CORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 650-v

HOUSE OF COMMONS

ORAL EVIDENCE

TAKEN BEFORE THE

NORTHERN IRELAND AFFAIRS COMMITTEE

THE BANKING STRUCTURE IN NORTHERN IRELAND

WEDNESDAY 4 DECEMBER 2013

SIMON HAMILTON MLA

Evidence heard in Public Questions 317-361

USE OF THE TRANSCRIPT

1. This is a corrected transcript of evidence taken in public and reported to the House. The transcript has been placed on the internet on the authority of the Committee, and copies have been made available by the Vote Office for the use of Members and others.

2. The transcript is an approved formal record of these proceedings. It will be printed in due course.

1

Oral Evidence

Taken before the Northern Ireland Affairs Committee

on Wednesday 4 December 2013

Members present:

Mr Laurence Robertson (Chair) Mr David Anderson Oliver Colvile Lady Hermon Kate Hoey Dr Alasdair McDonnell Nigel Mills Andrew Percy David Simpson ______

Examination of Witness

Witness: Simon Hamilton MLA, Minister of Finance and Personnel, Northern Ireland Executive, gave evidence.

Q317 Chair: Mr Hamilton, you are very welcome. I think you know the inquiry we are undertaking at the moment. We are delighted you are able to join us today, and thank you for the written submission you have given us. Before we ask individual questions, is there anything you would like to add to that by way of an opening statement? Simon Hamilton: No, other than to thank you, Chairman, for the invitation to be here today and to thank the Committee for its interest in this subject. As you know and appreciate by the very fact you are holding the inquiry, this issue is of great importance to the Northern Ireland economy. It is something that we have wanted to have this sort of level of attention on, not just at parliamentary level but at governmental level as well in the United Kingdom, so I am very grateful for the opportunity to give evidence to you today. Chair: Thank you very much. We will get straight into questions, then.

Q318 Lady Hermon: It is indeed a real pleasure to have you here to be grilled in person. I hope you do not feel too uncomfortable. We are very appreciative of the fact you have given up your time. It is a busy Department that you have to run in the Northern Ireland Executive and it is lovely to have you here at Westminster. When we took evidence from CBI Northern Ireland very recently, on 20 November, we were very struck by the opening comments of the Chairman of the CBI. He said that when he became the Chairman almost two years ago, “the biggest risk factor and the key blocker to the Northern Irish economy was” to his mind “our banking situation” and he did not think that that had changed—in fact, “it remains the biggest single risk factor and the single biggest blocker to growth in Northern Ireland today”. That was the evidence given to us a few weeks ago, as I say, on 20 November. Do you agree with that comment? Would you like to elaborate upon his observations about the banking sector in Northern Ireland? Simon Hamilton: Yes, I would agree to a large extent. Like a lot of the rest of the United Kingdom and a lot of other economies as well, we are starting to see the economy move towards the early stages of economic recovery. Our unemployment figures are falling: 2 they are now back down below the UK average, at 7.3%. For four consecutive months, Ulster Bank’s purchasing managers’ index has shown that business activity across all sectors is not just growing but starting to accelerate in some areas. The housing market, which was at the heart of the economic crisis particularly in Northern Ireland, is starting to show some stabilisation and some positive signs. There are very encouraging figures out today about the manufacturing sector in Northern Ireland, which has done incredibly well even down through the last five or six years, and they show that our level of exports is increasing. All of that suggests that we are in the early stages of economic recovery. As you will appreciate, Chair, people in my position are always hesitant to talk about any colour of shoots in the economy, just in case things do go wrong. I think we will see, certainly over the next year, some positive moves forward in the economy, but the odd setback as well. I think the biggest impediment to capitalising on those early signs of economic recovery, and is the biggest impediment to us availing ourselves of the opportunities that growing economies elsewhere provide, is the banking situation. The anecdotal evidence that we continue to get from business, from industry and from manufacturing firms is that they are still having severe difficulties accessing the finance that they need to invest in their companies, to seize the opportunities that are provided by growing markets, to develop new products and to employ new people as well. Access to finance slowing us up or even nudging us backward is my biggest worry.

Q319 Lady Hermon: You have identified that as your biggest worry; as Finance Minister, how often do you meet with the heads of the banks? Do you bring the four main banks in Northern Ireland in together? How do you conduct business with them in terms of making representations to them about changing what is seen as the biggest impediment to growth in the economy? Simon Hamilton: We have quite a considerable amount of ad hoc engagement, whenever issues arise. In the last 48 hours, for example, there was a particular issue with a particular bank— Lady Hermon: Called Ulster Bank. Again. Simon Hamilton: Yes. I am sure we may come on to that subject or that bank again. There is good engagement on issues like that. In terms of dealing with the broader issues of access to finance, my predecessor in this post, along with the Enterprise Minister, Arlene Foster, decided a number of years ago that it was simply not good enough to just meet every so often with our banks to discuss issues. We do meet with them collectively on occasions on particular issues; we find that that sometimes yields very good progress. One example is the agri-food loan scheme that we have been able to develop: we met all the banks—not just the big four, but other players in the Northern Ireland market as well—and we made good progress on that subject. We are actually about to go into our next round of meetings in early January, in the first week back after the new year. Arlene and I will meet with the senior management of each of the banks separately to go over any issues that are live at that minute in time and other, broader access-to-finance issues that we have. Lady Hermon: Yes. Your immediate predecessor, Sammy Wilson, was a very distinguished Finance Minister, and I have high hopes for you as well, Mr Hamilton. Simon Hamilton: It is early days yet.

Q320 Lady Hermon: Given that Sammy Wilson had worked so hard on this issue with your party colleague, Arlene Foster, how is it that the CBI Chairman was able to say to us just a short time ago that “the biggest single risk factor and the single biggest blocker to growth in Northern Ireland” is the banks? Why has that not changed? Why do they have that 3 compelling negative impact on the growth of the economy in Northern Ireland, despite the best efforts and very serious efforts on the part of your colleagues? Simon Hamilton: As you know, we have no authority or say over the banks— sometimes I am glad I do not have any authority over the banks, when I see the extent of the problems. All we can do as a devolved Administration and as devolved Ministers is raise those issues of concern on a regular basis. If the blockage or problem does not emanate particularly from the banks themselves, and the solution might come from, say, talking to Government, we engage with the relevant Government Ministers as well. In fact, after this meeting I am meeting with the Financial Secretary on a particular issue to do with banking. We are prepared to do everything we can in terms of taking the message that the CBI gave you, which I agree with, to whoever will listen and whoever does have the power to solve that problem. It is not for want of desire or a lack of effort on our part that we have not been able to resolve some of these issues—quite the opposite, in fact. If our effort could have been converted into product, we would have been in a far less bad position than we are. The reason why all of that engagement has come to nothing—not quite nothing, but to limited impact— particularly comes down to the banking structure that we have in Northern Ireland. Our four big banks—yes, we have got some smaller players in the Northern Ireland market; the likes of Barclays and HSBC could not really be described as smaller players in the mainland GB market, but in Northern Ireland they are—are all, in essence, not British-owned or British-run. In the case of the one that is British-owned, its decision-making is done in Dublin. That makes it incredibly difficult for lots of things that are happening in the big four or big five banks here, and that are seeing some progress, to trickle down and flow into Northern Ireland. I think that is at the core, Chairman, of what your inquiry is about: looking at the structure of banking in Northern Ireland and, accepting that the structure is the way that it is, what steps can be taken to ameliorate the situation in Northern Ireland. Lady Hermon: That is very interesting. Thank you.

