Santander Closures and Local Communities

Debate between Catherine West and Paul Sweeney

Thursday 14th February 2019 Westminster Hall

[Mr Sweeney]

A rare collegial moment for the Chamber, perhaps. I agree entirely, and I was just about to come on to that issue.

When I met with Santander management last week to discuss the closure of the Springburn branch, I made the observation, “I recognise exactly why you’re doing this.” They did not deny it. I also said, “Yes, there needs to be total visibility about the economic impact and the disparity in terms of the demographics of where these bank closures are happening, because there is no visibility of that pattern.” This was recognised long ago: in the 1970s in America, there was a practice called red-lining, which involved American banks deliberately blacklisting poorer communities and withdrawing banking services.

In 1977, the Carter Administration passed the Community Reinvestment Act. As a result, commercial banks in America are obliged to redistribute their profits into sponsoring co-operative banking services and mutuals, and to promote credit unions. There is therefore a much more diverse range of banking services as a result of direct Government intervention to redistribute those services, which dates back to the 1970s. As a result of the Community Reinvestment Act, Santander will invest £11 billion in sponsoring co-operative banking, mutuals and other sustainable banking activity. That is a hefty redistribution and is in stark contrast with what happens in the United Kingdom, where there is no legislative imperative for banks to do it. We need to address that yawning chasm in legislation.

I made the point to the Santander management that the root cause of a lot of these problems is the increasing monopolisation of the banking sector in the UK. We have five major clearing banks, which hold 85% of all current accounts. By comparison, in Germany there are 400 local Sparkassen banks and over 1,000 co-operative banks. Clearly the picture there is very different, because there is legislation in place to redistribute the holding of capital in the banking system, so it is done more sustainably and is more responsive to local communities and to sectors of industry. As a result, Germany has a much healthier and more balanced economy.

I also made the point that Santander’s origins lie in the Abbey National, which was demutualised in 1989, the year I was born. We have seen a pattern of demutualisation across the banking sector, which has been negative for the UK economy. I would seek legislation to reverse the demutualisation of the British banking system.

[Catherine West]

Is it not particularly galling that a bank that used to be a building society with a sense of social conscience is inflicting this huge series of bank closures on our local communities?

[Mr Sweeney]

Absolutely. It is a stark example of the exploitation that we see on multiple fronts. We see it not only in universal credit, jobcentre closures and post office closures, but in things such as fixed-odds betting terminals and bookmakers being concentrated in poorer communities and high streets. We also see a stark contrast in microcosm in Springburn shopping centre. Right next door to the Santander branch is a branch of BrightHouse, which is a rapacious lender exploiting the poorest communities in our country. In my opinion, its practices should be illegal. It is just as bad as the payday loan lenders. That is a good example in microcosm in Springburn of what is wrong with the British economic system, writ large. We need to address that.

I hope the Minister will reflect on the reality. He is welcome to come and visit my constituency and see what it looks like on the ground. If we do not fix it, we will entrench economic division, alienation and the sort of social tensions that exist in our country, and which might have erupted as the reason why so many people voted to leave the European Union. A source of their frustration was an economic system that does not serve their interests. This is all connected; there is a complex interdependency. We need to address the wider tensions in society. This is yet another example of what is wrong with the state withdrawing from regulation and permitting neo-liberal practices to prevail. It is a major concern and needs to be addressed.

In the case of Springburn, the bank justified its closure programme by saying that there was a 25% reduction in footfall. I accept that the industry is subject to disruption due to changes in technology, as the hon. Member for Barrow and Furness (John Woodcock) said. However, the curve is way ahead of where people are at on the ground. The Government should be involved in closing down that gap, so that it reflects the real transitions that people make, particularly elderly people and disabled people.

It was claimed that 91% of people use a variety of other ways to engage with the bank in Springburn, but that includes phoning up the local branch to make an enquiry and using an ATM. Those are not mutually exclusive activities, so that is a questionable statistic. A minority of users—only 46%—use another Santander branch. The nearest branch is in Glasgow city centre, which is an expensive bus ride away for many people, particularly given that the community has a very low car ownership rate. A minority of customers—only 49%—use online or telephone banking services.

The Springburn branch is proposed to close in June this year, yet Santander’s lease will not expire until December, so for six months it will be a blight on the community with boarded up frontage. I want the bank to address that, as a minimum. If it is going to close the branch, it should ensure there is a transition. I appeal to it to realise its social responsibilities.

Ironically, at 2 pm today the Springburn Regeneration Forum kicked off across the way from the Santander branch in the Springburn shopping centre that is proposed to close. It is a community-led approach to bring together the council and other stakeholders to plan the regeneration of Springburn. What a blow that on the same day that that is happening the bank across the way in the Springburn shopping centre has announced that it is pulling out of the community. That is a sad illustration of our commercial banks’ lack of social conscience. That should be addressed. If the banks do not do so voluntarily, it should be done through legislation.

In a nutshell, that is what I think is wrong with the UK banking system and what the Minister should reflect on. I am sure our Front Bench team will do so, too. I am a Labour and Co-operative Member of Parliament. We are committed to a massive restructuring of the UK banking system in favour of co-operative banking, mutuals and a more equitable form of financing our economy. That is what we are supporting.