Cash Acceptance

Drew Hendry Excerpts

Monday 20th March 2023 Westminster Hall

[Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)]

It is a pleasure to serve under your chairmanship, Ms Bardell. I thank my hon. Friend the Member for Linlithgow and East Falkirk (Martyn Day) for securing this important debate. I thank the Petitions Committee, and most importantly the petitioners who allowed the debate to happen today.

This is about compelling the acceptance of cash. There have been some important points made about the fact that the issue has real implications for budgeting for many households. At its heart is the systematic reduction in the availability of cash, which has accelerated the refusal of cash. If cash is taken out of the system, of course that makes it more difficult for businesses to make that choice. That does not mean they should be allowed to make the choice to refuse cash, which should continue to be an important part of the system.

[Ben Lake (Ceredigion) (PC)]

I am grateful to my hon. Friend for giving way and for making such an important point. The reduction in banking facilities, especially in rural areas such as his and mine, has accelerated the move to a cashless society, as he rightly mentioned. With banking costs, the depositing of cash for businesses is becoming even harder and more expensive. Does he agree that in this conversation, the Government need to ensure that banking services, including deposit services, are retained in rural areas to make it easier for particularly small businesses to continue to accept cash?

[Drew Hendry]

I completely agree with my hon. Friend and his timely intervention. I will come on to that when I talk about the impacts on my constituency, which is largely rural.

Access to cash is vital for people across the communities in Inverness, Nairn, Badenoch and Strathspey. I have been speaking to people out and about in my constituency, and I want to relate some of the issues in the villages and towns. Although I will focus on one item for each of them, all these things affect all of them, all the time. It is vital for people living in the highlands to get access to cash. The lack of availability has direct impacts on our communities.

For example, Aviemore is a popular tourist destination. Large numbers of visitors come throughout the year. Cash means additional spend, and the lack of it can restrict add-on sales. Not everybody wants to tap their card. If there is an opportunity to spend some cash, they will spend it on smaller purchases, as well as some larger ones. Impulse buying is also restricted in the same way. That is all vital in an experience-based economy like we have, where visitors come to enjoy the different activities that they can take part in.

Kingussie and Newtonmore, like Aviemore, are in the Cairngorms national park area. There is limited infrastructure. The closure of bank branches and the reduction in the number of cash machines have made life in those villages far more difficult than it was before. For example, with the increased cost of transport, the extreme inconvenience makes life challenging and difficult for many, especially those with no access to private transport and precious little access to public transport.

People in Grantown-on-Spey, also in the Cairngorms national park, rely heavily on tourism as well. They are directly affected by access to cash. I can relate a personal experience from last year. The Grantown show is the big showpiece event of the year; people come from not only miles around but countries around the world to experience it. It is a fantastic event. However, by the opening time of the show last year, Grantown-on-Spey had run out of cash. The paltry cash machines that were left in the village after the others had been stripped out by the removal of the banks had actually run out, and all the shops that were able to issue cash said that they did not have any more to give out. That was before the thing had got into its swing. It is immeasurable and impossible to judge the impact that having no cash had on that key day for the local economy.

Nairn has been badly affected by bank closures and the reduction in the availability of cash. Businesses—whether they are microbusinesses, or small or medium businesses—have all historically relied on cash. It has been really difficult for businesses there, particularly looking at the struggles on the high street. The locals have performed miracles in keeping up interest in Nairn as an attractive place, and the local business improvement district organisation has done its utmost, but there has no doubt been an impact on Nairn’s ability to thrive. It is restricted from achieving its potential, at least in part.

Fort Augustus is a fantastically picturesque village at the southern end of Loch Ness in my constituency. Many older and disabled people there tell me that they rely on cash. It is a serious issue that affects people’s mobility; it affects their ability to manage their financial affairs and participate in social and economic activities in their local area. We have not even touched on younger people who are not at the point of accessing a bank account by tapping their phone or a card. They often start off with pocket money given to them in cash so they can start to learn about money. As my hon. Friend the Member for Linlithgow and East Falkirk said, the ability to handle money and count it out is a vital part of financial education. There are unintended consequences to restricting the availability of cash because some people cannot access plastic.

The lack of access across my constituency is very noticeable now. It has had a significant impact on towns and villages. I cannot mention them all today, as it would take me ages to cover all the places in my constituency, but it is important to point out that these are real issues for real people in towns and villages. Other Members in this Chamber who have rural constituencies will have these issues in common. For many communities, this is an issue of sustainability, affecting tourism, businesses, young and older people and those with disabilities.

