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Seema Malhotra (Feltham and Heston) (Lab/Co-op)
I beg to move,
That this House has considered financial exclusion and the future of access to cash.
It is an honour to serve under your chairship, Sir Henry. I thank the Backbench Business Committee for granting our request to hold the debate. I also thank the Access to Cash Review panel, Joe Fortune from the Co-op party, the RSA, Responsible Finance, Hounslow Council, UK Finance, the Payment Systems Regulator, the Treasury Committee Clerks, Visa, Mastercard, the Financial Inclusion Commission, Citizens Advice, the Money Advice Service, Age UK and many others for their help in preparing for the debate. I mention them as an indication of how widespread the concern is and how much of a contribution many stakeholders are making. I also declare an interest as a recent nominee to become a new commissioner on the Financial Inclusion Commission.
There is considerable interest in the debate, so I will try to keep my remarks to about 15 or 16 minutes. I will set out some of the context; where progress is being made, which we should recognise; opportunities that we should seize, including a particular mention for credit unions; and the importance of joining up to move forward together. I will also cover the potential for and importance of future legislation, which the Government have so far resisted and I am sure the Minister will mention.
As the map of stakeholders shows, access to cash is an important and complex issue that can no longer be primarily led by industry. We need a joined-up plan led by the Government that looks at the cost and effectiveness of our wholesale cash infrastructure, programmes for digital inclusion and incentives to diversify services based on complex customer needs. We need to ensure that those services can reach people, and that we both maintain free access to cash for those who need or choose cash as their method of payment and ensure that cash remains accepted.
There is clear cross-party interest, which the Chair of the Treasury Committee referred to in her recent correspondence with the Chancellor. That gives me hope and confidence that we are setting the right foundations for moving forward and addressing the challenges ahead.
Fundamentally, the bigger picture is inclusive economic growth and flexibility, security and choice in personal and family finance. Cuts to welfare, stagnant wages and economic instability in the last decade have exacerbated the precarious position of millions of people in the UK. The Money Advice Service estimates that 22% of UK adults have less than £100 in savings, which makes them highly vulnerable to a financial shock such as job loss or an unexpected bill. Some 8 million people rely on high-cost credit to pay essential household expenses, and may frequently turn to alternative forms of finance such as high-cost lenders or illegal loan sharks to make ends meet. Recent Financial Conduct Authority data shows that the number of high-cost short-term credit firms has decreased, but the volume of lending has increased.
Ten years ago, six in 10 transactions were made in cash, but by March 2019, that number had halved to three in 10. The combined number of banks and building societies is falling steadily, and in 2018, the number of free-to-use ATMs fell for the first time in 20 years.
Mr Gregory Campbell (East Londonderry) (DUP)
I congratulate the hon. Lady on securing the debate. The issue of free-to-use ATMs is particularly acute in rural areas, and especially among elderly and more vulnerable communities, which should be at the forefront of the debate.
Seema Malhotra
The hon. Gentleman puts on the record an important and well-made point, which I will address later.
Jim McMahon (Oldham West and Royton) (Lab/Co-op)
I, too, congratulate my hon. Friend on securing the debate. Does she agree that when banks, such as the Yorkshire Bank in Royton, close with an agreement to relocate a cash machine in a convenience store, the agreement must be that it will remain free to use? In Royton, just a year into that agreement, a charge has been introduced.
Seema Malhotra
My hon. Friend makes an important point about the situation in his constituency, and that is why regulation is increasingly important. In future, the issue will be maintaining not just access to cash but free access to cash.
There has been a renewed focus on the issue of the last bank standing in a community. As Sian Williams of Toynbee Hall pointed out, however, when we get to that point, it is often too late. There is an urgent need to join up, particularly in areas that are more likely to be left behind. Financial institutions have not tended to talk to one another, so towns and communities have been left with piecemeal and inaccessible financial services.
The change has not been orderly. In the RSA’s excellent report published earlier this year, “Cashing Out: The hidden costs and consequences of moving to a cashless society”, the situation is described as a “disorderly dash from cash” with
“a misalignment of incentives between individual banking institutions seeking to shed their costly physical infrastructure…and the needs of…thousands of communities that remain reliant”
on what, for them, are essential financial services. The report finds that substantial numbers of people rely wholly on cash and that access to bank branches is about not just the older generation but the younger generation, small and medium-sized enterprises and increasing numbers of self-employed people, who all have an important stake in the debate.
This year, the Access to Cash Review’s significant report found that 17% of Brits say that they would not cope without cash. As has been said, they are the most vulnerable people, such as the disabled, the poorest and the elderly, who are unlikely to be early adopters of contactless technology. Figures from the Financial Inclusion Commission suggest that they are also more likely to be among the approximately 700,000 people in the UK who want a bank account but, for various reasons, cannot open one.
There are significant regional, area-based and income-based disparities. More than 15% of people with an income under £10,000 rely completely on cash, in contrast with only 2.5% of those in the highest income bracket. People who have less access to cash are already subject to a poverty premium; they have been left behind by contactless and digital payment technologies and cannot shop around to get the best deals.
There are also difficulties for disabled people. Eleanor Southwood’s evidence to the Treasury Committee recounted how people who are blind or partially sighted can struggle to use a taxi driver’s touch screen PIN pad, and then often need to give away their PIN. It is important to think about the role of assistive technology in this space. As chair of the all-party parliamentary group for assistive technology, I understand the potentially transformative impact of accessible technology and why it needs to be part of the debate about how financial services move forward.
The gaps in broadband provision, including in rural communities, can make access to cashless payments more difficult. Indeed, broadband notspots are not confined to rural areas; an estimated 1,000 households in my constituency do not have access to decent-speed broadband. Hounslow Council’s work to help to end notspots is a key part of the jigsaw, which will take years to deal with.
The question is how we are going to respond to the drivers of such changes, including new technologies, lifestyles and uneven economic progress, and the consequences of the increasing cost of our nation’s wholesale cash infrastructure, alongside the need for better financial education and financial inclusion. I thank the hon. Member for Solihull (Julian Knight) for being here and for his work on the all-party parliamentary group on financial education for young people.
I will say a few words about supporting the cash infrastructure. We know that The Telegraph reported last year that there were about 123 cash deserts—postcode areas that do not have a single ATM in their geographical coverage—and there are more than that now. A further 116 areas have just a single ATM, 36 of which are fee-paying ATMs. The Association of Convenience Stores also highlights how convenience retailers and ATMs enable financial inclusion, but they are also under threat from high business rates bills and cuts to interchange fees.
In addition, research by the University of Bristol on the distribution of ATMs in that city has found that the provision of cash is almost opposite to the geographical need for it. Lower-income communities are poorly served by current cash infrastructure. ATMs are changing from free to fee-charging, with deprived areas disproportionately hit. Of the 16 ATMs in Bristol that changed from free to fee-charging between October 2018 and March 2019, 11 were located in deprived areas.
Holly Lynch (Halifax) (Lab)
My hon. Friend is making a characteristically passionate speech. We have heard about the provision of cash machines in rural areas and in deprived areas, but does she agree that another consideration is the provision of cash in market towns? When the last bank closed in the small market town of Sowerby Bridge in my constituency, taking the cash machine with it, there was a detrimental impact on the market, and on its traders, who deal exclusively in cash. We really need to reflect on that problem as, I am sure, it is replicated all over the country.
Seema Malhotra
My hon. Friend makes an important point. I agree that this whole debate also needs to be part of a strategy for towns, which are often left out of how progress is made, how policy is implemented and who is the first to benefit when new resources are rolled out. The provision of financial services and ATMs is absolutely vital for ensuring economic progress and the viability of businesses.
Hugh Gaffney (Coatbridge, Chryston and Bellshill) (Lab)
The banks are closing down everywhere and are using the excuse that we can use post offices to access cash. Yesterday it was announced that 1,000 post offices are to go and more to follow. Sub-postmasters are not making the same money as the banks. That is now going to lead to a more cashless society. That, to me, is what the banks are heading for.
