Budget Resolutions and Economic Situation

Debate between Catherine West and Jonathan Reynolds

Thursday 16th March 2023 Commons Chamber

[Jonathan Reynolds]

I am grateful to my hon. Friend for his question. He will know that he represents several members of my family, so I have personal knowledge of his constituency, and they think he is a very fine Member of Parliament. Because of my family and my personal heritage of growing up in County Durham and mining communities, I know the issues he talks about, particularly those around profit sharing and the surplus and reserves of the mineworkers’ pension scheme. There is a case to look at there, and I would be more than happy to engage with him on those issues for the benefit of his constituents and those of other Members in the Chamber.

We are seeing people cutting back on all they can, but still being left with too much month at the end of their money. The British public need only ask the following questions. Are they better off after 13 years of this Government? Are they safer? Are the public services they rely on working better than a decade ago? No, no, and no again. At the core of that failure is the hard truth that, over 13 years, the Government have turned the UK into the worst-performing major economy in the world. That failure is at the heart of what is hitting people’s pay packets and public services. As we have heard many times in the debate, the British economy is the only developed economy in the world that has still not recovered to its pre-pandemic size.

[Catherine West]

My hon. Friend is making an excellent speech. Does he agree that without reforming housing—be it the overly pricey private sector, the lack of social homes or the mortgage crisis created by the last Budget—there can be no real growth?

[Jonathan Reynolds]

I am grateful to my hon. Friend for raising those points, because housing is another area that we heard very little about in the Budget yesterday. Perhaps that was because of the mortgage premium that many people in this country are paying as a result of the last Conservative mini-Budget, if we are still able to call it that—the impact certainly was not mini. My hon. Friend makes some very good points about what that means for her constituents.

We have seen the lowest business investment of any G7 nation, and wages are at the same level as they were in 2008. I spend pretty much all my time talking to businesses, and I often genuinely find myself thinking, “With all the brilliant things in this country, how have this Government managed to do so badly?” The big story of the Budget is the same as ever: low growth, high taxes and poor public services. To truly realise the ambition of this country, we have to change course from that. Half measures on childcare, which will take years to come to fruition and just pile more costs on to providers and parents, will not cut it. Saying we want to be a science superpower or a leader on clean energy is not the same as delivering the measures to actually do it, and spending millions of pounds on a handful of very wealthy people getting even bigger pensions will not drive the kind of dynamic labour market we need. The big, bold and radical ambition for this country will come only from a Labour Government.

Crucially, the Budget comes at a time when we can no longer put off the major decisions on net zero, because our competitors are pulling ahead. The Inflation Reduction Act in the United States and the Net-Zero Industry Act in the EU have radically affected the relative competitiveness of the UK, which is a point that my hon. Friend the Member for Stockton North (Alex Cunningham) made particularly well. When it comes to climate change and the chance to reindustrialise parts of Britain, we are presented with the fierce urgency of now.

This year, we have already had bad news from Ford, which is cutting jobs in Essex. We have had bad news from British Steel, which is cutting jobs in Scunthorpe. We have had bad news from AstraZeneca, which has chosen Ireland over Cheshire. This is the challenge that I wanted the Budget to rise to, because I want to see the Government put up a fight for Britain. After 13 years, I am sick of austerity, poor public services and stagnation. If, like us, people want hope, optimism and change, it should be clear by now that it will not come from doing more of the same.

We all know that the Government have a poor record on crime, but perhaps even we did not expect them to be so brazen as to commit an act of burglary themselves by taking so many of Labour’s ideas for the Budget. Indeed, we have heard many speeches today extol the benefits of childcare reform, keeping the energy price freeze and ending the injustice of prepayment meters. I say to Ministers that they are very welcome, as we are more than happy to share our ideas with a Government who have seemingly run out of their own. But rather than have the half-fat versions of our plans, why not go the whole way and bring the fundamental change that this country needs with a full Labour Government?

