking about alternatives other than
• 5:11
  Speaker 4: making sure the FCA have all the information they need
• 5:14
  Speaker 4: to get to the right answer.
• 5:15
  Speaker 2: It's quite clear within the sector that there's quite a
• 5:17
  Speaker 2: lot of anger about this consultation and the proposal set
• 5:22
  Speaker 2: out by the FCAA. Do you still have confidence in
• 5:25
  Speaker 2: the FCA and in its chief executive?
• 5:28
  Speaker 4: Yeah? Absolutely. I mean, this is a very complex issue
• 5:30
  Speaker 4: that's been developed over a long period of time. The
• 5:33
  Speaker 4: core for us has always been on this issue is
• 5:36
  Speaker 4: that once we understand the law, how do we get
• 5:39
  Speaker 4: to a proportionate scheme that's the right scheme for customers,
• 5:42
  Speaker 4: that's close to harm and that allows the industry to
• 5:45
  Speaker 4: continue to operate.
• 5:46
  Speaker 2: But the FCA is kind of standing by this. They
• 5:49
  Speaker 2: feel like the balance is right and they'll point out
• 5:51
  Speaker 2: that Yeah, this is a lot of.
• 5:52
  Speaker 3: Money, and you talked about the profits being wiped out.
• 5:56
  Speaker 2: But the lenders break the rules and custom as ultimately
• 6:00
  Speaker 2: ended up paying more than they should have done, and
• 6:03
  Speaker 2: they just have compensation for that.
• 6:05
  Speaker 4: Look, where we've broken the rules, we definitely believe we
• 6:07
  Speaker 4: should compensate customers. Of course, there's been one case brought
• 6:12
  Speaker 4: to the Supreme Court, and the Supreme Court itself said
• 6:14
  Speaker 4: that was an egregious case with a very specific set
• 6:17
  Speaker 4: of multiple factors. At this stage, the way that's been
• 6:20
  Speaker 4: interpreted by the FAA for consultation consultation is that that
• 6:23
  Speaker 4: would then impact forty four percent of all agreements over
• 6:26
  Speaker 4: the last twenty years and fourteen million people. So we're
• 6:30
  Speaker 4: not comfortable that's the right interpretation of the law at
• 6:33
  Speaker 4: this stage, and that's one of the core things to
• 6:36
  Speaker 4: work with the FAA on in this next six week period.