Seema Malhotra
My hon. Friend’s extremely important point is one I was about to go on to. We have seen this debate previously in relation to post offices, and have then seen post offices become an important part of the strategy for maintaining access to cash—Mastercard and others are also working with them. Research from the Post Office shows that about 44% of small businesses believe that the convenience of cash is essential to their business, and also that they use post offices. Yet, alongside this debate, we see these warnings, and alongside the challenges that the post office network faces, deprived and rural communities will have even poorer access to cash.
Ruth George (High Peak) (Lab)
My hon. Friend is making an excellent speech. Does she agree that the change in the post office contracts, particularly in the local and local plus contracts, meaning that post offices get only £12 for handling £1,000 of cash, is driving down the provision of post offices in rural communities and towns in particular?
Seema Malhotra
My hon. Friend is absolutely right. Post offices in my constituency have raised similar concerns.
Charlie Elphicke (Dover) (Con)
I congratulate the hon. Lady on securing the debate. Should we also not look at what I see as the opportunities to improve the situation, including the opportunity to ensure more free cash machines supported by the banking system, which I hope the Treasury will take on? There is also an opportunity to require retail businesses to accept cash. The other day I walked into a Vodafone shop and they said that they did not accept cash—they had gone completely cashless. I thought, “What about vulnerable people? What can we do for vulnerable people?” Does the hon. Lady not agree that it is really important to do that as well, and to maximise the opportunity for the post office network to ensure that vulnerable people can still access cash and financial services in their often rural communities?
Seema Malhotra
The hon. Gentleman makes an important point. Indeed, he has made similar important contributions in his work on the Treasury Committee. He talks about the acceptance of cash needing to be part of the debate, and I know that other hon. Members will be speaking on that issue later. It is an important part of the jigsaw.
I want to make a few points about our policy response and about how we need to move forward. The report from the Access to Cash Review made five broad and important recommendations: to guarantee access to cash, to ensure that cash continues to be widely accepted, to create a more resilient wholesale cash infrastructure, to make digital payments an option for everyone and to ensure joined-up regulation of cash. Within that, there are important roles for national and local government, banks, regulators, FinTech, building societies, payment systems operators and others. I also want to mention credit unions and their role, and I hope that the Minister will be able to respond to this important issue, as we plan for the next decade and beyond.
There are 1.9 million members saving £2.4 billion in the UK’s 500 credit unions. Credit unions are financial co-operatives and are therefore member-owned and democratically run. They have huge potential to play much more of a role, but that will need support and Government leadership. The Treasury Committee recently raised concerns about credit unions either going bust or having to consolidate to survive, and there is an urgent need to consider how we better support them. I want to make a few suggestions about how we can support the expansion of the UK credit union sector. A response from the Minister today on that would be helpful, and perhaps we can continue the discussion after this debate, which is only an hour and a half long.
The first suggestion is to appoint a Minister for credit unions [Interruption.] Yes, but I hope that the Minister has a cross-cutting responsibility and is committed to placing credit unions at the centre of retail financial services to ensure more competition and choice in banking. The Minister will know that the Treasury is responsible for credit union legislation and that other Departments also have an important stake, especially the Department for Work and Pensions and the Cabinet Office. I hope he can discuss how, in his role, he will continue to join up that work across Government and where we might see faster progress.
The second suggestion is that all workers be given the right to save in a credit union directly from their pay. Some 39% of the population have no savings, and to counter that we believe that all employees should be given the right to save directly in a credit union, by payroll deduction and at no cost to them.
Thirdly, all schoolchildren ought to be given the right to join a credit union school savings club. Good savings habits for life should be encouraged at an early age. All policies in this area should reference credit unions as able to take such deposits, in the same way as banks and building societies can.
Fourthly, early changes should be introduced in the new legislative programme, to take the opportunity to build on the pre-election Treasury consultation on credit unions and dismantle obstacles that prevent the transformation of the UK credit union movement into a player with the significance of its international peers. Elsewhere, although there are market differences, credit unions are significant players: in Ireland 73% of the population are members of credit unions and in North America the figure is 43%.
I am pleased that, following the publication of the Access to Cash Review report, there were moves to respond to it very quickly. The Bank of England announced that it would convene relevant stakeholders to design a new system for distributing cash on the basis of the concerns that had been identified. The Treasury Committee took evidence and produced an important report on consumers’ access to financial services, which was published last week. The Treasury announced that it was commencing a new joint authorities cash-strategy group, involving the Treasury itself, the Payment Systems Regulator, the Financial Conduct Authority and the Bank of England. There will indeed be much work for the new body to do.
I would be grateful if in his response the Minister updated Members on strategy formulation, and how the work of the group will operate alongside the work being done by the Bank of England. There needs to be more joined-up working, rather than silos, overlap and duplication. I would also be grateful if he told us what progress he expects to be made by the autumn, when I understand the Access to Cash Review panel plans to meet and review its progress; which consumer bodies will be involved in the development of the strategy, particularly co-operative institutions; and how the group will respond to the individual recommendations made by the Access to Cash Review panel.
We face unique challenges in the modern world, and we need to make sure that both Parliament and the Government are responding to those challenges. Access to cash is not a problem that is unique to the United Kingdom, and neither is the need for robust legislation—as and when necessary—and regulation to ensure it. The Swedish legislature was recently forced to create a cross-party commission on access to cash, due to a public outcry after hospitals announced that they would no longer accept cash payments. Swedish bodies and representatives repeatedly told the Access to Cash Review that we needed to act now, as it is much harder to re-establish cash infrastructure than to preserve it.
Local authorities are an important part of this jigsaw and of our response. My local council in Hounslow, led by Steve Curran and Lily Bath, is taking steps towards financial inclusion, which is vital as local authorities are at the forefront of helping local citizens deal with a lot of changes. Those changes have come through welfare reforms, but also from the housing crisis that we face—a number of people are in temporary accommodation, and may have been waiting for a long time—and are affecting people’s access to services in many ways, as well as their resilience.
I am pleased that there are more innovations in communication and that better research into segmentation is under way, including understanding the financial capabilities of council tenants. A higher than expected number of those tenants do not have bank accounts into which payments can be made, whether welfare or other payments. That is why it is important that we all, including local authorities, revisit the idea of closer working with credit unions. Given the importance of this work, Parliament and Government must act to promote the role of local government in making sure that we preserve access to cash and financial services.
To conclude, joining up how we move forward together is increasingly important, because of the complex map of the stakeholders involved. We are not going to get multiple chances at this; change is going to take time, and it has to be done right. It has to be done with the right research, the right underpinning and the right policy frameworks, with confidence, and with the message that if all those involved in financial services who have a stake and a role, including banks and those involved in cash infrastructure, do not play their part effectively, there will be regulation and legislation. We also need considerable programmes for digital inclusion, and incentives to diversify services within the industry. We need to make sure that those services continue to reach the people who need them and that cash continues to be accepted.
I also hope that we can have a discussion about how this issue forms part of wider economic strategies, including industrial strategy. Labour has talked about regional banks providing an opportunity to ensure financial inclusion; there are examples from abroad that we can learn from, including the Sparkassen, and the Mann Deshi bank in India—I have been looking at whether we can do some reverse learning from that bank in my constituency. Mobile technology, which some of our financial services have already begun to use, has been vital in supporting women, particularly in rural areas—to set up their own businesses and manage their household finances.
I thank organisations such as City Pay it Forward that make an important contribution to increasing financial education in our schools; as I mentioned before, I consider that to be extremely important. Our new local charity, Hounslow’s Promise, is working to make sure that we have financial understanding and financial literacy, which are vital to ensuring that people can take advantage of new services that are on offer.
