Financial Services and Markets Bill

Baroness Tyler of Enfield Excerpts

Committee stage
Tuesday 7th March 2023 Grand Committee

Moved by

[Baroness Tyler of Enfield]

176: Schedule 8, page 162, line 7, at end insert—
“(1A) When exercising its functions under this Part, the FCA may issue a direction to a designated person, for the purpose of establishing a banking hub.(1B) A designated person must comply with a direction under subsection (1A).(1C) A “banking hub” is a facility which—(a) provides cash access and other basic banking services,(b) is facilitated jointly by multiple providers of such services,(c) contains private consultation spaces for users of cash access services, and(d) is established for the purpose of ensuring reasonable provision of cash access services where there would otherwise be a local deficiency of such provision.”Member’s explanatory statement
This amendment would require designated persons to comply with direction given by the FCA for the purposes of establishing banking hubs.

[Baroness Tyler of Enfield (LD)]

My Lords, this has been a wide-ranging debate and we now come to a very important group of amendments regarding access to cash and other physical banking services. Noble Lords may recall that this issue attracted a lot of interest at Second Reading and, in my view, is fundamental to financial inclusion. I remind noble Lords of my interests in the register.

I am speaking to Amendments 176 to 178 in my name. I also put my name to Amendments 180 to 184 in the name of the noble Lord, Lord Tunnicliffe. I very much look forward to hearing him speak. In addition, I am sympathetic to nearly all the other amendments in this group, which have similar aims.

My amendments are interconnected and cover face-to-face services, which the Bill does not specifically cover. Amendment 176 would require designated parties to comply with a direction given by the FCA to establish banking hubs. In short, my amendment provides, first, a high-level definition of a banking hub and, secondly, a power for the FCA to require one to be established. Without these, there is a real risk of inadequate face-to-face services being provided under the label of “banking hub”, which is not yet defined, or of no services being provided at all, despite all the warm words and promises.

I have long been a supporter of community banking hubs, as high street bank branches are disappearing at an alarming rate. To put this in context, there are currently some 5,000 branches in the country. By comparison, there were some 20,000 branches 30 years ago. Indeed, since the Bill entered Parliament on 20 July 2022, there have been 390 bank branch closures. Some estimates suggest that as many as 4,000 of the branches which still exist could close in the coming years, leaving an unrecognisable banking landscape about which customers have had no choice and no voice. It has just disintegrated before their very eyes.

Looking ahead, there could be as many as 2,000 shared banking facilities, generally referred to as community banking hubs. The importance and benefits of banking hubs, based on a full-service model—which my amendment sets out—include, first, allowing people who need or wish to speak to someone or to access physical banking services to do so. This may include people who need help and advice on complicated matters, such as loans and mortgages, or on issues such as powers of attorney, probate and third-party signature, when a family member becomes incapacitated or passes away. At moments of great emotional stress—I speak from personal experience here—people need a real human being to talk to and to navigate them through unfamiliar territory. They do not want to do this over the phone, online or in a distant town.

Secondly, for many people banking hubs could be a lifeline. We know that 5 million people still rely on cash, particularly to budget week to week. There is also a big overlap between those 5 million and the millions who are digitally excluded, deprived or otherwise vulnerable. We should not restrict the ambition of the Bill just to withdrawing cash.

Thirdly, and equally importantly, many shops are suffering. It is a challenging time on the high street. Banking hubs have been shown to improve footfall and make it easier for businesses to bank locally. Early evidence suggests that they have been welcomed in the locations where they have been installed and piloted. There is also early evidence of regeneration of the high street and of the service to individual customers. For example, the Financial Times reported that in Rochford, a local hairdresser can now stay open longer because it can bank its cash in its own town rather than having to travel. Also, Cambuslang has reported increased footfall at both the banking hub and the post office. Looking to the future, as we must, we should be using a national network of shared banking hubs to work with communities to help all our citizens to prepare to use digital services.

While there is clear potential for a major new national network of banking hubs, progress to date has been, I am sorry to say, glacially slow. We currently have a grand total of four, despite LINK, the UK’s largest cash machine network, having recommended 38 locations to receive a banking hub. There are two problems standing in the way, which this amendment addresses.

First, at present the legislation has nothing in it saying what a banking hub is. My amendment provides a broad definition that includes access, which is very important, but goes wider. Why is this important? Well, what I am calling a full-service banking hub would have a dedicated banker from your bank to offer support and advice as well as the full range of basic transactional services. There have been instances where banks have said that they are providing a banking hub when, in effect, it is a chair at the back of a church hall.

One of the big four high street banks, whose blushes I will spare—though I do not know why—set up a pop-up community service after the branch had closed. In reality, the service was advertised by a chalkboard and some flyers. It was a member of staff with a desk, a laptop and nothing else, in a small room at the back of a community centre. The banking rep could not do anything with cash, there were no cheque or printing services, and the rep could help only with very basic queries, not with actual transactions. In my book, that simply is not a banking hub.

We are told that we can expect a policy statement from the Treasury, which Amendment 181 calls for, among other things, but what guarantees do we have that it will actually provide the services that communities need? Could I ask the Minister when that policy statement will be published, what it will cover and whether we will have an opportunity to scrutinise it before the legislation reaches the statute book? I have given her notice of that question.

Secondly, given the very slow progress to date on the rollout of banking hubs, it is important for the FCA to be able to require delivery from the designated body. Delivery is a problem; as I said, of the 38 banking hubs recommended, we have only four so far. Yes, the chain of those involved in delivery is complex, with many suppliers and banks involved, as well as the Post Office, but the FCA needs to set out a clear target for rollout from the designated co-ordinating body, because without this requirement there will be endless arguments about who is responsible for what will happen, time will drag on and many communities will be left without a service.