Q321 Kate Hoey: Welcome, Minister. You were described as a younger version of Sammy Wilson. I am not sure that is, but anyway, welcome. It is nice to see a Minister not surrounded by loads of civil servants as well. In your submission, you talk in paragraph 2 about Barclays, HSBC and Santander having a presence in Northern Ireland, but a fairly small one, as a result of acquisition of former building societies, and said that you would like to see greater competition and them having a larger share, and a growth in those kinds of banks. Do you have any indication at all that banks that do not currently have any operation in Northern Ireland are planning to open branches there, or that banks that are already there are planning to expand? Simon Hamilton: The likes of Barclays and Santander certainly, and HSBC to a lesser extent, do seem keen to expand what they do in Northern Ireland, but they are being very careful about how they expand. In saying that, I do not want to sound in any way critical of their particular business model in Northern Ireland. They have come in a little bit later and they have not been hit by the property bubble and the bursting of that, so they are carefully looking at what sort of customers and what areas they are involved in, wisely so from their perspective. They are doing well and making a very useful contribution, and there is, as a result, a little bit more competition in the market, but the competition does seem to be at the end of business where businesses and companies are easily bankable, not the ones that are a little bit trickier. If you listen to people in the sector and if you listen to business, they will tell you that there is a significant volume of competition for the top 100 or top 200 companies, but when you get below that people tend to be a little bit more stuck with the bank that they are with. That is not to say that I would not encourage Barclays, HSBC, Santander and others to 4 continue to increase competition, because a lack of competition in the past has been part of the problem. We are not aware of any banks that are looking at coming into Northern Ireland, although First Trust was on the market not that long ago. I do not know who, if anybody, was interested, but it is still owned by Allied Irish Bank. It could be some time before you see an entire bank bought or other players coming in, just given where the market is at the moment and where the economy is, although I am heartened by the fact that there have been some new players coming into the mainland market here, particularly banks from some of the Nordic countries. Some of the Swedish banks that went through what we are going through now a number of years ago and have got themselves sorted out are well capitalised and wanting to get in. There is merit in us seeking to pursue more actively brand new banks—not literally brand new, but brand new to the British and Northern Irish market—who are not in any way tainted by property overhang and the problems that it presents.

Q322 Kate Hoey: Do you see that as very much part of your job to encourage? Simon Hamilton: Yes. Collectively within the Executive we are focused very much on doing what we can with the limited powers that we have to correct the current system. Even with a new entrant coming into the market, the market share of some of the bigger banks is always going to remain pretty high. People in Northern Ireland, as you will know, are quite conservative and do not like to move their business because of old loyalties and familiarity and things like that. But I do think that getting some more competition, whether that is through those who have entered the market recently expanding their operations, or bringing in entirely new banks, will be something positive for Northern Ireland.

Q323 Kate Hoey: If you were forced, in a couple of sentences, to say what you thought banks operating in Northern Ireland were doing wrong, what would you say? Have you anything that you think they are doing wrong? Simon Hamilton: In a couple of sentences? Kate Hoey: Yes. I am trying to get you to encapsulate it. Simon Hamilton: The banks everywhere in this part of the world did lots of things wrong, and it is easy to beat up on them and give them a kicking every so often. I am more than happy to give them a kicking whenever they deserve a kicking, but sometimes we miss the contribution that they do make and that they can make to economic recovery. Banks are essential to making our economy work, so there is sometimes not a terrible lot to be gained from getting stuck into them just for the sake of getting stuck into them. Where they are, or are potentially, an impediment to economic growth is in the fact that they are so encumbered by the property overhang that we have in Northern Ireland. One of the things I would like to try to get across to the Committee, and why the attention that you are giving is worthwhile, is that the problem in Northern Ireland is, in large measure, a distinctly different problem from the problem in the mainland: it is the property issue. It is very unusual for a Unionist politician to say, but our problem is more Irish than British in many respects. We followed the trends south of the border in terms of purchasing land and property and seeing the price rise and rise and rise to a completely unsustainable level. That is the biggest problem that we have and continue to have. That is why it is an impediment to dealing with economic recovery, and that is probably at the core. In terms of the solution, we can look at structure and we can look at competition and bringing other banks in, but if we do not get to grips with the property issue then we are going to have long-term sustainablility problems.

Q324 Oliver Colvile: First of all, may I say congratulations upon your appointment? 5

Simon Hamilton: Thank you very much. Oliver Colvile: Secondly, thank you very much indeed for coming here. Earlier on this afternoon, I was talking to one of my colleagues who is promoting local banks. It may be going back almost to an 18th century concept, but rather than having masses of people coming in with new institutions and things like that, you can create some local banks as well that are locally funded and are able to accrue the money. Do you think that is something that you might be interested in looking at in trying to create competition? I for one think that the more competition there is in society and in things like this, the better the value will end up being, but I am a Conservative. Simon Hamilton: I agree with you. There is no harm in having more competition in this sector, and at different levels as well. Some of the banks that have come in that have provided a little bit more competition are doing that at a particular level within the economy. We have in Northern Ireland a very good credit union movement, but, by its nature, what it deals with is very small scale. My party colleague, the Minister for Social Development, Nelson McCausland, recently talked about how he would like us to develop something along the lines of a community bank or a people’s bank, akin to some of the things that you see in some of the cities in the United States, for example. That is exactly what you are talking about. They would be much more localised, with a better understanding of some of the problems and issues that a local area faces. Northern Ireland itself, given its size, is almost a local area, so you would not need too many of those sorts of institutions to come in to make a difference. Yes, it is certainly something that would help, but I do not think it would necessarily overcome all of the problems that we have.

Q325 Lady Hermon: I have a quick supplementary. You have actually touched on the words, though you did not elaborate on them. As a Committee, we have received information about the possibility of credit unions taking on a much greater role in Northern Ireland. They perform a very vital function in many areas of the rest of the United Kingdom, but not so much right across Northern Ireland. Do you see the potential of credit unions growing and bringing that much-needed competition to the banks in Northern Ireland? Simon Hamilton: They do have potential. They certainly have potential on the personal banking side of things, and probably for some small businesses. David and I were on the Enterprise Committee at Stormont at the time when we looked at this issue. Recently, the oversight responsibility passed from the Department of Enterprise in Northern Ireland to the old FSA, and it has probably now gone to the FCA. The reason for doing that was not any problem at the Northern Ireland end, except that, in order for credit unions to get into the space where they could provide personal current accounts and where they could offer a lot more products, they had to be regulated by the FSA, or the FCA now. I met with some of the officials from the FCA on a recent visit to Belfast, and they are still at the early stages of engaging with Northern Ireland’s credit unions to try to talk them through the potential for them in terms of the growth they could achieve and the sectors they could get into. It is still very early stages for that. Credit unions are small by their nature and will need a lot of hand-holding to get to the stage where they can do a lot more. It is a similar response as to the previous question. The growth of credit unions can assist in certain areas of the market, but it will not be the whole solution; it is only part of the solution to our overall banking problem in Northern Ireland.

