Brown: Banks rip off small firms

The Chancellor today accused High Street banks of having ripped off small businesses by £2.2 billion over the past three years.

Gordon Brown said banks had been overcharging business customers by £725million a year since 1998 and he ordered immediate remedies

He also said the banks, which delivered profits of more than £17billion last year, were acting against the public interest and were operating a complex monopoly, by limiting choice for customers.

Acting on the advice of the Competition Commission, Mr Brown told the big four British banks - Barclays, HSBC, Lloyds TSB and Royal Bank of Scotland - they must instantly begin to offer interest on business current accounts or cut out a raft of charges normally levied on small firms.

The move is expected to save businesses at least £525 million a year and was warmly welcomed by trade bodies.

" We are delighted," said a spokesman for the Forum of Private Business.

The banks will be monitored over the next three years to ensure they are following Mr Brown's instructions and a full investigation will be carried out by 2005 at the latest.

"While we are pro-profit, we are also pro-competition," said Mr Brown.

Eight leading banks, including the big four clearers, are also being asked to change fundamentally the way they treat small businesses. Firms should be allowed to switch bank accounts easily and cheaply and bank charges should be made more transparent.

The recommendations were made by the Competition Commission but have been fully endorsed by Mr Brown and Trade and Industry Secretary Patricia Hewitt.

Today's move comes almost four years after former arch-regulator Don Cruickshank was commissioned by Mr Brown to investigate bank charges. He concluded business and personal customers were being overcharged by up to £5 billion a year and he was scathing about the banks' attitude towards business customers.

"In the absence of government intervention, the prospects for effective competition in these markets are remote," he said.

The big four banks control more than 85 per cent of the market and in some rural areas, competition is virtually non-existent.