Financial Services (South-east London)
(13 years, 8 months ago)
Commons ChamberRead Hansard Text Read Debate Ministerial Extracts
Mr Nick Raynsford (Greenwich and Woolwich) (Lab)
I am grateful for this opportunity to raise concerns shared widely across south-east London about the threatened closure of a large number of Nationwide branch offices. That is part of an even wider programme of branch office closures by Nationwide that will impact on many other areas, but the scale and nature of the closures in south-east London are particularly extreme and have aroused substantial anger and concern. I am pleased to have the support this afternoon of my constituency neighbours, my right hon. Friend the Member for Lewisham, Deptford (Joan Ruddock) and my hon. Friend the Member for Lewisham East (Heidi Alexander), whose constituents will also be seriously affected by the closures. I am sure that they will add their comments in so far as time allows.
Before getting into the details of what is happening, let me make it quite clear at the outset that the debate is not just a knee-jerk reaction to the threatened closure of one or two local branches. Like my right hon. and hon. Friends, I fully understand that any organisation operating on Nationwide’s scale must review from time to time the viability of its branch network in the light of changing demographics and trading patterns. We are not arguing for preserving the full existing network of branches in aspic. Change is inevitable, but what is not inevitable and is particularly shocking about Nationwide’s proposal is the closure of every single branch in inner south-east London while all the outer south-east London branches remain unscathed.
I realise that we cannot use visual aids in the Chamber, but a quick look at the map would make clear the scale and enormity of Nationwide’s actions, and I ask the Minister and colleagues to try to visualise its proposals. All seven existing branches inside the south circular road in south-east London—Walworth road, Peckham, Lewisham, Catford, Blackheath, Greenwich and Woolwich—are to close. At the same time, all the branches outside the south circular road—Beckenham, Bromley, Petts Wood, Orpington, Sidcup, Eltham and Bexleyheath—are to stay open. That is quite simply a crude and discriminatory exercise in which the leafy suburbs are favoured while inner London is punished. Not only is that socially divisive, but it leaves a huge section of London without access to the branches of the largest surviving mutual building society.
I estimate that some 670,000 people live in the area affected by the closures—the whole population of the London boroughs of Southwark and Lewisham and two thirds of the population of the London borough of Greenwich. Putting this in perspective, this is more than the entire population of a large city such as Sheffield or Manchester. Suggesting that an organisation calling itself Nationwide should entirely pull out of Manchester or Sheffield would be self-evidently extraordinary, but that is precisely what it is doing in inner south-east London.
Not surprisingly, this has provoked a great deal of anger and concern. Constituents who have contacted me as well as Nationwide have made their views very clear. Mr Daly from Woolwich writes to say:
“The suggested alternative Nationwide branches to Woolwich are Eltham and Bexleyheath which are not easy journeys, especially by public transport. The decision in respect of the Woolwich branch I find baffling as it is always busy and I don't see how closure of this branch can be justified”.
Mr Aldous from Blackheath says:
“Does the Nationwide as a mutual not have a moral obligation to the inner suburbs, where the presence of mutuals can help economic renaissance? Does the Nationwide, as a mutual, not have an obligation at least to consult its members in a timely and meaningful way before taking such a drastic decision?”
Mr Kidley of Westcombe Park writes:
“It rather looks as if someone drew a five mile circle around my house and decided to close all branches inside the circle. I can understand that the Blackheath branch could be replaced by Lewisham and Greenwich for most people, though I will miss the very helpful staff at Blackheath. I really cannot see how it makes sense to close the Greenwich and Lewisham branches, both of which are local transport hubs, easily reached from much of South East London. I can only assume that Nationwide is no longer much interested in South East London business”.
Mr Reader from Greenwich writes:
“I find this decision completely unacceptable by a major branch. I could stomach closure of my branch, but to close my next nearest six branches as well defies logic. I would ask that you contact the Nationwide and ask that they reconsider and show more respect for South East London customers, staff and local communities”.
