Financial Services and Markets Bill

Baroness Twycross Excerpts

2nd reading
Tuesday 10th January 2023 Lords Chamber

[Baroness Twycross (Lab)]

My Lords, I look forward to hearing the maiden speeches of the noble Lords, Lord Remnant and Lord Ashcombe, and the noble Baroness, Lady Lawlor. I join others in welcoming them to the House. I declare an interest as London’s Deputy Mayor for Fire and Resilience, as the points I shall raise relate to an issue identified as a risk to the resilience of individuals and vulnerable groups—a societal risk—in the London City Resilience Strategy in 2020. This strategy, published shortly before the first Covid lockdown, identified the trend in digital transactions and away from cash:

“A proliferation of digital payment technologies allow individuals to all but avoid the use of cash on a day to day basis. According to the AT Kearney Global Trends 2019-2024 Report ‘the growth of digital applications, e-commerce, and online payment technologies will keep growing over the next five years and beyond’ and we are ‘likely to see the emergence of the first truly cashless society in the next five years. A move away from cash may pose a risk to certain vulnerable groups, notably those facing barriers to digital transactions, or those more likely to be excluded from the mainstream banking system. This could affect the resilience of these groups, as well as … the personal resilience of isolated people, including older generations who are more likely to be reliant on cash.”


During the pandemic, there was a clear acceleration of cashless services, with the organisation LINK identifying that use of cash has reduced by 40% compared with pre-pandemic levels. More recently, however, there has been a subsequent increase in the use of cash by consumers during the cost of living crisis, with 10% of people saying they plan to use cash more than previously to help them budget. This alone demonstrates a clear continued need for cash by the public, despite what has been described as the turbocharging of a move away from cash since 2020. It is welcome, therefore, that the Bill includes a requirement on the Treasury to publish a cash access strategy and a requirement on the FCA to ensure reasonable provision of cash access services—and “reasonable” should, must, mean “adequate”.

The requirements must also ensure that older people, those with disabilities and those on a lower income who rely on cash are not adversely affected. We have a tradition in this country that the public are not charged for withdrawing their own money. This is a good tradition and should become an explicit right. This legislation should make it clear that there should be a default right to access cash free of charge and a right to use cash to buy basic goods and services for those for whom other forms of payment are not an option. This group, which is at risk of being marginalised, includes more than 5 million people who rely on using cash for their normal spending—a significant minority who should be protected.

Equally important is that there is no poverty premium on cash users and that the decline in free-to-use ATMs and the increase in pay-to-use ATMs—all too often found in some of our most deprived communities, as well as many rural communities—are halted. The closure of almost 6,000 bank and building society branches since the start of 2015, as has been noted, has left many consumers without easy access to a bank branch and is exacerbating the issue.

There have been some imaginative approaches to piloting ways to address these issues, but more needs to be done to assess the pilots to make sure they work and to roll out measures that can address this issue. The Bill provides the ideal opportunity to do this. I agree with the noble Lord, Lord Hunt, that it could go further in this regard. As the consumer organisation Which? has said, we need to avoid sleepwalking into

“a situation where cash users struggle to make purchases or are excluded from certain services.”

Without ambitious plans to ensure that all those who require cash can still use it and that they have easy and free access to it, there is a clear risk of further increasing the impact of financial exclusion, which is all too widespread in our society already.

Financial Services and Markets Bill

Baroness Twycross Excerpts

Committee stage
Monday 6th February 2023 Grand Committee

[Lord Davies of Brixton (Lab)]

My Lords, I will speak to Amendment 55. I broadly support the other amendments on financial inclusion and will perhaps say a bit more about that aspect when discussing the amendments in later groups. I thank the noble Lord, Lord Moylan, for explaining many of the points on which I had questions about his amendment, although I am still unclear what is covered by the term “regulated investments”. I do not think it is defined in the legislation, so perhaps it could be clarified.

I want to add a note of caution. I am not against the idea—obviously, it is motherhood and apple pie, and we are all in favour—but our old friend shareholder democracy is coming up again, and we should recognise that it has a political subtext. The truth is that, unfortunately, that ship has sailed, the bus has left the stop and it has gone the other way. Quite rightly, reference was made to our old friend Sid: the “Tell Sid” campaign was a masterpiece of promoting a policy that has had a lasting legacy, but that legacy has not been greater share ownership—greater ownership of regulated investments. In fact, we have seen the reverse, as the noble Lord mentioned in his introductory remarks. The whole thing has gone into reverse such that now, according to the ONS, only 12% by value of UK shares, for example, are owned by individuals, with the majority of shares owned by overseas entities. It is true that other shares are owned through other bodies, such as pension funds and unit trusts, but, in total, that is less than 10%, which I do not believe provides the individual holders with any sense of ownership.

