Bank Branch Closures

David Lammy Excerpts

Thursday 30th June 2016 Commons Chamber

[James Heappey (Wells) (Con)]

I join the hon. Member for City of Chester (Christian Matheson) in thanking the Backbench Business Committee for awarding us the debate. As he says, people should not mistake the sparsity of Members in the Chamber for a lack of enthusiasm for this cause. Many of my colleagues have told me just how significant it is to their constituencies, and it is just a shame that, for Members on both sides of the House, there are some distractions at the moment.

The issue of bank branch closures is gathering pace. There were 222 in 2013 and 681 last year, and given that there have already been 333 this year, it appears that the pace will quicken still further. The issue was drawn to my attention in my constituency by the fact that there are too many empty buildings on our high streets which used to be banks. There have been closures in, for instance, Wells, Shepton Mallet, Burnham-on-Sea and, most recently, Glastonbury. I pointed out during Prime Minister’s Question Time some months ago that there was still a chance of saving at least one of Glastonbury’s banks, but all four of them went in one year, and three within 14 weeks. Today’s debate is timely, because the following week there were 200,000 people in fields not far outside Glastonbury. The idea that the town does not have a single bank must seem quite remarkable to all Members.

The Last Bank Standing campaigners in Glastonbury have fought their corner in a formidable fashion. You will be entertained to learn, Mr Speaker, that when Lloyds closed, it marked the closure by putting a mock-up of a black horse in a coffin, feet up, and marching it out of the town in a funeral procession for banking. I am not sure that those in the bank’s PR department were particularly enthused by that. The sad reality is, however, that no matter how hard the campaign group worked to save those banks, their work was ultimately to no avail.

Having just embarrassed Lloyds, I will now praise NatWest, which saw an opportunity to take a mobile bank into the town occasionally. That service is very welcome and many people value it, but it is there for only an hour or two a week. The community is now, very creditably, considering the options for a credit union or community bank, but the hurdles are significant. It is extraordinarily difficult for a community to establish something that is not just a credit union for the purpose of saving, but a bank with functionality.

I do not think that it should have been possible for a town the size of Glastonbury, with such a vibrant economy, to lose all its banks. That suggests to me that the access to banking protocols that were agreed during the last months of the last Government are simply not doing the job that they were intended to do. I shall return to that point later, but one of the challenges posed by the protocols is the requirement for community impact statements to be produced, and in those statements the usage of the banks is hotly contested. The banks say one thing, and campaigners say another. When the Federation of Small Businesses surveyed businesses in the Glastonbury area that were using local banks, 750 of them responded. Glastonbury contains only about 10,000 people, but it serves a much wider hinterland. How extraordinary it is that 750 businesses should reply to a survey entitled “Glastonbury Bank Closures”! That tells us just what an important issue this is.

There is also the challenge of rurality. There are transport links in areas such as mine that do not allow people to travel freely from one town to another to do their banking when the bank on their high street has closed, and the people whom that disadvantages most are the most vulnerable and the isolated in our society.

[Mr David Lammy (Tottenham) (Lab)]

The hon. Gentleman has just made an excellent point, but may I ask him this? Given the iconic status of Glastonbury, and given the problems that clearly existed before the last branch closed, did the bank bother to consult him before making its decision, or was he presented with a fait accompli?

[James Heappey]

To be fair to the banks, they did write to notify me of their decision, and the more noise I made in the media, the more willing they were to meet me here to discuss it. However, the right hon. Gentleman would be right to suggest—and I would agree—that it was not exactly a process whereby the local Member of Parliament was encouraged, as a representative of the community, to take soundings on what was actually of value to that community. It was more about assuaging my fears and trying to persuade me that various steps were being taken in mitigation.

I was talking about the vulnerable and the isolated. There are certain things that draw the elderly, in particular, out of their homes over the course of a week, such as going into town to do their banking and to visit the market and the library. When banks are removed from towns and people are told, “We will teach you to be better at using a computer”, that is all well and good, but it does not alter the fact that, for some, that journey into town will have been their interaction with the outside world for that week.

Moreover, digital exclusion is a real problem, in two respects. First, there is the issue of competence. There are people who are just not very good at handling their affairs over the internet. There are people who have been doing things in the same way for a lifetime, and who do not trust the process of putting their financial affairs in the hands of electrons on a screen. They want to give their money to a person over a counter, and see it locked away in the drawer and on its way to the bank’s vaults.

Then there is connectivity. I know this is not a rural-urban issue and I know that the Government’s broadband roll-out programme is making great advances in areas like mine, but the reality is that these banks are closing more quickly than the broadband network is being improved and so even those who are willing and able to do their banking online are not always able to do so.

--- Later in debate ---

[Mr David Lammy (Tottenham) (Lab)]

I congratulate my hon. Friend the Member for City of Chester (Christian Matheson) and the hon. Member for Wells (James Heappey) on securing this important debate and echo the concerns that have been raised. Looking at the evidence, it appears that the Government lack the political will to hold the banks’ feet to the fire. What happened when a review into banking culture was announced? It was quietly shelved a few months later. What happened when branches were closing down at a rate of almost two a day in rural communities and deprived areas across the UK, affecting local businesses, the elderly and the disabled? Very little indeed. And what is happening when banks renege on their promise to retain the last bank in town, meaning that 1,500 communities have lost all their banks? Absolutely nothing.