That is precisely what I did, but when I met Mr Matthew Wyles, the group distribution director of Nationwide, on 1 March, the response was frankly shocking. Nationwide was clearly unwilling to reconsider its decision and showed little or no concern for the interests of its customers. When it suggested that none of the seven inner south-east London branches was economically sustainable, I pointed out that this might reflect on how Nationwide was running its business, as it seemed inconceivable to me that a major financial institution could not make a single branch viable in such a large and diverse area. Mr Wyles responded by saying:
“I can’t explain it to you because I myself can’t understand the reason”.
Nationwide’s behaviour is all the more extraordinary when one looks into the history of the various branches. Some were opened relatively recently. Indeed the Nationwide chief executive, Graham Beale, boasted less than four years ago when opening the Woolwich branch:
“The branch is in a central location and is a prime example of the investment and commitment Nationwide has in its branch network”.
I expect he regrets these comments now. He probably also regrets the fact that these closures come at a time when Nationwide is running a high-profile advertising campaign, including the lines:
“With no shareholders our only focus is you. Talk to the mortgage experts. Ask in branch”.
This is frankly adding insult to injury to the residents of inner south-east London who unless Nationwide reconsiders will be left with no branches to visit.
By contrast with the recently opened Woolwich branch, the Greenwich branch has a long and distinguished history. Originally it belonged to the Greenwich building society, which when established in 1809—more than 200 years ago—was the first recorded building society in London. In the 1990s, as consolidation occurred throughout the sector, the Greenwich building society merged with the Portman building society, which in time was absorbed by Nationwide. That long history of serving the community that I am proud to represent is now being snuffed out without any serious exploration of options to keep at least some of the local branches open.
What is particularly galling about this sad process is that Nationwide had its origins as the Co-operative building society, and continues to proclaim its commitments to mutuality. Indeed the advertisement to which I have referred uses the strap line, “Proud to be different”. The cynic might say that Nationwide will certainly be different from other banks, if it no longer has any branches in inner south-east London, but that is hardly something to be proud of. It is sadly reminiscent of that unhappy period in the 1970s when mortgage lenders had a tendency to “red line” inner-city communities that they regarded as undesirable and refused home purchase finance in those areas.
Those practices are now largely confined to the dustbin; indeed American experience has shown that many supposedly impoverished inner-city areas can be profitable locations for financial institutions to work in. The position in the US is helped by the Community Reinvestment Act, which imposes an obligation on banks to demonstrate that they are adequately serving low and middle-income communities. Will the Minister give some attention to whether similar obligations might be considered in the British context, if financial institutions disregard the interests of their inner-city customers?
I would also appreciate the Minister’s thoughts on how the objectives set out in the coalition agreement to
“protect consumers, particularly the most vulnerable”
and
“to promote more responsible corporate and consumer behaviour”
might be applied in the context of Nationwide’s actions. Specifically, I draw his attention to the commitment in the agreement to
“bring forward measures to enhance customer service in the private and public sectors”.
Unless Nationwide accepts that it is making a serious mistake and agrees to consult its customers further on options to maintain access to some branches in the area, it will stand accused of walking away from the inner city, from its history, and from social and economic responsibility. It will be a sad epitaph to the long, proud history of mutuality in the financial sector.
Heidi Alexander (Lewisham East) (Lab)
I congratulate my right hon. Friend the Member for Greenwich and Woolwich (Mr Raynsford) on securing this debate. When I first learned about Nationwide’s proposals to close two branches in my constituency, I admit to giving it the benefit of the doubt. Rather naively, I thought that, like many other companies, it was going through difficult times and needed to reduce its overheads. I assumed wrongly that the closures would be a small part of a national rationalisation of branches and that the building society’s customers in south-east London would be treated no differently from anyone else. How wrong I was.
