Financial Inclusion: Rural Areas

David Chadwick Excerpts

Wednesday 11th December 2024 Westminster Hall

[Anna Sabine (Frome and East Somerset) (LD)]

I beg to move,

That this House has considered financial inclusion in rural areas.

It is a pleasure to serve under your chairship, Mr Pritchard. I am grateful to the Chairman of Ways and Means for granting this debate.

Financial inclusion is the ability of people to access, understand and use financial services to manage their money and reduce poverty. I hope the Minister will agree that we need better financial inclusion across the UK. I have been heartened to hear the new Government talk about financial inclusion, but more rural areas face a whole host of issues that make the challenges around financial inclusion even greater, and that is what I will focus on today.

My constituency of Frome and East Somerset is a predominantly rural area, with a number of market towns such as Frome, Midsomer Norton and Radstock, and 150 villages and hamlets. Frome has recently been allocated a banking hub, after our last bank branch announced that it would close. Thankfully, Midsomer Norton still has two bank branches open, but they serve surrounding areas as far as the city of Bath, meaning that residents in the surrounding villages still have to travel miles to reach their nearest bank.

Access to cash and face-to-face banking is vital for about 5 million customers across the UK who may be vulnerable because of low income or age, and in rural areas many people are dependent on cash for their livelihoods. When bank branches close, which is already more likely in rural areas, residents are increasingly vulnerable because the alternatives are more physically spread out, and after losing free-to-use cashpoints, rural residents have to travel three times as far to get cash as those in urban areas.

[David Chadwick (Brecon, Radnor and Cwm Tawe) (LD)]

I thank my hon. Friend for securing this debate. Large banks are leaving our high streets at an alarming rate. Ystradgynlais, the biggest town in Brecon, Radnor and Cwm Tawe, has been denied a request for a banking hub, despite the billions of pounds of profit that Lloyds bank made in 2023. Does my hon. Friend agree with me that communities such as Ystradgynlais, which has some of the most deprived areas in Wales, should be at the forefront of moves to expand banking hubs across the UK, and that the big banks should treat their customers well and deliver a fair share of services for local residents?

[Anna Sabine]

It will not surprise my hon. Friend to hear that I do agree. I will come on to talk about the criteria that Link uses in allocating banking hubs.

In Frome and East Somerset, an average of £630,000 is withdrawn in cash each month, showing how vital access is for people in these areas. The two main groups most affected by lack of access to cash are the deprived and the elderly. For people on low incomes, cash can act as an effective method to budget efficiently. Many elderly people feel excluded by the increasing reliance on digital services. With BT set to swap from analogue to digital landlines for millions of customers across the UK, there are concerns that that will lead to more isolation for elderly people who rely on landlines for their access to the outside world, and in many rural areas they may not have good broadband or mobile signal either.

--- Later in debate ---

[Emma Hardy]

The right hon. Gentleman has made a good pitch for a cruise ship to visit his constituency. It was a good advertisement, and he made an important point about the role and importance of the post office. I am sure that it will be noted by the Department.

I know that many rural constituencies are concerned about the availability of cash, especially when they rely on it to pay for essential goods and services. We recognise how important that is for many vulnerable people. Arguments have been made by some—not by the Government—that people are using digital more and more, so there is less need for cash. However, we recognise that for some people it is the only way of paying bills and accessing funds. It is important that we continue to have it, because many rely on it for essential goods and services.

Although it is positive that data from the Financial Conduct Authority shows that over 98% of people in rural areas are within three miles of free-to-use withdrawal facilities, I understand the importance of ensuring that cash remains available for those who need it. The Financial Conduct Authority introduced its regulatory rules to protect access to cash on 18 September. In fact, under a previous Government I was on a Bill Committee debating that very issue, so I am pleased that we mandated access to cash.

The rules require the UK’s largest banks and building societies to assess the impact of the closure of a relevant cash access facility and put into place a new service if necessary. That ensures appropriate access to cash for those who need or choose to use it.

Lots of people asked about banking hubs. I should probably declare that I am getting a banking hub in my own constituency soon, which is very exciting. How do people get a banking hub in their constituency? I completely agree about face-to-face banking services. It is not just about accessing cash; it has a wider role to play. If someone is accessing banking facilities, it can be a way to spot financial crime and financial coercion as well, so it is important to have that.

The locations are independently determined by Link, the largest provider of the ATM network. When a cash service such as a bank branch closes, or Link receives a request directly from a community, Link assesses a community’s access to cash needs. A couple of people mentioned how they were not successful in their appeal for a banking hub. If people have already made a community request to Link and it has decided that no banking hub is needed, they can ask Link to review the decision within 28 days of the original assessment, stressing their concerns and evidence. I urge people to take advantage of that appeal process.

[David Chadwick]

Can the Minister clarify whether Link is covered by the growth duty, which requires regulators to consider the economic consequences of their actions? A point has been made a couple of times about the impact of these closures on local businesses.

[Emma Hardy]

Absolutely. Link is covered by the Financial Conduct Authority, which has a duty to promote growth. The criteria on which it bases its decision include whether there is a bank branch remaining, the population size, the number of shops on the high street, the distance to the nearest bank branch, the public transport links and the vulnerability of the population. I urge Members to appeal if they find themselves unsuccessful the first time around.

Alongside access to cash, I know that constituents are concerned about challenges in accessing in-person banking. As has been highlighted in this debate, that is particularly an issue for individuals living in rural areas, where in-person services are less easily accessed than in urban areas.