When we hear about a banking crisis the Government jump into action to protect the banks, but where is the same activity to support our communities who are in a banking crisis? They do not have banks or access to cash anymore. Where is the activity and energy for them? The Government need to step up and make sure there is continuity for people and a reversal of this journey to drain cash out of these communities the way that has happened.

There should be a move to increase cash machines. We hear about reasonable access, but what does that mean? They are just words without any meaning. What people in my communities want to know is where, how and when they can get access to the cash they need. Yes, I support the move towards more shared hubs, but let us make sure those hubs are available to all communities and that everybody can access them in the proper way. We should be requiring banks to supply cash, particularly in rural areas when there are events coming up. This should be about protecting cash payments and access to cash.

Finally, if we are to move to a situation where the Post Office takes the strain, that is fine, but post offices must be properly supported and recompensed for taking on this social need. They are next to breaking as well. If we are relying on post offices to pick up the slack, what do we do when post offices are no longer there? People are genuinely worried about that. I thank my hon. Friend the Member for Linlithgow and East Falkirk for bringing this debate forward. We could have another half a dozen debates about the effect of lack of access to cash. I look forward to hearing from the Minister what he is actually proposing to do to help communities to maintain the cash in their communities.

[Richard Foord (Tiverton and Honiton) (LD)]

It is an honour to serve under your chairship, Ms Bardell. I thank the hon. Member for Linlithgow and East Falkirk (Martyn Day) for introducing the debate.

When I was a child, scratching around in the earth in Somerset I happened upon what I thought was a stone—it was more like a flat pebble—but was, in fact, a Roman coin. Reflecting on that today, it strikes me that we have spent 2,000 years in this country handling real currency. Coins and, in more recent years, notes have been with us for such a long time. I am therefore alarmed that our generation might see the end of real hard currency.

Members have expressed many real concerns this afternoon. Thinking about rural areas like mine, I am most concerned about the plight of older people. Both my hon. Friend the Member for North Shropshire (Helen Morgan) and I get stacks of correspondence from elderly constituents who just cannot abide trying to remember the PIN for a card that they have no assurance works, and have no faith or trust is reliable. In October 2022, the Bank of England stated:

“Cash remains an important payment method in the UK, and a critical means of payment for many people.”

In addition I endorse what the hon. Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry) said about children and educating them about money. We do not know what the consequences may be for a generation who are not schooled with tangible money, but they may not be able to budget quite as well as their parents’ or grandparents’ generations for that fact.

We should also think about how our small businesses are affected. In rural areas such as my part of Devon, small businesses are concerned about the closure of not only banks, but cash machines. The other day, I received correspondence from the secretary of the Axminster chamber of commerce, who pointed out that the town of Axminster lost its last bank last autumn, and the neighbouring town of Honiton is set to lose its last branch of HSBC this summer. This issue is affecting in quite a miserable fashion some of the small businesses that depend on being able to deposit and withdraw money locally.

[Drew Hendry]

The hon. Gentleman makes a good point about businesses in rural areas. When these facilities are withdrawn, businesses often face insurmountable challenges in terms of what they then do, where they travel to and how they staff their businesses when they have to travel to different places to carry out transactions or indeed take on new methods. Sometimes they just do not have the time to do that. Does the hon. Gentleman agree that this is a significant issue that is never covered in any of our discussions?

[Richard Foord]

I completely agree. It is great that we have an opportunity today to hear reassurance from the Minister on what the Government are doing to address some of these concerns. We have to ensure that nobody is locked out of our society simply because it is seen as easier for others to use electronic payments. Some people are more inclined to give to charity or leave tips if they can do so with notes and coins.

I am also curious to know what the Government think of tax evasion in relation to tangible money. When the Government think about phasing out cash, do they have one eye on how small and medium-sized enterprises pay VAT? Is that a factor when they think about how we will access money in the future?

As I draw my reflections to a close, I want to talk about another personal experience, this time of travelling in China. Before the pandemic, I was working in China, and my Chinese colleagues found it hilarious that I had brought notes and coins with me, because they were so used to using Alipay on their mobile phones. In some societies, it has become unfashionable—really passé—to use coins and notes. I am proud that we live in a liberal democracy that serves to protect the rights of minorities. One of those rights ought to be the continued use of tangible cash.

