Chancellor bows down to the banks

Chancellor Rachel Reeves has attempted to shield banks from the consequences of having to pay compensation for mis-selling car finance. Reeves and Labour leaders talk a lot about “growth”. But what we see is an increasing disregard for the needs and interests of ordinary British people.

The Financial Conduct Authority (FCA), one of the UKs financial regulators, had banned car dealers from receiving commission from lenders without customer consent. After an Appeal Court decision last October confirming that such commissions were unlawful, the banks appealed.

Intervention

The Supreme Court hearing is scheduled for April of this year on the banks’ liability for compensation. But Reeves and the Treasury moved to intervene, afraid that lenders and financiers might choose to take their business elsewhere. Indeed, one of the lenders, Santander is reported to be “…considering its position in the UK.”

For the moment, the Supreme Court has rejected the government’s blatant attempt to influence this case. But when it comes to car buyers being compensated for overpaying through undisclosed showroom deals, Labour has again declared itself the advocate of financiers.

Loss

Financial services companies can set money aside and treat compensation payouts as tax deductible, leading to a possible loss to the Treasury. According to media reports an estimate from investment bank RBC Capital put the figure at £5.5 billion.

• In another move, Reeves is talking to City fund managers who want her to change tax-free cash ISA rules so that more people put their savings into stocks and shares. The City will earn fees, but at greater risk to savers. Typically Reeves and her advisors are describing this as a possible policy for “growth”.