Barclays backs baby credit cards

THE head of Barclays has revealed that the bank is keen to extend credit cards to children - despite fears that it could land youngsters with thousands of pounds of debt. Chief executive Matthew Barrett told a committee of MPs today: 'The net present value of the baby in the cradle is quite attractive.'

Asked whether it would be a good idea to offer credit cards to young people, who might not understand the financial implications, Barrett said he wanted to provide 'low-level credit card capability' on a 'controlled basis'.

He did, however, admit: 'It is a safety issue. You would exclude anyone without the ability to pay...you would have to be very careful.' But he added: 'We are interested in the youth market. If you can recruit the whole family, it is very attractive.'

Barrett, an outspoken Irish-born Canadian, directly contradicted Fred Goodwin, chief executive of the Royal Bank of Scotland group, who said: 'It doesn't make any sense to advance credit to any group of young people where there is a high level of credit risk.'

Reacting to the proposals, a spokesman for the National Union of Students said that many students were arriving at further education establishments where they would get into debt through student loans. To suggest that they should arrive at the age of 18 carrying a debt burden from banks willing to extend credit cards to teenagers was ridiculous.

The Children's Society said they planned to look into the matter and would issue a statement once they had read the details. Initially they expressed outrage at the idea.

The remarks were made as the heads of Britain's big four banks gave evidence to the Treasury Select Committee, investigating whether the banks had made excessive profits from small and medium-sized businesses.

All the chief executives denied that they had made excessive amounts, despite a recent report from the Competition Commission suggesting that, over a three-year period, they had made £725m in excess profits.

Barrett told MPs: 'I don't know what excessive profits means.' Peter Ellwood, chief executive of Lloyds TSB, told the committee it was not fair 'to pick three good years out of a cycle and ignore the fact that there were many years when this business was earning less money, and didn't cover the costs of equity'.

The banks' chief executives all argued that customer satisfaction with the banks was running very high, quoting several surveys which showed that 90% of small businesses were happy with the services they received.

But Labour MP George Mudie asked the banks whether it was time for them to channel some of their profits back to their customers. 'When the bad times are bad, small businesses are the first to feel it,' he said. 'When the good times are good, there is no recognition, and you could be making them a bit better.'

The chief executives were asked by Tory MP Nick Palmer whether there was not a 'cosy market' which the Big Four enjoyed, which worked against the interests of the customers. Barrett denied this, saying they were all competing aggressively for customers: 'I would say that the inertia of the customer was quite pronounced in the UK,' he told MPs.