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[The Economic Secretary to the Treasury (Andrew Griffith)]

It is a pleasure to serve under your chairmanship, Ms Bardell, and it is always a pleasure to follow the hon. Member for Hampstead and Kilburn (Tulip Siddiq). I commend the hon. Member for Linlithgow and East Falkirk (Martyn Day) on securing this debate. I also commend the many members of the public who signed the e-petitions to rightly raise this important issue here, in the home of democracy, where it falls to us to resolve these matters. I know that the hon. Member for Linlithgow and East Falkirk has a long-standing issue with cash access and acceptance. We have had a wide-ranging debate, and I will try to address as many of the points raised by colleagues as possible. As the hon. Member said right at the beginning, this is a complex issue.

It falls to me to inject some balance into the debate. Cash has many virtues, and I assure Members that the Government recognise the role played by cash when other technologies fail and the real concerns regarding privacy and the potential, in a cashless society, for states to control freedom of speech. One of the first issues that I dealt with as Minister was the withdrawal of certain account facilities from the Free Speech Union. However, we should also recognise that despite its many virtues, cash is expensive to handle, can be subject to theft and can make businesses—particularly small businesses in the rural areas we have heard a lot from today—feel vulnerable and potentially targeted by criminals. The physicality of cash means that it has a higher carbon footprint, and it can be less convenient when someone is fumbling around and does not quite have the right change.

[Drew Hendry]

I am grateful to the Minister for giving way. He makes a fair point about vulnerability, with people feeling perhaps a bit unsafe with cash, but does he not agree that part of the reason why businesses are now feeling a bit more vulnerable with cash is because of the bank closures that have been allowed to go ahead? Now, they have to travel greater distances to deposit cash. Is the Minister willing to come up with a solution for businesses so that they can continue to have cash and use it safely?

[Andrew Griffith]

The hon. Member makes a good point. He talked a lot about his rural constituency, which is a little larger than mine but also very rural, and brought that to life by talking about the Grantown-on-Spey annual show. He is quite right, but if he will bear with me, I will talk about the solution to precisely the problem he raises. This is not just an issue of access to cash, or the use of cash, but, as my hon. Friend the Member for Blackpool North and Cleveleys (Paul Maynard) said, about how we can ensure that businesses and retailers have access to facilities to deposit cash. I will come on to discuss the legislative action that I assure the House we are taking on precisely that point.

I have followed this debate extremely closely so, to be clear, let me say for the Government that there is no plan, no drive and no conspiracy to eliminate cash. This Government continue to support the ability of citizens to use cash as an alternative to digital payments, and I am proud that the Government are taking legislative steps to support the use of cash well into the foreseeable future. It is this Government, for the first time, who are taking those legislative steps.

A number of Members have talked about the fact that the way people make payments is changing. We have seen that over time. Analogies have been drawn with the transition from analogue to digital television and with decimalisation—I do not remember that, but the Father of the House was not shy about his recall of going through that transition. Digital payments play an important role in people’s lives. We see that from our own experience in the Tea Room of this House and also from the data. The industry body UK Finance found that in 2021 non-cash transactions accounted for 85% of UK payments, up from 45% a decade earlier and 60% in 2016. That is a really fast rate of change. I do not say that to unsettle anybody in respect of the continued attachment to cash, but it does mean that we in this place have to contemplate very rapid changes in society and technology.

Cash remains important for millions of people across the UK. We are an ageing society, and many Members have talked about the vulnerable groups—my hon. Friend the Member for North Norfolk (Duncan Baker) thought it was about 10 million people—who make up a significant part of society. We should rightly have great recourse to work out how we can protect them, whether that is through support with the convenience of managing their finances or with other vulnerabilities. Members made some great points about the importance of managing finances through the use of cash.

This is about striking a balance in society, which we have sought to do through the Financial Services and Markets Bill. I want to offer reassurance and protection for those who seek it. I am conscious that not everyone will be as familiar with the clause-by-clause detail of the Bill as the hon. Member for Hampstead and Kilburn and I am. That Bill, which has made its passage through the House, will mean that for the first time, not just since the hon. Member for Tiverton and Honiton (Richard Foord) scrabbled for coins himself but since ancient Celts first manufactured coins on this great isle of ours, there will be statutory protection of access to cash and the ability to deposit cash. It is important that we get that Bill on the statute book in this time of rapid change. It will cover access to deposit facilities on a similar basis as access to cash withdrawal.