Q326 Dr McDonnell: Thank you, Simon, so far. You are very welcome. My question is simple. In your written submission you said you thought that NAMA was being positive. Are you still happy and comfortable with NAMA, or do you believe there is any risk of a fire sale? 6

Simon Hamilton: You will recall that at the time when NAMA was created, just as there was south of the border, there was a particular concern in Northern Ireland that the creation of NAMA by the Irish Government would lead to a fire sale of the sizeable volume of assets that they held in Northern Ireland—the purchase value was around £1.3 billion and the nominal value about £3.5 billion. We were—rightly, I think—concerned and worried at the outset that, given that these assets were not in the Republic of Ireland but were outside it, if NAMA’s very job was to get capital back into the Irish Government’s coffers, they would sell those assets that were furthest away from them first. Through a lot of hard work done by my predecessor on a personal basis with the then Irish Finance Minister, Brian Lenihan, we were able to get assurances that that was not the case, and we were able to get Northern Ireland representation in NAMA with the Northern Ireland Advisory Committee, which is still in existence. That has helped to ensure that they have not gone down that path. It is not in their interest anyway to have a fire sale in Northern Ireland, because the overall Irish property market would suffer as a result of prices deflating in Belfast or elsewhere in Northern Ireland. It is in their interest not to do it. I am quite content with what NAMA has done to date. It has not just been about managing assets. There are undoubtedly individual stories where people will say, “I have had a particular problem with them,” but on the whole they have been able to do some positive things. They have been able to release some property on to the market, and they have been able to give some of the organisations and businesses that are tied up in NAMA some additional finance to put additional value into their assets so that they can sell them off for a higher price. For example, just on the edge of my constituency, there is a piece of land that went into NAMA and has been given around £10 million worth of finance to develop 95 or 99 properties on that site; the work is ongoing at the minute, and about 100 people are employed in doing that. There were a couple of big office blocks in the centre of Belfast that were stuck in NAMA; finance has been given to finish those off and they are now going to be finished. In fact, there was an announcement today about a piece of land in Templepatrick being sold to a developer to develop. NAMA are a player in the market in Northern Ireland and are making some positive contributions. Where I would be concerned is that we are now getting to more the business end of what NAMA does. Their early engagement has been positive. Given that they have to have everything cleared off their books by 2020, you are now getting into a period of time where they will have to, maybe more aggressively, look at some of the assets and selling them off and getting value for them. That is where there could be problems, but they have taken a long-term view, which is, I have to say, better than what the Government has proposed with the Ulster Bank distressed assets, which is a very short-term, three-year view. As long as NAMA takes that long-term view and acts accordingly, I think it will continue to have a positive contribution in Northern Ireland.

Q327 Nigel Mills: Can I take you to RBS and Ulster Bank? Just when you thought it was safe to go back in the water, they find some whole new problems. Last week’s was them being accused of deliberately driving small businesses out of business to seize their assets. Have you got any evidence that that sort of terrible act was perpetrated by Ulster Bank or not? Simon Hamilton: We have no hard evidence; it would be anecdotal evidence. My Department and, indeed, the Enterprise Minister’s Department would regularly be contacted by businesses who would be reporting what, on the face of it, would appear to be sharp practice on the part of not just Ulster Bank but all banks. Indeed, we would have some anecdotal evidence of some of the issues that were revealed in Lawrence Tomlinson’s report happening in Northern Ireland as well. Lawrence Tomlinson’s report did not touch on Northern Ireland; what evidence he has does not, I understand, include Northern Ireland 7 firms, although, as I understand it, it has been referred to the FCA and the PRA, and RBS themselves have said they are going to investigate it. I hope that all three of those ensure that the GRG in Ulster Bank in Northern Ireland is also investigated, to see if this kind of practice is going on. Nothing has come across my desk in the last couple of days, but my colleagues in DETI have had a few more companies come forward as a result of the news to say, “This, or something similar, has happened to me as well.” The answer is we do not have any hard evidence of it. Sometimes, even in dealing with some of the companies that we do deal with who come to us with problems, you get some of the story but you do not get all of the story, and you have to then tease that out in engagement with the bank. We have some anecdotal evidence of it—nothing hard and fast. I hope that the investigations do not reveal that this has happened, but, if it has, I hope that they do unearth those problems.

Q328 Nigel Mills: I suppose we would all quite like Ulster Bank to get back to being a fully effective bank that could be lending to consumers and businesses and helping grow the economy. You just touched on the RBS bad bank proposals. Are you optimistic that Ulster Bank, now the RBS review has taken place, can get back to being a fully effective bank? Simon Hamilton: It is not a matter of hoping that it gets back; we absolutely need it to get back to the position where it is a properly functioning bank. In Northern Ireland, Ulster Bank is our big bank, with over a third of the market and around 800,000 customers. We cannot afford for it not to be functioning properly. It has not been functioning properly for the last number of years, and look at the effect that it has had on our economy. As we enter into economic recovery, we need it to start to function as a proper bank would function. The result of the review in terms of keeping it as a core part of RBS Group was positive for Northern Ireland. There were a lot of concerns—valid concerns, because these sorts of options were being actively considered, I understand—that a bad bank would be created and hived off separate from RBS, and all of Ulster Bank’s assets dumped into that bad bank, good or bad, or maybe the Ulster Bank would just be hived off and it would be the bad bank and the receptacle for all of the bad loans, wherever they emanated from. The fact that it has been kept as a part of the RBS Group is good for Northern Ireland. The review that is ongoing and is to be concluded by the end of February is potentially positive, in that the objective is to put it onto a long-term sustainable footing. Again, that is something that we would want to see happen, although there will undoubtedly be consequences on the ground in Northern Ireland of that. You will see some job losses and further branch closures to try to get the bank onto a sustainable footing, and that will have an impact on the ground in Northern Ireland. My bigger concern, though, is the decision to release the now £9.5 billion of impaired Ulster Bank assets that they have put into the bad bank back onto the market over a three-year period, with 55% to 70% of them out by the end of the second year. I understand why they want to get as much value back as they possibly can, but the problem for Northern Ireland—it is not just a uniquely Northern Irish problem; certainly my finance minister counterparts in Scotland and Wales would subscribe to this view, and I am sure many regions of England will be in exactly the same position—is that you can take a decision in London, looking at the London and South East property market, and say, “We might be able to move some assets out into this market and get some value for them,” but that is not the case in Northern Ireland. At the minute, whilst we are seeing some stabilisation and some positive movement in the housing market and the property market in Northern Ireland, it is very much in its infancy. Going back to Alasdair’s point, avoiding a fire sale with NAMA took a lot of work, which has paid off, and we have not seen that, but we could be in a situation where our own Government takes a decision to, in effect, have a fire sale in Northern Ireland and sets us back even further. 8

That is something that I want to see avoided, because the impact that that would have on tentative economic recovery could be devastating.

Q329 Nigel Mills: You said we should do more than hope that Ulster Bank can sort itself out; we need it. Is there anything you think the Executive in Northern Ireland can do to ensure that Ulster Bank ends up being healthy and effective again, or is it a case of, “They are a private bank; we have to let them do it”? Simon Hamilton: It is hard for me to be definitive and say to you, “These are the two or three steps I think need to be taken to sort Ulster Bank out,” because you are right; it is private. I do not have sight of what is going on within Ulster Bank. I have some limited lending data, which comes to my department on a quarterly basis, but it is aggregated and anonymised, and does not give us a terrible lot of insight into what is going on. That in itself, Chairman, is a particular problem. It is hard to be very clear and definitive with you about the steps that, even if it were not in my power, others should take. The commitment to ensuring that it remains a functioning bank and part of the RBS Group is, as a principle, a good starting point. I accept that some of the medicine that will have to be taken to get it onto a long-term sustainable footing will be very nasty medicine, but that is what we need. We need it to be in a position where it can start to lend again and it can be seen as a real, proper player back in the market. Unfortunately, that is not what it is seen as, and it has not been seen as that for the last number of years.