My initial generosity of spirit turned to complete disbelief when I discovered, as my right hon. Friend said, that out of a total of 700 branches across the country, there are 13 closures, seven of which are in south-east London. Two of those branches, in Catford and Blackheath, are in my constituency and two others, in Lewisham and Greenwich, are located within easy walking distance of many of those whom I represent. Hundreds if not thousands of my constituents rely on those branches to do their banking. My constituents may not be buying lots of insurance or putting thousands of pounds into individual savings accounts, but they use their local building society branch to do the sorts of things that people all over the UK do—some to access their bank accounts, others to manage their mortgages.
Why is Nationwide closing a swathe of branches in south-east London? It seems to come down to what are known as transaction patterns. Basically, transaction patterns are not as profitable in south-east London as they are elsewhere. This means that Nationwide, regrettably, sees its customers with a south-east London postcode as something of a drag on its business. Basically, customers who live in south-east London do not make it enough money.
I am sorry to say that when my right hon. Friend the Member for Lewisham, Deptford (Joan Ruddock) and I met Nationwide’s group distribution director and suggested to him that Nationwide customers would simply take their business elsewhere, he did not convince me that he cared. In fact, I left the meeting wondering whether Nationwide would be quite glad to see the back of them. When we pressed him further on why so many branches were closing and why Nationwide was not retaining a central branch, say, in Lewisham, he suggested that demand would be so great for that one branch that it would just “topple over”—I think he referred to it as a “vortex effect”. We were left thinking that there are clearly enough customers wanting to use a branch in south-east London, yet Nationwide is still determined to press on with its closures.
It is tempting for me to rehearse the arguments that have already been made, but I will not because I know that time does not permit. Suffice to say that ours are not the parts of London where people have easy access to the internet at home, or where people want to do everything by telephone. There is a reason why I have 40 people coming into my advice surgery every fortnight. They want to speak to a human being, because it is easier and more convenient. I do not know why their building society will not give them that same opportunity, and I do not know why Nationwide is giving that opportunity to people living in leafier parts of south-east London but not to my constituents.
I wholeheartedly agree with the comments made by my right hon. Friend the Member for Greenwich and Woolwich, and I join him in urging the Minister to look carefully at this situation and to consider what, if anything, he can do to encourage Nationwide to reconsider its decision. It seems ironic that the UK’s biggest building society—which does, after all, call itself “Nationwide”—will have a high street presence only in those parts of the country where there are healthy profits to be made. I cannot help but think that it is nationwide except for those people on modest incomes and for those in my corner of south-east London.
Joan Ruddock (Lewisham, Deptford) (Lab)
I congratulate my right hon. Friend the Member for Greenwich and Woolwich (Mr Raynsford) on securing the debate. With the Minister’s indulgence, I am to be allowed to say a few words on behalf of my constituents. I want to give the last word to Stella, who wrote to me on her own behalf and on behalf of the 140-plus customers of the Lewisham branch of Nationwide who have signed her petition. She says:
“I am particularly concerned at the proposed closure of the branch in Lewisham High Street where I have been a customer for 33 years. The argument that the Nationwide gave me when I complained was that it was not a profitable branch and that they had to consider the needs of the millions of other members of the society. I don’t know how many of the 265,000 residents of Lewisham are members of the Nationwide but I can guess that several thousand of us have our mortgages and savings with them and there has been no consultation with us. Even more troubling is that the staff who work in the branches did not know that this was being proposed until the day before the letters announcing it arrived on members’ doormats.”
Stella goes on to talk about the advertisements for the Nationwide that encouraged people to “apply in branch”. She asks:
“How? When the nearest branches are a couple of bus rides away and I know that some disabled customers whom I met at the branch will find that a very real inconvenience. It does not seem to make business sense to close all the branches in the area as many local people will then close their accounts and transfer to other banks. When I suggested that they could have combined the three Lewisham branches into one larger branch the area manager replied that they could not find premises. They can’t have been looking very far as I was easily able to identify two eminently suitable premises at a short distance from their existing, well-used branch in Lewisham High Street. Previously I have been proud to say that I banked with the Nationwide as it combined efficiency with a strong ethical sense, safeguarding the principles of mutualism, but now it seems to have forgotten its roots and seems to be behaving as badly as the other banks and targeting people in poorer areas with an even poorer service.”