At the top of that list is that Labour believes that this country needs an industrial strategy, one that is not about picking winners; an industrial strategy means having a plan to keep Britain competitive in the global race. This Government have a curious mix of big state, top-down targets and a kind of total libertarianism in how to deliver them. For example, it is Government policy to force residential and commercial property to meet higher standards in just four years’ time or be removed from the market; to decarbonise home heating; and to phase out petrol and diesel vehicle sales in just seven years’ time. But the Government are not on track to meet any of those targets because there is no plan to deliver any of them. Just to retain our existing automotive industry we will need 10 battery gigafactories, but we have one. Germany has 10 times that capacity, and every day we fall further behind, more jobs and industries go elsewhere.

Only private investment and public investment pulling in the same direction can deliver the wall of money we need to renew this country. We accept that we cannot possibly equal the awesome fiscal firepower of the United States, but we can make the UK more competitive, we can target funding where it will make a difference and we can make markets deliver what we need. Let us consider a sector such as steel. We know that we must make the transition to green steel or face the likely end of the UK steel industry. Governments from across the world—Sweden, Austria, Canada, Germany—are partnering with their steel sectors to go green. We know that there is market demand for that here in the UK, but we have not got a Government willing to be the partner that industry needs. So Labour’s industrial strategy will work in partnership with industry to keep Britain competitive, not with random pots of money with no return to the taxpayer or endless changes to the corporation tax and investment regime, but with a long-term plan to make Britain investible again.

Labour also believes in a fundamentally different approach to our economy and our politics. We know what every good business leader knows: sustained growth comes from working people, and they are our biggest asset. So where is the employment Bill the Government pledged? Where is the promise, 12 months on, that there will be no more P&O Ferries ever tolerated again in the UK? Basic rights, such as sick pay, holiday pay and protection against unfair dismissal, should be for everyone. That is why we in the Labour party will always be the party of good work and good wages, and where this Government have failed to act, we will act, with our new deal for working people to do just that.

I did welcome one part of the Budget: the trailblazer announcements on devolution to my area in Greater Manchester and to the west midlands. We believe that the country is too centralised, and too often that leads to poor public services and the inefficient use of public money. But why should only two parts of England get the chance to shake themselves free from the dead hand of this Conservative Government? Why can the remaining 90% of the country not have that option too? That is why we will give every community the power it needs to shape its own destiny.

For all the talk of going for growth, at the core of this Budget is the same old Conservative malaise: the lack of ambition and vision that has turned us back into the sick man of Europe. I have sat through 13 years of Conservative Budgets, and as the years go on their claims get thinner and thinner. Last year, when inflation was rising, it was all down to global forces, but this year when it has peaked and it is set to fall, all of a sudden that is down to Conservative genius. Frankly, the British people are not fooled.

Listening to Government Members today, it seems they want to congratulate themselves on a job well done because a Conservative Chancellor got to his feet and this time has not crashed the markets, because we narrowly and technically avoided a recession, and because the growth forecasts are bad but not quite as bad in the short term as last time. Is that what the Conservatives have come to? Is that the measure of success? Have we set a bar so low that we will trip over it as we leave the Chamber today? People are paying more than £1,000 more on their mortgages right now because of recent Conservative actions. Investment and jobs are leaving our shores because of those actions. Our constituents are stuck on waiting lists because of those actions. The lack of action on tackling that is unforgivable.

We believe that Labour has the ambition to match Britain’s potential. We will take this country from the bottom of the G7 to the top. We will have the highest sustained growth of our competitor countries and deliver the public services that people can rely on. We will deliver more doctors and nurses to get waiting lists down; police officers back on the streets; higher wages and better jobs in industries that people will be proud to work in; and a plan to reindustrialise Britain, to give back our hope and our future. That is why it is clear that only a Labour Chancellor can deliver the change that our country so desperately needs.

Santander Closures and Local Communities

Debate between Catherine West and Jonathan Reynolds

Thursday 14th February 2019 Westminster Hall

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

I thank the hon. Member for Glasgow East (David Linden) and the Backbench Business Committee for enabling us to have this debate on a topic that is clearly vital to many communities.