Q330 Nigel Mills: And you would not like to see the Government here take radical action and say, “Your market share is just too high; you really need to sell off part of your Northern Ireland activities to boost competition and take away some of the exposure.” You think that is a step too far. Simon Hamilton: It is. This is perhaps one of the problems that we have had in trying to communicate the extent of the problems in Northern Ireland over the last number of years. I accept that, just as Northern Ireland is a small part of the United Kingdom, our banking problem is a small part of the problem compared to what is being dealt with overall, although Ulster Bank’s problems were famously described by the Chairman of RBS as the thing that kept him awake at night, so it is a pesky problem in that sense, for him and for all of us. I would not want to see the sort of radical action that you have described taken, but what I would say—and what I have said repeatedly to Government and will continue to say to Government—is that you can look at it as a small problem in the context of the overall problem, but in Northern Ireland it is a huge problem. That is why it needs action: not radical action that destabilises things, but certainly definitive action that puts Ulster Bank on the right course so that it can make the contribution that we need it to make to a growing economy.

Q331 Lady Hermon: I have listened very carefully, and the tone of your response is very sincere and earnest, but underlying it I get the impression that you are not convinced that HM Treasury or the British Government recognise the seriousness to the Northern Ireland economy of the condition of Ulster Bank. Is that the case? Simon Hamilton: It is a fair enough conclusion to reach that over the last number of years, the extent of our problems has not been taken seriously. I can to an extent understand people thinking, “Oh look, there is Northern Ireland talking up their problems and blowing them up out of all proportion”, but I do not think we are blowing them up out of all proportion. We have a bank that has over a third of market share; in the state that it is in, if it was one of the big four or five banks on the mainland, there would be lots of noise being made about it. We are right to say that we have a particular problem—not entirely unique, but almost unique in a British context. It does need the sorts of levels of attention that we have 9 been talking about. I welcome the fact that it has belatedly got attention, but it is still, even if you look at many of the recommendations in the report that was published recently, almost an afterthought and something that, yes, is a problem, “but it is a problem over here rather than a fundamental problem”. That sounds very negative, but the message is progressively getting through with Government, not least given the fact that we have now seen the creation of a joint ministerial taskforce, which has, probably for the first time, elevated our banking problem in Northern Ireland to the level where senior Government Ministers are engaged in it, and officials are doing work in behind that. For the first time, there has been an acceptance that, “Yes, Northern Ireland has a problem. It is a serious problem and we do need to take some action.”

Q332 Lady Hermon: Good. I could not possibly let this week pass without enquiring as to the excuse offered by Ulster Bank for the very serious—let us call it a “glitch”. It was a very serious problem for everyone who was out shopping or trying to put petrol in their cars for several hours at the beginning of this week. We had the same problem with Ulster Bank and RBS 18 months ago. We were told then that they were going to have new IT and infrastructure, and that this was most unlikely to ever happen again, and, bang wallop, it has. What excuse was offered this time? Simon Hamilton: This is the third time, in fact, that it has happened to the Group overall. Mercifully, this time and the previous time were not as bad as the first time back in June 2012. I agree with you; it is not nice at any time for people not to be able to make payments or access their funding, and you just know that there will have been circumstances where individuals will have been trying to make a payment in a shop and have been embarrassed because the payment has not been made. Lady Hermon: After all, they are trying to use their own money. Simon Hamilton: Yes, they are trying to use their own money. This happens all the time; for various reasons, payments do not happen, but it is incredibly embarrassing for people maybe trying another card from the same bank and it not working either, or trying, in emergency circumstances, to get money out of the cash machine—their money, as you rightly say—and not being able to do it. As soon as I became aware on Monday evening that a problem had started to develop, I was in contact with Ulster Bank. I was in contact overnight, in contact early the next morning, and then spoke on the telephone with their Head of Retail Banking later in the day. By that stage, the problem had been resolved, thankfully. They told me that it was a different problem to the previous problem. I am not sure if that is reassuring or not, but perhaps because it was a different area of the IT system it was not as severe. They are still, I understand, investing in their IT system, including a separate IT system for Ulster Bank. That is at the core of the problem; whenever they made some previous changes as a Group, Ulster Bank was always put at the bottom of the heap. Lady Hermon: Yes, it was. Simon Hamilton: That was a particular problem. I have been assured as well that anybody who is out of pocket as a result of it will receive compensation. They do not need any of us to tell them that it is bad for their reputation; it has damaged their reputation, and I think they realise as well that if this happens again in short order, some people who maybe have been loyal to the bank for their entire lives will seriously look at going elsewhere. There are mechanisms now to make it much easier for people to switch their bank account. I hope that the realisation of that means that they will do everything that they can to ensure that this sort of problem does not happen again.

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Q333 Oliver Colvile: How big is the property market, in percentage terms, as far as the Northern Irish economy is concerned? Do you have any idea what it is? Simon Hamilton: I do not at this time. The broad property and related construction sector was a huge part of the Northern Ireland economy a number of years ago. The property bubble bursting has had a serious impact on that sector. One figure that I do know that is reasonably indicative of the extent of the problem is that roughly half of all of those who have been added to the unemployment register during the downturn have come from the construction sector. The sector has suffered very badly as a result of the property crash. There are some indications that the sector is starting to tentatively come out of the downturn, but it is patchy. I do not know what percentage of the economy property and construction currently comprise—I am sure we can get that information and provide that to the Committee—but we are seeing some heartening signs. Property prices are growing slowly. Thankfully they are growing, which is good for those who maybe are in negative equity. They have grown by 2% in the last two quarters. The more positive figure is that the number of transactions went up between quarter one and quarter two by 10%, and between quarter two and quarter three by 12%. There were 4,000 house sales in quarter three, which is the highest since 2007. It is starting to move again, but very slowly.

Q334 Oliver Colvile: You should be aware that before I was elected to this place I did a lot of work in the property sector, so I understand development quite well. I would be interested to know whether or not there are many cranes over Belfast and other places as well. Simon Hamilton: It is funny you say that. Mr Anderson: There are the two big yellow ones. Simon Hamilton: Aside from those famous ones, yes. The visibility of big cranes is something that, almost no matter what is happening, is indicative in terms of the psyche of people that things are happening in the economy. Oliver Colvile: If you look out of this window, you can see a big crane there. London, since 2008, does not seem to have had a reduction in the number of cranes around the place. London remains a particularly big, buoyant international market. It is a sign as to whether or not people are investing in property. Simon Hamilton: It is. Sadly, it is not a sign that we see in Belfast at the minute. It was for a number of years, which was probably part of the problem; there was almost too much of it going on, in the wrong sectors. There were lots of cranes on the skyline, indicative of an economy that was going in the right direction. That then disappeared very quickly. I do understand that there is one due on site very soon. The University of Ulster are moving their campus in Jordanstown to the centre of the city, and that will see some activity in that part of the city. There are a few other significant schemes that have gone through planning and are just about to hit the ground as well. It is good that those things are happening. You are right; it builds confidence in the community that the economy is growing, and the absence of confidence is part of the problem as well—people are not spending.

