The Financial Secretary to the Treasury (Lucy Frazer)
It is a privilege to respond to this debate on behalf of the Government. I congratulate the hon. Member for Airdrie and Shotts (Ms Qaisar) on securing her first Adjournment debate on an issue on which she has been vocal and campaigned hard. My hon. Friend the Economic Secretary to the Treasury takes the issue of bank closures very seriously, and he would have represented the Government’s position here today were he not on ministerial business abroad.
The hon. Member for Airdrie and Shotts talked about the importance of people going into banks. The reality is that the way that consumers engage and interact with their banks is changing, with increasing numbers using digital services to manage their affairs. It was interesting to hear her talk about her own experience and that of her generation in terms of how people are now accessing their money.
Martin Docherty-Hughes
The reality is that the experience of those states that have moved to a digital framework, such as Estonia, highlights the fact that this transition needs to recognise those who find it most difficult. Therefore, we need to be in a position where people who still use cash are able to do so whenever they need to.
Lucy Frazer
The hon. Member makes an important point. I will come on to the ways in which we are ensuring that those who need to access a physical location are indeed able to do so.
According to UK Finance, as of 2019, half of adults in this country used mobile banking. In the 12 months to February 2020, half of adults with a day-to-day bank account carried out their banking activities face to face in-branch, down from almost two thirds— 63%—just three years earlier. The Government want to ensure that people have appropriate access to banking services, and the transition towards digital banking brings many opportunities for individuals and businesses. It is our view that the Government cannot and should not seek to reverse the changes we are seeing in the market and in customer behaviour. Nor should the Government determine firms’ commercial strategies in response to these changes. Having the flexibility to respond to changes in the market is part of what made the UK’s financial services sector one of the most competitive in the world, and the Government want to protect that success.
Stewart Hosie (Dundee East) (SNP)
While Governments should not be setting commercial objectives for the banks, I was told by a representative of a bank which had shut both a branch and removed the automated teller machine that it cost as much to keep an ATM as to run a branch, so I think we need to say to the banks—while not imposing any commercial criteria on them—that they should at least be honest about the reasons why branches are shutting.
Lucy Frazer
I am confident that banks will be carefully looking at how much it costs to run an ATM versus a people-staffed bank and will make those decisions accordingly, but we recognise the impact of branch closures on people and their communities, and the hon. Member for East Renfrewshire (Kirsten Oswald) talked about the importance of engagement with communities. Since 2017, the UK’s largest banks and building societies have been signed up to the access to banking standard, which commits them to ensuring that they inform customers about any branch closures, that they explain the reasons for the closure, and that they clearly outline customers’ options for continued access to banking services.
Lucy Frazer
I am going to carry on because the hon. Member for Airdrie and Shotts, who secured the debate, made many points and I want to respond to them.
The Financial Conduct Authority has also set out its expectations of firms when deciding whether to reduce the number of their physical branches or the number of free-to-use ATMs. FCA guidance states that firms are expected to carefully consider the impact of a planned closure on their customers’ everyday banking and cash needs.
The hon. Members for Strangford (Jim Shannon) and for Reading East (Matt Rodda) talked about the importance of going into a physical location for those such as the elderly and the disabled. As well as the innovations around mobile and online banking, there are alternative options to access everyday banking services via telephone banking and also, importantly, via the Post Office. The Post Office plays a significant role in servicing people’s everyday banking needs across the UK. The Post Office banking framework allows 99% of personal banking and 95% of business customers to deposit cheques, check their balance, and withdraw and deposit cash at the 11,500 Post Office branches right across the UK. As the hon. Member for Airdrie and Shotts pointed out, it is important that there is somewhere to take that cash, which is why the Post Office provides such an important service.
Lucy Frazer
I am going to come on now to the point the hon. Lady made about access to cash. Access to cash is one of the services that bank branches and post offices help to deliver, but the Government understand the importance of cash to the daily lives of millions of people across the UK, particularly vulnerable people, which is exactly why we have committed to legislate to protect access to cash.
Last year, the Government consulted on further proposals for new laws to make sure people need to travel only a reasonable distance to pay in or take out cash. The Government’s proposals are intended to support the continued use of cash in people’s daily lives and help enable local businesses to continue accepting cash by protecting deposit facilities. We are carefully considering the responses to the consultation as we develop legislation and will set out next steps in due course. Encouragingly, following the Government’s commitment to legislate, firms are working together through the Access to Cash Action Group to develop new initiatives to provide shared services.
I wish to touch on another way for people to access the banking system in person. The hon. Member for Reading East mentioned banking hubs. The introduction of shared banking hubs is an exciting development. Last year saw the successful pilot of the initiative, with two bank hubs offering counter services run by the Post Office and dedicated spaces for customers to see community bankers from their own bank. The findings of the pilot revealed that, as of October 2021, £4.65 million of cash had been deposited at the two pilot sites. Almost a quarter of local businesses said the pilots meant they no longer needed to close their shop to get or deposit cash. As a result, the two bank hubs have been extended until at least the spring of 2023.
Building on the experience gained in the pilots, last December the industry announced its intention to introduce five more Post Office bank hubs in Acton, Brixham, Angus, Knaresborough and Syston. The bank hubs are a commercial initiative, meaning it is for industry to play a key role in the provision of appropriate facilities for customers.
At the beginning of her speech, the hon. Member for Airdrie and Shotts talked about HSBC’s announcement of the closure of some banks. I reassure her that all the branches that are to close have a post office within 1.5 miles for everyday banking transactions.
Lucy Frazer
I am going to conclude because I fear I am running out of time.
The Government understand what is at stake here and are working hard to do right by communities up and down the country. Banking is changing in ways to which industry can and should respond but, as I have said, it is also right that the impact of branch closures on people and communities is understood, considered and, where possible, mitigated, so that everyone, whoever they are and wherever they live, continues to have access to the services they need.
Question put and agreed to.