Banks and Communities

Ged Killen Excerpts

Thursday 11th January 2018 Westminster Hall

[Ged Killen (Rutherglen and Hamilton West) (Lab/Co-op)]

It is a pleasure to serve under your chairmanship, Mr Gapes. I thank my hon. Friend the Member for East Lothian (Martin Whitfield) for securing this timely and important debate. There is no doubt that how we access banking services has changed in recent times. However, as with any change, there is a balance to be struck between evolving practice—in this case, the rise of online banking—and ensuring that the drive for change does not cause damaging disruption to the services local communities rely on.

The recent round of bank closures by RBS, NatWest and Lloyds has got the balance wrong, as did the previous round of bank closures. The Government’s view is that bank closures are a commercial matter only and that they will not intervene in such issues. As someone who used to run a small business—I refer Members to my entry in the Register of Members’ Financial Interests—I can say from experience that local branches are not just private companies but essential utilities to the communities in which they are based. An easily available, well-run local bank branch has all the productivity benefits of good roads and a reliable internet connection.

The Government cannot absolve themselves of responsibility by claiming that such closures are simply a commercial matter. Research by the Federation of Small Businesses shows that branch closures are damaging to small businesses, with one study finding that lending to small businesses in a given postcode area fell by almost two thirds following a bank branch closure. Lending for small businesses grows on average from one quarter to the next by 2.13%. However, after a closure, growth falls to 0.79%—a reduction of 63%.

In the last round of closures it was announced that six bank branches were closing in a matter of months. Both Blantyre and Cambuslang no longer have any bank branches. I recently asked my constituents what effect the closures were having on them. One respondent, Joy, said:

“My husband is self-employed and he has a lot of coinage to bank. Because of the bank closures, we now have to travel from Cambuslang to Rutherglen, as the branches in Cambuslang and Burnside are now closed. There never seem to be more than two tellers on the counter at any one time and you can wait for over 30 minutes before being seen. This eats into time that could be spent earning.”

RBS says that post offices can provide services in the place of closed branches. However, I have concerns about the capacity of post offices, which have also closed in great numbers, to meet that demand. Post offices do not have the expertise of local branches, which will deprive people of easy access to more complex banking services.

The impact of such closures will be felt hardest by those who struggle either physically or financially to travel, meaning that the elderly, disabled people and the poorest in society will be most affected by the Government’s failure to act. An impact will also be felt by aspiring local businesses. From my experience, I know how important it is to build that trusting relationship with a bank from the beginning, and there really is no better way of doing that than old-fashioned face-to-face contact.

It is likely that small businesses will receive less money for setting up and essential in-branch transactions will take more time and be less accessible to those who find it difficult to travel. Banks draw people to the high street, and retail businesses are already struggling to survive. Any decline in footfall and reduction in availability of free-to-use ATM machines for customers to withdraw cash could well be the final straw for many retail businesses.

It is important that we view local branches not just as commercial enterprises but as essential local utilities that play an important role in supporting local economies. Communities rely on banks, but that relationship is two-way. When the banks got into trouble, it was taxpayers in our local communities who stepped in to save them. What a dreadful way this is to repay that favour.