Sir Henry Bellingham (in the Chair)
I thank the hon. Lady for her knowledgeable, detailed and excellent speech. We are going to have to introduce a voluntary time limit of three minutes, which I ask right hon. and hon. colleagues to try to stick to.
Kirstene Hair (Angus) (Con)
It is a pleasure to serve under your chairmanship, Sir Henry, and I thank the hon. Member for Feltham and Heston (Seema Malhotra) for bringing this important debate to the House. This issue has been debated many times, and I see many familiar faces in the Chamber today.
We are moving towards a cashless society far too fast, and a number of our constituents are simply not ready. As the chair of the Access to Cash Review stated:
“If we sleepwalk into a cashless society, millions will be left behind.”
Between 2015 and 2017, I have lost 12 banks in my constituency. Since I was elected, I have lost the Royal Bank of Scotland, the Bank of Scotland, the Clydesdale Bank and Santander, and my TSB branch has reduced its hours. That acceleration is concerning, and we cannot continue to sit back and let it happen.
In the short amount of time I have, I will raise three issues. First, rural areas are suffering most, because when those areas lose a branch, their communities cannot simply adapt. They have poorer transport links to get them to the next branch; they have poorer connectivity in terms of digital options; they are scared of using phone banking, and sometimes do not have the mobile signal that they require; and they have fewer cash machines. Quite simply, those communities are an easy target for our banks. Like many Members present, I have a higher number of older people—those over 65—living in my constituency, and those people rely heavily on that banking provision. Some 20% of the population lives in rural areas, yet only 12% of bank branches are in those areas. Banks exist to serve all consumers, but what we are seeing is banks serving urban consumers, with rural consumers losing out.
Time and again, the banks say that the solution is digitisation. However, in Angus, only 83% are covered by superfast broadband, so they immediately alienate the other 17%. We have lost a number of post office branches, and—as has already been mentioned—for viability reasons, that is not going to pick up. Quite frankly, the numbers do not stack up. Post offices do not provide the same service: many services are missing, and we do not have privacy in our post offices. As we all know, when we go in to post our letters or a parcel, we are often waiting in queues. It is not particularly private, and often this is taking place in a small shop as well.
There is a whole host of issues; I do not have enough time to cover them all in three minutes, but one obvious issue is access to cash. We cannot continue to suggest that everybody is turning to digital, because we have small shops; my high streets are struggling, and we need to ensure that they have access so that they are not penalised every time somebody makes a card payment. We need that continued access to be able to secure the future of our high streets.
My final point, which I have made to the Minister several times, is that we must look towards banking hubs. We have to look at alternatives to ensure our consumers continue to have choice.
Gareth Thomas (Harrow West) (Lab/Co-op)
I congratulate my hon. Friend the Member for Feltham and Heston (Seema Malhotra) on securing this debate. I will echo one of her points, and then throw in two other issues.
First, credit unions represent a potential solution to financial exclusion, but they suffer from regulatory handicaps at the moment: they cannot offer a series of products that are clearly in demand, including car lending, insurance and credit card services, and they often cannot offer services to small businesses. It would be helpful to hear from the Minister what action the Government will take to sort out the problems in this area, which I know he is familiar with. Credit unions have been lobbying for some time for legislative changes, and to get a more sympathetic regulator. From what I can see, nobody on the FCA board has any credit union experience whatever. There was someone in the past, but there does not seem to be anyone with any awareness of credit unions, and that may explain why the FCA has interpreted the Credit Union Act 1979 in a particularly restrictive way to date.
We have to accept that there is a significant market failure in the provision of financial services, but we should also accept that the big banks still have a responsibility to help tackle the problem. They should be held to account for who they are lending to and in which districts. In that sense, they should support a campaign that the Centre for Responsible Credit is particularly vociferous in. It demands that banks publish what they lend down to postcode level in an anonymous way. Through that, we could track the areas that are genuinely being supported by the bigger players in the financial services industry and the areas with a need for charitable activity or more support for credit unions.
Lastly, if someone is looking for financial services products in media and advertising terms, they are deluged with services offered by the big banks or the payday lenders. Credit unions and other charitable and not-for-profit lenders are not given anything like the same attention. There needs to be a significant effort by Government at all levels to promote alternative sources of lending, with a particular focus on credit unions.
Lee Rowley (North East Derbyshire) (Con)
It is a pleasure to serve under your chairmanship, Sir Henry. I draw attention to my declaration in the Register of Members’ Financial Interests. I am also the chair or vice-chair of various all-party parliamentary groups that are pertinent to this debate and discussion. I congratulate the hon. Member for Feltham and Heston (Seema Malhotra) on securing this debate on a hugely important issue that needs greater consideration than it has had in this place. The issue affects us all, as we have outlined already, and I am sure Members will continue to do so.
In my part of the world, our local newspaper the Derbyshire Times reported only last week that the number of ATMs available in my constituency has reduced by 20% over the past couple of years, from 137 to 111. We have had the usual bank branch closures and changes. We lost another branch in Dronfield just a few months ago. That was the Royal Bank of Scotland. We have lost our Lloyds branch in Clay Cross, and we continue to see reductions in ATMs and the like.
We have to deal with those challenges, however, rather than just moaning about them. There is a conundrum in front of us. People’s habits are changing, as is how people want to bank. The numbers of people going into bank branches and using cash are decreasing. Cash is now being used in three in 10 transactions—10 years ago, it was six in 10—and that number will reduce further. We have to find a way to balance the challenges that have been rightly articulated by Members this morning with recognising that we cannot and will not stop progress.
We also have to recognise that there is a cost to the provision of cash. That cost may not be obvious to consumers, but it is built into the infrastructure and the costs of financial services already. Essentially, we are dealing with a classic long-tail problem. We have early adopters. The majority of the market and a majority of consumers can deal with this issue and are happy to do so, but we rightly identify a group of vulnerable people and customers who we need to ensure are supported. Those consumers live in my constituency, as they do in everyone else’s.
In the brief time I have available, I will make a couple of points and a couple of suggestions for things to consider or where it might be useful for the debate to go next. We should be careful about explicit legislation, but I agree that there may be a case for it in certain places. We should celebrate, as the hon. Lady outlined, alternative forms of saving and lending, such as credit unions, which I am personally very supportive of. If there is an argument for legislating, it may be around equalising the premium in accessing cash and the poverty premium that goes on top for vulnerable people in accessing various things. We should foster competition and celebrate those institutions and building societies, such as Metro Bank, that are expanding their networks. We should also look at how we expand the number of bank accounts available for people.
Yvonne Fovargue (Makerfield) (Lab)
It is a pleasure to serve under your chairmanship, Sir Henry. I congratulate my hon. Friend the Member for Feltham and Heston (Seema Malhotra) on securing this debate. It might seem counter-intuitive to suggest that access to cash is vital for financial inclusion, because everyone says the future is in FinTech, but my local authority did a survey two years ago to see how many people in Wigan use the internet regularly, and it found that 30% have never even accessed the internet. That is below the national average. Many who do not access the internet are on lower than average incomes or are disabled or old. Some 93% of those over 80 have never used internet banking, and we need to think about those people when we promote digital by default. It does not have be online and cashless.
Clearly those without internet access cannot bank online, but with the pace of bank closures, neither are they able to do it face to face. Not only are the physical branches going, but the ATMs are going, too. In Wigan, we lost one in nine cash machines in less than two years. Yes, that is the cashless society, but many prefer to use cash, particularly those on low incomes. If their income is tight, they need to be able to check every penny that passes through their hands, and cash is a tangible asset. People cannot go overdrawn with the money in their purse.
It is not just a few people who say it is important to have that access. A survey of more than 1,200 Which? members found four in five saying that access to the free-to-use network was important to their daily lives and for paying for goods and services. It found that removing free-to-use access would leave one in 10 struggling to make payments. We therefore have to question the closure of so many ATMs and bank branches. As the hon. Member for Angus (Kirstene Hair) said, we also need to ensure that shops and businesses remain cash-friendly and customers are not forced into paying by card.
