Baroness Tyler of Enfield
To ask His Majesty’s Government how many banking hubs have been established in response to bank branch closures since January 2022, and whether they are taking steps to facilitate the establishment of a national network of banking hubs.
The Parliamentary Secretary, HM Treasury (Baroness Vere of Norbiton) (Con)
My Lords, since January 2022, the financial services sector has opened 23 banking hubs, with another 27 hubs expected by Easter next year. Following government legislation, last week the Financial Conduct Authority published proposals for a new regulatory regime to protect access to cash. This includes proposals that seek to ensure a timely delivery of services that meet the needs of communities.
Baroness Tyler of Enfield (LD)
I thank the Minister for her Answer and welcome the steps being taken to safeguard free access to cash. Does the Minister agree that many people, particularly older people and those with disabilities, need access to physical banking services which go much further than access to cash? It is about having a real person to talk to. Given that banks and building societies have closed over 6,000 branches since 2015, does the Minister also agree that the rollout of banking hubs has been painfully slow, leaving many communities to become banking deserts? The current plans are totally inadequate for creating a much-needed national network of banking hubs, which some have estimated would require between 800 and 1,000 such hubs.
Baroness Vere of Norbiton (Con)
There were many questions there and perhaps I will focus on the last one, which is where the FCA consultation comes to the fore. The proposals set out by the FCA are very detailed and potentially go much further than the voluntary initiatives of banking hubs that have so far been undertaken by the sector. Obviously, that consultation remains open until 8 February, and we will be looking for not only banks to respond but representatives of the vulnerable groups the noble Baroness describes, so that we can get a full view of what the proposals should be.
Baroness Foster of Aghadrumsee (Non-Afl)
My Lords, I commend the establishment of banking hubs across the United Kingdom as an alternative to the closure of mainstream banks. Can the Minister set out the criteria for such banking hubs being initiated? Just one has been established in Northern Ireland. Recently, the Ulster Bank decided to close a range of banks across Northern Ireland, leaving many rural areas without physical banking facilities. What are the criteria for the establishment of banking hubs, because there is a need for one in Lisnaskea, south-east Fermanagh?
Baroness Vere of Norbiton (Con)
I recognise what the noble Baroness is saying. The criteria currently used to assess whether a community needs a banking hub are set out in consultation with the financial services sector; that is part of the current voluntary arrangement. I point the noble Baroness to the FCA consultation, because the criteria to be set out going forward are far more detailed and focus on the needs of not only local communities but SMEs. The consultation will also look at seasonal fluctuations in the need for cash access and the ability of SMEs to get coins and notes. The FCA is going further than the current voluntary arrangements.
Lord Anderson of Swansea (Lab)
As with rural bus services, the loss of banking facilities bears most heavily on the elderly. Does the Minister agree with the principle that the last facility in a community should not be lost until a hub is established?
Baroness Vere of Norbiton (Con)
I agree with that in principle, and that is what the FCA set out in its consultation. If the assessment is that a community needs services, it will be beholden upon the designated firms—the banks—to put an alternative service in place before the last bank is closed, or alternative services will need to be put in place within three months if the existing service had somehow disappeared many months or years beforehand and an assessment was made that the community was lacking access to cash.
Baroness Butler-Sloss (CB)
Perhaps I may add to what other noble Lords said about the urgency of this. In the part of Devon where I live, it is a desert. In Fleet Street, there used to be two Barclays branches between the law courts and the Old Bailey and now—can you believe it?—there is none; and yet, another set of courts is about to be built. Can the noble Baroness inject some urgency into this?
Baroness Vere of Norbiton (Con)
That is why the Government decided that it was time to legislate. We felt that the voluntary initiative was not coming along fast enough, and we legislated in the Financial Services and Markets Act in the summer. The FCA, the key independent regulator, has brought forward its consultation in short order.
Baroness Sater (Con)
My Lords, we know that banking hubs should provide the face-to-face communication which is so valuable and important for those who need extra help and support with their finances and may not be equipped with adequate financial understanding and skills. As we know, not all young people are leaving school having had an adequate financial education. Can the Minister assure us that there will be a person at each of these hubs to provide much needed and valuable face-to-face communication?
Baroness Vere of Norbiton (Con)
In many circumstances banking hubs have a private room where community bankers can meet customers to discuss their financial requirements. Cash Access UK, the partnership that sets up banking hubs, publishes a list showing where community bankers are available. I should also point my noble friend to other interventions that some banks are using, such as mobile banking services, pods and pop-ups. There are a lot of ways to have face-to-face contact with consumers.
Lord Livermore (Lab)
My Lords, the latest figures from the British Retail Consortium show that shopping with cash has risen for the first time in a decade, as household budgets are increasingly stretched. At the same time, almost half of bank branches have closed, while the rollout of banking hubs has been much delayed. Will the Minister agree to match the Labour Party’s commitment to work with banks and, where necessary, bring in additional powers for the FCA to guarantee face-to-face banking services, beginning by prioritising areas that currently have no high street banks?
Baroness Vere of Norbiton (Con)
I think what the noble Lord has just set out is exactly what the Government are doing. The FCA consultation goes into an awful lot of detail on the criteria that will need to be met for banking services to continue. We accept that, while the use of cash has declined over time, it has possibly reached a plateau. But I reassure noble Lords that, for example, 97% of the urban population is within 1 mile of a free-to-use cash access point.
Baroness Kramer (LD)
My Lords, surely the Minister has hit the nail on the head: the weakness of the current banking hub system is its voluntary character. That could be corrected with a relatively simple statutory instrument so that, when a local community applies to Link and is shown to meet the criteria, a banking hub is guaranteed and it does not suffer what happens today—delay or refusal by the banks.
Baroness Vere of Norbiton (Con)
I disagree with the noble Baroness. I would not want to put the current arrangements on a statutory footing at all, because they could be better. That is exactly what we are doing: we are looking at the existing voluntary arrangements and saying that we need a regulatory footing, not for where we are now but for where we should be in future. That is why the FCA consultation is so important. But this also builds on FCA guidance, which is already out there and which banks already follow.
Lord Bird (CB)
Is there a case for working much more closely with the Post Office, which is doing an enormous amount of work in backing up the lack of banking in certain areas? We are working with the Post Office, and its commitment to filling the gap left by banks is incredible.
Baroness Vere of Norbiton (Con)
The noble Lord is absolutely right. The Post Office banking framework has been in place since 2017, and we recognise the really important role post offices can play for people and for small and medium-sized enterprises. The current arrangements are in place until December 2025, when they will of course be looked at again, but we recognise that the more than 11,000 post offices offer a very helpful route to get cash and other services.
The Lord Bishop of Durham
My Lords, I thank the Minister for that last answer. However, in the north-east, only one banking hub has been opened this year and there is a diminishing number of post offices, so it is quite hard to see how the post office network is actually helping in the north-east.
Baroness Vere of Norbiton (Con)
I point the right reverend Prelate to figures released by the FCA last week. We know that geographic coverage of the cash access network remains comprehensive, despite some branch closures over a period of time. Of course, we are keeping this under review, which is why we await the response to the FCA consultation. We expect any proposals to be in place by summer next year.