Q335 Dr McDonnell: Simon, earlier you mentioned bad banks. On that point, could I pick up on the Irish Bank Resolution Corporation? Have you any update for us on the position of staff that were previously Irish Bank Resolution Corporation, or, before that, Anglo Irish Bank? Simon Hamilton: This was a problem that manifested in the way the IBRC—the old Anglo Irish Bank, and Permanent was in that as well—disappeared, and it did cause some problems in staffing. It was an issue that the Department was very much engaged with our Irish counterparts on. In June, my predecessor met with the Irish Minister for Finance and also wrote to the Chair of NAMA in respect of it. It was whenever NAMA took over these assets 11 that the problem developed. Instead of getting the staff who were in IBRC to administer the operations of the bank, they got the firm Capita to do that for them. Capita had a presence in Belfast and there were IBRC staff in Belfast, and our argument was that the work that they were doing, instead of being carried out in Dublin or elsewhere, could continue to be carried out in Belfast. Since all of those discussions earlier on in the year, it has been confirmed that that operational model, where staff in Belfast were carrying out the work on behalf of NAMA in respect of the IBRC assets, was actually taking place, and they were doing that in Capita’s offices in Belfast. I understand 15 former IBRC staff are doing that work in Belfast. I do not think it is everybody who was doing it, but it is better than what we imagined was going to be the case, which was zero.

Q336 Oliver Colvile: Would you say that the banks have a leading role to play in reducing the dependency within Northern Ireland on the public sector? My understanding is that 80% of people who work in Northern Ireland work in the public sector, and that has been the case for a very long time. Would you say the banks have got a role to play in all this, or would you say it is down to the Northern Ireland Executive and HM Government to try to rebalance the economy? Simon Hamilton: The actual figure of people directly employed in the public sector is lower than that. It is closer to a third. Once you then start to factor in all sorts of calculations as to the percentage of people in the private sector who are completely dependent on the public sector contracts— Oliver Colvile: The subcontractors. Simon Hamilton: Yes. It does increase significantly then. That third does not include the likes of the third sector and the community and voluntary sector, which will be doing a lot of work on behalf of the public sector. Regardless of what the figure is, it is still higher in Northern Ireland than it is in the mainland. Oliver Colvile: It is quite big in my constituency, I can tell you. It is about 38% in my patch. Simon Hamilton: It is high as well, yes. The Chairman is wanting to progress on, and this is a subject that I can talk for hours about. Chair: Just a few minutes would be preferable. Simon Hamilton: It is very important that we do rebalance the economy in Northern Ireland. I came to the conclusion some time ago that that will not be achieved just by willy-nilly cutting away at the public sector in Northern Ireland, simply because there is not the activity on the private sector side to mop up everybody who moves from the public sector. To be absolutely frank and fair, if it had not been for our rather large public sector over the last couple of years, our economy would be in an even worse position. It has provided somewhat of a bolster during very difficult times. That does not excuse it and it does not say that is what we are going to have forever. We do need to rebalance. I have come to the conclusion that even if we grow our private sector, we are still going to have a large public sector in Northern Ireland; it is going to account for a large measure of our economy in Northern Ireland, just as it does in other regions within the United Kingdom. In terms of whose responsibility it is, it is a collective responsibility. To go back to the points I made previously, if the banks are functioning properly, if they are well capitalised and if they are doing the job that we need them to do, then they can assist firms in Northern Ireland to grow. I was with David two weeks ago in his constituency talking to a very good firm that is slowly growing. It does not shout about it a terrible lot; there is not that desire to go out and say, “We are doing really well and others are not doing so well,” but there are things starting to move in small manufacturing firms in Northern Ireland. There is huge 12 potential there, but if they cannot get the finance that they need, then we are not going to be able to grow the economy and we are not going to be able to rebalance it either. That is the role that they have to play. Government needs to support that by sensible and wise investment of the money that we have in infrastructure, including energy and telecoms and other areas. We have a role as Government, and the Westminster Government can assist us in that. The banks have a role too, as does industry itself.

Q337 David Simpson: Simon, earlier you mentioned briefly the ministerial taskforce that, as we know, was set up by the Secretary of State. Could you indicate to us how many meetings have been held since the formation of that? Is it moving forward? Is it being constructive? That is the first part of the question. Simon Hamilton: The very fact that it exists is constructive. As I said before, it is made up of myself and Arlene Foster representing the Northern Ireland Executive; the Secretary of State for Northern Ireland; Sajid Javid, the Financial Secretary; and Matthew Hancock, the Minister of State for Skills and Enterprise. For the first time, we have the right very senior, high-level people in the room talking about this issue. It has taken a while to get to that position, but it is welcome nonetheless. It has had one meeting in that format. Officials have a sub-group that goes away and does some work in between meetings. Our next meeting is scheduled for February. The importance of it will be seen in that we have a forum now not just to discuss all of the issues that we have been discussing here today and others, but to come up with recommendations as to how we can do certain things. No doubt we will discuss Ulster Bank and the ramifications of the report and the review that is ongoing, but one of the primary purposes I see is to look at those national lending initiatives, some of which have not worked anywhere, and some of which have worked here on the mainland but have not worked in Northern Ireland, to see how we can tailor some of those to the Northern Ireland circumstances. Some of those initiatives, like Funding for Lending, which some of our banks have availed themselves of and through which some money has been released, are very welcome, but they do not get to grips with that very property-related problem that we have in Northern Ireland, which is more a risk-based problem than an affordability problem.

Q338 David Simpson: You mentioned the membership. Members of the banking world and senior businesspeople were not included in the membership of that. Is it less strengthened by that? Why do you think they were left off it? Why were they not included in the taskforce? Simon Hamilton: As I said in response to Lady Hermon’s question earlier, I am not against engaging with the banks, and will do so either collectively or individually, along with ministerial colleagues and others. I am definitely not against that. The nature of this taskforce is to hollow out the steps that we in Government—whether that be in London or in Belfast— can take and the collective muscle that we can bring to the problem to get the banks to do things that we would like them to do.

Q339 David Simpson: You think having banks and businesspeople on it would have had more of a negative input. You think more progress can be made— Simon Hamilton: Having banks on it might have distracted us from some of the important work that we will do. We will engage, I am certain, with business and with others to get their views, but that is something that we do regularly anyway. Almost on a weekly basis I am engaging with either a particular business or a business organisation like the CBI about these types of issues.

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Q340 David Simpson: So you think meeting the banks and businesspeople in a separate venue or whatever, on a different agenda, is better. Simon Hamilton: Yes. It is best if ourselves at Stormont and Westminster come up with a list of things that we think need to be done and then engage with banks, rather than have banks in the room almost trying to shape it and take us, perhaps, in a direction that we do not want to go.

Q341 David Simpson: This is my last question, because I have to go for another meeting, unfortunately; it is not a walk-out. What is your view on Mr Coulter’s comments recently when he said it would make sense for the British Business Bank to devolve funds to Northern Ireland so they could be managed or allocated locally? Do you think that is a good thing? Simon Hamilton: I do think it is a good thing. I recently had some engagement on this very issue with the Secretary of State for Business, Vince Cable, when he was over in Northern Ireland. As I said before, those national lending initiatives simply do not seem to be working in Northern Ireland. Part of this comes from very few of our banks getting involved in it; it goes back to the structural problem. Sometimes it is only RBS that get involved, through Ulster Bank. If you look at the Enterprise Finance Guarantee scheme, it is a very low figure, far less than our population or our Barnett share would be, in terms of the number of deals and the amount of business that has been done.

Q342 David Simpson: Some would say that there is not enough money in it for the banks. Simon Hamilton: I have heard that said. I have heard it said that the banks do not have enough knowledge about the products and are not, therefore, willing to push them on customers and are not selling them to customers; there is a bit of a skills gap in that respect. That discussion that we had with Vince Cable was very productive and this issue that you mention was touched upon. We have about £140 million in access-to-finance schemes that Invest Northern Ireland are taking forward. Chair: We are going to have to suspend the Committee. I am terribly sorry. We will come back in 15 minutes, unless everybody can get back a little bit quicker and we will start straightaway.

