Rural Bank Closures

Chris Ruane Excerpts

Tuesday 21st February 2012 Westminster Hall

[Roger Williams]

My hon. Friend makes a good point, but the responsibility lies with all the banks. They have got to come together a find a way of addressing the problem.

[Chris Ruane (Vale of Clwyd) (Lab)]

Should the Government be looking at closures over the past 10 years, and at which banks have closed branches and which have not? They could then force banks to get together and create a common policy for bank closure programmes in rural areas. Each bank would take part of the burden so that it would not be left to just one bank.

[Roger Williams]

There is a theme running through the interventions that I have taken so far. The problem is a responsibility for all the major banks, rather than for a specific bank in a particular town or community, or even in Harrow. Banks should come together and solve the problem.

Presteigne is not only a sleepy country town; it contains a number of innovative businesses such as Mangar International, which manufactures, designs and supplies rehabilitation and assisted living equipment of a sort not found anywhere else in the world. Teledyne Labtech manufactures microwave circuits, and there are a number of other businesses. We were lucky to have attracted those businesses through the Development Board for Rural Wales, and a number of manufacturing facilities sprang up in Presteigne of which we are proud and wish to hold on to. I cannot, however, see us being able to attract that type of development if there is no bank in Presteigne—it is unlikely that businesses will be attracted to areas where banking is not available.

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[Roger Williams]

I thank the hon. Gentleman for that intervention, but I think that I have made it clear that although I believe that the Government can take a degree of initiative in this field, it is really the responsibility of individual banks or banks as a whole to ensure that they are able to service these vulnerable communities, because they owe a debt of loyalty to them.

[Chris Ruane]

I thank the hon. Gentleman for giving way to me again. I do not have the exact phrase with me, but does he recall the banker who said, 18 months into the recession, that the time for remorse is over? That banker misjudged the mood of the nation then and, indeed, now. Relying purely on the good will of bankers when that is the feeling from them—the time for remorse is over—is not likely to bring about the change that most of us in this Chamber want.

[Roger Williams]

In the long run, it is in the banks’ interest to ensure that they provide a comprehensive level of service to the communities that they wish to serve and services that are more accessible and more convenient. I think that it is probably the role of the Government to sit down with the bankers, as was suggested by the hon. Member for Harrow West (Mr Thomas), and set out what should be required of banks. Not all the banks were bailed out with public money as a result of the banking collapse, but all banks have benefited from Government action—quantitative easing, for instance—and just about all banks are dependent or have depended on measures that the Government have brought forward. It is time to sit down and see what can be achieved to help these communities.

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[Chris Ruane (Vale of Clwyd) (Lab)]

I want to carry on where the hon. Member for Montgomeryshire (Glyn Davies) left off and talk about the public reputation of banks in the UK—in fact in the whole world. Banks today are not in a good place. Earlier, I mentioned the quote, “The time for remorse is now over”. The banker who said that totally misjudged the mood of the nation. Having been through the expenses scandal, we as MPs recognise this situation. We know that we have to build bridges with the public, and the banks and the media must do the same. Of all three sectors, the banks are showing the least remorse and seem less anxious to make good their reputation with the public. They must look again at the balance between profit and social responsibility. Banks are about profit, but as they make that profit from people and from communities, they bear certain responsibilities, which we have not witnessed their fulfilling since the banking crisis. They have the opportunity to learn their lesson and to make amends with local communities, especially in rural areas. It sticks in people’s guts when they hear about billions of pounds being set aside for bonuses while branches are being closed. Such action does not sit well with the British public. Banks should perhaps take some of those bonuses and reinvest them in rural and poor communities across the UK.

The local presence of a bank in a high street or a village is very important. It is about making a commitment to a community. In the past—I will not go too far back—local bank managers were trusted pillars of the community. They were down at the golf club, picking up the local knowledge. They knew who was a sound investment and who was not, so when they were sat across from someone who wanted money, they were able to give the appropriate advice. That cannot be done by proxy from a city 20 or 30 miles away, or from a town 10 or 15 miles away. Understanding the vibes of an area and keeping a finger on its pulse needs to be done in the community; local knowledge and local presence are very important and lead to sound lending. Banks were also involved in the wider community; they were in the business groups and the town centre forums, using their expertise and knowledge to help local people.