Briefly, Amendment 177, which complements Amendment 176, relates to access to other banking activities often associated with a current account that the FCA considers to be significant. I believe that the legislation is too narrow as currently framed, as it covers only cash and would allow this to be delivered through fully automated services without real-life people present. That is not in line with the industry’s findings from the successful Rochford and Cambuslang pilot schemes that I have already talked about.

I readily acknowledge that the Bill is helpful in providing a framework to protect basic access to cash services so that the high street will still have ATMs and deposit services, which millions of people and shops rely on. However, consumers withdrawing and paying in cash also need other basic services delivered face to face. I have already talked about this, why they need it, the complexity, et cetera. If you do not have digital skills, access to broadband or appropriate devices, you often cannot use online services and increasingly face being cut off from basic financial services. The FCA must be given the powers to oversee this issue.

The amendment would give the FCA the authority to take other essential face-to-face transactions into account when it supervises banks. I am sure that none of us in this Room wants people who need face-to-face support to be left behind by an unambitious Bill. Indeed, the Bill is an ideal opportunity to protect those face-to-face services as long as they are needed, supporting millions of consumers, including the elderly and vulnerable groups, such as those with mental health problems, physical disabilities or long-term health conditions. To be absolutely clear, I am not stuck in the past. I am talking not about a bank branch on every corner but rather about protecting the core services we expect from our financial services and which many people would struggle to function without.

Amendment 178 relates to the closure of cash access services and preventing gaps in services—or banking deserts as they have been called. I have already talked about shared banking facilities and the benefits they bring to individuals and small businesses but, and this is critical, when the last bank branch announces that it is going to close, a gap rapidly opens up and leaves people simply cut adrift from vital financial and banking services. Although the existing voluntary arrangements are an improvement on what came before, they are simply not allowing for replacement services to be put in place anything like quickly enough.

The truth is that delivery is not fast enough because the incentive, frankly, is not there. In my view, the current voluntary arrangements lack teeth. I know there are some valid reasons why it is quite tricky. After all, it is a new network of services and it takes time to get these things right, particularly in relation to staffing and premises, but this is simply not acceptable for those communities where a service is recommended but not delivered. We should not accept a gap in service and nor should the FCA. The solution is simple, and this amendment would achieve it. It would give the FCA the explicit power to stop branches closing until the alternatives are in place, thereby protecting consumers, businesses and the high street.

Finally, on Amendments 180 to 182 and 184, I will simply underline the critical importance of free-to-use cash access services being in the Bill. In September 2022, there were nearly 13,000 fewer free-to-use ATMs in the UK than there were in August 2018—a decrease of nearly 25%. In contrast, there has been a much smaller decline in the number of pay-to-use ATMs. People living in the most deprived areas find it hard to access cash without incurring charges; to compound this, those on lower incomes understandably often withdraw smaller amounts of money more frequently and are disproportionately affected by flat fees, which are often in the region of £1 to £2 per withdrawal.

--- Later in debate ---

[Baroness Penn (Con)]

On interchange fees, decisions regarding the operation and funding arrangements for an ATM network are taken by the parties involved. The noble Lord will know that LINK has commitments to protect the broad geographic spread of free-to-use ATMs and is held to account against those obligations and commitments by the Payment Systems Regulator. It has specifically committed to protect free-to-use ATMs more than one kilometre away from the next nearest free ATM or Post Office and free access to cash on high streets, and it supports free-to-use ATMs in deprived areas through its financial inclusion programme.

I recognise the point that the noble Lord has made. Coming back to the provision in the Bill, while I understand that different amendments have been tabled to look at how it could be enhanced or altered, it is important to acknowledge that legislating to protect access to cash is the Government recognising the point that the Committee made and taking action to address it. We want to have flexibility in how that is delivered, but we are providing for it in primary legislation and I hope that principle is welcomed, even though there are different opinions about how it could best be delivered.

Drawing towards the end of my remarks, I was going to note specifically on accessibility that that question was considered by the most recent Financial Inclusion Policy Forum. As I was saying to the noble Lord, Lord Hunt, while the Government do not support these amendments, I hope that noble Lords recognise the action that is being taken through the Bill and elsewhere, because the Government take these issues seriously. It is right to consider the outcome that we are all trying to deliver in a changing world: accessible financial services. That can mean a range of things, such as for people on low incomes being able to budget their money or for accessibility when it comes to disability, age or other factors. The way we have tried to approach access to cash in the Bill is by looking at delivering those outcomes in a flexible way, so I hope that at the moment the noble Baroness, Lady Tyler, is able to withdraw her amendment and that other noble Lords do not press their amendments.

[Baroness Tyler of Enfield (LD)]

My Lords, it feels some time now since we started this group of amendments. I thank the Minister for her measured response in which she tried hard to reflect quite a wide range of views on the issues we have been talking about. I also thank all other noble Lords who have contributed. This has been a fascinating debate. There has been a reasonable degree on consensus in places, but by no means full consensus, and I certainly understand that.

I want to refer to a very important comment made by the noble Lord, Lord Tunnicliffe. He said that this group is different and is about whether we want a divided society. Another noble Lord said—I am sorry but I cannot remember who it was—that banks are not charities. I think we all understand that but it is for us as legislators, a point I made in my opening speech, to decide on the sort of society that we want. That is actually what this group of amendments is about.

I listened to the noble Baroness, Lady Noakes, and others, and I assure your Lordships that I am not stuck in the past. I make most of my payments by holding out my phone. However, a very helpful point was made by the noble Baroness, Lady Fox, which was that there are times when I do not want to pay like that. I still want to use cash sometimes, even though I can hold my phone out, and it is rather important that I have that choice.