Sitting suspended for a Division in the House. On resuming—

Q343 Mr Anderson: I apologise for being late. Mr Simpson asked a question about the involvement of people from the business community. Can I ask you about how you engage with people who are not members of that group, but who are clearly impacted by the banks, for example the community organisations across the North, of which there is a huge depth and breadth—particularly the people in the rural communities? My impression, from working in Northern Ireland for a long time, is that the urban and the rural are much further apart than they are anywhere else in the United Kingdom. How do you engage with people at the sharp end? Do you have discussions with ICTU or other people in the trade union movement about how the banking system is letting them down because they are letting the business down they are working for? Do you engage them on a forward basis? Simon Hamilton: What I have found, certainly in the four months that I have been in post, but also over the last couple of years, being close to my predecessor, is that we tend to operate a very open door policy in respect of access to the Department and the Minister for people such as those that you described to bring problems to us. It is one of the benefits of 14 devolution, in that you have people on the ground in Northern Ireland who are able to listen to the particular problems and give them a hearing in a way they might not have got in the past. So, yes, we meet with people from the trade union movement and from the community and voluntary sector, which—you are right—in Northern Ireland is probably the strongest in the United Kingdom. There are lots of reasons why that is the case. I was at NICVA, which is a sort of umbrella body for the sector, just over a week ago talking about something different, but there is a good high-level engagement with all of those sectors on an ongoing basis. You are right; there is a very distinct urban-rural divide in Northern Ireland. Not that long ago—in fact, very early on in my tenure as Minister—I met with the Ulster Farmers’ Union to discuss quite a range of things, but included within that was a discussion about access to finance and the problems that their members were having. That is a sector of our economy that has done very well over the last number of years and has grown, but has huge potential to grow even further. Even though it has grown, that does not mean that people at the sharp end have not experienced some of these problems.

Q344 Mr Anderson: Would you have regular sessions, almost like what we are doing here today, or would it be as and when? Would they be able to say, “Can I come and see you?”, or does it fit around what you are doing? Simon Hamilton: It is probably a lot more as and when than formal, and probably sector-by-sector or group-by-group rather than a few from a sector or a few groups coming together. I do not think there has been any reason for that, other than that we never started doing it any other way and it has, by and large, worked.

Q345 Lady Hermon: I have two disconnected questions. Well, actually, there is an overlap between them. You explained, Minister, that you go around Northern Ireland, as one would expect you to do. When you are going around and you are meeting with businesses and they are talking to you, what is the feedback about Invest NI? I know they are not directly accountable to you—they are in the Department of your colleague, Arlene Foster—but in the privacy of a meeting, is it good, positive feedback about Invest NI? Simon Hamilton: Reveal it and the meeting is not private. By and large, the feedback I get is good. Lady Hermon: If it is helpful at all, the feedback that I get in my constituency of North Down is very positive about Invest NI, so it is not a leading question asking you to be critical—quite the opposite. Simon Hamilton: No, and I do not think I could have been invited to be critical anyway. I would have Arlene on the phone, I am sure, pretty immediately. I can, with confidence and truthfully, say that the feedback is positive. A lot of work has gone in to ensure that the feedback is positive and not negative. If you were asking me the same question five years ago, or if I was asking you the same question five years ago, I think the feedback would have been different. Through Arlene’s leadership at the head of the Department over a sustained period of time, they have focused on working with small businesses a lot more. We are a small or medium-sized economy, so many of our businesses are, but they have worked with them a lot more. The perception in the past, Chairman, was that they were only interested in big-name, blue-chip companies coming in from the States or elsewhere. That is still a core part of our work—we need to ensure we get a lot more foreign direct investment, not just for the jobs but the skills that they then bring that transfer into our workforce—but they have switched their focus and balanced their focus as well now very much on working with small and medium-sized businesses, not just for the sake of it, but to try to encourage those businesses to export. 15

That is very much the focus of Invest Northern Ireland: getting companies ready to export and opening up other markets to them. The Minister was recently in Dubai, and the First Minister and Deputy First Minister are in Japan this week. We are not afraid to go out there and to sell what Northern Ireland has and what our companies have to offer. What I find is, no matter what company you are dealing with who are clients of Invest Northern Ireland, there is always somebody to contact and they get good hands-on support. I remember recently on a trip I went to the North Antrim constituency, and both businesses that I met were very positive about the different types of support that they got. I can, in all fairness and truth, say that the feedback is now a lot better than it would have been five years ago. I do not think five years ago I would have been able to say half of what I was able to say there. Lady Hermon: I agree entirely. In fact, we took evidence from other witnesses last week who were very complimentary about the current work of Invest NI. Simon Hamilton: They are very good. I was saying in answer to David before he left that they have developed £140 million worth of five different funds, including the Growth Loan Fund and the Small Business Loan Fund. It was not their intention or desire to become almost like bankers, but because of the failure that there has been in the market, they have had to step in. That is another string to their bow now, and they are doing that very well and, again, there is very good feedback on that area of work as well.

Q346 Lady Hermon: Yes. As I indicated, the two questions are technically separate but there is an overlap, and it will become apparent. As someone who has never been a Member of the Northern Ireland Assembly, I am always intrigued to know how close the working relationship is between Members who have ministerial portfolios but are also party colleagues. Again, you do not have to breach confidentiality here, but just technically, you have the First Minister, who is Leader of the Democratic Unionist Party, and Arlene Foster, who has been a tremendous asset to Northern Ireland and to DETI, which she has been in charge of for several years now. Do you meet regularly as a group? Within the Executive, is banking top of the agenda for all of the political parties? Simon Hamilton: Yes, we are an Executive and we have very formal executive meetings, like cabinet meetings, on a regular basis, but you do find that the real business gets done away from those in bilaterals, or sometimes trilaterals, on issues that cross over more than one Department. I mentioned earlier the agri-food loan scheme, which is using £10 million this year and next year from the financial transactions capital that we are now starting to get through from Treasury. That would not have happened had it not been for the Department of Finance and Personnel working hand in glove with the Department of Enterprise. We were able to work, again, very positively with the banks to produce that scheme, and that scheme is now on the ground and starting to work. Where there are areas of shared and mutual interest across Departments, it is probably more difficult where it is not with a party colleague, but there are other Ministers who I have exceptionally good personal relationships with, which means that you can break down some of those departmental barriers that are there and some of the political barriers that might be perceived to be there. But on an issue like this, having the Department of Finance and the Department of Enterprise in the hands of Ministers from the same party has certainly helped to ensure that that focus has been concentrated. Banking is an issue that the whole Executive recognises is a major problem and a potential impediment to economic recovery in Northern Ireland. Economic growth as a subject, including access to finance, is something that we discuss at the beginning of every Executive meeting. There is no absence of focus on the economy or jobs or, indeed, banking and the part that that plays within the Executive. Lady Hermon: That is what I would have liked you to have said, but I could not have written the script for you. It is very heartening to hear that. Thank you. 16

Q347 Nigel Mills: When we took evidence from the British Bankers’ Association, which I think we are probably all agreed was not the best session we have ever had, they said that awareness of the Better Business Finance mentoring and appeals support programme was not as extensive in Northern Ireland as they would have hoped, or at least take-up of it was not very high. Is that a theme you are familiar with and you have tried to get some more activity on? Simon Hamilton: Yes, it is fair enough to say. The Better Business Finance initiative launched to a lot of fanfare, and there was a lot of hope that this would herald better relationships between banks and their customers. It is fair to say that it has not worked as well as people might have hoped it would work. It needs to be reinvigorated and a lot more effort needs to be put in. I met recently—I think it was early September—in London with the Chief Executive of the British Bankers’ Association and some of his colleagues on a range of issues. Lending data was one of those, but this issue was also raised, and I encouraged them to work on what they could do to breathe some new life into the initiative. There are a lot of good points contained within it, including getting mentoring from banks to businesses to try to encourage businesses to grow and to develop, and whilst a lot of these things on paper and in theory were very good, they have not materialised that well on the ground, unfortunately.

