Banks and Communities

Angus Brendan MacNeil Excerpts

Thursday 11th January 2018 Westminster Hall

[Martin Whitfield]

My hon. Friend raises a very interesting point about who the winners are in this situation. Certainly, we can identify the losers. The losers are the very community that we hold so dear; the losers are the high street—that geographical area where people gathered together and still try to. As my hon. Friend says, we have high streets that have been hollowed out. We need to find a way to stop this hollowing out and fracturing. The banks form a crucial, fundamental part of the foundation of maintaining our high streets, which we need to maintain our community and our society. We have reached a tipping point now—a point of no return—where the Government must step in with practical solutions to stop future closures and to address the fragmenting relationship with banks.

In 2015 we had the access to banking protocol, which spoke highly of financial inclusion and local engagement from big banks, but that fell short of any statutory protections. Members will be aware of the Griggs report the year following, which offered a series of constructive remarks and ideas to improve the settlement. Unfortunately, it addressed areas where the last bank had already left town. It does not, like my party's position, commit to a new legal protection that would enable banks to keep a presence in their local communities, which need them so much. Any new settlement should be constructively built in partnership with the banks and should engage with the shareholders of the banks who often engage with them most the local users.

What are the other answers? The Government have tried, and I suggest failed, over the past three years to try to displace some of the local bank branches with community post offices. The post office is another fundamental cornerstone of our high street and community. As my hon. Friend the Member for Coatbridge, Chryston and Bellshill (Hugh Gaffney), a campaigner on this matter, will testify, that alternative provision works only if the post offices are not themselves being ripped from our high streets and from the communities they serve at a similar rate. Post offices rightly have a valued position on our high streets, but we cannot place the burden and responsibility of banking on a workforce who are already stretched.

The decision to merge retail banking into our post offices is not workable in the present form, and nor is it a popular alternative. Figures from Which? show that although the British public think most post offices are doing a great job, many do not even know of the alternative banking options available there. I also tentatively welcome services such as the mobile branch service operated and offered by RBS and the idea of shared buildings. My constituents do not believe that such solutions go far enough to ensure a trustworthy banking presence in East Lothian. They may fit an economic model, but they do so at the risk of continuing to fracture the trust. The single solution of a banking van might work in one place, but will not work in another. To apply it as an idea across the country is foolish and short-sighted.

The trust that people have is also influenced by the quality of protection that communities witness. Local bank staff, placed at the heart of communities, have a responsibility to be the last check and balance in terms of consumer protection. Speaking with campaign groups, including Which?, this week, I was heartened to hear of cases where people had gone into their local branch to withdraw large sums of money and the bank teller has said, “This is unusual for you. What is this about?” With that simple question they have prevented a retired couple from losing substantial sums of their life savings. That solid local relationship with trained members of staff in the local bank can go a long way to protect current accounts from bank fraud, and staff can also advise on and discuss people’s challenging financial problems.

When it comes to the assessment of community safety, I raise the question of the bank’s responsibility when a sophisticated thief dupes an individual out of money. Is it right that the bank can absolve itself of all responsibility simply because the crime was so complex and maliciously delivered that the victim genuinely believed they were dealing with their own bank branch? Such a crime might be a lot harder if the perpetrator first had to build a branch on a high street to defraud retired couples of their money.

The advent of online banking has been transformative, and it will continue. There is no argument or objection to that, but I am concerned that focus has shifted solely to it as the answer to the banking problems. It would be completely irresponsible to abandon the 20 million people who still depend on face-to-face bank services. Online banking, which will continue to grow, must be accessible. It is certainly not the fault of the big banks that Governments have failed to implement a broadband service fit for the 21st century. Nor is it the fault of the banking industry that nearly 2 million people across the UK experience internet speeds of less than 10 megabits per second, meaning that online banking will not work. But banks should be made to consider broadband blackspots and digital inclusion when they plan closures, as well as the impact of shifting consumer services from face-to-face banking to online services.

