Access to Cash in Scotland

David Mundell Excerpts

Thursday 14th July 2022 Westminster Hall

[Pete Wishart (Perth and North Perthshire) (SNP)]

Thank you, Ms Rees. I also thank the Backbench Business Committee for allowing me to make a statement on our report, “Access to cash in Scotland”, which we published on Monday. It is great to see so many colleagues from Scottish constituencies here today. [Interruption.] And of course from Northern Ireland—I cannot possibly forget the hon. Member for Strangford (Jim Shannon). I look forward to their questions.

We know that lack of access to cash continues to concern many of our constituents, and it impacts on some of the most marginalised and vulnerable people we represent. The Scottish Affairs Committee has taken a long-term interest in the issue: our predecessor Committee released a report in 2018. We looked at the issue in the round and made a number of recommendations. We have also taken an interest in banking infrastructure right across Scotland, publishing reports and holding sessions on that subject over the past few years.

Our inquiry took evidence from representative groups and organisations; we also invited members of the public to complete a public survey on access to cash in Scotland, noting their own experiences and views. We of course thank everyone who contributed to our investigation, as well as those who responded to our public survey.

A key recommendation of the previous report, which the Committee published in 2018, was that the Government consider legislating to ensure that communities continue to have access to vital banking services. We are therefore delighted that the Government have done just that, by including a Bill in the Queen’s Speech to ensure that happens. The financial services and markets Bill is a positive development and a constructive response to the efforts of the Committee and the many representations that have been made by colleagues from across the House. If we have any disappointment, it is that the Bill may be a bit too late because we have lost many elements of our banking infrastructure in the intervening years. We understand that the Government want to conduct a wider and all-inclusive consultation prior to publishing their Bill, but it concerns us that we have lost so many bank branches in the intervening years, and we know that banks are now considering rushing closures ahead of any legislation being passed by the House.

The picture today looks considerably different from when the previous Committee investigated access to cash. The pandemic has changed everything, and the rush to digitalisation and the increased use of digital facilities for personal and business banking have continued. The pandemic accelerated that move, but cash payments are still the second most used form of payment and account for 17% of all transactions.

Currently, 5.4 million people, or about 10% of UK adults, are reliant on cash. In Scotland, that is equivalent to around 500,000 people—half a million of our over 5 million population. In 2019, the “Access to Cash Review” found that over 8 million adults, or 17% of the UK population, would struggle to cope in a cashless society. That was reflected in the public survey I mentioned. The majority of our respondents held very negative views about the potential for the UK to become a cashless society. Some 67% of those who responded to our survey told us they thought it would be “very negative” if the UK became a cashless society.

The other thing that concerned our Committee was the sheer volume of bank closures that we have seen across the UK—specifically in Scotland, of course—over the past few years. Since 2015, Scotland has lost 53% of its bank branches; we have experienced the greatest percentage of loss out of all the UK nations. The figures for the automated teller machine or ATM network are just as bad, with 20% of Scotland’s free-to-use ATMs closing since 2018.

Obviously, the banking industry contributed to our report and inquiry. It told us that it is merely responding to falling customer demand, and that many bank branches and ATMs are no longer commercially viable. I think that all of us understand, appreciate and respect the fact that many more people have taken advantage of the useful digital services that are now available to each and every single one of us. However, we were told by Which? that the impact of bank branch and ATM closures is most severe in remote and rural areas of Scotland, due to challenges around connectivity. Often, people must travel greater distances to reach the nearest cash access point and I am pretty certain that hon. Members will want to raise that issue with me this afternoon.

Which? also told us that the covid-19 pandemic resulted in an increase in the number of retailers refusing to accept cash as a form of payment. There is no doubt that the pandemic forced a number of businesses to adapt and accelerate the move to digital payment. On top of that now, there is the cost of living crisis. We heard in evidence that increases in the cost of living may result in more people choosing to use cash to manage their finances and budgeting. We were told that there is limited publicly available data on retail cash acceptance, but the report of an increase in the number of retailers refusing to accept cash is concerning. We recommended in our report that the UK Government consider asking the Financial Conduct Authority to investigate and monitor cash acceptance levels across the UK.

We also note in our report that the banking industry has undertaken several impressive initiatives to protect consumers’ access to cash. One example is LINK’s financial inclusion programme, which ensures that the most rural and deprived areas in the UK continue to have access to cash. That effort is very welcome, but the programme’s success is reliant on the voluntary membership of card issuers and ATM operators, so we also recommended that the UK Government mandate membership of LINK for card issuers and ATM operators, to ensure that LINK’s initiatives are not simply enacted on the voluntary basis that they are today.

We also heard about the benefits that the introduction of universal deposit-taking ATMs would bring to consumers and especially businesses across Scotland. Such infrastructure would contribute to the sustainability of the ATM network, while providing a secure location for customers and businesses to deposit cash. However, attempts to introduce this sort of infrastructure have been constrained by a lack of progress on the part of the UK Government and the banking industry. Our predecessor Committee considered deposit-taking ATMs, and we repeated its recommendation that the UK Government set up a working group with industry to introduce network-wide deposit-taking ATMs.

Throughout our inquiry, we heard about the substantial role of the Post Office and its increasing provision of banking services, and it continues to provide consumers and businesses with access to basic cash and banking facilities. However, despite the positive interventions made by both the banking industry and the Post Office, the current provision of cash via post offices rests on the short-term and voluntary banking framework agreement. We recommend in our report that the UK Government seek a long-term commitment from the banks to maintain appropriate banking services for their customers using the post office network.

As I said earlier, the Committee of course welcomes the Government’s commitment to protecting access to cash through legislation, but we are concerned that measures may be needed now, until that Bill is introduced and the legislation enacted. Nevertheless, we look forward to working with the Government to ensure that the Bill is a success when it is introduced.

[David Mundell (Dumfriesshire, Clydesdale and Tweeddale) (Con)]

As a humble Back Bencher, it is always a privilege to be able to question a leading member of the British establishment in Parliament.

I very much welcome the Committee’s inquiry, because this is a serious matter. The hon. Member for Perth and North Perthshire (Pete Wishart) touched on a number of subjects, although he did not mention an issue that is important to my constituents, which is the ability to deposit cash. That, as well as access to and use of cash, is a significant issue.

I want to touch on the hon. Gentleman’s point about banks taking pre-emptive steps ahead of any legislation, which I experienced in my constituency recently when the Bank of Scotland closed branches in Innerleithen and Lockerbie. From my discussions with the bank, it seems that the only basis for that action was to pre-empt legislation that it anticipates the Government bringing forward. In their work on the report, did he and the Select Committee consider how that practice could be prevented ahead of the Government bringing forward the legislation to which he referred?