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Patricia Gibson (North Ayrshire and Arran) (SNP)
I echo the thanks to my hon. Friend the Member for Midlothian (Owen Thompson) for securing this important debate. I feel as if I have spent quite a lot of time in the five years since I was elected bemoaning the stampeding of banks out of our communities without so much as a backward glance.
My constituency has several towns where there is no bank at all, and other Members have talked of similar issues. Ardrossan, Stevenston, Kilwinning—a town of 21,000 people—West Kilbride, Dalry and Beith are all without a bank, and Kilbirnie’s last bank has reduced its opening hours. That is the only bank left in the entire Garnock valley, which is three distinct towns with a collective population of more than 19,000 people. Losing the last bank in our towns is a severe blow to our communities. It undermines their commercial stability and has a significant social impact, which we have heard much about today.
My constituency, like that of every Member who has spoken, has been hit particularly hard, and I share all the concerns expressed by my hon. Friend the Member for Midlothian (Owen Thompson). In Scotland, according to research, we have lost more than one third of our bank branches since 2015. The consumer organisation Which? found that banks shut 396 Scottish branches between January 2015 and August 2019, reducing their number by 38%—an alarming rate of closure, by any measure. My hon. Friends the Members for Midlothian, for East Renfrewshire (Kirsten Oswald), and for Kilmarnock and Loudoun (Alan Brown) and the hon. Member for Strangford (Jim Shannon) have all said similar things.
As we have heard from my hon. Friend the Member for East Renfrewshire, it is clear that any consultations are simply window dressing. They are tick-box exercises so that the banks can reassure themselves and the Minister—“Oh yes, Minister, we have undertaken consultation”—when we know that is not true in reality. I remember the same thing happening in 2007 and 2008, when there were mass post office closures in my constituency. That was long before I was elected to this place, and perhaps innocently—perhaps even naively—I, along with other Scottish National party activists, set up street stalls. We went door to door with petitions. We did everything we could to get the post office to reverse those closures, but of course nothing changed, because the consultations were not at all meaningful. We have memories of these consultations from other times, and I say to the Minister that this has to stop.
The Treasury Committee concluded that
“there are still large sections of society who rely on bank branches to carry out their banking needs. A bank branch network, or at the least, a face-to-face banking solution, is still a vital component of the financial services sector, and must be preserved.”
I know that the Minister probably will not agree—I have said this to him before, during one of the countless debates on this topic I have participated in—but I genuinely believe that because there was no UK Government intervention when RBS announced its radical, eye-watering programme of closures, although we as taxpayers owned a significant stake in RBS, the fact that nothing was done emboldened the other banks that have no element of public ownership. If a publicly owned bank can do it, why can a private bank not do the same without any kickback or repercussions from those in the corridors of power?
If the Government are as willing as they have demonstrated to accept closures of bank branches—banks that they owned, in the case of RBS—that is extremely disappointing. Throughout RBS’s entire closure programme, I listened very hard, but I could not hear anybody in Government condemning those closures. All I heard was a distancing from any sense of responsibility, which is really disappointing for our constituents. It seems that other banks felt they could employ the same tactics and close down wherever they felt it was no longer convenient to have a branch, without any consequences or official condemnation from Government. As a result, the people who pay the price are those in our communities who are suffering for want of a bank, and will continue to suffer. We have heard a lot about that today.
Of course, we have these mobile banks, but they really do not answer the question of what we do without a bank. They are not disability compliant, their reliability is questionable at best, and they simply do not fit the bill or take the place of a bank. We also know that the gaps left by banks cannot be properly filled by post offices. That is no reflection on post offices, which work hard to provide a good service to our communities, but they are not banks and they cannot fill the gap. As the Minister will know, the Treasury Committee concluded that post offices
“should not be seen as a replacement for a branch network, but a complementary proposition”.
Other Members have talked about the fact that post offices simply cannot fill that gap.
Along with branch closures we are witnessing the demise of free cash machines, as we have heard. About 10 free-to-use ATMs a week have been shut down in the past year. As far as I can make out—although I hope the Minister will contradict me—the Treasury seems to have been deaf to all pleas for Government intervention to protect free cash. I hope that the Minister is able to offer some comfort today.
Patricia Gibson
I look forward to hearing from the Minister, who is speaking from a sedentary position.