Four in 10 Scottish consumers experience service issues with their broadband. How does the banking industry expect a transition to take place? In 2015, 80% of my rural constituents were dissatisfied with their internet speeds, and yet banks in Tranent, Prestonpans and Gullane in my constituency have closed in the past three years. I am interested in the thoughts of my Scottish colleagues and others here on this matter. Should big banks be made to consider broadband speeds in any meaningful consultation on bank closures?

[Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)]

It would have been nice to have had a consultation before we heard that the bank was closing. The buccaneer spirit of the Royal Bank of Scotland is exemplified by the fact that it did not bother having a consultation.

[Martin Whitfield]

I will deal with the question of consultation in a few moments. I want to establish a basis for that with regard to the availability of physical money.

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[Stephen Kerr (Stirling) (Con)]

It is a privilege to serve under your chairmanship, Mr Gapes. I compliment the hon. Member for East Lothian (Martin Whitfield) on obtaining the debate. It was my privilege to accompany him to the Backbench Business Committee and I was delighted when permission to hold the debate was granted.

If anyone should be aware of how important banking is to people in their daily lives, it is the banks themselves. They know that people need banking services to get paid, pay their bills, save and, usually, buy a house. They know that keeping a pile of cash under the bed is not an option in our society, so they should recognise that it is their responsibility to ensure that rural communities in particular have reasonable access to banking services. Unfortunately, as a Member who represents a largely rural constituency, I have to tell the House that many rural communities are losing that access and their connection with banking.

I am going say something now that might be seen as something of an article of apostasy in my party, because I am going to agree with the Scottish National party council leader in Stirling. He wrote to me just before Christmas making some valuable points that I can only agree with. In fact, I think I may have said them first, which justifies me in agreeing with him. He makes the point in his letter about the Royal Bank of Scotland closing its Bannockburn branch, which means there will be no banks at all there. I want to use this opportunity to commend the people of Bannockburn ward, more than 2,000 of whom signed a petition asking the Royal Bank of Scotland to review its decision. I want to make a point that is also made by the leader of Stirling council:

“This closure will have a disproportionate impact on some of our most vulnerable citizens”—

as was mentioned earlier—

“within the Bannockburn and Eastern Villages area with many reliant on high street banking.”

The letter continues:

“I have been approached by concerned constituents many who are elderly and neither have the access or ability to engage with on-line banking. Many are distrustful and indeed fearful of using the internet for such transactions.”

That point was also made by the hon. Member for East Lothian. I have also been approached by hundreds of my constituents—I do not exaggerate—who tell me that it is a fundamental act of injustice to remove the banking services from the communities that, as he said, need them most.

In my constituency, RBS plans to close three branches—in Dunblane, Bannockburn, and Bridge of Allan—leaving one RBS branch in the entire constituency. By the way, that branch is in the centre of Stirling and access to it is impossible for anyone with any form of mobility challenge. It is not the best locality—either for car parking or for getting to—for the single remaining RBS bank in my constituency. That is bad news for small businesses, which benefit from having a local branch, as the hon. Member for East Lothian explained well. It is bad news for the staff who work in the branches, and for elderly people and people who are less well off, who are less able to make the journey to a branch several towns away.

I should make it clear that the Royal Bank of Scotland is not the only offender. I should also make it clear that I used to work for RBS, when I was a callow youth, on leaving school.

[Angus Brendan MacNeil]

Last week.

[Stephen Kerr]

Thank you very much. The hon. Gentleman has become my hon. Friend suddenly.

I have a fondness and affection for the Royal Bank of Scotland. It is a grand old Scottish institution, which has been ruined by the mismanagement of the directors of a decade ago.

I ask the Minister to look at what the banks propose. They are saying, “We are going to close the branch. Go to the post office.” That is not practical.

