Bank Closures: Impact on Rural Communities

Baroness Kramer Excerpts

Thursday 13th February 2025 Lords Chamber

[Baroness Kramer (LD)]

My Lords, I join in the thanks to the right reverend Prelate the Bishop of Newcastle for obtaining this debate. It may be a short debate but, as others have said, it is an exceedingly important one. If it was not the last debate before recess, there would probably be a much bigger attendance but the range of comments would be very much the same. This is an area where the House has tended to be of one voice in its general concerns. That has not always penetrated through to the regulators or the banking community.

The right reverend Prelate described very accurately that the whole banking landscape has changed beyond recognition in the last five years. I accept the number of about 3,000 branches remaining open in the UK. More of them are closing on almost a daily basis. That is compared with about 10,000 10 years ago and over 20,000 in the late 1980s.

We can all accept that the rapid transition to digital banking and a broadly cashless way of life suits a lot of people. However, there are an increasing number of people and communities—especially people with disabilities, older people and particularly people in rural areas—who are being left behind because their basic banking needs are barely being met by the system as it is today. Rural Northern Ireland is an extreme example of an area of concern. Some areas of the UK can now very accurately be described as “banking deserts”, with long trips to physical branches and often not even a reasonable bus route for someone who does not have a car.

The FCA has produced new guidance on bank closures: it is very cash-focused. Is the Minister able to comment on whether she thinks it is adequate? Can she tell us whether sanctions have been applied to banks which seek to evade the intent of that guidance?

It is not just individuals who are affected. As other speakers have said, many small businesses, especially independent shops, have been very adversely impacted, and bank closures have added to that growing sense of desolation in many high streets. Surveys show that many customers feel they are being forced into a new way of banking which they find far less convenient and secure. In addition, customers whose local branch has been shut down not only are travelling long distances if they want to talk to someone about their money but feel that that whole closure process is happening without proper engagement with them, and certainly without the consent of many vulnerable groups and communities. It has simply been done to them and they feel powerless. It would be naive not to recognise that the banks are saving some £2.5 billion annually with these changes, so they are very motivated to close bank branches and move away from providing that face-to-face activity. Some 5 million people still look on cash as a necessity, and 5% have no bank account.

Far too often, the debate is framed solely around access to cash. That really fails to recognise that some people want and need face-to-face banking without having to make a long journey. It might be something such as registering a death, probate, powers of attorney, support with fraudulent activity, larger payments and transfers, and help on mortgages and loans. As the noble Lord, Lord Holmes, pointed out, small businesses often find that face-to-face discussion is necessary for them to have the confidence to begin to branch out and acquire the knowledge that they need to borrow and then to grow, so it is very much part of the Government’s economic agenda.

I am concerned that banking hubs, along with post offices, are being positioned as the key solution. We on these Benches have always supported shared banking hubs, provided that they provide a good range of basic banking services, including the presence of community bankers from all the main banks on a regular and frequent basis. When the Government have the next financial services Bill, will they amend the legislation to reflect that much broader need? What measures are the Treasury and, indeed, the regulator taking to make sure that those additional banking services are very much the norm and well represented within banking hubs? I join the noble Lords, Lord Holmes and Lord Arbuthnot, in saying that the rollout has been quite glacial and that there is a serious lack of ambition in 350 banking hubs; I would assess that double, perhaps even treble that number is necessary. The Economic Secretary to the Treasury, Emma Reynolds, says that she is

“championing sufficient access for all as a priority”.

Can the Minister tell us what “sufficient” means?

As the noble Lord, Lord Arbuthnot, has said, in many small or medium-sized rural towns where a banking hub would not be viable, the Post Office is now the only remaining financial institution where consumers and SMEs can do basic banking. I am really taken with his focus on these post offices as also functioning in many ways as the heart of the community and building the relationships within it, as well as providing services. What assurances can the Minister provide on the survival of these post offices?

The Small Business Minister, Gareth Thomas, said he wanted 99% of people to live within three miles of a post office. I remember trying to deal with this issue when I was an MP, and we had a huge battle because being within three miles or even one mile required you to swim across the Thames to get to the post office that had been identified. Do we now have a common-sense approach to try to work out whether these distances make sense for people in the way that they actually have to travel? What is the timetable, and can the Minister tell us how many post offices are surviving and being protected in rural areas? It is important that they are in deprived parts of urban communities, but rural areas are a greater challenge. The Minister’s views would be extremely helpful.

Community access to cash pilot schemes have been recommended for some of these areas, supposedly with tailored solutions. Can the Minister tell us whether those pilots have taken place?

I will pick up on the concerns that were raised by the noble Lord, Lord Holmes, on digital exclusion. He is essentially the House’s expert in this area, and I found it interesting that he does not consider digital inclusion to be sufficient. He points out that this very much goes hand in hand with the ability to receive face-to-face services.

With 17% of social tenants without any internet access at home, and with so many others in areas where internet access is unreliable and difficult, what action are the Government taking on access to skills? The noble Lord, Lord Arbuthnot, asked, why not use the post office for teaching and access to skills? Also, what are the Government doing to upgrade the technology as part of financial inclusion?

Access to banking services is a necessity, not a luxury; inclusive growth absolutely requires it. Our rural communities cannot be left disadvantaged. Are the Government ready to get a grip on this issue, be radical if necessary and make sure that both individuals and businesses have the financial infrastructure they require?