There are many issues with paying by card. People do not always trust online transactions, and I congratulate the TSB on its fraud repay scheme, which creates more trust in financial services. Access to banking and financial services is at the heart of the inclusion and exclusion debate. We need to be careful not to be drawn into saying that FinTech will be a universal panacea. It is vital that consumers have the freedom to pay for goods and services however they choose. If we sleepwalk into becoming a cashless society, it will have grave consequences for our most vulnerable people. I am not anti-technology; we need to encourage people to face the future and to embrace the advantages of technology, but we should not run before we can walk. For the foreseeable future, cash and digital have to exist side by side and as complementary tools in increasing inclusion and improving people’s lives.
Bim Afolami (Hitchin and Harpenden) (Con)
I thank the hon. Member for Feltham and Heston (Seema Malhotra) for bringing this debate forward. I speak as chair of the APPG on credit unions and as a fellow member of the Financial Inclusion Commission. When I first came to this place two years ago, I visited a credit union just outside my constituency that serves several of my constituents. A lady there said something very important to me. She said, “Bim, it is very expensive to be poor.” I really thought about that, and everything I have seen in the past couple of years has confirmed my sense of the facts. We have already heard that 39% of people have no savings. When people have very little cash—or, should I say, money, resources, or assets—it can often cost them so much to do things and to borrow money. They can quickly fall beneath the waterline. That is one reason why credit unions are so important, and I echo the things that have already been said about promoting credit unions.
Financial education has not particularly come up in the debate. I lose track of the number of times that people have said over the past five, 10 or 15 years, “We need to promote financial education in schools. People need to learn better habits. They need to be able to manage their money more effectively. They need to understand how mortgages work, how credit cards work, what annual percentage rate is and what interest is”, yet we never do anything. Will the Minister respond to that in his remarks? I know he is not the Education Secretary—at least, not yet.
Bim Afolami
That is good. I hope that the Minister will tell us what work he can do across Government to champion financial education, which we all agree needs to be improved significantly.
The Minister wrote to me on 20 February about things that the Government were doing to promote affordable lending and credit unions, and about the affordable credit challenge fund, a no-interest loan scheme. Those are all very good things, but I simply say to him: we want more. There is a need for legislative change to allow all types of credit to be provided by credit unions. If he pushed that through Government, he would be a hero not only on the Government’s side of the House but on the Opposition’s side as well.
The last thing I will say about the cashless society is this: I was on a trip to China a year or so ago and I was in a city called Wuhan, a long way away from Beijing, and I could not use cash. Things are moving very fast. I could not use cash. We need to enable people to adapt to the new society and not try to hold back the tide. The Government need to help people achieve that.
Jamie Stone (Caithness, Sutherland and Easter Ross) (LD)
It is a pleasure to serve under your chairmanship, Sir Henry.
In my home town we have an excellent fish man called Steve who comes all the way from Buckie to flog his fish, and his smoked haddock is to die for. Steve is also a political sage. When he predicts that an MP will lose their seat, he is usually right, so I am very careful of him. Steve takes cash for his fish. You could no more present your mobile or your card to pay by contactless than fly to the moon. For many years, having ready cash in one’s purse, wallet or pocket has been fundamental to a civilised society. If we do not have it, we might as well go back, at least where I live, to bartering and swapping a salmon for a bag of peats or something like that.
With the best will in the world, we cannot go entirely digital or contactless in a constituency such as mine. As the hon. Member for Angus (Kirstene Hair) has said, there are many areas where the iPhone and iPad simply do not work. In the case of my own Bank of Scotland card, it is already playing up, so it does not always get money out of a hole in the wall or work when I go contactless.
In my constituency we already have precious few ATMs. There has been talk of safeguarding them, but that is time limited. If a retail premises with a cash machine shuts, the shop goes, the cash machine goes, and no safeguard in the world can stop that happening.
Peter Aldous
The hon. Gentleman makes a very good point. His constituency is similar to mine. Does he agree that 24/7 access to cash is important in market towns? Certainly I note a postcode lottery developing in my area.
Jamie Stone
That is absolutely correct. I compliment the hon. Gentleman on his very good point.
There is a nasty parallel, as other Members have said, between the closure of ATMs and the closure of bank branches. In just a short time—can you believe this, Sir Henry?—we will have only one bank branch in the whole huge county of Sutherland, which is 2,028 square miles. Imagine what that means for my constituents. There are, however, already examples of banks working together to form one-stop shops in southern conurbations in England. I call on the Government and the Scottish banks to do something similar for rural areas such as mine in Caithness, Sutherland and Easter Ross.
I must give due credit to the Minister. We had a constructive meeting care of the right hon. Member for Don Valley (Caroline Flint) the other day. I believe that the Minister is on to the issue and is working well towards sorting it out, so I wish him Godspeed. If we do not get it right at Government or bank level, it will be a fundamental failure and we will be letting down the poorer, as other Members have pointed out, and the elderly, who absolutely rely on having 24/7 access to cash.
Gerald Jones (Merthyr Tydfil and Rhymney) (Lab)
It is a pleasure to serve under your chairmanship, Sir Henry. I congratulate my hon. Friend the Member for Feltham and Heston (Seema Malhotra) on securing this debate on an important issue. I agree with her point that there is widespread concern across the country about access to cash. It is hugely important to us all. We all need cash to varying degrees for incidental purchases, giving children money for school, paying the milkman and so on. Access to cash is often, though not always, easier in cities and towns, but our country is also made up of lots of smaller towns, villages and communities.
There are 2.2 million people in the UK almost entirely reliant on cash in their daily lives. We know that the use of cash is in decline, but, as we have already heard, the UK is not ready to become a cashless society, and sleepwalking into one will leave millions, including many people in my constituency, behind.
The communities that I represent in Merthyr Tydfil and Rhymney are ranked in the Welsh index of multiple deprivation as some of the most deprived in the country. Deprivation is measured by a range of statistics, including health inequalities, educational attainment, income levels and access to services. In my constituency, some of the economically deprived areas are also geographically isolated communities, such as Bedlinog, Ponsticill, Fochriw, Butetown, Abertysswg, Pontlottyn, Phillipstown and Aberfan. Those communities have a strong community spirit and breathtaking views up or down the valley, but they are often isolated from services and support. The Access to Cash independent review established in July 2018 concluded that around 17% of the UK population would struggle to cope in a cashless society. I welcome the recommendations in the review to ensure that consumers can get cash wherever they live or work, and I look forward to the further work to consider the report’s findings.
In the south Wales valleys, as in many other parts of the country, we have seen banks closing, with a 38% reduction in the number of banks since 2010. In the Upper Rhymney Valley part of my constituency, the last bank closed in January. On the Merthyr Tydfil side, the only banks that remain are in the town centre, leaving huge parts of the county borough without access to bank facilities. There are ATMs throughout the area, but many impose a charge for residents to withdraw their cash. As an example, Aberfan has three ATMs that all require a fee to be charged, and Bedlinog has two machines that are both chargeable.
Along with my Welsh Assembly colleague, Dawn Bowden, I am currently working with the company LINK to identify communities that have little or no access to free-to-use cash machines. We hope that shop owners will convert to free-to-use machines. As we know, subsidies are available for cash machines located in deprived areas, with the first ATM to convert to free usage receiving the subsidy.
Geographically isolated communities often experience issues with digital inclusion because the broadband is not as strong as it is in other areas. The report and the attention that it has received is welcome. However, it must be part of an ongoing awareness campaign to ensure that we move at a pace that does not leave communities behind.