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[Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)]

What we see here is a bank that has acted in a buccaneering way, with no impact assessment at all, no community responsibility and no thought of how it might affect communities. The community I am talking about is an island community, and one of their first thoughts was of the Cashline machine. Islanders on the island of Barra have to take a five-hour ferry to Oban and then either take a few hours’ drive to Gairloch or another ferry to Tobermory on the island of Mull to access a Cashline machine. Their next thought was, of course, going to South Uist, which would involve at best a half-day trip at a cost of about £20 or £30 return to access maybe £50 from the Cashline machine.

Luckily, on day one RBS, after telling us it had done thorough diligence and been very thoughtful, had to reverse its position after a few tweets about what it was doing on the Cashline machine—so little was the thought that RBS had put into the buccaneering, high-handed, reckless hatchet-man job. It does not care about the communities it has served for so long, and it is showing them no loyalty whatsoever. As a customer of RBS—the only bank on the island of Barra—it is absolutely sickening to find that it is turning its back and walking away, and that it does not care.

I argue that the way RBS is going about this at the moment is such that the patriotic move would be to move money out of the Royal Bank. It can drop the name “Scotland” for the way it is treating people all over rural Scotland at the moment. Whether in East Lothian, Stirling, Inveraray or even Wales, the way RBS is going about this is in no way decent, moral or nice. It is a bunch of people on corporate welfare, with £16 million in bonuses a year. Now, £16 million in bonuses a year would pay for the salaries of the staff at the branch in Castlebay, Barra, for 266 years. That is the level of greed we see from those people—it is not just greed, but cowardice and irresponsibility.

I invited Ross McEwan to come to Barra, and I got a letter from Les Matheson, which said:

“Thank you for inviting Ross McEwan and Hollie Voyce to visit the Isle of Barra. As the CEO for Personal and Business Banking I regularly visit our branches across Scotland to meet customers and staff, and I can confirm I will be visiting Castlebay in the New Year.”

He came in on a flight in the morning and went in the afternoon. How do I know? Because I happened to visit the branch with a banking issue on Friday afternoon, to be told by the staff, “Did you know you missed Les Matheson coming to Barra?” It was an act of utter cowardice. None of them have yet come to face the community at all.

Before I come to the end of my speech, I congratulate the hon. Member for East Lothian (Martin Whitfield) on securing the debate and say to him, “Very well done indeed.” I was trying to do the same myself. I hope that some of us will give thought to demonstrations outside the headquarters of the Royal Bank of Scotland if it continues in this way. My hon. Friend the Member for Argyll and Bute (Brendan O'Hara) pointed out that George Osborne, when he was Chancellor, sought consent for Stephen Hester’s appointment. I have to ask the Minister: this time, with the devastating blows that are hitting Conservative, Labour, Scottish National party, Liberal and everyone else’s constituencies, was consent sought?

I know the Minister is a principled man. He is in a new job, and such a job in the Treasury is a great test of principles. We will have to see who is in charge here. Is the bank owned by the Government, or do the bankers own the Government? Who is telling who where to jump? Who is pulling the strings? What is happening? The Government cannot play Pontius Pilate. With the Bannockburn closure, I am left to think that we will have to send the Royal Bank and its greedy corporate welfare home to think again.

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[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

I begin by congratulating my hon. Friend the Member for East Lothian (Martin Whitfield) on securing this debate on a topic that is clearly of such central importance to many Members. I also congratulate him on his speech, which I mean not just with the usual courtesy. I thought it was an excellent introduction and a fair assessment of the situation the UK faces, and particularly Scotland.

This debate is the first in which I face the new City Minister. I warmly welcome him to his new role. He will find the shadow Treasury team always available with reasonable suggestions for a fairer and more prosperous Britain. I look forward to spending a great deal of time with him on statutory instrument Committees over the next few years.

I often think that banks have one thing in common with those of us who are politicians—with Members of Parliament in this place. People often say that they are not keen on politicians but that they feel quite affectionate towards their local MP. Similarly, many people do not feel particularly affectionate towards the banks, but do have quite a lot of regard for their local branch. We can see in this debate the strength of feeling that changes to the high street banking presence have generated.