The ATM Industry Association has warned that one fifth of Scotland’s free ATMs will start to charge consumers in the next year. That can be seen only as a cynical move to force us to become a cashless society. Picking up what has been touched on by my hon. Friends the Members for Kilmarnock and Loudoun, for East Renfrewshire, and for Midlothian, and the hon. Member for Strangford, bank closures have, as we now know—the game is up—been a tool to force people to bank online. As banks have quietly cut the fees that they are willing to pay machine operators to provide bank customers with access to cash, they are forcing us to go cashless and online. Banks are attempting to put pressure on customers who do not act in a way that they—the banks—find convenient. What happened to the customer being king?
Going cashless and banking online may, as we have heard, be the preferred option for some—and good luck to them—but some of us do not want to go down that route, and increasingly aggressive efforts are being made for it to happen, at breakneck speed. I and those of my constituents who do not favour those options will not be forced to bank online. We will not be bullied into doing so or into going cashless. It is a rum do when the service provider is bullying the customer—because that is how it feels. In any case, even among customers who may be interested in banking online there are some who simply are not able to, for a variety of reasons that the Minister will understand, and of which the hon. Member for Strangford reminded us.
I have corresponded with the Treasury about online banking in the past, and it accepted that broadband access is not yet good enough for everyone to rely on digital banking. The Government and the access to banking standard must ensure that banks have a social responsibility to provide banking facilities to all our towns. Such services could be provided relatively easily through the wide rolling-out of banking hubs. Indeed, I met the Minister in his constituency to discuss that very issue last year. I am hoping—I am quite excited about it—that he will be able to update me on progress with that. I am sure that the Minister will correct me if I am wrong but I cannot see any discernible obstacle to the option except for perhaps a lack of political will and, indeed, the arrogance and intransigence of the banking industry.
Our communities and constituents deserve better than they have had up to this point. Banks have to face up to their social responsibilities, get their heads together and create banking hubs in our towns, across the board. There is no real impediment to that, and I urge the Minister to use his good offices to bang some banking heads together and ensure that customers’ voices are heard. The Government have a role to play when the last bank in town is closed. They have said repeatedly that those are commercial decisions, but it is not just a commercial matter. It is about social responsibility and financial inclusion. I urge the Minister to reflect further on the strong feelings and concerns that have been expressed today. Will he finally bring forward legislative proposals to ensure that banks live up to their responsibilities to our communities?
The Economic Secretary to the Treasury (John Glen)
It is a pleasure to serve under your chairmanship, Sir David.
I thank the hon. Member for Midlothian (Owen Thompson) for securing this debate on an enduring concern across this Chamber and the House as a whole. I thank him for our conversation yesterday, following up on his question during business questions at the end of February. Since the start of this year, I have had conversations about similar matters with the hon. Member for Caithness, Sutherland and Easter Ross (Jamie Stone) and my hon. Friend the Member for Colne Valley (Jason McCartney).
In the debate, I listened carefully to the speeches of the hon. Members for East Renfrewshire (Kirsten Oswald), for Kilmarnock and Loudoun (Alan Brown), for Strangford (Jim Shannon) and for Stalybridge and Hyde (Jonathan Reynolds). In my remarks, I will address the points they made.
The hon. Member for Midlothian, in opening, referred to the current context. At this time, obviously, banks will operate using contingency plans. In the light of such circumstances, we expect them to consider what that means for their branch closure programmes.
Customer-facing financial services are undeniably changing, as consumers and businesses opt for the convenience, security and speed of digital payments and banking. In 2018, almost three quarters of UK adults used online banking, half mobile banking and two thirds contactless payments. Meanwhile, branch usage fell by 26%, on average, between 2012 and 2017, with many communities seeing even more drastic declines.
Banks clearly must balance changing customer interests, market competition and other commercial factors when they consider their response. Many have proceeded in different ways. Sometimes they take the difficult decision to close branches in order to strike that balance. Although that is disappointing for communities, I have been clear that banks are best suited to know what works for their customers, and these must ultimately be commercial decisions.
That said, in January, I visited Yarm in Stockton to look at what Barclays is doing with its network. It has taken a group of more than 100 branches—102 or 112, I think—that are the last bank in their towns, and is working hard with the communities to secure a future. I encouraged it in that work, because models exist to sustain such branches, if transfers are made into that last bank. Barclays is optimistic about a large proportion of the cohort surviving for a significant time.