David Linden (Glasgow East) (SNP)
I congratulate the hon. Member for Feltham and Heston (Seema Malhotra) on securing the debate. In my constituency we are fighting two bank branch closures: Santander at Parkhead Forge, and, just recently and most unhelpfully, the Clydesdale Bank, which has announced that it plans to shut the Shettleston Road branch. The Government and the banks would say that the post office network can provide support, but there is a flaw in that argument when we look at the Tollcross post office in my constituency, which has had a temporary closure for two years now. I leave that point with the Minister. We are due to meet tomorrow to discuss it a bit further.
One thing that has most angered me has been that Santander and the Clydesdale Bank both proposed to remove the ATMs as well. Santander had the absolute barefaced cheek to contact me to say, “This is a very well-used ATM machine. Can you help us find someone else to take it on?”, which is laughable. However, ATMs are hugely important to a local economy, and any moves to remove them from the high street or to add charges to them has an impact on people from low-income areas such as my own. In Cranhill and Sandyhills we already see ATMs that now have a charge, which we are taking up with the ATM providers.
Some Members have already touched on the issue of credit unions. Before I entered politics I worked in a credit union, and only last month I chaired the summit of a lot of Glasgow’s credit unions. It is no secret that in Glasgow we have had two credit unions go bust recently: most recently, Parkhead Credit Union. It is all well and good for us in this place to talk about the importance of credit unions, and I would absolutely encourage people to join a credit union. I should at this juncture declare an interest as a shareholder in Cranhill and Baillieston credit unions. There are, as I am sure the Minister knows, issues relating to capital ratios and the governance of credit unions. More often than not when I visit my local credit unions, most of the members of the board are well over retirement age, so if we are talking about the sustainability of credit unions, we need to look at that as well.
The hon. Member for Hitchin and Harpenden (Bim Afolami) touched on the important issue of financial education. He is absolutely right to point out that it is an issue we have spoken about for a long time. If I reflect on my own experiences, it was only in my late teens that I started to really understand budgeting and the importance of financial education. I very much commend Christians Against Poverty, which does really good work supporting people with budgeting. If we are serious about ensuring that young folk make informed decisions about their finances, we need to teach them about such things as APR the importance of ethical lending. One way of doing that is through credit unions. What discussions has the Minister had with Education Ministries across the UK to ensure that we put pressure on Governments across these islands to invest in financial education?
This has been a good debate, and there is clearly an appetite for lots more debate. I hope that the Minister will take the points raised on board.
Martin Whitfield (East Lothian) (Lab)
It is a pleasure to serve under your chairmanship, Sir Henry. I congratulate my hon. Friend the Member for Feltham and Heston (Seema Malhotra) on securing the debate, and the Backbench Business Committee on facilitating it.
The banking situation has changed substantially over the past 20 years. Indeed, some of the traditional banks would say that the playing field is unfair as it stands. New incomers do not have the fixed asset responsibility of our traditional banks, yet they pick up none of the responsibility for the financial exclusion towards which we are seemingly heading. Work is needed to ensure that all those that benefit as new emergent banks are responsible for the traditional side of banking, which forms such an important part of our communities, particularly our high streets.
Scotland has suffered more bank closures than many areas. Over the last eight years, the number of branches has fallen from 1,625 to 1,015. Indeed, more than 400 have closed since just 2015. In East Lothian, virtually all our towns—Tranent, Prestonpans, Gullane, North Berwick and Dunbar—have suffered bank closures and changes to ATMs and branch opening hours.
We have heard about many important things, including credit unions and education, which has thankfully opened the space for the use of hubs, to which the hon. Member for Angus (Kirstene Hair) referred. The Royal Bank of Scotland, Lloyds and Barclays have started business hubs in England. Companies that have large amounts of cash to deposit and want to transact business can go into such hubs and deal with them, irrespective of which bank is theirs.
Similarly, in Edinburgh and Glasgow an entrepreneurs’ hub has been formed, orientated towards new businesses. That model will work on our high streets. The challenge for banks is that, in essence, two separate software systems are operated. However, that can surely be overcome. The advantage of a hub, shared by branches, is that when someone goes in they are dealing with their bank. The challenge facing post offices is that often the employees on the other side of the counter, employed by the Post Office, do not have the banking experience or knowledge to deal with sometimes significant problems, and it is basically unfair to expect it of them.
Through legislation and Government and local authority work, the facilitation of hubs would allow people to continue to deal with their bank. The asset cost would be shared, and it would keep footfall on our high streets so that there is cash for our markets and for people who want to deal in it. Problems will be solved, and hopefully banking on our high streets will have a future.
Jim Shannon (Strangford) (DUP)
I, too, congratulate the hon. Member for Feltham and Heston (Seema Malhotra) on introducing the debate and setting the scene. Building a relationship with staff enables trust to be built, and with that comes a better working relationship. Although I am obviously of an older generation, I understand that it is a lot simpler for my staff to log on to online banking on their lunch and pay their credit card bill than to spend their entire lunch in the queue at the bank. That leads to better working relationships between employer and employees.
Notably, the bank is still busy: it is not failing or empty. There are always queues in my local branch, because its presence is necessary. There is a need for the ease that online provides, but there is an equal need for a bank on the high street to service people. That is the argument for retaining cash in our society. Technology is great for those who do not want to use cash, but not so great for those who cannot use that technology, as hon. Members have mentioned.
An estimated 17% of the UK population—more than 8 million adults—would struggle to cope in a cashless society. A decade ago, six out of 10 transactions were cash; now it is three in 10. On a number of occasions in my constituency there has been a glitch in the car parking payment system. Such glitches mean that issues with a 30p payment can lead to a £45 fine in the post that is impossible to query, as other payments are supposedly logged as successful. There is a fear among an older generation that if they cannot see or touch something, they cannot really have it.
I have also heard from several shop workers who have had to chase customers after their card payment did not go through due to connection errors. Those are things that happen every day, and are real issues with cashless options. They show that we are nowhere close to being able to do away with money. People want it all. For me, that does not mean that we should do away with cash; we should embrace all payment methods. I hear the banks crowing about how online banking is thriving, but sometimes signs tell us that we cannot lift money in a bank unless the cash machine is broken, or that there is a charge for paying a bill in the bank that can be paid for free online. Many such things annoy people, pushing them away from frontline banking and cash.
Hailing from a mixed urban and rural constituency, I fear that we are leaving behind too many isolated people, who cannot rely on technology and an internet connection. Some 60 bank branches and 250 ATMs across the UK close per month. The Countryside Alliance has suggested that the regulator take action to stop further closures of ATMs, that an access to banking protocol be introduced so that when a branch moves, customers are made aware of the banking services at the nearest post office, and that the Post Office and banks standardise the banking services over the post office counter.
The move towards a cashless society risks creating vulnerable customers and exacerbating financial exclusion among those who cannot access those services. We have a duty to ensure that both forms of payment and transaction are available. If that means Government intervention, I believe that that is what we must do.
Ruth George (High Peak) (Lab)
This is not a minor issue, particularly in constituencies such as mine with a large rural area and market towns. The LINK Access to Cash Review found that cash is an economic necessity for 25 million people, and that 8 million adults—17%—would struggle to cope in a cashless society. In my constituency, as in others that have been mentioned, banks, post offices and ATMs have closed, making it more difficult not just for ordinary people to go about their everyday lives and make transactions, but for market traders, those wishing to hold community events, and charities—[Interruption.] I hope that we can all recover from that cry for attention from the alarm system.
I was speaking about the problems faced by market traders and charities in holding events, fundraising and bring communities together. Such events rely on cash to make them happen. It is already becoming much harder, with insurance premiums and regulations governing them. That means that people are less and less able to hold such events to bring people together. A lack of cash also means that people in rural areas who need it feel that they have to take out larger sums when they travel to a town. That makes them more vulnerable to crime and to people seeking to prey on them. The Government have to be mindful of that.
