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The Economic Secretary to the Treasury (John Glen)
It is a pleasure to serve under your chairmanship this morning, Mr Gray, and I commend my hon. Friend the Member for Brecon and Radnorshire (Fay Jones) on securing this debate and on the eloquent way in which she set out a whole range of issues concerning her constituents. I know that she has deep first-hand experience of rural affairs, given her prior role working for the National Farmers Union before she came to this place, and she spoke very clearly about the significance of bank branches for many in rural areas across Wales, England, and indeed Scotland too. I also listened very carefully to the three interventions from the hon. Members for Pontypridd (Alex Davies-Jones) and for Strangford (Jim Shannon) and my hon. Friend the Member for Aberconwy (Robin Millar), and I am keen to address those in my response.
From my first-hand experience growing up in rural Wiltshire, as part of a family running a very small business, I know the significance of bank branches and the central role that they have in the community. However, I also have to recognise that the world that we live in today is very different from the one of a few decades ago. Technological progress means that more consumers and businesses are opting for digital payments and banking, and last year’s figures from UK Finance show that around seven in 10 adults in this country used online banking and eight in 10 used contactless payments. Although cash represented almost a fifth of the total number of payments, this was a reduction from 56% a decade earlier in 2009, so while the longer-term impact of the pandemic on banking is not yet absolutely clear, the switch to those digital methods is likely to have been accelerated by coronavirus. Times are changing and have clearly changed, and digital technology is transforming banking just like ATMs did in the 1960s.
None the less, as we have heard today, bank branches still matter a great deal to many people, and permanent branch closures can be a source of real dismay to communities across the country. Although closures can be upsetting, they are commercial matters and the Government cannot intervene. Indeed, one could argue that the UK’s financial services sector is among the most competitive and productive in the world precisely because it has the flexibility to respond to market changes.
It is also crucial that the impact of branch closures is understood, considered and, where possible, mitigated so that all consumers across the country can continue to access over-the-counter banking services as they choose. As has been mentioned, since 2017 the major high street banks have been signed up to the access to banking standard, which commits banks to ensuring that customers are well informed about branch closures and the reasons behind them, and that customers have options for continued access to banking services, including specialist assistance for those who need more help. That is not some passive intervention. The operation of the standard is monitored and enforced by the independent Lending Standards Board, which holds banks that close branches accountable for their treatment of customers. That means monitoring to see whether they help individual customers to make the transfer to using the Post Office or other solutions.
Last September, banks’ responsibilities around closures were further clarified by the Financial Conduct Authority when it published guidance setting out its expectations of firms that decide to reduce their physical branches or the number of free-to-use ATMs. Under that guidance, which seeks to ensure that customers are treated fairly, banks are expected to consider the impact of planned closures on customers’ everyday banking and cash access needs. In addition, banks should consider alternative access arrangements. On that last point, it is my understanding that within a short distance of the Llandrindod Wells Barclays, which my hon. Friend the Member for Brecon and Radnorshire mentioned, there are two post offices and two free ATMs. In addition, I note that Lloyds and NatWest provide fortnightly mobile bank branches throughout the constituency.
My hon. Friend quite rightly highlighted the great significance of cash to constituents, and the Government recognise that we have to address that need and the ongoing importance of cash to millions of people, particularly those in vulnerable groups—often the elderly and the poorest. I am therefore glad that LINK has already said that it will protect the broad geographic spread of free-to-use ATMs. It is being held to account against those commitments by the Payment Systems Regulator.
As my hon. Friend acknowledged, the Government are committed to legislating to protect access to cash for those who need it while ensuring that the UK’s cash infrastructure is sustainable. Clearly, the way it is funded and the way the wholesale system works has to evolve to reflect the changing usage pattern. That is why we brought new laws into effect at the end of June through the Financial Services Act 2021 to support the widespread offering of cashback without a purchase by shops and other businesses. That exciting development unlocks the potential for cashback without a purchase. It will provide a valuable facility for cash users and will play a major role in the UK’s cash infrastructure. As my hon. Friend highlighted, cashback without a purchase has been trialled in Hay-on-Wye—clearly a community with a strong independent streak, from what she said—for some months under the community access to cash pilots.
In addition, earlier this month we published a consultation outlining broader legislative proposals to protect access to cash. Those proposals seek to ensure that people need to travel only a reasonable distance to pay in or take out cash, and that the right regulatory oversight for cash access is in place for the future. My hon. Friend made a point about the rurality of her distinctive and distinguished constituency, with respect to its geographical size. This is obviously a matter that we must consider carefully as we move forward with these proposals.
Together, these measures will support the use of cash and help local businesses to continue accepting it by ensuring reasonable access to cash depositing facilities for small and medium-sized enterprises. The Post Office is also playing a key role; the Post Office banking framework allows 95% of businesses and 99% of personal banking customers to deposit cheques, check their balances and withdraw and deposit cash, across a network of 11,500 post office branches across the country. The Post Office is also required to ensure that 95% of the total UK rural population is within three miles of an outlet. I am pleased to tell hon. Members that the Post Office is trialling bank hubs as part of the eight community access to cash pilots around the country that I mentioned earlier. Rochford in Essex and Cambuslang in south Lanarkshire are benefiting from those shared branches. They are a significant innovation from the business hubs that were on offer a few years ago, and I am very pleased with the direction of travel in that area. The hubs will offer access to face-to-face community banking services provided by the banks with the most customers in each area. In addition, Hay-on-Wye’s post office is being refurbished to better support banking services, as part of the eight pilots. I look forward to learning lessons from the pilots and to the future industry models for supporting access to cash that they will help to inform.
A final point, which has been raised, is that there is a need to improve mobile and broadband coverage in rural areas, to make the immense benefits and opportunities of online products open to all. That is why the Government remain committed to delivering UK-wide gigabit connectivity as soon as possible, with £5 billion to support roll-out in the hardest to reach areas. As the Prime Minister mentioned in his levelling-up speech last week, we have made great progress. By the end of this year, 60% of the country will have a gigabit connection. We are working with industry to target a minimum of 85% giga-capable coverage in just four years in 2025. We will seek to accelerate roll-out further to get as close to 100% as possible.
However, while 4G coverage continues to improve in rural areas, admittedly it is not yet as good as in towns and cities—again, Members rightly raised that. As a result, the Government are providing £510 million for the shared rural network. Mobile operators will contribute an additional £532 million as part of this deal, which will extend high-quality 4G mobile coverage to 95% of the UK by 2025. We are also focused on removing the practical barriers that stand in the way of our broadband and mobile coverage targets, through our barrier busting task force. We are looking at the difficult challenges in some communities, many of which are in rural areas, to try to make a real difference on the ground.
While technology is continually changing, the principles that guide the Government’s approach to banking services remain entirely consistent. I have been in this role now for more than three and a half years, and I continue to work with banks, the Post Office and industry stakeholders to try to find practical solutions. We are working to ensure that all consumers, in both rural and urban areas, can access the services they need. We are committed to legislating to protect access to cash for those who need it, and to maintaining the sustainable cash infrastructure that the country needs. We are determined to help the whole country benefit from better broadband and mobile coverage, so that everyone who wishes to use digital and online services can do so.
I will continue work with colleagues across the House, and with my hon. Friend, on these important matters in the coming weeks and months. I hope that that is a reasonable appraisal of and response to the issues that she rightly raised this morning. I am happy to continue correspondence with all Members, because I know that this is something that concerns our constituents.
Question put and agreed to.