As my right hon. Friend has said, we have put all these points to the Nationwide, but we could not get a satisfactory answer. I wrote a letter to the chairman, whose reply demonstrated complete contempt for the Nationwide members in our area. The public have long been sickened by the behaviour of the bosses of the major banks in this country, but it is a very sad day indeed when our largest mutual shows the same disregard for its loyal customers.
The Financial Secretary to the Treasury (Mr Mark Hoban)
I congratulate the right hon. Member for Greenwich and Woolwich (Mr Raynsford) on securing a debate on this issue, and on the powerful way in which he raised the concerns of his constituents. The hon. Member for Lewisham East (Heidi Alexander) and the right hon. Member for Lewisham, Deptford (Joan Ruddock) echoed those concerns about the closure of the branches by the Nationwide building society. I recognise their concerns about the impact of the closures on south-east London. I raised similar concerns when I met Graham Beale, the chief executive of Nationwide, yesterday.
As I am sure right hon. and hon. Members will know, decisions on the opening and closing of branches and agencies are taken by the management team of each bank or building society on a commercial basis, and the Government do not intervene in those decisions. All banking service providers will need to balance customer interests, market competition and other commercial factors when considering their strategy. So, while the closures that we are discussing are a commercial decision for Nationwide, I would like to respond to right hon. and hon. Members’ concerns by setting out the Government’s commitments to improving customers’ experiences of dealing with financial services institutions more widely.
I also want to tackle the issue of access to financial services, especially among the most vulnerable groups in society. When I looked at the measures of financial exclusion in south-east London, I found that this was clearly a big issue for residents in all three constituencies. I shall set out how the Government are responding to support the financial mutuals and I will end with a few comments about increasing competition in the banking sector.
The coalition is committed to improving access to basic financial services, especially for those vulnerable to exclusion. The Government believe that banks and building societies should serve the economy and we are committed to improving access to banking and the transparency of financial products to consumers. We are therefore working actively to ensure that all consumers can access an appropriate mix of financial services.
We should bear in mind that bank or building society branches are not the only channels for accessing financial services; nor are they necessarily favoured by consumers on low incomes. For many people, the barriers will be significantly greater than simply having no local bank or building society branch to visit. Simply saying, as the right hon. Member for Greenwich and Woolwich did, that we should introduce a community reinvestment Act, as the US did, is not the solution given the differences in financial services between the UK and the US.
It is important to acknowledge the real progress that has been made on tackling financial exclusion in recent years. The most recent figures show that since 2002-03 the number of adults living in households without a transactional bank account has decreased from 3.5 million to just over 1.5 million in 2008-09. The unbanked now represent just 3% of the population. Banks have improved the provision of basic bank accounts for those who need them.
There remain a group of people who are unbanked. A recent review by the Financial Inclusion Taskforce found that the remaining unbanked are generally the poorest and most deprived people, and it recommended a number of minor changes to existing basic bank accounts to make them more accessible and easier for poorer households to use. It also highlighted the scale of the challenge of extending bank accounts to those who currently do not have them. As more people open bank accounts, we see the unbanked becoming concentrated in hard-to-reach, more deprived groups. We must think carefully about how to work closely with those groups to get people to open bank accounts and access the benefits that they bring.
We should not assume that simply because someone does not have a bank account, they have not previously held one. Six out of 10 unbanked people have previously held a bank account, but no longer hold one because it did not work for them: they might have been charged too much or perhaps it did not give them right amount of control over their finances. So we believe it is important to find solutions that go with the grain of how people run their lives. Many unbanked consumers express a preference for managing their finances in cash. They want direct control over their spending and can often feel that having a bank account takes that away from them.
We see an important role for the Post Office in promoting access to financial services. The Post Office has more branches than all of the retail banks put together, and an important part of the future sustainability of the Post Office will be the continued growth of revenue from financial services. The Government are also ambitious for all UK current accounts to be accessible through the post office network, making post offices the convenient place for people to access their cash.