It does not strike me as fair that ordinary people are paying the price for the failure and mistakes of banking executives. Those ordinary people have been good to the banks. They have loyally paid in their savings month after month. They have taken out their mortgages with their bank. In the cases of Lloyds, Halifax, RBS and NatWest, they have bailed them out after the banks got themselves into trouble during the financial crisis. The banks have got themselves into trouble time and again, lurching from one scandal to the next, by aiding and abetting clients who want to avoid paying their taxes, fixing the LIBOR rate, money laundering, mis-selling PPI—the list goes on. Barclays, HSBC, Lloyds and RBS have been hit with fines of more than £55 billion since 2010, and that figure is set to rise to £75 billion by the end of next year, but who takes the hit? Their customers, whose views and needs are completely disregarded by the banks’ management teams.

It is not as though there is no evidence to tell the banks that their customers value their local branches and want them to remain. Research from the Competition and Markets Authority in April 2015 found that 63% of current account customers felt that having a convenient local branch was either “essential” or “very important”. Research conducted for TSB in June found that 69% of people believed it was important to have a bank branch close to where they lived. Just because more people are repaying small debts to friends or carrying out basic money management online or by using an app on their phone, that does not mean that branches are becoming redundant—far from it. The Social Market Foundation has found that, when it comes to big financial decisions such as taking out a loan or a mortgage, or seeking financial planning advice, the majority of consumers still use bank branches. In these troubled economic times, ordinary folk want to be able to go into their branch and get good advice so that they can properly plan their finances, but in towns, villages and cities across the country, that is soon going to be nigh on impossible. That is why this debate is so important.

Banks are disproportionately shutting up shop in lower income areas. Indeed, 90% of the 600 branch closures between April 2015 and April 2016 took place in areas where the median household income is below the average of £27,600 a year. Move Your Money has told me that, far from responding to demand pressures, the major UK banks are simply closing branches in poorer areas and opening or retaining them in more affluent ones. We are seeing the creation of a dual financial system in all but name, with one section for the wealthy and the middle classes, and another for those on low incomes.

The University of Nottingham has found that the least affluent third of the population has borne the brunt of two thirds of the total closures since 1995. Indeed, the rate of closures experienced in traditional manufacturing and inner-city areas is 3.5 times higher than in areas defined by academic researchers as middle England—mainly suburbs and small towns. It is therefore a cruel twist of fate that those who are most likely to be adversely affected by branch closures are the people living in those areas in which most closures are happening. Do we really want this country to become like some areas of the United States where those who are already deprived and poor are bereft of quality financial services and left to flounder? Again, that is why this debate is so important.

I know the situation to be true because earlier this year HSBC decided to close its branch on Tottenham High Road after almost 100 years. That followed the closure of a branch of Barclays the year before. In just two weeks’ time, that HSBC will close its doors for the last time. My constituents have been told to travel to Southgate if they want to access a branch, but the journey takes at least 45 minutes by bus. What is the impact of that closure on the elderly? What is the impact on the disabled, the vulnerable and local traders who rely on such branches? I am appalled that HSBC’s management did not feel it appropriate, or even a matter of common courtesy, to consult the local Member of Parliament, the local authority, councillors or the community before making that decision.

The situation is an outrage because my constituency is a target regeneration area for the Government and the Mayor. The Treasury has underwritten regeneration in Tottenham to the tune of £500 million. We have Spurs—the best premiership football club—building a new stadium in the constituency, yet the bank did not think that it was worth picking up the phone and calling the local authority leader or the local MP to say, “We are thinking about this. What do you think? What will the High Road look like in the months and years ahead?”

[Mims Davies (Eastleigh) (Con)]

The right hon. Gentleman is making an important speech about the value of banks to our communities. Barclays and HSBC have contacted me about closures in Hamble and Hedge End respectively. In my experience, there is no point hearing from them because they have already made up their mind. The situation is difficult and disappointing for my elderly, vulnerable and, perhaps, non-internet-savvy residents.

[Mr Lammy]

The hon. Lady makes an excellent point; that is also my experience.

I am talking about consultation with democratically elected people. Banks certainly ought to speak to the local authority leader before making a decision to say, “We’re thinking about it. What do you think the impact might be?” All of us, as professionals and Members of Parliament, are used to having private, confidential conversations every day of the week. We are sometimes able to say, in private, “Have you thought about this or that?” We can talk about the future economic context of a community of which the bank may not be aware. But there was none of that; I was presented with a fait accompli. Frankly, HSBC was patronising.

When I was a 16-year-old with what felt like very little prospects way back in the mid-1980s, I got a little job over the summer holidays in that local HSBC branch—it was then Midland Bank. I feel personally affronted that the bank where I saw my first prospects, and where I had put on a suit and thought that I might have serious job one day, is to be shut down without HSBC even thinking of consulting me. It meant a lot in the local community that I used to work in the bank, but HSBC was not interested. That is what big banking has come to in this country after all that we have paid in. I am frankly appalled by HSBC’s behaviour.