There has been a lot of bank kicking today; I have done it a bit myself, but let me mention some examples of good social responsibility that I have come across over the years. About 10 years ago, I wrote to all the banks in my constituency and said, “What is your corporate responsibility agenda? What do you give back to the community?” I had an excellent response from Barclays’ Wendy O’Raheilly, who was based in Cardiff. She said that she would drive 200 miles there and 200 miles back to tell me about it. She told me that at that time, Barclays was the second biggest corporate donor in the country, donating some £52 million. Sue Jones, Barclays’ local person based in Rhyl, attends every Rhyl in Bloom meeting. She brings 70 Barclays personnel from all over the UK to help out in community initiatives. There are clearly some good banks. HSBC has received a kicking here today, but its local person, James Smith, attends all our town centre forum meetings. I wrote to the HSBC chief executive for the whole of Europe, Brian Robertson, to tell him what a great employee he had. He then got on the phone to James Smith, saying how pleased he was to receive such a letter. Some banks take their social responsibility seriously; other banks need to do more. The Britannia building society is now getting active in my local community in Rhyl.

In the interests of transparency, the banks need to advertise what they are doing. They need to tell us the criteria for closing down rural banks. We need to know what is best practice and how we can push the worst practice upwards towards best practice. Some banks inform MPs of their branch closures. Do they inform the town council, the county council or the community council? How far in advance do they do that? Do they produce the criteria for closures so that communities can argue against them, or is it all done and dusted before the dialogue is started?

My hon. Friend the Member for Harrow West (Mr Thomas) made the excellent suggestion of holding a summit with the banks. I hope that the Minister and the shadow Minister, my hon. Friend the Member for Chesterfield (Toby Perkins), will hold such a summit and invite rural MPs from across the House. Actually, why keep it to rural MPs? Perhaps all MPs who are experienced in bank closures should be invited.

We need historical perspective: how many branches have been closed by each bank; what percentage are they of the total number and were those branches in rural, urban or poor communities? That will give us a picture and allow us to say to a bank, “Yes, we can hold you up as best example and you, as worst example.” We need a ranking of banks. Which are the banks that have social responsibility and which are the ones that do not? I am not sure whether there is an all-party parliamentary group on banking. If there is, I have been inspired to join it after today’s debate. Perhaps it would have a role to play. Perhaps we should be tabling parliamentary questions on the matter. Are such closures being recorded by Government? Part of this Government want a hands-off approach towards the private sector because they want to let it get on with its business, but these are big issues affecting our communities. Access to finance can help decide whether communities in rural or poor areas flourish or die. I fully back that idea of a summit, and hope that it is taken up by the Minister, the shadow Minister, the all-party parliamentary group and MPs.

What can be done with these closures? We can look at what the Labour Government did with the post offices; we had to close them in some rural communities and it was a painful process. Can the private sector learn from the public sector? In our closure programme, we looked at where a post office was and where the next one was. We studied the radius around the post office under threat. Everything was done mathematically and systematically. Should the banking sector get together and co-operate? They could cut their costs if they said, “We won’t close a bank here if you don’t close a bank there.” Is there synergy to be had among the banks in the banking sector? Is there enough co-operation? I understand that it is difficult because they are all after the same pot; they are all after profit. If they have social responsibility, they should consider more co-operation.

Mobile banks have been mentioned today. We discussed and implemented such a strategy when we closed the post offices. We had post office mobile vans going around the country. Could there be any co-operation between the post office mobile vans and mobile banks? Such a scheme will cost money, but it might be a sound investment for the banks, not only economically but socially, because their reputation would improve.

Is there room and opportunity for the banks to co-operate with the credit unions, which have already been mentioned in this debate? If banks are pulling out of an area, could they co-operate with credit unions—again, giving them a bit of a subsidy—to move into the areas that they are moving out of? Is more co-operation possible with static post offices, rather than just with mobile post offices? Money is being collected and deposited in those post offices. Are there any synergies between the banks and the post office network?

There have been a lot of good suggestions today from Members of all parties; I think that the debate has been consensual and further progress can be made; and I thank the hon. Member for Brecon and Radnorshire (Roger Williams) for securing this debate, which has been well attended. Indeed, the hon. Gentleman took lots of interventions; he was very generous in doing so, especially with me. And some good has come of the debate.

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[Chris Ruane]

I thank the hon. Gentleman for giving way, especially as I had babbled on for 10 minutes before him. Regarding the loss of those facilities—the pubs, schools, post offices, banks and petrol stations—within rural communities, does he think that there is an onus on those communities to accept more housing and not to lump all future housing developments in urban areas? I represent an urban area and a rural area, and as we look at housing development over the next 10 years, the feeling is that all the houses should go to the urban areas to preserve our rural areas. But each community should expect to have a 10% increase in housing, with social housing, so that there is mixed tenureship, and family housing, so that communities can keep the schools, pubs and post offices open, because people are living in them.

[Simon Hart]

The hon. Gentleman tempts me to engage in a debate about affordable housing and rural areas, and I am not sure that the Chairman would forgive us if we were to do so this late in the day. Perhaps we can have that conversation over a cup of tea after the debate, if he does not mind my putting it that way.

