Bank Closures: Impact on Rural Communities

Baroness Blake of Leeds Excerpts

Thursday 13th February 2025 Lords Chamber

[Baroness in Waiting/Government Whip (Baroness Blake of Leeds) (Lab)]

My Lords, I thank the right reverend Prelate the Bishop of Newcastle for this very timely debate. I reassure her on behalf of all of us that the number taking part is no reflection of the significance of the debate: rather, it is a reflection of the time of day in the run-up to the recess. I thank other noble Lords for their significant contributions to the debate. By way of context, I will say that I live in a small market town and have witnessed the decimation of the number of branches. We are left with one building society branch, although a community hub has opened—so I have personal experience of the issues that have been raised.

There is an important thread running through all of this. We are of course talking about the rural economy and how it is going to survive, but the comments today have been mostly around communities, vulnerability and making sure that we are inclusive in all the work we have done. We have heard the statistics of the rapid closures today. I do not need to repeat them, but I emphasise the comments of the right reverend Prelate around her concerns at the speed with which this is happening.

We must acknowledge the change in banking in recent years. Again, I know from experience the impact of the Covid-19 pandemic, my family making sure that I got my act together and got fully included so that they did not have to worry. We must acknowledge that this has opened up a whole new tranche for people and many have benefited from the digital innovations. In 2017, 40% of UK adults regularly used a bank branch. By 2022, only 21% of UK adults still did. Almost 9 in 10 adults banked online or used a mobile app, including 65% of over-75s.

I emphasise that it is this Government’s ambition to ensure that all consumers can benefit from digital services. That is why, in the 2024 Autumn Budget, the Government announced funding of over £500 million next year to deliver digital infrastructure upgrades through Project Gigabit and the shared rural network. None the less, I assure noble Lords that the Government understand the importance of face-to-face banking to communities across the UK and continue to take action to realise the full economic potential of rural businesses and communities—picking up on the points that made by the noble Baroness, Lady Kramer.

For example, the Government intend to introduce permanently lower tax rates for high-street retail, hospitality and leisure properties with a rateable value below £0.5 million from 2026-27.

There have been many comments about connectivity, and I heard the comments that the noble Lord, Lord Holmes, made very powerfully. That is why, on 17 December, the Government introduced the Bus Services (No. 2) Bill to this House, putting power over local bus services back into the hands of local leaders, to address the concerns that have been raised today.

We have heard a lot about the target for banking hub services and we are working closely with banks to roll out 350 hubs by the end of this Parliament. As we know, over 100 have already been opened. I reassure noble Lords of the extent of the services on offer. They provide services for personal account holders, but they also offer services to business customers so that they can withdraw cash, deposit cheques and pay bills. They also have separate rooms where customers can see community bankers from their own bank to carry out the wider banking services that have been raised today, such as registering a bereavement or help with changing a PIN—whatever the need, that service is available. The Government are committed to working with industry to ensure that banking hubs meet customers’ needs. Some banking hubs are trialling opening on Saturday mornings, which is something we can all look at with interest. We will drive forward the rollout of hubs. I cannot say how many hubs will open this year—this is work in progress—but I recognise the ambition around this, and the training needs that have been highlighted today.

It might help if I set out the FCA’s rules that underpin the rollout of banking hubs. When a bank announces a branch closure, LINK, the operator of the UK’s largest ATM network, will carry out an impartial assessment of communities’ access to cash needs. Where LINK recommends a banking hub, Cash Access UK—a not-for-profit company funded by the major banks—will provide it. Where a closure triggers an assessment, the branch cannot close until any LINK-recommended services have been installed. I hope that gives some reassurances about the concerns raised.

LINK considers population size, the number of small businesses and levels of vulnerability. It also considers the distance to the nearest branch and the cost and travel time via public transport. Anyone who feels a banking hub is needed, including members of this House, can request an access to cash review directly through the LINK website. The noble Baroness, Lady Kramer, highlighted access to services. The Government are determined to see local communities get what they need when it comes to cash and banking services and are continually working to improve this.

I pay enormous tribute to the noble Lord, Lord Arbuthnot, for the work that he has done with post offices. I recognise what he said about them being at the heart of the community. I remember the days when you used to go on a weekly basis to pick up child benefit, and the people that you met. When you did that, people knew you were okay. I am afraid that we have lost that. I was a proud owner of a Girobank account as well, and I am delighted that post offices are stepping up to the plate in terms of offering banking services. They have a duty to serve their communities, which is at the heart of this debate, and 99% of personal customers and 95% of business customers can do their everyday banking at the 11,500 post offices around the country. The comments from the noble Lord, Lord Holmes, about communities absolutely fit in with that.

I assure noble Lords that the Secretary of State for the Department for Business and Trade has met the Post Office’s chair, Nigel Railton, to discuss the Post Office network. It is central to our thinking as a Government.

I appreciate that post office closures can be concerning for communities but, unfortunately, branches can shut down for a variety of reasons, many of which are outside the Post Office’s control. Post Office Ltd works with communities to ensure that services are maintained, and the government-set access criteria ensure that services remain in reach.

Running throughout this discussion today was the issue of financial inclusion. I am pleased that work on the financial inclusion strategy is carrying on and is being developed, alongside a supporting committee chaired by my colleague, the Economic Secretary. The committee’s mission is to tackle a range of barriers to inclusion for excluded groups. That includes work being taken forward by a sub-committee of consumer and industry representatives, focusing on key policy issues, including digital inclusion and access to banking services, which met for the first time earlier today.

I recognise the whole issue of fraud. We have to emphasise that. It is one of the most cynical crimes in the country, targeting the most vulnerable and the elderly.

To respond to the noble Lord, Lord Holmes, many firms support access to digital services through different initiatives. On the noble Lord’s point about the accessibility of card payment terminals, I am pleased that UK Finance and the Royal National Institute of Blind People have developed accessibility guidelines for touchscreen chip and pin services and an approved list of accessible card terminals, although I accept that there is certainly more to do.

Access to cash is something that we have run through, but the whole issue of digital inclusion, as expressed so ably, is pivotal. Through the Department for Science, Innovation and Technology, this Government are taking the lead and looking forward to working around digital barriers beyond financial services, which can include customers, while the whole issue of the rollout of broadband internet services is something that we are all aware of.

What we need to understand is that access to a transactional bank account is a crucial element in supporting people’s financial resilience and well-being. I think that runs throughout this. I am conscious that there were a number of very specific questions put to me. I guarantee to write in response to those questions.

I end by thanking the right reverend Prelate again for her timely debate, and for her continued championing of rural banking access. I was struck that she broadened this out and recognised that inclusion is an issue right across the country for many of our different communities. I reassure her and the House that the Government will reflect very carefully on all the points that have been raised today in this very thoughtful and helpful debate.