The Government are working with banks, building societies, e-money service providers, bill payment organisations, retailers and post offices to pursue new ways to improve the opportunities for low-income households to make the most of their money. We should recognise that the model of banking is changing and that people are increasingly turning to prepayment cards or e-money as a way of controlling their finances or paying bills online. I believe we should encourage the development of safe and convenient new financial services, using those channels.
Let me now deal with mutuals. They are clearly seen by many people as more accessible to those who cannot, or do not want to, readily access banks. The coalition believes that a strong mutual sector should have the capability greatly to enrich British society. It is in the Government’s interest to do whatever they can to help the mutual sector prosper and grow, and it is in everyone’s interest to achieve that in a sustainable way.
Over the last few months, I have had the opportunity to start a meaningful dialogue with the mutual sector about its ambitions, what services it can offer and how it can overcome hurdles that have been holding it back. We recognise that one of the strengths of mutuals is that they do not have to pay dividends to their shareholders, but they do have an obligation to their members. They have to strike a balance between meeting their wider obligations to the communities in which they are based—the people they serve—and providing returns to their members through higher interest rates on savings or lower costs of borrowing. It is their ability to compete that ensures that they remain viable in the long term. Such considerations are at the heart of every decision made by building societies.
Clearly, there is an appetite for change in the way in which financial services operate, and mutuals stand well placed to respond. To achieve that, the Government are implementing a number of legislative reforms to help to create a more equal playing field in financial services, thus promoting diversity of ownership and a better challenge to the banks. The legislative reform order for industrial and provident societies and credit unions will be relaid before Parliament shortly, and will introduce many basic yet far-reaching reforms that will enable credit unions to modernise and grow and fill some of the gap that banks and building societies have chosen not to fill or been unable to fill. After the LRO comes into force, we will also take forward the implementation of the Co-operative and Community Benefit Societies and Credit Unions Act 2010, which will bring the industrial and provident societies’ name into the 21st century as co-operatives, and modernise the powers available to update the legislation in future.
We are also keen to ensure that we do as much as possible to reduce the costs faced by mutuals, so that they can spend more of their income on meeting the needs of members. We will lay an order shortly to give mutual societies the option to use electronic communications to engage with their members, rather than sending statutory information by hard copy, enabling them to reduce costs and invest more in their businesses.
Credit unions in particular have made great progress in recent years in bringing affordable financial services to people who would not otherwise be able to access them. We are providing additional support to such institutions, outside the regulatory and legislative process. Building on the financial inclusion growth fund, the Department for Work and Pensions will continue to support credit unions for four years through a new modernisation and expansion fund worth up to £73 million. The new fund will seek to extend access to basic, appropriate financial services to many more people on lower incomes, through modernising delivery and customer support systems so that credit unions can become financially sustainable. We also see real opportunities for the post office network in building closer links with credit unions. In future, the Government want to see credit unions—in partnership with the post office—providing more services, more efficiently, to more people, and through the Department for Work and Pensions we are looking at the most feasible ways to make that happen.
On competition, through supporting the development and sustainability of financial mutuals, whether building societies or credit unions, the Government seek to address concerns that there is too little competition in the retail banking sector. Furthermore, the Government have established the Independent Commission on Banking, to make recommendations on both structural and non-structural measures to change the current banking system, and promote stability and competition, to the benefit of both businesses and consumers. That will include looking at the issue of consumer choice and considering measures to reduce market concentration. The commission will publish its interim report next month and a final report in September. The Government look forward to receiving its recommendations and will then decide on the best course of action.
I thank the right hon. Members for Greenwich and Woolwich and for Lewisham, Deptford, and the hon. Member for Lewisham East, for raising this important issue. I recognise the importance of access to financial services in south-east London. Clearly, more work needs to be done to encourage access and ensure the right provision of services to people in their constituencies. I hope they can see that the Government are committed to ensuring that everyone, not just in their constituencies but across the country, can access financial services so that they can play a full role in society.
Question put and agreed to.