Post offices are expected to pick up the pieces of access to cash, as well as the lack of banks. As I mentioned, post office contracts are extremely important. Sub-postmasters across my constituency on all different types of contract tell me that they are struggling, but particularly those on the local and the local plus contract. However, it is not possible to scrutinise those contracts and how the changes have affected the profitability of post offices. I urge the Minister to speak urgently to colleagues in the Department for Business, Energy and Industrial Strategy about that much-needed review.
Convenience stores must not be left to carry the load. As chair of the all-party parliamentary small shops group, that is certainly close to my heart. At the moment, 62% of convenience stores provide ATMs, almost three quarters of which are free to use. Interchange fees have been reduced twice already, resulting in cuts worth more than £1,000, split between the operator and the retailer. In spite of the delay in next year’s cut, ATM operators serving 73% of free-to-use ATMs not hosted by banks are now implementing or considering a decision to switch to pay-to-use machines. They are also penalised by business rates; I call on the Minister to look strongly at the fact that average ATM rates add £4,000 a year to the bills of a small retailer. That seems punitive, certainly for free-to-use ATMs at a time when we need to encourage them.
LINK says that we need
“a clear government policy on cash...market forces alone won’t make any of this happen.”
Besides looking for a joined-up policy on cash in rural areas, towns and hard-to-reach areas, I encourage the Minister to look at the review of the interchange fee and at enabling banking in all areas, reviewing post office contracts and profitability, and exempting free-to-use ATMs from business rates. If he wants some practical methods to look at, I hope that that gives him a start.
Sir Henry Bellingham (in the Chair)
Thank you for being so brief. I call Paul Sweeney.
Mr Paul Sweeney (Glasgow North East) (Lab/Co-op)
Thank you for calling me to speak, Sir Henry. I congratulate my hon. Friend the Member for Feltham and Heston (Seema Malhotra) on securing this critical debate at a time when our financial system is in flux. A decade ago, six of every 10 purchases were made in cash, but that figure has now halved and in a few years’ time it will be only one in 10, so there is a clear transition. Sometimes it catches me out; when I was in church a couple of weeks ago, I realised as the collection plate came round that I did not have any cash on me. The fear suddenly struck me that I would be humiliated in front of the congregation, so I am heartened to see that the Church of Scotland proposes to introduce cashless collection plates, which will save me that embarrassment in future. That is just one example of how the transition to a cashless society can catch us out suddenly and at the most unexpected moments, in a very public way.
The picture in my constituency is of a rapid removal of banking services. I represent one of the poorest constituencies in Scotland, which has seen a disproportionate decline in the number of bank branches and free-to-use ATMs. Indeed, one in five of Scotland’s 6,000 ATMs will soon be fee-charging, while ATMs are closing at a rate of one day. That significant decline is disproportionately affecting the poorest communities in Scotland, so it is critical that we address the issue.
Gavin Newlands (Paisley and Renfrewshire North) (SNP)
I raised that very point in the main Chamber just a few weeks ago. Ferguslie Park is the most deprived community in Scotland, yet it has two ATMs, which charge 95p and £1. That goes to show that LINK’s financial inclusion programme is not worth the paper that it is written on. I am still awaiting a reply from LINK after a month. Does the hon. Gentleman agree that its inclusion programme needs to be improved?
Mr Sweeney
I completely agree. My constituency, like the hon. Gentleman’s, has had a disproportionate number of closures. I commend and thank the Select Committee on Scottish Affairs, my hon. Friend the Member for Rutherglen and Hamilton West (Ged Killen), and the hon. Gentleman for their work on the issue. The LINK cut is critical, but we need legislative backing to safeguard provision. Many small businesses, including postmasters, are saying that they will not pay punitive business rates to maintain free cash access.
The discussions about credit unions are pertinent, and I commend the hon. Member for Glasgow East (David Linden) and my hon Friendfor Harrow West (Gareth Thomas) for speaking about their work on the issue. As a result of the closure of the Greater Milton and Possilpark credit union, 4,212 members have had that facility taken away. Santander is threatening to close and remove its ATM, just as in Parkhead. This is a critical issue, because banks do not feel any sort of obligation to maintain their provision. In America, Santander has a £1.9 billion community reinvestment fund because the American Government have forced it to do that in poorer communities, but there is no equivalent legislative obligation in the UK.
We need legislative teeth to back up the provision of banking services in our poorest communities. I urge the Minister to recognise that urgent need in our communities, particularly in Glasgow North East.
Sir Henry Bellingham (in the Chair)
We want to leave two minutes at the end of the debate for the hon. Member for Feltham and Heston (Seema Malhotra) to wind up, so if the Front-Bench spokespersons confine themselves to eight minutes each, I would be very grateful.
Patricia Gibson (North Ayrshire and Arran) (SNP)
I thank the hon. Member for Feltham and Heston (Seema Malhotra) for securing this important debate. As we have heard today, there are serious concerns that too many people, including some of the most vulnerable, are being left behind.
Every one of us needs a viable way of paying for goods and services that meets our needs and circumstances. For some people that may be card payments, but we need access to cash for goods and services if that is most appropriate to the way we live our lives and if it suits our circumstances. Digital payments have become easier, but research shows that more than 8 million adults would struggle to cope in a cashless society.
It is important to remember that many people pay for goods and services in cash because their circumstances mean that they do not have the option to pay in any other way. The biggest factor in paying for goods and services in cash is where someone is on the income scale: the lower someone is down the scale, the more likely they are to rely on cash transactions, regardless of their age. Importantly, approximately 9% of those who rely on cash transactions do so as a budgeting strategy because they fear that if they do not use cash, they may overspend and fall into debt. Using cash helps them to keep track of their spending.
There is no doubt that cash allows many people a degree of control that digital transactions do not offer, as we heard from the hon. Member for Strangford (Jim Shannon). They can hold it and count it—and when it is gone, it is gone. It is a real and physical aid to budgeting. Indeed, debt advice charities actively encourage people in debt to cut up their cards and deal only in cash, for obvious reasons. That goes back to the points that have been made about financial education.
We have heard much about the decline of ATMs, but that is merely the tip of quite a significant iceberg—it is a symptom of a wider trend. The underlying issue is that some businesses prefer payments to be made digitally, because of the costs of handling and banking cash; we heard today that Vodafone no longer accepts cash payments at all. We have also heard much about access to high street banks. In my constituency, North Ayrshire and Arran, the banks are stampeding out of our towns with alarming and eye-watering speed. In the past eight years, Scotland has lost one third of its banks, and closures continue apace, as the hon. Members for East Lothian (Martin Whitfield) and for Glasgow North East (Mr Sweeney) described.
Driving consumers towards digital payments clearly excludes those consumers who do not want—or simply do not have the option—to pay for goods digitally. If we want businesses to continue to accept cash, we have to make it easier for them to do so, and to bank and deposit it in a way that works for them. Post offices have been suggested as an alternative to banks, but post offices are in crisis. Many postmasters are finding their business increasingly unsustainable, and they often work for less than minimum wage—an issue that I raised with the Treasury and with Post Office Ltd almost two years ago.
For those who need to use cash, we must keep it viable. It is important to remember that 1.3 million people in the UK do not even have a bank account, for a whole variety of reasons. Problems with ATM access are both a cause and a symptom of a society that is moving closer to being cashless. That should give us cause for real concern.
Patricia Gibson
I am worried about time, so if the hon. Gentleman does not mind, I will press on.
Consumer organisation Which? has found that cashpoints disappeared at a rate of 488 per month between June and December last year, with more than 250 free-to-use cash machines closing monthly and 3,300 UK bank branches closing their doors since 2015. One in five cash machines in Scotland will impose charges by the end of this year. It is self-evident that charges for using ATMs hit those who are much less affluent much harder, because those people are more likely to make regular smaller withdrawals rather than occasional larger ones. Quite contrarily, pay-to-use cash machines are most often found in poorer areas—yet another poverty premium that punishes the less well-off.