We have heard some very good speeches today from the hon. Member for Angus (Kirstene Hair), my hon. Friend the Member for Heywood and Middleton (Liz McInnes), the hon. Members for Sutton and Cheam (Paul Scully), for Strangford (Jim Shannon) and for Tiverton and Honiton (Neil Parish), my hon. Friends the Members for Ynys Môn (Albert Owen) and for North Tyneside (Mary Glindon), the hon. Member for Barrow and Furness (John Woodcock), my hon. Friends the Members for Plymouth, Sutton and Devonport (Luke Pollard), for Hornsey and Wood Green (Catherine West) and for Glasgow North East (Mr Sweeney), the hon. Member for Central Ayrshire (Dr Whitford) and my hon. Friend the Member for Coatbridge, Chryston and Bellshill (Hugh Gaffney). That is quite a coalition, by any measure of parliamentary activity. Each of those speakers articulated very well the impact of bank branch closures—not just by Santander, but more widely—on their communities. Each speech raised several issues of public policy that I certainly agree need to be addressed.

The debate has shown that the challenge to maintain a banking sector that works for everyone at a time of rapid technological change is not being met and that the balance between digitisation and traditional banking models is not being got right. I want to say a few words to concur with the sentiment in the room today, but also a little about some possible solutions to these problems.

In advance of the debate, Santander provided some statistics on how people use its services and how that has changed. It said it has experienced a decline of about a quarter in branch transactions over the past three years, including for branch ATMs. It went on to say that that trend is expected to continue, with a projected 37% decline in branch visits across the industry in five years’ time. That is an empirical case for branch closures. We understand that—it is based on numbers and projected future demand. Those numbers alone, however, do not tell us the real story of how people depend on some of those services.

Today we are here specifically to debate the impact on local communities, and to do that, I want to share with colleagues and with industry, which will listen to the debate, the experience of my constituents and what bank branch closures have meant for them. Thankfully, the Santander branch in Hyde is not earmarked for closure in this round, but in recent years my constituency has lost branches of RBS, Lloyds, HSBC and Yorkshire Bank. Yesterday, on my Facebook page, I asked my constituents to share with me some of their direct stories of what that has meant for them. The first comment was:

“Losing the Lloyds in Stalybridge has been a blow. Yes there is one in Ashton”—

the town next door—

“and there is online banking. But there is no substitute for making an appointment you can walk to, talking to an actual human being.”

Another constituent, from Droylsden, which is just outside my constituency, said:

“Here…we now don’t have a single bank! We’ve gone from having Lloyds, NatWest, Royal Bank of Scotland and Halifax to having none!!! Our infrastructure dwindles by the day.”

The problem is even more acute for colleagues in more rural constituencies.

For businesses as well as individuals branch closures have posed particular challenges. One business owner—an existing Santander customer—said:

“You can do banking at the Post Office but, in order to pay things in, you have to get in touch with your bank first and get paying in slips sent out. Santander would only send me 5 and I have run out now. It means that I can’t accept cheques for my business easily, and I don’t have time to keep ringing up for more paying in slips.”

Someone else said:

“It’s a killer for small businesses, who have to close their shops to go and stand in a queue for a lengthy period of time just to get change.”

[Catherine West]

Given the history over the past decade of how small businesses have been let down by the big banks, does my hon. Friend agree that this is yet another slap in the face for small business?

[Jonathan Reynolds]

I agree with my hon. Friend. She is right to highlight—she did so in her speech—the many difficult issues with conduct in the UK banking industry, and specifically the abuses of lending to small businesses, which we have had many debates about in this Chamber and the main Chamber. Such abuses are particularly difficult to hear about—people have suffered some real abuses—and compounding them makes things especially difficult.

I have heard some particularly moving stories from those who care for others, who have borne the brunt of some closures. This comment choked me up:

“My mum with Alzheimer’s relied on her Lloyds branch in Droylsden before it was shut. The staff knew her well and helped her. They knew her condition and if she was in a bad way they would phone me and give her a cup of tea while they waited for me to arrive. The staff said there were lots of other people like my mum. The closure really affected her.”

Such stories show that we are talking about real people and the impact on their lives. Those are real experiences. The data do not always reveal that. The banks, of course, have the right to present that data to us, but our job is to tell the human side of the story.