There are many reasons for the shift away from individual ownership, and I think the attitude of the regulator is only a very minor part of it. In a sense, the objectives set out in the amendment have been overwhelmed by bigger forces. There are many reasons why people do not have individual ownership; many people are too poor and simply do not have the money. Even those who have some money in savings—this is a bit of a caricature—have it for rainy days. Regulated investments are not necessarily, depending on the definition, the best place to put your rainy day money.

My concern is the extent to which this amendment suggests it is advisable for people to use their money in this way. It would be very unfortunate and of great concern—perhaps the noble Lord can give me an assurance on this—if the regulatory bodies by implication were providing investment advice. I certainly do not think investment advice belongs in an Act of Parliament.

[Baroness Twycross (Lab)]

My Lords, I declare an interest as London’s Deputy Mayor for Fire and Resilience, as risks associated with access to cash were noted as a risk to financial inclusion in the London City Resilience Strategy published in 2020.

I am grateful to my noble friend Lord Tunnicliffe and the noble Baroness, Lady Tyler, for allowing me to add my name to their excellent Amendment 117 on financial inclusion. I will speak particularly on digital inclusion. The other signatories have already outlined in much better words than I could why this amendment is required. This amendment would ensure that the heart of this legislation takes account of the needs of the most vulnerable and that we have the opportunity to mitigate the risk that a significant minority of the population may be unwittingly left behind or excluded from crucial financial services. This amendment would be an important addition to the legislation. I agree with my noble friend Lord Tunnicliffe that this is not party political. It is a really sensible and pragmatic measure which should afford significant protection.

On financial inclusion, I ask noble Lords to note specific issues of digital inclusion. This relates to financial inclusion as, without access to a smartphone or computer, it is almost impossible to carry out online banking or transfer money to a family member or a business.

I apologise for using a string of statistics, but beneath them there is a significant minority of the population whose stories and suffering because of financial exclusion often get missed. These people may be unable to access basic banking services online, relying heavily on cash or even cheques, and may struggle to pay for very basic things we all take for granted—for instance, automated parking.

Latest figures from the ONS estimated that, in January to February 2020, 96% of households in Great Britain had internet access. This increased from 93% the year before and 57% in 2006, when comparable records began. Although this number is increasing, and statistically it looks as if there is not a huge number of people without internet access, in the same period 76% of adults were using online banking. This leaves a significant minority who still do not. Estimates suggest that over 7 million adults in the UK—around 14%—could be classed as potentially financially excluded, with around 5.8 million having no record of an open or closed bank account. There are well over 600,000 people who could be classed as credit invisible, with the issues that causes for affordable credit.

Digital exclusion’s effects fall disproportionately, and research by the Centre for Social Justice has found that digital exclusion is significantly higher among those on the lowest incomes. It has a disproportionate impact on those who can least afford it. A fifth of adults with a household income below £15,000 are digitally excluded, compared to just 1% of those with an income of £50,000 or more. In turn, this adds to the poverty premium they already pay, as they cannot access the best prices or deals. This poverty premium, which has already been mentioned in this debate, includes borrowing and other financial services, so the proposed duty to be placed on the FCA would ensure that it, as well as the Government and the banking sector, can act to mitigate the risks posed by increasing digitalisation of the sector.

I note that technology often moves faster than we can imagine, Covid changed behaviours that now cannot be unchanged, and any duties imposed on the FCA in relation to financial exclusion will need to assume that the discussion about cash versus card that we are currently having will move to card versus phone, as well as include other technological approaches. Ensuring that the FCA has oversight over that would provide additional protection for the most vulnerable in our society, and I hope the Minister sees the merit of safeguarding which this amendment would provide and agree to include it in the Bill.

[Baroness Kramer (LD)]

I shall combine speaking as a winding speaker with addressing the amendment that sits in my name. I added my name to the two amendments from the noble Lord, Lord Moylan, Amendments 55 and 241. Like him, I am very conscious of many of the recent scandals we have seen—he mentioned London Capital & Finance, but there is also Blackmore Bond and mini-bonds, to mention just two of the most recent. They were fuelled by ordinary investors looking for improved returns. I would hope that with easier access to regulated markets, which typically come with information and analysis by independent entities such as the rating agencies, an investor would be far less likely to fall into unscrupulous hands. That is a consequence that neither the regulator nor the Government have been fully aware of. They are always surprised when an unscrupulous product appears, and they should not, given the general track record.

I also join the noble Lord, Lord Tunnicliffe, and the noble Baroness, Lady Tyler, in their amendments to insert at least “have regard” for financial inclusion and for proper reporting on financial inclusion. I also support Amendment 67A, in the name of the noble Lord, Lord Holmes, to turn that into an objective.