Q348 Oliver Colvile: The British Bankers’ Association—I rather agree with Nigel that our session was not the most glorious of events—has a partnership with the UK Business Angels Association to make businesses in GB more aware of how they could be helped by angel finance. Have you been looking at that in Northern Ireland at all? Do you think that would make a difference? If you have not been, will you be looking at it? When are you going to try to get it to come in? Simon Hamilton: There is a small business-angel network in Northern Ireland, run through the Northern Ireland Science Park. It is an organisation called Halo, which is doing a lot of good work in that space. It is fair to conclude that business-angel networks in Northern Ireland are very much in their infancy. There are lots of reasons for that. There is a cultural issue as well in Northern Ireland. I know it is not distinct and absolutely unique compared to, say, England, Scotland or Wales, but in Northern Ireland, because the majority are small businesses and tend to be family-owned, the idea of bringing in somebody else and giving up an equity share is something that is anathema to many businesses in Northern Ireland. They would rather stay small than grow on the basis of getting angel finance in. But it is increasingly being seen as an option by those who are hungry to grow and know that they cannot get the finance that they need entirely from their banks any longer, so are a little bit more open to looking at alternative sources of finance, including some of those Invest Northern Ireland funds that I mentioned and also talking to the likes of Halo and others to see if there is any source of finance—including giving away equity shares—that allows them to do that. In another example of where take-up is slow in Northern Ireland, I met recently with the Business Growth Fund, which is being funded by four of the big banks here, and I think another bank as well, to get into that sort of space where businesses need finance of between £2 million and £5 million. Businesses give a small equity share over to the Business Growth Fund and the Business Growth Fund in turn puts somebody on their board. They have been doing a lot of deals here, but there has not been a single deal done in Northern Ireland yet, which is indicative of that cultural difficulty sometimes that there is in Northern Ireland.

Q349 Dr McDonnell: Thank you, Minister, for your mention of Halo there, because I thank God for the fact that I was the one that set it up, but I know you forgot to mention that. 17

Simon Hamilton: Modesty prevents you from mentioning it. I did not want to embarrass you. Dr McDonnell: Your predecessor, our good friend Mr Wilson, identified the lack of availability of accurate or detailed regional lending data as contributing in a large way to the lack of transparency in our banking sector. Do you think banks should make their data available, or be made to make the data available, on a postcode or a constituency or even a district-council basis? Simon Hamilton: Absolutely I think they should, and I see no reason why they should not. I have been present with others as we have had frustrating engagements with the British Bankers’ Association on this issue. There are times when you are having that engagement and you think you are asking for something that they do not have or that you are not entitled to see, when in fact you are merely asking to see for Northern Ireland data that is quite freely available for the mainland. We have made some progress. The Department has for a while now received aggregated and anonymised information—very headline figures—on lending, demand and approval rates. We get that on a quarterly basis, and that is very useful and it is quite informative for us to see where trends are moving, but we are not allowed to do anything with it, certainly publicly anyway. The reason why I think it is useful that we get it and we should get more is that if we are going to increasingly get into the space where we are developing or own funds, such as those Invest Northern Ireland have, it is useful for us, given the limited resources we have at our disposal, to know that we are putting that money into the best possible schemes—so, instead of putting all of it into one scheme, which maybe is not where it is needed, that we are spreading it out over a couple or putting it in a different one entirely or creating a new one. We are making some progress, in that we have been assured that we will get sectoral data for Northern Ireland—so, broken up by, for example, hospitality or construction or manufacturing—early in the new year. Again, that is something that is already readily available for the rest of the United Kingdom. What we would like to see as well is some postcode data, which, again, I think has started to be rolled out on the mainland. Lending by postcode would be useful. It is not that we are asking for anything unique or different for Northern Ireland; it is what everybody else already has. We should be getting it. It would better inform policymaking on the part of the Northern Ireland Executive and it would give us all a better sight of where the economy is and where lending is going. In some ways it would actually help the banks, because if the banks are doing what they are telling us they are doing, and they are lending and there is actually more of a demand problem at the minute, then these figures will publicly reveal that, surely, if that is what they say is happening, and will debunk some of the myths that they would say are out there. It is in their interests too to reveal this sort of information.

Q350 Dr McDonnell: It is my sense that the Northern Ireland Executive, or the Assembly, does not have a lot of authority or clout to push this issue. I think that is the undertone of what you are saying there: “Yes, we get access to some figures, but we do not have a lot of authority over them.” Would it be helpful if UK Government departments, like the Treasury or BIS or even the NIO, were willing or able to demand that banks provide those figures in a more structured and organised fashion? Simon Hamilton: My predecessor had a series of conversations with everybody from the Treasury to the Bank of England to the British Bankers’ Association and back round again trying to resolve this, with some progress but very limited success. I hope the efforts that he has put in, and that I am going to carry on, will start to yield some more success. To be fair to the Secretary of State for Northern Ireland, she was at the meeting with the British Bankers’ 18

Association, which was helpful in showing that there was Government support to reveal this information, and I hope that that continues. It should not be that difficult to get, given my previous comments, but if the Secretary of State or the Treasury or this Committee, or whoever, wants to push those sorts of issues, that could only be helpful.

Q351 Dr McDonnell: I think it would be very useful, because I never fail to be amazed by figures and what figures tell you. No matter how often you look at them, you always see something new in them. I just think that we are left in the dark, because all our stuff, as we heard earlier, is anecdotal. I will leave it at that. Thank you. Simon Hamilton: Perhaps on some of the postcode data, if you broke it down so small, you might be able to see individuals who are being lent money by particular banks. You have to aggregate that up at a higher level, but it still can be done. I can see no good reason why this data, which is available elsewhere in the United Kingdom, cannot be revealed for Northern Ireland. There is no good argument.

Q352 Lady Hermon: Have I got the joy of the last question? You have the joy of the last question. I am going to bring you back to something that is of concern to you and is of concern to the Committee and any of us who represent constituencies of Northern Ireland: the problem of a series of bank closures by different banks but in the same locations. In your submission to us as a Committee, you mentioned in particular your concern about rural communities where the banks have closed a branch that might have been there for years and years and years and years, and those who do not bank online and do not use a smartphone may also be people who have to use public transport, so it is difficult to go to another branch when you want to meet and engage face to face. Are the banks listening when you have expressed your concerns to them about bank closures, particularly in rural areas? It is not just the rural areas: Ballyholme is not rural, but they closed down there. Simon Hamilton: No, you are right. That one in your constituency is a good example. You can see the negative effect that it has on what was a vibrant area in terms of the footfall adjoining businesses do not get. You are right; it goes back to the point about Northern Ireland having a large, dispersed rural community. I understand and accept to a degree that banking and our interfaces as customers with banking are changing. A lot of us are going online to make transactions and even using our phones to do that. I understand as well that banks have to lower their cost base; that is part of the restructuring that they are having to do, and that will inevitably lead to branch closures, but there has been a very high number of them, right across Northern Ireland, in rural and urban settings. One of the more alarming things about it has been that you get announcements very close to one another by different banks closing branches in the same town, for example. I am not asking them to sit down and run banking like a cartel or anything like that, but, particularly when they are Government-owned—whether it be the British Government or the Irish Government that owns them—you would think they might have some greater sense of duty to the people to at least seek to, insofar as they could, co-ordinate where they are closing their banks and not leave some large tracts of Northern Ireland without any bank at all. As a Department, the core of the problem is we have very little authority or power, but one of the slightly more positive things that we were able to do as a Department was rate exemptions for ATMs in rural settings, which has ensured that at least some banking presence has been kept. Initially it stabilised the number there were in a rural setting, and we have now started to see the number of ATMs increase.