We cannot hold back the tide of technological change—like some of my colleagues, I am not a luddite, and I love technology—but we can stop to think about how to make it work for us, not the other way around. Without protection the move to online as a default option will risk leaving the most vulnerable and marginalised in our society without services that work for them.

As we have seen in the debate around ATMs—which were raised several times in this debate—the risk is that we will sleepwalk into a society without access to cash at all, with the industry realising that we need those safety nets only when it is too late. Access to cash is becoming an increasing challenge for people, following bank closures and the decline in our high streets. The chair of the Payment Systems Regulator, Charles Randell, was right to ask in a Treasury Committee evidence session earlier this week whether access to ATMs should be seen as a universal service. I am sympathetic to that.

No one wants to prevent innovation. Indeed, some technological advances, such as remote video appointments or audible speaking ATMs, could for the first time help to include people who have historically had trouble interacting with traditional banking. Our objective, however, must be to use technology to benefit all customers, rather than creating a pared-down, automated banking sector that leaves people without the support they need.

The bank 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. Banks stopped publishing data on closures in 2015, and there is now no central source for it, so the exact number of closures becomes more and more difficult to find out. Since those figures were published, however, we have seen multiple further closure announcements from banks, including Yorkshire Bank, RBS, Lloyds and now Santander.

The scale of the closures seems disproportionate and does not necessarily match how people want to use their bank branches. Also—this has come out in the debate—some of the modelling around the closures does not reflect the fact that branches are all closing at the same time. That was particularly the case in Scotland with RBS. Research conducted by the Social Market Foundation in 2016 found that strong consumer appetite remains for a physical presence. Nearly two thirds of consumers would prefer to talk to someone face to face when making a big financial decision.

A report by Move Your Money, published in July 2016, made the damning assessment that, far from responding to market pressures, the major UK banks are simply closing branches in poorer areas and opening or retaining them in more affluent ones. That is simply not acceptable. The same report mapped bank branch closures against the postcode lending data from the British Bankers Association, which is now UK Finance, to show that bank branch closures dampen SME lending growth significantly in the postcodes affected. The figure grows even higher for postcodes that lose the last bank in town. At a time when we all want to stimulate more lending to SMEs and to encourage growth, a sustained programme of bank branch closures risks taking us in precisely the wrong direction.

Labour’s answer to that is a proposal to change the law regulating banks so that no closure can take place without a real local consultation or the Financial Conduct Authority approving the tranche of closures. A future Labour Government would obligate banks to undertake a real consultation with all customers of the branch proposed for closure, including local democratic representatives on the relevant local council. The bank would be mandated to publish details of the reasons for closure, including the financial calculations showing the revenues and costs of the relevant branch. The share of central costs such as accounting systems, IT, cyber-security and personnel would have to be identified separately, because many of those costs are relatively fixed and not proportionate to the number of branches. The FCA’s approval would be needed for any bank branch closure. We think that is the right balance. It accepts that, as technology changes, there might be some closures, but it would ensure that customers are not forgotten about or taken for granted.

That is our policy on closures, but as my hon. Friend the Member for Ynys Môn said, we wish to go further. The Post Office is often referred to as the solution to bank branch closures, through its relationship with the Bank of Ireland. That is better than nothing—something like £14 billion in deposits is held in accounts linked to the Post Office—but there are clearly shortfalls. The hon. Member for Central Ayrshire highlighted some of those in her speech.

The potential exists, however, to build on that model and to create a genuine Post Office bank, which would ensure universal access to banking services for every part of the UK. It would be a standalone institution; it would pay the post office network for use of those branches, and it would therefore replace the network subsidy payment. It would offer a future for the Post Office, as well as for financial services in every part of the country. It would be held in a public trust model, with 100% of the shares held in trust for the public benefit, ensuring that no future Government could seek to privatise it. I plan to develop those plans and to present them in more detail in the near future, alongside our plans for the future of the public stake in RBS and other measures designed to increase plurality in the banking sector, including the return of new post offices to the UK.