My biggest gripe with the FCA on the financial inclusion agenda is that it is passive. If a new product or organisation were to come forward serving part or all of that community, it would of course appropriately regulate it. The problem is that it does not use its incredibly powerful and influential role as a regulator to spearhead the actual change—to pick up the words of the noble Lord, Lord Holmes. It does not, for example, ask the competition to come up with a product or even look at mechanisms such as bank in a box, which is very popular across the globe. That makes it very easy for new entities to come to market, because the whole core regulatory piece comes off the shelf. That changes the dynamic dramatically. It does not take the initiative and, until it does, I can see that no one else will.

All of that in a sense leads me to my Amendment 228. Others have talked about the intractable problem of financial inclusion, and I suspect that many in this Room, like me, have been to round table after round table, meeting after meeting, conference after conference, with banks, credit unions, mutuals, fintechs and civil society groups to hear proposals for cracking the financial inclusion problem. Year after year, it is the same conversation, with relatively little headway. Others may correct me, but the number I have is that we still have 1.2 million people without a bank or credit union account, and in modern society that means that you simply cannot function.

I have huge respect for credit unions; I am delighted that there are amendments to support them and mutuals in the Bill. However, only 1.4 million people in the UK actually use them. That is a fraction of those who could benefit. Other forms of community development financial institutions are scattered, tend to be small and have limited scope. Local and community banks, as well as the old savings and loans, have largely been absorbed by the high street banks. In turn, as others have said, they have rapidly closed branches and anyway rely on a centralised system of decision-making that does little for local businesses or circumstances; we saw that graphically after the 2007 crash. There is a regional mutual bank movement—the noble Lord, Lord Holmes, addressed this in our debate on a previous set of amendments—that is trying to build, but the lack of capital is a major hurdle. Again, my noble friend Lady Tyler referred to the banking hub scheme driven by the access to cash task force, but it is growing exceedingly slowly.

Financial Services and Markets Bill

Baroness Twycross Excerpts

Committee stage
Tuesday 7th March 2023 Grand Committee

[Lord Hunt of Kings Heath (Lab)]

My Lords, I support the general thrust of the amendments on access to cash and the availability of real banks, if I can put it that way. I take the point of the noble Baroness, Lady Noakes, that the future is digital and that our effort should be to incentivise the financial sector to make it easier for those people who, at the moment, lack the confidence to use digital methods. I accept that she is right, up to a point; we probably are moving to a cashless society. So far, however, the financial sector has shown itself to be rather backward in coming forward with innovative solutions for people who lack confidence.

Secondly, there is enough evidence around to suggest that, at the moment, enough people—millions of people—use cash. They often use cash as a way of budgeting at a very difficult time. I would be loath for us to take action that disenables them from doing so. One of the concerns about access to cash is not just that the number of machines is being reduced but that the amount of free access to cash is, I understand, also reducing. Some of this is to do with the way that fees are charged by the LINK facility. I will not put the noble Lord, Lord Hunt of Wirral, on the spot, but there are issues around the way in which that policy has developed over the past few years, as it seems to be putting pressure on some of the cash providers. This, again, needs to be looked at.

I was very struck by an article in the Guardian today about a 91 year-old who

“discovered that her pension and benefits payments had been stopped and her direct debits cancelled after a Barclays agent recorded that she had died and closed her account.”

I realise that hard cases cause bad law but her experience brought home to me many of the problems that are being faced. She

“informed Barclays that her husband had died. She asked for his name to be removed from their joint account and replaced with that of her daughter … who has third-party access to her account. Instead, she was marked as deceased and the account was closed. Her pension and benefit payments were returned to the Department for Work and Pensions and her direct debits were stopped. She discovered the mistake when she returned from a family Christmas to find her phone line and energy supply had been cut off and a sheaf of letters from companies and the council demanding payment.”

The article continues, as she then

“made two trips to her nearest Barclays branch and was told on both occasions by staff that she was recorded as dead. The bank refused to discuss the case with her daughter because her third-party authority had been revoked when the account was closed.”

This recalls the experience of my wife and I, who had power of attorney for our parents. Once they have died, you lose that power of attorney; it becomes very difficult to have any interaction with the bank at all, and the bank itself is often unsympathetic when you try to discuss this.

In Mrs Roper’s case, the account was eventually reopened and the payments restored after intervention by the Guardian. However, as the article states:

“Roper’s ordeal highlights the obstacles facing vulnerable customers who do not have access to online banking. A Barclays customer for 65 years, she is unable to cope with the automated menus on the customer service phone line and, since her local branch closed, she is forced to take two buses to the next town to withdraw money and manage her account. The only available appointment to request the account change was at a branch 23 miles away where staff did not know her. She brought the required documents, but the bank refused to proceed with the requested name change because she could not recall her little-used pin number. She was told her to make another appointment when she had remembered her pin.”