My hon. Friend the Member for North Norfolk reminded us that this is the domain not just of the banks and ATMs, but also the extensive post office network. I know that postmasters—notwithstanding the loss to the profession of my hon. Friend—do a fantastic job in our rural communities. We should support them, and we do want to see that support. The provision of cash and banking services can be one way in which we underwrite their continued service to the community.

--- Later in debate ---

[Andrew Griffith]

My hon. Friend is absolutely right. That is one of the principles in how we have approached the issue. Although we are taking powers in the Financial Services and Markets Bill to mandate access to cash and cash machines, we must remember that 95% of the population are within 2 km of a free cash machine.

[Drew Hendry]

Will the Minister give way?

[Andrew Griffith]

I will make some progress, because I have been relatively generous in taking interventions.

Cash acceptance is an emerging issue that we contemplate for the future, but it is not a prevalent issue today, other than when people conflate it with the loss of bank branches. That is understandable, but we are seeing very rapid changes in society. I am clear that it is not the Government’s position—I think this is also true of the Labour party and, probably, the Scottish Executive—that we will mandate cash acceptance on retailers or public services. If anyone has done battle with a local authority parking machine, or the Mayor of London’s cashless transport system, they will know that it is often public services that do not take cash, while 98% of retailers are happy to continue to take cash indefinitely, particularly if the facilities can be made available. Public services are often the first to migrate to a cashless economy.

[Drew Hendry]

I am grateful to the Minister for giving way one final time. I would love him to come to the highlands and take a 2 km walk around parts of my constituency and point out where the cash machines are. We always try to find things to agree on in Westminster Hall, so I agree with the Minister’s earlier comment that his Government have “no plan and no drive”. If the 70 hubs are to be spread across the UK, will the Minister tell us when my constituents in villages and towns will see hubs arrive near them?

[Andrew Griffith]

It would not be for me to promise any Member a hub; it is for them to make the case. I observe that many other Members have been able to make that case successfully, and the hon. Gentleman has proven very persuasive today, so I wish him well in procuring a hub for his constituency. I will now make some progress, in the interests of time.

It is important to have the flexibility to respond to changes in the market. What we are doing in the Financial Services and Markets Bill should not be underestimated. As I said, for the first time in law we are protecting the ability of people and businesses—businesses are in scope as well—to deposit as well as accept banknotes and coins. The Government’s position is that it is much better that we will the means to enable businesses to continue to take cash, rather than simply will the ends without addressing any of the means, as some would do.

Apart from the Bill, the Government work with the financial services regulators to monitor and access trends related to cash. The hon. Member for Hampstead and Kilburn asked if the work to track the accessibility of cash will be done; it will. As part of that, the Financial Conduct Authority has surveyed retailers and found that even of small businesses—this is not an issue for big businesses, by and large—98% would never turn away a customer if they needed to pay by cash. I extend an invitation to any Member to share with me, the Treasury and the FCA any specific examples of retailers declining cash. I am conscious of a number of examples in the public sector—local authority car parks, and even municipal transport run by executive bodies—but I am not aware of a high level of prevalence among retailers.

We must also recognise that technology is providing solutions. Big Issue salespeople are now equipped with tap readers, and report 30% higher donations being given when people tap rather than use cash. That was my experience when I joined the Royal British Legion to collect for poppy sales. There are a number of other examples of how technology can try to solve the gap, notwithstanding the fact that we will continue to ensure that we protect access to cash. We have talked about the good work of the cash access group and of Link, and it should be incumbent on any Government to continue to ensure that we put those important solutions in place.

Once we have passed the Financial Services and Markets Bill, we will provide the policy statement about the importance of access to cash, the prevalence of that across the UK and what thresholds will be appropriate for Government to take different decisions or possibly to look at mandating things. My hon. Friend the Member for Blackpool North and Cleveleys talked about wholesale cash distribution, and the back end is important if we are to continue to ensure that businesses have the access to cash that they need. It is important that the wholesale cash infrastructure in the UK works and, in the Bill, again for the first time, we will take powers to regulate that, mindful that over time we expect to see the volume of cash decrease.

I have set out what the Government will do: the important step of taking powers in legislation that will soon be on the statute book, giving the FCA the ability for the first time to regulate access to cash. I have given our commitment to continue to monitor the situation, accepting that we all have constituents we are concerned about and that we are seeing fast-moving changes in society. I also give Members the reassurance that the Government’s desire or policy is not to eliminate cash. We have no such objective, but quite the opposite: the Government recognise the importance of the utility of cash in the system and will do whatever we can to ensure, practically, that our constituents continue to have the ability to use cash, as has always been their historical right.