Community Bank Closures

Baroness Laing of Elderslie Excerpts

Thursday 8th February 2018 Commons Chamber

[Madam Deputy Speaker (Mrs Eleanor Laing)]

You certainly do.

[Ruth Smeeth]

Thank you very much, Madam Deputy Speaker. For many young women on a Friday night, the prospect of walking all the way out of town to a petrol station’s cashpoint may leave them vulnerable and afraid.

All that is merely a snapshot of the human impact that the decline in community bank branches is having on communities like mine. I am deeply concerned about what will happen to our towns should these branches disappear. I had hoped that the banks would share, or at least understand, that concern. Instead, when I met representatives from the Co-operative bank, which is no longer associated with the Co-operative Group, my concerns were dismissed and ignored. When I pointed out that the bank’s impact assessments were riddled with obvious inaccuracies, its representatives merely shrugged and said that it would make no difference to their decision. They treated me, and by extension my constituents, with contempt. They should be utterly ashamed of themselves.

The Co-operative is a bank that once distinguished itself by its commitment to ethical finance, so tell me, what is ethical about leaving a community without a lifeline and ignoring its objections? What is responsible about providing an incompetently researched impact assessment that cites nearby alternative branches that closed down a year ago? What is caring about hearing the concerns of 80-year-old men and women who have used a local branch their whole lives, and simply saying to those people, “The world has moved on—there’s an app for that now”? Let us be clear: a bank that treats people in that way cannot claim to be a “community” anything and should be embarrassed even to try.

As the statistics demonstrate, the problem is not limited to north Staffordshire. It is a national problem, certainly, but that does not mean that the hardship is evenly distributed—far from it. University of Nottingham research found that between 1995 and 2012, the areas that suffered the largest decline in branch numbers were

“characterised by unemployment rates and levels of renting from the public sector that are far above the national average”.

The researchers concluded that

“the least affluent third of the population has borne the brunt of two thirds of net closures.”

The people making those decisions might call it the reality of market forces, but I call it abandoning the people and communities that need those services the most. Whatever we choose to call it, the facts remain the same: the poorest and most vulnerable people in our country—especially those in rural or inner-city areas—are frequently discriminated against in the banks’ decision making process.

The social cost of excluding low-income consumers from mainstream financial services can be severe, and could even risk driving people into less legitimate but more visible and convenient methods of financing, including loan sharks, legal and otherwise. The costs of these closures go beyond the individual; they have long-term repercussions for the whole community. The Campaign for Community Banking Services has argued that bank closures contribute to the commercial decline of an area, as better-off consumers change their purchasing habits and begin to shop, bank and even socialise further afield. Worse still, closures are associated with a real decline in local bank lending. Growth in lending to small and medium-sized enterprises is dampened by an average of 63% in postcodes that lose a bank branch, and that figure grows to 104% for postcodes that lose the last bank in town. The impact on our high streets, on our local businesses, and on future regeneration can be devastating.

What does all that mean for towns such as Burslem, where local people are coming together to lift their community up and push back against years of decline? There was a time when the local bank was thought of as the heart of the community—perhaps it still is—so what happens to a community when it loses its heart? What happens when the monetary circulation of a town is cut off mid-beat? What happens when the last financial lifeline disappears and leaves the elderly and vulnerable without support? The world we live in is not the same as it was 10 years ago, let alone 40 or 50 years ago. Times change, technologies change, and we must change with them. But we must also do more to ensure that as the world moves, we do not leave behind those who find it hardest to keep up. We must recognise that there remains a place for community banking, local lending and face-to-face advice. That means we need the banks to take some ownership and responsibility for their loyal customer base. They need to be imaginative and consider sector and community-wide solutions, not pass the buck and blame their customers. If they will not do it voluntarily, we will have to force them to.

The banking sector has options. Banks could launch community banks that share counter facilities, like they do in parts of Spain. They could invest in multi-functional ATMs so that customers can pay in money directly, in their local communities. They could fund more extensively community-based financial education to assist people with online banking. They could even fund access to broadband in some of the harder to reach communities, so that their customers could access online banking. Yet all we have had from the sector is silence. We need to ensure that our banks are working in everyone’s interests, not just their own.

--- Later in debate ---

[Nick Herbert]

The hon. Gentleman has anticipated exactly what I was going to say. If the post office premises become the location of the only banking services in a village or small market town, we must ensure that they are suitable, and the Post Office needs to ensure that that is the case when it identifies premises. It must also ensure that the banking services can be provided. The online systems have been down in the post office in Arundel over the past few days and as a result there have been no banking services.

As suitable premises can often not be found, suitable post office sub-postmasters cannot be found in various villages and small market towns in my constituency. This means that there is sometimes a suspension of post office services for a period of months, even though the Post Office’s policy is that there will be a post office outlet in these communities. That cannot happen if the post offices become increasingly important owing to the fact that they are providing banking facilities as well as all the other important facilities that they provide for the local community.

We need some more creative thinking. We cannot just allow the banks to step away and absent themselves from their responsibilities to ensure better services in this regard. To that extent, I agree with the hon. Member for Stoke-on-Trent North. The Government do have a role to play, by stepping in where the market is not working properly. The market is not working because there is insufficient demand in some areas for banking services in their traditional form, but those services are still important to local communities.

We must remember that local high streets are already under great stress. High streets in rural areas have really been suffering from the impact of globalisation and competition from online retail services. It is very difficult for small businesses to keep their heads above water as it is, so banking services are very important for them. If the Government’s objective is to maintain the vibrancy of these high streets—and I think it is—we need some active measures to ensure that post offices are promoting the best banking services and that these services are well publicised. We need banks to step up to the plate and contribute to ensure that the banking services can be universal and just as good as the services that were provided before. All those things can be done.

I recently had a useful meeting to discuss the issues with the Post Office’s senior management and the Minister’s predecessor, who acknowledged all these points. I know that the Government are concerned to ensure that banking services are provided. We must look forward to what can be created using the existing post office network and ensure that services are provided properly. It does not help to look backwards and think that we can somehow set a retail banking model in aspic, when it is actually failing because it does not provide the services necessary for the wider community and only supplies a very small number of customers. We need banking services in these areas, and they could be provided more creatively and innovatively. The situation needs a bit of Government help, but we also need the banks to play their part.

[Madam Deputy Speaker (Mrs Eleanor Laing)]

Just before I call the next hon. Member to speak, I ought to point out, for the sake of clarity, that we are in very unusual circumstances today because the timing of this business has changed and changed and changed again. I appreciate that this is the last day before a recess, and that Members—especially those with long distances to travel—are in some difficulty. I have therefore allowed far more leniency than is usual, first in the timing of people arriving for the beginning of the debate and, secondly, in the timing of their departure, either before or after the wind-ups. I would like to make it clear to the House that this does not create a precedent—absolutely not. We have a combination of circumstances today, which is highly unusual and is why I have allowed leniency. That will not be the case on other occasions.