I am afraid that this is all too common. When we talk about encouraging people to use online facilities, I recall my mother in her last year or so. She was very frail. Even using phones with big numbers, not smartphones, became very difficult. With banks and other financial services, we know who the policy people are; they are often the same young people who work in government developing policy. I accept that the noble Baroness, Lady Noakes, is right about where we are going as technology moves on. However, we are talking about forgotten millions of people here. So far, because I do not see the financial sector responding, we need some safeguards in the Bill. Before Report, I hope that we can coalesce around one amendment that will really enable us to ensure that there are strong responsibilities on the regulator to encourage best practice here.

[Baroness Twycross (Lab)]

My Lords, I want to speak to my Amendments 185 and 188 in particular, as well as on the broader points made by other amendments in relation to access to cash and basic banking services. I declare an interest as London’s Deputy Mayor for Fire and Resilience and the chair of the London Resilience Forum, not least because the London City Resilience Strategy highlights the risk of moving to a cashless society.

First, Amendment 188 concerns the importance of cash to national resilience. It is of critical importance that the Government have due regard to what might happen in some crisis situations were we to become an entirely, or almost entirely, cashless society. Comment has been made on the march towards a cashless society in Scandinavian countries, including by the noble Viscount, Lord Trenchard, but we should also note that these countries have not only greater equality and lower financial exclusion than the UK but, in formal government guidance to their populations on preparedness, they recommend that their citizens have some cash for use in an emergency.

The Norwegian Government’s English language public information leaflet on personal preparedness says:

“Most of us are completely dependent on electricity in our everyday lives: for heating, light, cooking, hot water and running electrical appliances and devices. Storms, natural disasters, sabotage, technical problems, terrorism or acts of war can result in many people’s electricity or water supply being cut off.”


The digital world in which we live, which is reliant on electricity, creates huge risks as well as opportunities. The world is in many ways less resilient to shock than it was previously as a result. You only have to look to the recent cyber incident that Royal Mail experienced, with weeks of not being able to send international post, to understand the real risks of a world in which individuals, companies, sectors and countries become overly reliant on digital finance and digital infrastructure.

On a national basis, everything from a major power outage to a rota power outage—your Lordships will know that local resilience forums were asked to plan for one this winter so this is not a hypothetical situation—whether this is through shortages, hostile cyberattacks or a major storm, could restrict the ability of individuals, businesses and government to function. I agree with the noble Lord, Lord Holmes, that access to cash should be viewed as part of the national critical infrastructure.

The scenarios in which an overreliance on digital banking, with an absence of cash as a back-up, becomes an additional complication or risk in an emergency situation are not far-fetched. This is a genuine threat to our country’s resilience and to our national security in an unstable world. I therefore ask Ministers to consider including this amendment and would suggest that, as a minimum, the ongoing work that the Government are undertaking on the national risk register considers what additional risks might emerge in relation to emergency situations in which cash was no longer available.

There is limited reference to this issue online. In my attempt to get more extensive examples or comments to back up my points, I did not find much of note to cite relating to the UK. This actually made me more concerned, not less. The reality is that it is not far-fetched to have a scenario in which we could lose access to digital finance or payments systems for a number of days—or weeks—on a national, regional or sub-regional basis. The reason cash has lasted so long is that it is, in essence, resilient. That is not the only reason for keeping cash but we need, as a country, to avoid sleepwalking into losing the resilience that it can provide. If you spoke to people working on resilience in Sweden, for example, I think they would also note that it presents additional problems. This is not about preserving history, as the noble Baroness, Lady Noakes, suggests, but about preserving our resilience.

Amendment 185 in my name, which is on the regional experience of cash provision, is intended to highlight the need for us to understand and plan, through the FCA, for cash provision—not just on average, or on the whole, but in relation to whether provision has a regional and potentially sub-regional imbalance. This would enable any regional disproportionality that exists to be addressed. I am particularly concerned that we have large areas, both rural and within cities, that no longer have banks. I know, for example, that the entire constituency of Bradford South no longer has a bank. Like others, I am particularly concerned about the risks of there being a lack of cash and basic banking services for the most vulnerable in society. Others have already spoken on this point and given detailed statistics illustrating it, so I will not dwell on it.

In conclusion, I commend those noble Lords who have tabled specific amendments covering free access to cash and access to basic banking services. It is not a coincidence that Amendment 182 has cross-party sponsors and I commend my noble friend Lord Tunnicliffe, the noble Lord, Lord Naseby, and the noble Baronesses, Lady Tyler and Lady Altmann, for their work on it. I also commend those in the other place, particularly the honourable Member for Mitcham and Morden, who have pushed for this matter to be addressed. Quite simply, free access to cash and basic banking services must be guaranteed. At the heart of British personal banking lies free access to your own money. It is outrageous that if you are poor, you are more likely to have to rely on charged-for cash machines. This legislation provides an opportunity to address the issue, as well as ensuring that we safeguard our country’s resilience.