Q353 Lady Hermon: Just explain the rating implication. Simon Hamilton: An ATM, albeit very small, would still be rateable. 19

Q354 Lady Hermon: A machine in the wall is rateable. Simon Hamilton: Yes. Well, it is not at the minute; we have exempted it for rates.

Q355 Lady Hermon: Indefinitely? As long as you are Finance Minister? Simon Hamilton: It is ongoing. Given the fact that it is starting to work, but the problems have not gone away, it is not something that is being looked at right now. You always look at these sorts of exemptions on an ongoing basis, but so long as the problem that created the need in the first place is still there, you would not be wanting to do away with it. Because they are usually in a shop, that part of the shop would be rated, and that can be sometimes the difference as to whether it is financially viable to have it or not. Removing rating on it has ensured that the decline in rural ATMs has stabilised, and we have seen the number increase. It is not a bank and it is not face-to-face contact, but at least people now have, in some areas, greater access to their own money. Lady Hermon: Unless it is Ulster Bank on a Monday night at the beginning of December. Simon Hamilton: Yes. Branch closures are a problem. Unfortunately, I do not think we have seen the last of them. I think we are going to see more, and the number of branches overall is going to go down. I would like to hope that the banks would at least try to work together, insofar as they possibly could, to ensure that even if it is not them that is in that town, there is some bank that is in that town, and that towns are not completely abandoned by their banks.

Q356 Nigel Mills: Can I just steal Sylvia’s last question and take you to banking competition in Northern Ireland? You have already said you would like more competition. Four pretty sizeable banks for a population of one million or so is probably not that bad, is it, compared to the size of the business banking market? If you took the same ratio on the mainland, where we have got 65 million people, we would need 260 banks competing. We have four, basically. Do you think more competition is the answer, or does that lead to too many banks chasing too little business and ending up with probably too great a risk being taken to chase market share? Simon Hamilton: I can see the point you are making. We have talked about competition as if it was a market that was functioning properly. You are right; you can over-saturate a market by having too many players in it. We are not dealing with a market that is functioning properly, so some of those banks that are described as “big banks” and have a share of the market have it by default, almost, and have it in spite of the fact that they are not necessarily performing the best and providing their customers with the best possible service from time to time. In that respect, it is not about competition. In some ways, ours are around the wrong way. What you would describe as a big bank here is a small bank in Northern Ireland. We need some of those banks to increase the presence that they already have, both in terms of their branch presence and also some of the activity that they are getting into. We are starting to see some evidence of those banks that have not been performing well starting to move into a better position; one of those big four banks has now moved into profitability, albeit very small, and two of the other ones are anticipating that they will be into profit in the next year or so. Things are starting to get slightly better, but what we need to do is to keep them on their toes a bit. That is what we have not seen at home. If I was to think of the mainland market, yes, you have four or five big banks, but you do also have smaller regional banks in different parts of the country. We need some of those bigger banks to become bigger players in Northern Ireland to try to get that better balance that is the case in the mainland and that we do not have in Northern Ireland. 20

Q357 Nigel Mills: Are there any policy changes that you think would help Santander or Barclays, or maybe even the new TSB, to get established in Northern Ireland? Simon Hamilton: There are not specific policy initiatives that I can think of that would suddenly cause them to have a “eureka” moment and flood into the Northern Ireland market. It is as much the Government using its very privileged position with some of those banks to ask them, “Have you looked at Northern Ireland, or are there opportunities for you to start to do banking there?”—even if it is not having a high street presence, which would be nice for them to have, to at least start to increase their business, doing that centred from here and into Northern Ireland.

Q358 Oliver Colvile: What about reducing corporation tax? Lady Hermon: That is a completely different issue. Simon Hamilton: We would hope that it encourages business in general in Northern Ireland to grow if we get that power and we are able to reduce it. You are right; because of the impact that I would imagine that it would have on the economy in Northern Ireland over the medium term, in terms of generally more activity, more people employed, more companies coming and investing, small companies becoming medium-sized companies and medium- sized companies becoming large companies, that will then change the nature of banking as well. You may see some of those banks that are already there just naturally then starting to grow their business in Northern Ireland, because it becomes a more attractive place to be doing business in. I can understand why, maybe looking from the outside in, Northern Ireland now, in terms of where we are economically, is maybe not the sort of place that they are wanting to go into in big style very quickly, but perhaps, as our economy stabilises and grows and perhaps with the benefit of corporation tax, it may become a lot more attractive for them.

Q359 Andrew Percy: I just have a quick question on access to banking services for consumers in rural areas. What is the situation with accessing bank accounts through the Post Office network in Northern Ireland? Is there a possibility of that network being used to increase the range and choice of banks? Simon Hamilton: I should have said when we were talking about it that there is a reasonable and growing presence of banks in post offices in Northern Ireland, just as there are here in the mainland. Bank of Ireland run that, so they have a presence. I think you can access Barclays’ accounts through a post office, and there are a range of others who are increasingly taking up that opportunity, which is good. We have seen a lot of post office branch closures as well, but having those services that drive footfall through post offices makes them much more sustainable. I raised the issue about rural ATMs that they are not banks, and a post office is not a bank either, but if we accept that technology is having an impact and we accept that banks are having to reduce their cost base, it at least provides people with some way of accessing banking services, and the post office is as close to an example of where you can get that done as anywhere else.

Q360 Lady Hermon: Could we just urge you, then, to make a public commitment that you will go home as the Finance Minister—a job you are doing very well indeed—and urge all of the banks in Northern Ireland to do as much as the Bank of Ireland is doing through post offices? We have to retain our limited and decreasing network of post offices right across Northern Ireland and, as Andrew has suggested, if we increase the banking facilities available through post offices, that would be a great help to them. If we could have a commitment on that, we would be delighted. 21

Simon Hamilton: Yes. In general it is a good idea, because people trust their post office perhaps more so than they trust their bank. Maybe they trusted their bank more in the past. As I said previously, I am starting another round of engagement with the banks in early January, and what I can do is gauge what the seven—the big four and the other three—in Northern Ireland are doing and what their plans are. I am happy to share that information with the Committee when we get it. Lady Hermon: Yes please.

Q361 Andrew Percy: It is also about public awareness. The last bank went in one of my towns, Snaith. We lost HSBC. What was quite complicated about that for consumers was understanding what it was they could do and what sort of accounts they could access at the post office. At HSBC, you were allowed to do personal banking; you could not do anything else. In some places you could do withdrawals, but you could not pay in, depending on the bank. All that confusion does not help, so you are nervous about using your post office. It is about working with the banks to extend the services, but also ensuring there is an engagement process with consumers so they are aware of which banks allow them to do what. The sooner that is evened up across the various banks, the better, so everybody is clear. Lady Hermon: It is consistent, yes. Andrew Percy: Yes. Otherwise, in the face of confusion, people do not make the choice; they just avoid it. Simon Hamilton: Yes.

Chair: Unless there are any other burning questions, we will close the session. Mr Hamilton, thank you very much. It was a very interesting session. We wish you well with your work.