Covid-19: Access to and Acceptance of Cash

Bridget Phillipson Excerpts

Thursday 3rd December 2020 Westminster Hall

[Bridget Phillipson (Houghton and Sunderland South) (Lab)]

It is a pleasure to serve under you in the Chair, Ms Ali, and to have had revolving Chairs this afternoon. My hon. Friend the Member for Makerfield (Yvonne Fovargue) and the right hon. Member for Dumfriesshire, Clydesdale and Tweeddale (David Mundell) also did fine work in the Chair.

I am very grateful to the hon. Member for Blackpool North and Cleveleys (Paul Maynard) for securing this important debate and for his excellent contribution. I should just draw the House’s attention to the fact that my husband is employed by the Bank of England. I will refer to the Bank later.

As many hon. Members have set out, the use of cash in this country has been declining for some time and the decline has been accelerated by the pandemic. Many consumers today are turning towards digital payment methods. However, as we have heard, that change in behaviour does not fall evenly across society.

According to the Treasury Committee report on increasing financial inclusion, there are still about 1 million people in the UK without a bank account and some older, lower-income households that rely on cash to budget or because of a lack of access to online banking. Many communities and many people, especially older and more vulnerable ones, still rely on cash. As we have heard, the Access to Cash review carried out by Natalie Ceeney estimated that that was the case for some 17% of the population.

We have been seeing a shift away from using cash and towards digital for some time, but that has clearly been accelerated by the pandemic. Data from LINK suggests that ATM cash withdrawals were down by 60% between March and April this year, compared with the same period in the previous year. Although ATM withdrawals have increased since that period earlier this year, the change in behaviour is likely to be long-lasting.

Many people are able to adapt to the changes and welcome them, but an unmanaged drift towards a cashless society risks seriously disadvantaging many of the people we represent. We have heard in many contributions today what that might mean for communities and individuals in regions and nations of the UK.

My hon. Friend the Member for Makerfield, who brings to the House real experience in these matters, talked about the pressures faced by families on lower incomes and described how many people find it easier to budget using cash. Like my hon. Friend the Member for Luton North (Sarah Owen), I am a GMB member. I was very pleased to hear her raise its concerns about job losses. She is a passionate advocate on behalf of her constituents, and I know she will keep pressing Government on this issue.

It is clear that we need to find ways to manage and protect access to cash. Otherwise, we risk exacerbating inequality and shutting people out from access to various services. We know that a failure to manage the transition and a sudden inability to access cash will cause problems for many of our constituents. I saw that in my own constituency last year, following the decision by Barclays to opt out of the Post Office cash withdrawal scheme. That followed a bank closure not long before in a community in my constituency. There was significant worry about what this would mean for my constituents in Hetton-le-Hole and how they would adjust. We should not underestimate the anxieties that such developments can cause and what they mean for the local high street.

I welcomed at the time Barclays’ decision to reverse the plans, but notwithstanding the wonderful news on the vaccine that we have seen, the reality is that the future of our society may well mean reduced reliance on face-to-face everyday services for some time to come, and the Government should be thinking about how we protect those services for those in our communities who would otherwise be left isolated.

In the light of that, I welcome the commitment from the Government in the March Budget to legislate on cash access, and I congratulate organisations such as Which? that have been tireless campaigners in this area. However, I am worried that if we do not get to grips with this task quickly, the cost of inaction or, indeed, slow action will only make the inequalities that we see even more severe.

Without clear legislation, we risk the creation of cash deserts. We must not allow the financial exclusion of those who rely on cash purchases. I recognise that Ministers have previously recommitted to bringing forward that legislation, and that the call for evidence ended only last week, but can the Minister set out today a rough timescale for legislating on this matter? Does he agree that the longer the current situation goes on, the more severe the consequences may be, and that uncertainty is damaging? We know that an unmanaged transition to a cashless society would not just affect families who rely on cash, but could have a significant impact on jobs and businesses. As the GMB has rightly pointed out, many small and medium-sized enterprises rely on cash transactions. Many thousands of people work within the cash transit and ATM service industry, too.

Has the Minister considered the implications that this trend will have on jobs and livelihoods? If so, what are the Government doing to ensure that businesses can adapt and plan for the future?

We know that the infrastructure around cash is a critical element in this debate, as we have heard from Members of different parties. Joint research by the FCA and the University of Bristol found that the number of free-to-use ATMs fell 19% between March 2018 and March 2020, and that number is likely to continue falling. It should worry all of us that the conversion from free-to-use to pay-to-use ATMs appears to be concentrated in deprived communities where there is much greater reliance on cash.

There is also an obvious need to protect ATMs in rural communities, as we have heard this afternoon. Across the country, the Post Office plays a vital role for those who need access to cash. In 60% of rural settings, post offices are the nearest cash access point, yet thousands of post offices remain worried about the future. Of course, that concern is not limited to rural communities. Can the Minister tell us what work his Department is doing with the banks and ATM providers to review these matters and to ensure that people who depend on cash have good geographical, and free, access to it?

The Minister will doubtless be aware of the recommendations made in the 2019 Access to Cash review about how we maintain the infrastructure. It called on the Bank of England to redesign the high cost of the infrastructure we have today so that it is tenable for banks to provide free access to cash. The review also highlighted the role that the FCA can play in ensuring that the cost of handling cash is kept on a par with digital.

The pace of technological change in the past 60 years has been extraordinary, and it is important in any area of our lives where technology has transformed the questions of who can exercise power over us and how, that as a society we keep under anxious review the question of whether we have struck the right balance between enabling commercial success and ensuring public benefit. The GMB submission to the Government’s call for evidence highlights the importance of getting the regulation right. As the GMB says, there is

“an urgent and compelling need for regulation to ensure the sustainability of the ATM network.”

We have the Payment Systems Regulator, of course, but there is a wider strategic question about the relationship between the work that it does and the availability of cash. The GMB’s view is that

“a single regulator with overall statutory responsibility”

would be the preferred outcome, and it recommends the FCA for that role. The GMB also notes, however, that it would need proper support from Government to ensure it can perform its functions effectively, given the scale of the challenge. Will the Minister set out the Government’s current thinking on how the system will be regulated in future and how we might bring costs down?

There should be a focus on ensuring alternative access to cash. We have seen a number of pilots recently across the country—I particularly note the work of LINK and PayPoint—but can the Minister tell us whether any efforts are being made to promote pilots and to look at new, innovative solutions around the issue of access to cash?

At the heart of this issue is a transition to digital forms of payment, and no one must be left behind by this transition. Of course, one of the most significant factors is the level of deprivation in an area. We must ensure that deprived communities are not left behind, so can the Minister outline what more the Government intend to communicate throughout the transition? How will they support communities in all parts of our country through this process?

It is quite right that we focus on the impact on individuals, but we must not forget the security implications of an unmanaged transition to a cashless society. The Minister will doubtless be aware of the example of Sweden, a country that is much closer to becoming cashless, and where concerns have been raised about the risk of cyber-attacks or foreign interference in a totally digital system. Consumer privacy is clearly an issue too, given the traceability of digital transactions and how so much information is stored and used. What consideration has the Minister made of these matters, and will he address the potential vulnerabilities of a cashless society in legislation?

I want to close by saying that we all recognise that an unmanaged drift to a cashless society would do significant harm to millions of people right across our country. Once infrastructure has gone or communities have been harmed, rebuilding is very hard. I urge the Minister not to delay work on this important issue and to work with all of us across the House to get the response to this issue right.