It is clear that we need urgent regulatory action to protect the right of consumers to use cash. Otherwise, as the Minister will know, we will exclude many of our constituents from buying goods and services that they wish to access. I therefore fully support the Which? campaign “Freedom to pay. Our Way.”, which is supported by the Federation of Small Businesses. The campaign calls on the Government to appoint a regulator with sole responsibility for cash infrastructure, to ensure that consumers and businesses can continue to access cash. It should not be an uphill struggle for people to access the cash on which they rely, because it means that they struggle to go about their daily business.
The drift towards digital has not been without its problems, including IT glitches such as the high-profile problems suffered last year by TSB, which caused chaos for consumers. As the hon. Member for Feltham and Heston reminded us, aside from IT glitches, people living in rural areas can find digital access extremely problematic, with poor broadband reliability. Of the 5.3 million adults who never use the internet, 70%—some 3.7 million people—live in rural areas. They do not rely on cards and digital payments. We must not overlook the challenges of relying on digital payments for consumers and businesses in rural areas, as mentioned by the hon. Member for Caithness, Sutherland and Easter Ross (Jamie Stone).
It is essential that consumer interests are front and centre in this debate—the customer must be king. The way we bank and the way we pay for our goods and services must meet the needs of all customers, and banks and financial institutions must have a legal duty of care for their customers.
I hope the Minister will indicate the Government’s willingness to appoint a regulator with sole responsibility for the cash infrastructure, to ensure consumers and businesses can continue to access cash. I hope to hear what he will do to ensure a duty of care in all our communities so that they are not financially excluded and can access the goods and services that they need. It is clear from this debate that there is a financial exclusion crisis. I am sure we are all keen to hear what measures the Government will take and are willing to take to address the matter.
Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)
I thank you, Sir Henry, for giving me the opportunity to respond to the debate. I thank my hon. Friend the Member for Feltham and Heston (Seema Malhotra) for securing this debate on such an important issue. It is good to see such a significant turnout of colleagues. There has been a fair degree of consensus in what has been said.
As shadow City Minister, I spend a great deal of time thinking about how financial services can be changed to improve financial inclusion and how we can remove the poverty premium that we know exists in the UK and that so many Members have referenced. For me, it is impossible to build a fair society—the kind of society we all want—without guaranteeing a degree of access to basic financial services. It always confounds me that we are one of the most advanced global financial centres in the world, yet there are 1.6 million adults in the UK who remain unbanked, and thousands more who are denied access to the basic levels of credit that many of us take for granted.
When I look to the future, I see the challenge as making sure that we can use new technology to tackle financial inclusion, rather than compound the problem. Some new financial technology companies are doing brilliant work to break down historical barriers in banking, such as providing easier access to bank accounts or using rental payment data to help build up credit scores, but technology risks leaving people behind if we do not protect and equip them along the way. That has been evident in the trends surrounding the use of cash.
As many Members have said in the debate today, our use of cash as a nation is declining. According to figures from the British Retail Consortium, cash accounted for just 22% of retail transactions in 2017, which is an inevitable consequence of the rise in popularity of contactless and mobile payments, but there is a significant danger of sleepwalking into a cashless society without giving careful thought to what that will really mean. Some communities, especially vulnerable ones, are still reliant on cash and their ongoing access to cash must be protected. I unreservedly commit the Opposition to that position.
Some poorer families and individuals need cash to budget effectively, a point that was well made by my hon. Friend the Member for Makerfield (Yvonne Fovargue). There is no solution that compares with cash for people who are reliant on, for example, a carer to carry out tasks for them—it is quick and easy to see how much change there is when a carer has done the shopping for someone—and, of course, for the unbanked, cash is a lifeline without which participation in society would simply be impossible. It is up to us to carefully consider access to cash and to create a system that protects more vulnerable individuals.
Natalie Ceeney’s Access to Cash report, which was commissioned by Link and has been referenced quite a lot in the debate, outlined the situation we face and made some sound recommendations for consideration. The Chair of the Treasury Committee noted at the time that
“leaving the future of cash to be determined by market forces will not work.”
The Opposition certainly agree with that.
Establishing cash as a utility will be central to protecting consumer access. I have heard quite a lot of support for that in my initial conversations with the big UK banks, with ideas such as how they could share cash-centre facilities—the sort of back-office function that underpins much of the cash system.
Bank branch closures form a critical part of this debate. In the Opposition’s view, the reduction of the bank branch estate has been too severe. Under a Labour Government, there would be mandatory consultation on bank branch closures, given the negative impact they have on communities, which many Members have referenced. I am mindful that we have held quite a few Westminster Hall debates on this topic recently, and Members will have heard our views then, so I want to focus on the ATM estate.
We know that the number of ATMs has dropped significantly. There are complex factors at work that we must be mindful of. We should focus on protecting ATMs in communities that would end up being stranded long distances from free access to cash if they were to close. LINK’s offer to pay a subsidy on those machines of up to £2.75 is an important step towards preventing cash deserts from emerging.
In other places, especially city centres, we will ultimately see that there is an excess of cash machines. It is inevitable that there will be closures in areas of high concentration. For example, I am planning to go home today and when I get to Manchester Piccadilly station, there are at least six free-access cash machines on the station. I think that will probably decline over time.
I add a word of caution. We must be alert as politicians and regulators not to be seen as being there to protect the incumbents from the consumer change that we have seen. We can protect access to cash at the same time as recognising changing consumer habits.
We must also must be open-minded about creative solutions that will help to safeguard choices for everyone in how we pay. Lloyds Banking Group, for example, has launched a pilot scheme to incentivise cashback by paying retailers a small fee per transaction. We will have to see the results to ascertain whether it is effective, but at face value it seems like an interesting addition to the provision of cash. Cash can be expensive for shops to process and handle securely, yet keeping a small cash float that can be passed on to consumers would help address that problem. It means they can still accept some cash from customers who want to use it, and it would encourage visits to the high street. The point about business rates raised by my hon. Friend the Member for High Peak (Ruth George) must also be addressed. There will not be one panacea that regulators can impose to solve access to cash. The solution will lie in deploying a mix of such co-operative tools that see banks and shops working together.
The Opposition urged the Treasury to open an urgent review into access to cash when Natalie Ceeney’s report was published. I am pleased that those calls have been heeded with the establishment of the Joint Authorities Cash Strategy Group, which must act quickly to ensure that the future of cash can be safeguarded. I am particularly keen for local communities to be given the right to demand a review of access to cash in their areas, which the regulator will then have to respond to if necessary. For our part, the Opposition are ready to support any effort that moves us towards treating cash as the essential utility it is, guaranteeing access to it for all and protecting cash for those who really need it.
The Economic Secretary to the Treasury (John Glen)
It is a pleasure to serve under your chairmanship, Sir Henry. I thank the hon. Member for Feltham and Heston (Seema Malhotra) for securing this important debate. I commend her for encouraging us to consider the issue across multiple areas, because it is in understanding how things fit together that we will find some of the solutions that the 15 speeches that I have carefully listened to in this morning’s debate have drawn attention to.
To improve financial inclusion, we need to be firing on all cylinders, bringing together regulators, civil society and industry—from the big banks to credit unions—to ensure we create a financial services landscape that offers something for every consumer. I am keen to engage with the points made. I will have further conversations, including with the hon. Member for Glasgow East (David Linden) tomorrow; I have attended the all-party parliamentary group of the hon. Member for Makerfield (Yvonne Fovargue) and met a number of other colleagues, who are here today, on specific matters. I will try to attend to all the points in my response.
It is undeniable that the retail financial landscape is changing, as more consumers and businesses opt for the convenience, security and speed of digital payments and digital banking. At the end of 2017, debit cards overtook cash for the first time as the most frequently used payment method in the UK. It is also true that increasing digitalisation and technological innovation are changing not just the way we pay for things, but every part of our society—from communications to shopping, and from transport to healthcare. It is an exciting but disruptive time. I acknowledge that it is a confusing time for some of our constituents, as they struggle to keep pace with the rate of change.