The British banking industry is vital to our national economic infrastructure and is a sector that we should be able to be proud of. It is clearly important because of the revenue that it generates for the Treasury. UK- domiciled banks contributed an estimated £35 billion in tax in 2017 and they also employ 1.5% of the entire UK workforce.

[Angus Brendan MacNeil]

On that point, will the hon. Gentleman give way?

[Jonathan Reynolds]

I give way to the hon. Member for Na h-Eileanan an Iar.

[Angus Brendan MacNeil]

Well done—perfect pronunciation as well. The UK has a problem with productivity. Does the hon. Gentleman agree that this move means that people will have to spend many hours moving about the country to get to the banks, which were much closer at one time, not on their core activity? It is a destroyer of productivity. On that basis alone, the UK Government should call them to heel.

[Jonathan Reynolds]

That is a very reasonable point. Hon. Members such as my hon. Friend the Member for Bishop Auckland (Helen Goodman) and the hon. Member for North Ayrshire and Arran (Patricia Gibson) have shared stories of the round trips, the incredible journeys, that people have to make because of the lack of a banking presence locally. I thought that my constituency was quite badly affected, but the stories that I have heard today show just how widespread the problem has been.

The lending that banks provide is essential to financing growth in the economy, for both individuals and small and medium-sized enterprises. Many British people who are in credit benefit from free banking and 24/7 access to their money through a variety of channels and new technologies. However—and it is a big however—the memory of the British public is not so short that they do not recall the immense damage wrought on the country in 2008 by the financial crisis, which started in the banking sector. We should not underestimate the profound impact that those events have had on public trust in both retail and business banking.

Bailing out the banks, as the Government of the time did, was, without question, the right move. I often say that it would be more accurate to describe that as the Government bailing out the public from the consequences of what the banks had done, rather than straightforwardly bailing out the banks. However, those actions, which in some cases brought establishments into public ownership, clearly reiterated that the relationship between the banks and the public should be reciprocal. The fact that taxpayers’ money was made available to banks reinforces that financial institutions are of central importance to our economy’s wellbeing.

Banking is unlike other industries, in that dealing with people’s money gives banks a unique and special responsibility. That brings with it, rightly, higher expectations about conduct, culture and putting the customer first. As a country, we have in the past 10 years legislated for a considerable increase in bank regulation, much of which, we hope, will prevent us from ever having to witness events like those of 2008 again. I recognise that in tandem with that many banks have made efforts to bring about cultural change internally, to overhaul systems and processes and to show that they take their role in the economy seriously.

However, there is clearly still so much to be done in rebuilding the relationship between the banking sector and the public. A YouGov study released in March 2017 showed that just 36% of British consumers trust banks to work in their customers’ best interests. Last year, I was at Mansion House for one of the industry body dinners, where the chief executive of one of the big banking representatives said that its research showed that just 13% of SMEs felt that they could trust their bank to do the right thing for their business. That is no good for the banks or for us as politicians and it is certainly no good for the businesses that feel that way.

Now is the time for banks to demonstrate that they have learned from the past and to recompense for past failings. This is not just about a banking presence on the high street. The historic events involving things such as RBS’s Global Restructuring Group are a case in point. Serious mistakes, errors of judgment and, we have to say, in some cases, criminal activity took place, with appalling consequences for some businesses in this country. It is not enough that the requisite cultural change has taken place to prevent such events from happening again; rather, the banks must show that every effort has been made to rectify that behaviour, show that complaints are taken seriously and, crucially, show that changes are in place to ensure that customers can never again be exploited in that way.

That underpinned Labour’s decision to table an amendment to the Finance Bill calling for a reversal of reductions in the bank levy. The cut in the bank levy is in effect a tax giveaway to the big banks and is worth £1 billion in 2018 alone. Given that that comes at the same time as the Government’s baffling decision to sell off RBS shares at a huge loss just as the bank returns to profitability and after the taxpayer has paid the fines for past behaviour—

[Angus Brendan MacNeil]

Given the state of flux in UK politics, it is perfectly possible that within a year the hon. Gentleman could be sitting in the Minister’s seat. What would he do about all these branch closures if he were?