In an earlier intervention, I mentioned the irritation that I experience at being charged exorbitant sums to take my own money out of certain cash machines, but there is another element to the availability of cash that I did not refer to: cash-in as opposed to cash-out. The right hon. Member for Torfaen (Paul Murphy) may have mentioned this point already, but rural areas survive—survive a lot, in the case of my constituency of Carmarthen West and South Pembrokeshire—on tourism-related events and tourism-related industries, which often involve people who carry substantial amounts of cash. When there is a fundraising event in a local area, or indeed a busy weekend in general, the need to get any cash that is made into somewhere that is reasonably safe reasonably quickly goes to the heart of the social responsibility that the hon. Member for Vale of Clwyd (Chris Ruane) referred to. We must bear in mind that there is a proper need—not just a desire to be treated differently—to get that money into places where it is safe, as soon as it is possible to do so.

On the topic of a summit, as yet no one has mentioned the requirement for banks in the rural areas that we are talking about to address—again and again—lending. We all know, and indeed we have heard today, that there are very responsible staff and managers of local banks, but they have their hands, feet and everything else bound by central office lending guidelines. To me, it is one thing to debate the availability of banks on the high street for our rural communities, but let us also get those banks lending. I suspect that the guidelines for such lending no longer lie with the bank manager in Narberth, Whitland, St Clears or wherever it might be. I have here an e-mail from NatWest that is about the closure of the NatWest branch at Whitland in my area, but it comes kindly from the Royal Bank of Scotland at 280 Bishopsgate, which I suspect is where most of the decisions are made with regard to rural banking. Therefore, I say to the Minister that if we are to have a banking summit, let us also deal with lending to some of the small and medium-sized enterprises in rural areas.

I also want to talk about high street prosperity. We had a debate in the main Chamber the other day about the Portas report, the Government’s warm recognition of its recommendations and how we can regenerate one or two of our ailing high streets as a consequence of the advice that the Government has received from Mary Portas. Of course, within all that discussion, there is a need for a vibrant high street banking facility. Such a facility is one of the vital pieces of the economic jigsaw in our rural market towns, and no jigsaw works if a vital piece is missing. So we cannot accept the Portas report and then say, “But not banking.” We have to accept high street banking as part of that package, and as I have already said, I hope that—as part of the proposed banking summit or even perhaps as part of the Minister’s summing-up of this debate—reference can be made to that issue.

Sharing facilities was mentioned earlier by hon. Members from all parties, and it is an extremely helpful development. Mobile facilities have worked in one or two rural areas, as far as post offices are concerned. Having referred to the e-mail that I received from NatWest, I must say that NatWest has been helpful in our area by

“working closely with the Post Office to make changes to its IT systems to enable customers to use the Post Office branch network”,

as its e-mail sets out. That is a positive development in terms of shared working, which I commend NatWest bank for making.

Finally, my hon. Friend the Member for Suffolk Coastal (Dr Coffey) made the point about a possible investigation into rural bank closures by the Office of Fair Trading. It would be helpful if the Minister leaned in the direction of working with the Welsh Assembly Government—or the Welsh Government, as they now like to be called—with regard to making a proper team effort to address the impositions put upon rural communities as a consequence not only of bank closures but other closures of facilities. Rural communities do not want special treatment, but they want to be able to function on equal terms with the rest of the UK.

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[The Economic Secretary to the Treasury (Miss Chloe Smith)]

I hope you will excuse my slightly unorthodox speaking style, Mr Brady, due to a broken foot. I thank the hon. Member for Brecon and Radnorshire (Roger Williams) and his colleagues, who are now giggling in the back row. I also thank the other Members who have contributed to this important debate. It follows the interesting and useful debate secured last year by the hon. Member for Brecon and Radnorshire, to which my hon. Friend the Financial Secretary responded. He is in Committee today, considering the Financial Services Bill. I am sure that he will read today’s Hansard with deep interest and mull over the calls for a summit and the suggestions about with whom he should work if he is minded to hold one. I recognise the concerns expressed capably by all hon. Members about the impact of past and planned branch closures by high street banks in their constituencies and about the availability of banking services in rural areas more generally.

[Chris Ruane]

On the issue of a banking summit, will the Minister consider calling it herself, in co-operation with the shadow Minister, or is it something that she will leave to Back Benchers?

[Miss Smith]

The hon. Gentleman will appreciate that I shall have to leave that to the consideration of my colleague at the Treasury, whose portfolio it more properly is. However, as I said, I am sure that during a slow moment in Committee upstairs, he will read today’s Hansard and take the hon. Gentleman’s views deeply into account.

