I have a confession to make. Before I was allowed to be a baker I used to be a banker. Not just any old banker, but an RBS banker. Back in 1969, when a strawberry tart cost 6d, I failed to satisfy the dons at Aberdeen University and also to persuade my father to give me a job in our bakery business, so I went to work for the same people who would later take on good old Freddie Goodwin, ex-RBS chief executive.
In those days, being a banker commanded respect and guaranteed you a job for life. You were promised a pension, a cheap mortgage, but absolutely no mention of a bonus. I stayed for six years and only left because they wouldn’t give me a cheap mortgage (because I was single and working in my home town). Many years later, I found out that I wouldn’t get any pension either, because I hadn’t worked for RBS for 10 years! And, of course, no bonus. So why, in 2010, am I surprised that the banks are still letting down small to medium-sized businesses like Stuart’s?
In 1969 the banks were very different. Current account banking was restricted to the salaried middle class and the toffs all used their own private banks, such as Coutts or Hoare’s (no jokes about all bankers being Hoare’s). The working class dealt in cash, but might have had a deposit account. Lending was conducted at a personal level in the branch with head office only getting involved for larger loans.
Today, all has changed. Personal lending on credit cards, mortgages and loans went crazy, with extortionate rates to cover the inevitable tsunami of bad debts. Then, two years ago, it was all swept away, leaving the customers, especially SMEs, to pick up the bill. Banks regularly use their power to remove billions of pounds from our accounts in charges and interest rates.
Let me give you some examples as an independent baker. Have you heard of unutilised borrowing charges? No? You arrange an overdraft of £10,000 at base rate plus 2%. Today you are £5,000 in the red fair enough, you pay 2.5% on £5k. But, because you haven’t used the other £5k, you are charged a flat 1% for not borrowing it. "No. Rubbish. Couldn’t possibly happen," I hear you say. But it did for almost 18 months, until I wrote to six MPs and Darling, Alastair.
Next, how much can an annual arrangement fee go up, even though the borrowing remains steady? Answer: 600%, from 0.25% to 1.5%. And it was restricted to just 1.5% by the Treasury.
We wanted to move to another bank, but because we had negotiated such a good deal on the loan for our new bakery, at 1.25% over base, nobody would take us on. So we were stuck with them and vice versa. In my letter to Darling, Alastair I likened it to two nude wrestlers who, half-way through the fight, simultaneously grab each other’s testicles. Result? Complete stalemate. Would you let go and trust the bank to do likewise?
And that is the nub of it. There has been a complete breakdown of trust between the banker and the baker. Restoring that trust has to be a priority for our new coalition government, although I’m not sure I want Vince or David anywhere near my privates either!
My fear is nothing will really change. The banks, like the supermarkets, are too powerful and will run circles around the politicians. It’s enough to make you weep when you realise just who controls our lives. I should have stayed with Fred!