[Jonathan Reynolds]

First, I am very grateful to the hon. Gentleman for suggesting that such a promotion might be possible. It is not something we can take for granted, but I will specifically address the RBS branch closures later in my speech. I want to make the point at this stage that rightly, and for a variety of reasons, the British public are questioning the return that they have got for their investment in the banking sector.

Much of this debate has been about branch closures. I think that everyone in the debate has admitted that we are in a time when the banking sector is undergoing considerable technological change. The exciting bit of that is the potential to deploy some of the advances for the benefit of those people who have had trouble interacting with the traditional banking system. It always confounds me that this country can play host to the most successful and most global financial sector in the world, yet at the same time we have such high levels of financial exclusion. More than 1.5 million people remain entirely unbanked. In many cases, how the traditional banking system has worked has compounded the problems rather than seeking to solve them.

I want to see new technology give us new ways to address financial exclusion, rather than being used as an excuse to push more people towards the excluded position. There is no doubt that the reports that the sector itself is looking into show how low-cost, flexible and accessible services can be provided to people who are excluded. Doreming, for example, allows individuals to shop without access to a bank account. We want to work with both the banking sector and regulators to ensure that such initiatives can access a level playing field, with the right safeguards for those who use them. When I talk to people in the financial sector, they show huge enthusiasm and passion for using their expertise to make the sector world leading and to address some of these issues. However, 10 years on from the financial crisis, rather than having that moment of reflection and seeing what new opportunities we could use to tackle financial exclusion, debates such as this, about the sense that banking is being removed from more and more people, seem to dominate.

It is crucial that we use technology to benefit all consumers, rather than creating a pared down, automated banking sector that leaves vulnerable customers without the support they need or that gives us a situation akin to what we see in the energy market, where a small group of savvy consumers get quite good deals, but at the cost of a larger group of people subsidising them and getting quite a poor deal.

Specifically on branch closures, there is no doubt that the branch network has been shrinking at an accelerating rate. In December 2016, Which? reported that more than 1,000 branches of major banks had closed between January 2015 and January 2017, with nearly 500 more set to be axed in 2017. We have seen from recent announcements by the Yorkshire Building Society and, more dramatically, by RBS, which plans to close 259 branches, just how much that is accelerating. As I said, this has affected my own constituency: Mossley, Stalybridge and Hyde have all seen branch closures. But frankly, the scale of some of the stories that hon. Members have shared today has been quite shocking. I want to say clearly that we believe the scale of the closures is disproportionate and unwarranted and should be reconsidered. In 2015, the big four high street banks made profits of more than £11 billion from their retail businesses, which own and operate the high street networks.

Research conducted by the Social Market Foundation in 2016 found that a strong consumer appetite remains for a physical presence when banking. Nearly two thirds of consumers would prefer to talk to someone face to face when making a big decision, and nearly half of those who had visited a branch in the previous 12 months said that that was for reassurance and support with more complicated transactions. The report found that 11% of the population—nearly 7 million people—use no other banking service than their local high street branch and that those people are overwhelmingly older and less affluent. Another study found that lending to small businesses in the postcode area actually fell following a local branch closure—that has to be of concern.

If you bear with me, Mr Gapes, I will conclude in a moment, but I want to say specifically that Labour’s answer to this problem is to propose a change in the law regulating banks, so that no closure can take place without appropriate local consultation—not a tick-box exercise—and without Financial Conduct Authority approval. A future Labour Government would obligate banks to undertake a consultation with all customers and to ensure they involve representatives of the relevant local council. The branch would be mandated to publish details of the reason for closure and include the relevant financial calculations showing the revenues and costs of each branch affected. The share of central costs such as accounting systems, IT, cyber-security and personnel allocated would have to be separately identified, especially as many of these costs are relatively fixed and are not proportionate to the number of branches in the network.

