High Street Banks and Banking Hubs

Baroness Kramer Excerpts

Thursday 25th January 2024 Lords Chamber

[Baroness Kramer (LD)]

My Lords, this has been a very short debate, but my goodness it has been a very powerful one—including the example we have just heard from the noble Lord, Lord Hacking. I have great empathy as I have spent hours in NatWest branches just to get an APPG account transferred from one treasurer to another. Let me congratulate my good and noble friend Lady Tyler on obtaining this debate on a crucial issue on which she has campaigned tirelessly.

The access to cash review, chaired by Natalie Ceeney, goes back to March 2019. That is nearly five years ago, and the problems were apparent long before that. Many of us have raised the issues over and again in this House. The Government have made progress, but it is glacial, despite the obvious truth that local banking services are vital to a very wide range of individuals and small businesses. We have, as others have said today, just 31 banking hubs. LINK has recommended over 100, but acknowledges that 1,000 could be needed just to provide cover for medium to large towns, and that is assuming that bank branches stay open in the largest towns and cities.

I am pleased that the FCA, as the new regulator, is conducting a consultation—but my it is narrow and missing many of the key issues. So I thought that I had better talk to some colleagues to see what they were picking up in their local communities. I was stunned when my colleague Jamie Stone, MP for the far north, reported that the Bank of Scotland is closing even its mobile banks, reducing even further the already skeleton access service that is provided. Tom Morrison, my LibDem colleague and the PPC for Cheadle, described the success of the local campaign to get a hub for the south part of Cheadle. However, as yet there is no agreement for a separate second hub that is needed to give access to face-to-face services to thousands of people in the northern part of Cheadle. Lisa Smart, another LibDem colleague and the PPC for Hazel Grove, asked me to thank LINK very clearly for responding to the request for a review of banking services in Bredbury and Woodley but to press for much faster action. A large number of colleagues have asked me both to praise banking hubs but to warn that they should not become an excuse to close branches. That must be reflected in FCA rules.

Therefore, I very much support the proposal of my great noble friend Lady Tyler that the last branch in town should not close until the banking hub has been established. That is the minimum. It must be obvious to every major bank that, if they insist on closing branches—I hope they will be very cautious in doing that—then banking hubs are an efficient way to deliver at least some critical service to the local community on a face-to-face basis. It must be obvious to the banks that local financial services are necessary if we are to grow the kind of economy that banks themselves require if they are to be profitable in the future.

Across the globe, there are a wide range of different models providing banking services, typically face to face, that meet local needs. There are community development banks in the United States, created under the Community Reinvestment Act; the Landesbanken in Germany, which support a local structure; and major credit unions in Ireland, which have a lot of face-to-face presence. Although different, these various models have demonstrably cushioned communities in difficult economic times and provided a resilience not available in the UK. I do not understand why our UK banks have not, in their own interests, seized on the banking hub model and participated with enthusiasm. Perhaps the Minister could tell us. Are they just uninterested, quietly hostile or what? They are the reason we have only 31.

Recently, I used the opportunity of Oral Questions to ask the Minister why bank participation in a banking hub is voluntary, even when a request for a banking hub has been shown by LINK to meet the qualifying criteria. She told me that putting the scheme on a statutory basis has removed what is effectively the bank veto that I was referring to. But, as I look in more detail, and as my noble friend Lady Tyler made clear, this statutory basis applies only to access to cash; banks need not co-operate in providing other services. But that seriously undermines this whole scheme. Communities desperately need access to cash but also to saving and investment products, to mortgages and business loans, to guidance in resolving system problems—indeed, a wide range of services. That simply comes in. As well as reinforcing my noble friend’s proposal on the last bank in town, I want to ask the Minister: will she now bring forward legislation that will take away the voluntary participation in providing the broader range of banking services? Will she say to banks, “You must participate in a banking hub where the criteria have been met showing that a banking hub is vital for this local community”?