The Government recognise that people in rural areas experience much the same financial challenges as people living in towns and cities, even Harrow. However, living in a rural area can bring additional challenges apart from the obvious examples of bank closures. Exclusion from financial services can be less visible in rural areas than in urban areas. My hon. Friend the Member for Montgomeryshire (Glyn Davies) and others have highlighted a range of rural challenges. I have some understanding of them myself, having grown up in the fens in rural Norfolk. My first bank account was in a branch in a market town.

With regard to access to bank accounts, the Government are committed to improving access to financial services, as I shall explain, and in particular to bank accounts. It has been amply demonstrated that having a bank account is an essential aspect of modern life and that being able to access counter services at a branch while interacting face to face with staff is a service valued not only by individuals but by businesses. I have also heard the points made today about its tourism value. However, I must point out that decisions whether and where to maintain specific branches are commercial decisions and, as such, for the financial institutions in question. The Government do not intervene in such decisions, as a matter of principle.

All banking service providers must balance customer interests, market competition and other commercial factors when considering their strategy. I note the call by the hon. Member for Vale of Clwyd (Chris Ruane) for banks to balance social responsibility with those factors, but I will say at the outset that the Government have been clear about the need for a change in bonus culture and for banks to contribute to the real economy, support small and medium-sized enterprises throughout the UK and lend to families. The bottom line of today’s debate is that banks have customers, and it is clear that they must treat them fairly in taking decisions about them.

With that in mind, I will set out briefly the regulations that apply. Banks’ and building societies’ treatment of their customers is currently governed by the Financial Services Authority in its “Banking Conduct of Business Sourcebook”, which includes a general requirement for firms to provide a prompt, efficient and fair service to all their customers. The guidance agreed by the industry and the FSA sets out expectations of how banks should live up to that code of conduct and specific guidelines for how banks should behave when considering closing a branch.

The guidance states that if a firm plans to close or move a branch, customers should be notified at least 12 weeks beforehand and told how the firm will continue to provide retail banking services. That includes providing micro-enterprise customers with information on any existing inter-bank agency agreements. A notice should be placed in the branch, and consideration should be given to other local advertising and notification of local councils and community groups. The bank should provide information on alternative facilities offered by the firm in the locality, including its nearest alternative branch and nearest free ATM, as well as other channels through which banking services are provided.

My hon. Friend the Member for Carmarthen West and South Pembrokeshire (Simon Hart) mentioned free ATMs. I believe that the LINK network, of which, I note, he is perhaps no great fan, runs a phone line that customers can use to propose sites for new free-of-charge cash machines. Perhaps he might encourage his constituents to take that up.

The guidance also requires that customers be notified at least 12 weeks in advance of significant alterations to counter services or opening hours. On the back of those points, first, such arrangements clearly help customers make alternative arrangements to meet their banking needs. Secondly, they enable options to be considered, such as the action plans for which the right hon. Member for Torfaen (Paul Murphy) called. Thirdly, to use an example that we heard today, I am pleased that people in Suffolk, Coastal could respond in that way. When people see a notice in branch buildings, some are clearly able to respond. Fourthly, however, that does not change the end fact that a branch may still be withdrawn.

Let us move on and note what banks offer in addition to their face-to-face services. Several Members have made the point today that banks offer services by telephone and by internet. My hon. Friend the Member for Carmarthen West and South Pembrokeshire raised the significant issue of broadband, which I am sure is on everyone’s minds. The Government have laid out significant plans to improve and complete broadband for rural areas. I could go into that more, but I suspect that that is a different debate and that you, Mr Brady, will not allow me to speak on it. I reassure Members that the Government understand that point and are acting on it.

It is fair to say that the channels I have talked about are not always appropriate for every customer and every service. As hon. Members have noted, having access to a branch with face-to-face services is particularly important for older people and for small businesses that may require cash facilities to trade. However, the fact is that phone and online channels are increasingly popular, and the provision of such services is expanding and diversifying rapidly, giving customers a range of choices as to how they manage their affairs.

It is important to note that many bank account providers have an arrangement for customers to access their accounts via post office counters, which I am glad that hon. Members have noted throughout today’s debate. I know that Members will welcome the Government’s stance on post offices, notably making clear commitments regarding the future of the network—that there will be no further closure programmes and that we will maintain a network of at least 11,500 branches and ensure that specific access provisions for rural areas are included. I understand that 80% of customers now have the possibility of withdrawing or depositing funds or checking their balance at a post office branch.

Hon. Members raised shared branching, which is where several banking providers pool their services in some way. That is an interesting idea that clearly requires a high degree of commercial collaboration. I return to my point that the best people to judge that are the banks themselves, and I would certainly encourage them to consider that idea and also mobile banking, which was also raised in today’s debate.