I thought the suggestion from my hon. Friend the Member for Bishop Auckland is absolutely the right one and I have considered it for some time, that is, how, when branches leave the high street, the sector can come together to provide a joint solution. Those of us who use online banking recognise that there will parts of our lives in the future when we might no longer be able to do that—whether because of dementia or Alzheimer’s—and we need a solution.

In conclusion, Britain has a world-leading and robust banking system, but the banks must work with all of us, as policy makers, to tackle problems such as the lack of investment in this country and financial exclusion, and crucially to make sure that we move away from a country mired in personal debt to one with robust savings. Only when they are able to do that and show that their branch networks are part of that, will they be able to restore some of the faith that was lost in the sector 10 years ago.

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[John Glen]

Thank you, Mr Gapes. If I am going to get through and give some detail, I need to press on. The point I am making is that, in a number of cases, alternatives are available. I want to make that clear—it needs to be made clear by us to our constituents.

The hon. Member for Bishop Auckland (Helen Goodman) and another hon. Member made a constructive suggestion about shared premises. That is obviously a decision for individual banks to consider, but through the office that I hold I would encourage the industry to think creatively about how banks can continue to serve their customers and minimise the impact of bank closures. Those are certainly conversations that I will take forward in my engagement with the industry.

Let me get back to the script, as it were, and try to make some progress so that I can address some of the issues that have been raised.

[Angus Brendan MacNeil]

Before the Minister goes on, will he give way?

[John Glen]

I will not, if the hon. Gentleman does not mind. I realise that his constituency is perhaps unique in the United Kingdom, and I acknowledge that those alternatives are not going to be available in every circumstance, but that was not my purpose in making that point. What I am trying to say is that there are alternatives and we should be talking about them.

The responsibility of banks is to consider the impact of closures on a community and to mitigate that wherever possible, but as we have heard today, and as the title of the debate suggests, banks are much more than just bricks and mortar. Their contribution to our economies and communities does and should go much wider: providing basic bank accounts to those who need them; providing the mortgages that help young people to get their first step on the housing ladder; and offering financial education.

I will now set out some of the ways in which banks are developing and evolving. Like all businesses, they must adapt to changing customer behaviour. The industry estimates that branch visits have fallen by roughly a third since 2011, just seven years ago. Three times out of five, when customers need to make a payment or otherwise interact with their current account, they use a mobile to do it. It is easier and quicker than it has ever been before to manage our money in that way. We are much less likely to use a physical branch on a regular basis, and that has driven some of these decisions. The banks’ branch networks are changing to reflect that, and I suspect that trend will continue.

Earlier this year, we saw the implementation of open banking, a new initiative that will transform how we are able to manage our finances, unlocking new opportunities for businesses and consumers. Good-quality broadband is important to ensure that these innovations do not leave anyone behind. That is why the Government are taking action to support access to these new digital services. The new universal service obligation on high-speed broadband will give everyone in the UK access to speeds of at least 10 megabits per second by 2020, which should play a big role in enabling some more of these services.

We are supporting customers who still need or want to bank in person. The Government support the industry’s access to banking standard, which commits to providing a minimum of three months’ notice. Some banks are giving longer periods—I believe that RBS was giving six months’ notice of closures in December. I note the observations of some Members on the inadequacy of that process, to which the banks will need to respond, but there is a practical way that we can shape the banks’ approach in a local area. The access to banking standard is overseen by the independent Lending Standards Board. It will monitor how banks, including RBS, fulfil their obligations to their customers under the standard, and it is responsible for enforcement.

The Government have supported improved face-to-face banking services at the post office, which is a critical element. The post office network is in good health, and the number of branches grew significantly in 2017 for the second year running. As a courtesy, I need to make way for the hon. Member for East Lothian to respond to the debate.