Given that the Government talk about being a friend of small business and the high street, it is important that they think carefully about this issue. In June 2014, research by YouGov for the British Bankers Association found that over 50% of people see a branch as important, with that figure rising to 68% for SME customers. The impact of branch closures goes far beyond local businesses having nowhere to go to get credit or to do their banking. The consequences are grave for the whole high street.

Local retailers are hit hard by the fact that customers go elsewhere when they do not have easy access to cash, which is still the preference for many, despite the rise of chip and pin and contactless payments. Cash still accounts for 46% of high street sales, with that figure rising to 75% in newsagents and convenience stores. On average, local ATMs inject some £16 per withdrawal directly into nearby stores, which amounts to £36 billion a year. More than a third of total high-street spending is contingent on the ready availability of cashpoints.

I was told by HSBC that one reason why it was closing my local branch was footfall on the high street. I pointed to the fact, which it had seemed not to realise, that we had had riots just a few years before and that we had found wonderful businesses that wanted to support the high street, not desert it, as it made its way back from the riots. Given that this bank was meant to be one of our national institutions, citing footfall as its reason was deeply painful to my constituents.

In tough times, people remember who their friends are. The banks should think carefully about their customer base and how their customers feel when banks desert a community that has already been through the mill and is trying to build its way back. I think of parts of this country that not so long ago had floods, for example. It takes a long time for a high street, a village or a town to get over a flood. Are the banks going to blame lack of footfall and say, “Things were a bit depressed for a few months so we just couldn’t stand by you. We’re disappearing”? Customers have stood by them, so it is about time that they grew some, as my mum would say, and stood by the community.

[Mr Gareth Thomas]

Can I tempt my right hon. Friend to agree that perhaps part of the solution would be more action by regulators and the Government to encourage different kinds of banks to emerge—banks that are profit-making, but not necessarily profit-maximising? Many banks, including those he has listed, will always face pressure from shareholders, in their management’s view, to reduce costs. Bank branch closures are always likely to be among the options available, so perhaps a different kind of bank is necessary.

[Mr Lammy]

My hon. Friend is right. The House will recall the hugely important role that building societies played in local communities 20 years ago. We destroyed that important relationship as they all merged and became banks, and now we are left where we are. That local proximity and that different structure were lost and now we have to reinvent it. I hope that the hon. Member for Wells is part of that reinvention. The Government should think carefully about whether we need a review of such new structures. If we do, the man to do it is my hon. Friend the Member for Harrow West (Mr Thomas), who knows a lot about mutualisation and co-operatives. We need that back on our high street.

The access to banking protocol is undergoing independent review by Professor Russel Griggs—I am sure that the Minister will refer to it. In response to my written questions last month, the Government revealed their belief that

“banks should act in the best interests of their customers and continue to serve the needs of the consumer as well as the wider economy”,

and that

“it is imperative that the banks live up to the spirit, as well as the letter, of the commitments in the protocol.”

However, the Government also revealed that they have not

“assessed the impact of the protocol or banks’ compliance with their commitments in the protocol”.

Perhaps the Government have not bothered to assess the protocol because they know that it is irrelevant. It cannot and does not aim to alter any decision and, as such, pays mere lip service to the idea of access to banking. The protocol states that after a bank has decided to close a branch, it will engage with local stakeholders in order to understand the impact on the community, businesses and consumers. What is the point of a consultation after the decision has been made? That is not a consultation in the proper sense of the word—it is a notification of the closure. May we change the wording from “consultation” to “notification”? Once the horse has bolted, it does not make a blind bit of difference how customers or local businesses will be affected, so surely it would make sense to have a proper, full and open consultation process in place when the bank is considering the future of a branch, before serving notice on the local community in question.

Another problem with the protocol is that there is no firm definition of adequate replacement services; it is left up to the bank to assess and even define those. Leaving the elderly and disabled with no choice but to take a 90-minute bus trip is not an adequate replacement service by any stretch of the imagination. It is clear that when banks make their decisions, they do not take into account the public interest or the likely damage that a closure will cause. I cannot see how the access to banking protocol is anything other than a woolly and inadequate attempt to protect the bank’s name.

The Government have not assessed banks’ compliance with the commitments in the protocol, I assume because their conclusion would be that there is no mechanism in place to police whether banks have fulfilled the commitments that they made in relation to closing down a branch. If a bank says that it is closing a branch but will work out an arrangement with the post office so that customers can bank there, or will move its ATM so that customers can still use it, are those promises worth anything if there is no way to enforce them? The access to banking protocol is merely being used as a Trojan horse on both sides. Banks can claim they have followed the protocol, no matter how meaningless it is, and that therefore their hands are clean and they do not need to do any more.

On that basis, it really is time the Government got a grip of this quiet scandal and tragedy that is taking place across our country and really hurting a lot of local communities. I commend my hon. Friend the Member for City of Chester for bringing this debate to the House.