The Government cannot reverse changes in the market and in customer behaviour, and nor can we determine the commercial strategies of individual firms. I still believe that it is not for me in Westminster to decide the shape of a branch network or whether a bank should place a branch in Wolverhampton or Wick, but it is important that the impact of closures on communities is understood, considered and mitigated. I will set out some of the ongoing work in that area.
The access to banking standard is a key mechanism to ensure that customers are well informed about branch closures, and that banks set out their reasons for closure and the alternatives available to consumers. Since May 2017, the major high street banks have voluntarily signed up to the standard. However, I acknowledge that hon. Members have made representations to the effect that the application of the standard lacks transparency, is inconsistent and is insufficiently tailored to local conditions.
Last July, therefore, I met representatives of the Lending Standards Board and UK Finance, which enforce and own the standard, to discuss some of these concerns. As a result, they have agreed to two key improvements to the application of the standard. The first is agreement on a common definition of what constitutes an impacted customer when a branch closes, and the second is agreement on a number of common metrics to be used in impact assessments. Both of those will drive greater consistency of information among banks when they are closing branches.
In its recent annual report, the Lending Standards Board reported improved compliance with the standard among firms. It found that firms were providing more local information specific to the branches in question, and strengthening their relationships and engagement with the Post Office. In due course, the Lending Standards Board will publish examples of best practice to highlight positive approaches and provide a standard for under-performing firms to work towards.
Hon. Members will know the important role that the Post Office plays when branches close, and I have noted the comments of the hon. Member for North Ayrshire and Arran (Patricia Gibson) about the Treasury Committee’s report on this issue. I was therefore pleased by the successful renegotiation of the Post Office’s commercial agreement with the high street banks. That means that for the next three years at least, 99% of personal customers and 95% of small and medium-sized enterprise customers can continue with everyday banking at one of the UK’s 11,500 Post Office branches.
The agreement also ensures that local postmasters will see a considerable increase in fees for processing transactions, which will rise as volumes grow. I acknowledge the hon. Lady’s point about this being a complementary activity; I do think we are on a journey when it comes to the functions that post offices can provide, because they clearly cannot provide face-to-face banking services. Those are being aggregated generally across the industry, but these are issues that the banking industry must come to terms with. I will say more about that in a minute.
Post Office figures from between 2018 and 2019 show that overall transactions increased by 15.5%, deposits increased by just under 40%, and withdrawals grew by 16%. Increased income from fees will help the post office network become more financially sustainable and will allow for investment in automation, training and security. As high street entities, post offices face similar challenges when it comes to footfall and the changing behaviour of customers.
Turning to the issue of access to cash, three in 10 payments in the UK are still made in cash, and the Government want to ensure that cash remains available for those who need it. That is why in last week’s Budget, the Chancellor announced that the Government will bring forward legislation to protect access to cash. We will work with regulators and stakeholders as we develop our approach, including with LINK, the Payment Systems Regulator, and people such as Natalie Ceeney, who carried out the “Access to Cash” review last year. That process will also involve stakeholders such as Which?, who have taken a great interest in this issue.
Improving digital access must be an equally important part of our response. The opportunities created by digital and online products should be open to all, which is why we 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. Of course, doing so depends on physical connectivity; some 98% of premises in the UK can access decent broadband, but there is more work to be done. That is why the Budget announced a £5 billion commitment to support the roll out of gigabit-capable broadband.
Mobile coverage is also important; as the Chancellor has announced, the shared rural network agreement has been finalised, which will involve an extra £510 million of funding from the Government. That means that 95% of the UK’s landmass will have that connectivity.
Last year, I concluded a Westminster Hall debate on this topic with a call to arms for the industry, which I reiterate and re-emphasise today. We cannot reverse digital innovation—nor should we, given the benefits it brings. However, this House can agree that vulnerable customers must not be left behind or locked out of opportunities. Government, regulators and industry are already acting to ensure cash remains available. I have just come off a call this afternoon in which I discussed mutual banks, credit union reform—which was also announced in the Budget—and hubs and cash access, which is something I am actively pursuing the banks about.
We must keep putting energy into digital inclusion, and not let the process of innovation run out of steam. I will be working with the industry and pushing it to go further. I value all the contributions that have been made today; they reinforce the energy that I will continue to bring to solving some of these difficult problems, which differ across the country.