The Government recognise that there is a need for cash and traditional face-to-face methods of banking. Although financial firms take operational resilience very seriously—indeed, last Monday I visited Barclays Joint Operations Centre to see how the bank is keeping its customers safe from cyber-attacks—we cannot guarantee that IT systems will never fail. Cash is therefore a crucial back-up system that many people continue to rely on.
We have heard that cash remains some people’s preferred, or only, method of payment for a variety of reasons. I am sensitive to that, and it is important that the Government act. We have expressed our commitment to safeguarding access to cash for people who need it. As the hon. Member for Feltham and Heston acknowledged, we have set up the Joint Authorities Cash Strategy Group, which brings together the Bank of England, the Payment Systems Regulator and the Financial Conduct Authority, to provide comprehensive oversight of the UK’s cash infrastructure, from supply to customer access. The announcement was made a couple of weeks ago, and the group’s work will complement the Bank of England’s work to reform the wholesale cash industry, so that it encourages innovation and guarantees resilience, even in a lower cash usage environment. As cash is used less, we need to refine the way it is distributed, because the existing method is too expensive and needs to be improved.
Industry has a central role to play in maintaining access to cash, because with industry innovation we can do more at a lower cost. As the Access to Cash Review showed, creative industry initiatives are already being developed. In conjunction with PayPoint, Link is exploring a new service that offers cash and balance inquires through PayPoint’s convenience store terminals. In response to the hon. Member for High Peak (Ruth George), I make the following observation on an initiative by Square, a digital payments company that recently did a trial in Holywell to help small, independent retailers take card payments. It found that 55% of shoppers in Wales would be more likely to shop locally if businesses took cards, which has led to more than 95% of the town’s independent shops now taking cards. It works both ways, and FinTech provides new opportunities.
The shadow Economic Secretary mentioned the important initiative by Lloyds, in partnership with Visa. I note his reference to the Post Office, which provides for cash withdrawals and cash and cheque deposits at each of its 11,500 branches across the UK. Indeed, a sub-postmaster in Devon, whom I met last year, recently contacted me again to say that banking transactions have really boosted business at his rural post office, which is hosted in a library. I will meet him next week to look at that and at what lessons can be learned across the country.
I am sensitive to the points raised by the hon. Members for Feltham and Heston and for Harrow West (Gareth Thomas) on credit unions. I want to update the Chamber on that matter, which I take very seriously. There are 440 credit unions across the United Kingdom, and it is a question of distilling exactly what they want to happen. When I spoke to a number of CEOs of credit unions at the Association of British Credit Unions Limited conference on 9 March, it was clear that they have initiated a national call for evidence and will come back in September with a clear ask of Government about what legislative action needs to take place. As the hon. Member for Glasgow East helpfully pointed out, there credit unions have a whole range of experiences. It is not a question of the Government’s mandating them to be set up, because that would not work. We have initiated a pilot for prize-linked savings, and I hope that will actually increase the use of credit unions. I note the suggestions about getting schoolchildren involved in the use of credit unions, and I am open to looking at how that could be advanced.
Mr Sweeney
I spoke to John Lyons, who runs the Carntyne and Riddrie Credit Union. He made it clear that the reason the Greater Milton and Possilpark Credit Union failed my constituents was that credit unions were previously allowed to share resources between each other. Owing to punitive restrictions on regulations, that is no longer the case, which is why individual credit unions are more vulnerable to failure.
John Glen
I am always sympathetic and listen carefully to credit union chief executives and their experiences. I have been in the Treasury for 16 months, and rarely does a week pass without my receiving notification of a credit union that could be in difficulty. If we are to loosen the regulatory reform and enable more transactions and more functions of credit unions, we need to ensure that we have the governance in place, so that people do not fall foul of credit unions that go the wrong way. It is a complex area. I am not trying to be patronising, but it is important that we get a joined-up policy solution that pays attention to the sector’s requests.
Although maintaining access to physical banking and cash is important, there is another, equally important side to this story: ensuring that the benefits of new technology are felt by all, and that everyone has the ability to participate. For people who need to keep tight control of their money, and for those who cannot afford to lose a penny, the ability to check their bank balance on the go, or to freeze a card instantly, is critical. We know that too many people are currently excluded from such benefits.
Recognising that the advantages of digitalisation should be felt by all, the Government’s digital strategy commits to enabling people in every part of society to access the opportunities of the internet. We have established the digital skills partnership to bring together the public, private and third sectors to address the digital skills gap in a more co-ordinated and collaborative way. From 2020 we will introduce an entitlement for adults who lack basic digital skills to undertake fully funded basic digital skills training. This new entitlement will mirror existing entitlements for adult literacy and numeracy training.
I want to address the point made by my hon. Friend the Member for Hitchin and Harpenden (Bim Afolami). The new Money and Pensions Service will simplify the current public financial guidance landscape and offer a more holistic approach to financial education. I am talking to representatives of UK finance and the voluntary sector to look at how we can get a more co-ordinated approach to financial education, which is always raised in these debates.
The Government recognise that access to the internet depends on being able to connect to it, and we are making progress with this problem. Superfast broadband, providing downloads of at least 24 megabits per second, is now available to 96% of UK homes. Hon. Members will have seen that last Sunday we launched the Rural Gigabit Connectivity programme, a £200 million investment that will enable communities that have not previously benefited from broadband to leapfrog to the most advanced fibre technology. I hope that will be a solution for colleagues who represent the most rural constituencies.
I will conclude, in order to give the hon. Member for Feltham and Heston an opportunity to respond. We all agree that vulnerable customers must not be left behind as digitalisation changes the way we bank and pay for things. Of course, part of that is about ensuring that physical banking and cash remain available to people who need it—the Government, regulators and industry are already taking action to ensure this. However, it is equally important that we redouble our efforts to ensure that all our constituents benefit from new technology. We cannot reverse digital innovation and nor should we, given the benefits it brings to our constituents.
I want to end with a call to arms to industry to think about all consumers—not only when it is considering the future of cash and physical banking, but when it designs new digital products and brings new innovations to the market. I will keep pushing industry to achieve this, and I hope hon. Members will join me in doing so.
Seema Malhotra
I thank the Minister and the shadow Minister for their remarks. I also thank the Minister for recognising that this is a confusing time, that the rate of change is faster than we had predicted, and that cash is required. He made a very important point on cash being a back-up if a system of technology fails. I thank all hon. Members who have taken part in the debate, including the hon. Member for Hitchin and Harpenden (Bim Afolami), who helped me pitch this subject to the Backbench Business Committee.
We absolutely cannot sleepwalk into a cashless society. Equally, we cannot turn the clock back on progress. However, the market is failing and we need to intervene. We also need to ensure that it continues to be affordable to accept cash, requiring joined-up action to reduce the cost, reform our cash infrastructure and ensure efficiency and resilience. Where needed, we must also incentivise joint industry working in the design of consumer services and products that are based on need. If that requires further supply-side reforms to enable hubs and provide more opportunities to work together, we need to grasp that challenge—both in terms of policy and of shifting our culture. I recognise some of the interesting ideas coming from Mastercard and Visa—including jam-jarring to help with savings, and support for credit union infrastructure—but there needs to be so much more.
I thank Natalie Ceeney and her panel for their work on the Access to Cash Review. Government action is welcome, but it cannot be on a slow burn—for example, the no-interest loan scheme pilot, which was announced last year, has not yet progressed. We need to continue working together on this issue, and I look forward to doing so.
Question put and agreed to.
Resolved,
That this House has considered financial exclusion and the future of access to cash.
Sir Henry Bellingham (in the Chair)
I thank right hon. and hon. Members for their patience and restraint in restricting their speeches to the limit. This has been an excellent debate.