Community Bank Closures

Ged Killen Excerpts

Thursday 8th February 2018 Commons Chamber

[Ruth Smeeth]

I completely agree with my hon. Friend, although I think many others will be astonished that he has had a bank account for that long. There is a genuine issue about the responsibility of community banking. When I got my first paying-in book, there were 20,585 branches across the country, but by 2012 that figure had dropped to just 8,837. In the past three years alone, we have seen a further 1,500 branches close, and that does not include the announcement of further closures made in the past three months.

The hole that these closures leave behind goes far beyond an empty shop front. For the elderly or disabled, a 3 mile journey to the nearest branch is more than inconvenience. In my constituency, Burslem, Kidsgrove and Tunstall are all facing the loss of well-used local bank branches and the impact on local residents and local businesses will be severe. In Burslem, we are currently facing the prospect of losing our very last bank branch, a local Lloyds. Burslem is the mother town of the Potteries, as I am sure the whole House is aware. It is home to Burslem School of Art and the Wedgwood Institute, to Port Vale football club and the outstanding Titanic brewery. Yet if these plans go ahead, there will no longer be a single solitary bank. What message does that send to a community that is doing everything it can to support local businesses and improve our town centre? When did community banking become a phrase devoid of meaning?

In Kidsgrove and Tunstall, Co-op customers are faced with the prospect of losing their local branches—the last remaining Co-op banks in my constituency. As a Tunstall resident and a customer myself, I know how popular the branches are and the impact that their disappearance will have. Walk into any one of these branches at virtually any time of day and people are queueing. They are used by hundreds of residents as well as local businesses.

Petitions against the closure have already attracted thousands of signatures, and residents have contacted me about what the closures will mean for them. I must thank Councillor Kyle Robinson for leading the campaign in Kidsgrove, collecting more than 1,200 signatures so far, as well as Tom Simpson, Lucy Kelly and local traders in Tunstall and Tunstall market for their incredible efforts, as well as the wonderful June Cartwright for co-ordination of the Our Burslem campaign.

The closures will have an immediate effect and impact on people’s lives. I have heard from elderly constituents who use the Tunstall Co-op branch and will be forced instead to travel 3 miles via unreliable public transport to a city centre with no public conveniences. For people in their 70s and 80s, or those with a disability, this is more than an inconvenience—it is a genuine struggle.

That was brought home to me by a story from a constituent whose parents have used the branch for many years. They are not technologically savvy— a weakness I, and I am sure others across the House, share—and they find it difficult to use an ATM or to pay for things in shops using their debit cards. If the House will humour me for just a moment, I want to quote what my constituent had to say about this matter:

“My parents are 81 and 83 years old and have used the Co-op bank in Tunstall for many years. The staff know my parents very well. They are exceptionally helpful, supportive, patient and ensure that they understand everything that they need to. Knowing that my parents have this level of support when I’m unable to be there every day, provides me with a great deal of reassurance, and I’m extremely grateful for this.”

I am sure that we all know people who benefit from this level of personal service and for whom the faceless and bewildering world of online banking simply will not work. In fact, in my great city too many of my constituents do not even have access to the internet. In the past three months, the Office for National Statistics suggests, up to 51,000 people, or one in four, aged over 16 in Stoke-on-Trent have not accessed the internet. One in four. For the record, that is more than double the national average, which makes talk of internet banking as the panacea for this crisis nonsense for too many people.

For businesses too, the closures present a challenge. For those who trade primarily in cash it is neither safe nor practical to expect staff to travel halfway across the city to deposit the day’s takings. And for small businesses with a limited number of employees, the time that this will take out of their day is a real hindrance. One of the defences often given in advance of such closures is that nearby ATMs will continue to be available, yet hundreds of them are at risk of being closed down thanks to the proposed overhaul of the LINK network. What is more, the services provided by external ATMs are incredibly limited, even compared only with the automated services available in bank branches.

The Post Office provides a valuable service, and in 3,000 locations—soon to include Burslem—it is the last banking retailer in town. But its ongoing restructuring process has seen too many branches close in recent years and we do not know what the future holds. Of course, although the Post Office can support customers looking to withdraw or deposit cash, it cannot provide the same range of services and advice as a bank branch.

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

Does my hon. Friend agree that many people are not necessarily aware of the services available in post offices? If they are, they do not always want to do their banking in, for example, a local shop—where a lot of post offices are now based—because it might be busy.

[Ruth Smeeth]

I could not agree more with my hon. Friend. In fact, one of my concerns is that no assessment is made of whether local post offices have the capacity to deal with these issues when a bank in a community closes, and there is no communication with those post offices.

Britain has often been described as a nation of shopkeepers, so what does it say about us if we are unable to maintain the national banking infrastructure that our small traders need? There is a safety aspect to these closures as well. Should the final Lloyds branch in Burslem close, the only remaining ATMs will be inside shops. There will be no external ATMs available in the town and nowhere to withdraw cash after closing time. If I were to go for a drink in Burslem one evening, and as the vice chair of the all-party beer group, it would be impolite not to—

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[Caroline Flint (Don Valley) (Lab)]

I am sure that we all heed your words, Madam Deputy Speaker, and thank you for your consideration this afternoon. I congratulate my hon. Friend the Member for Stoke-on-Trent North (Ruth Smeeth) and the hon. Member for Hazel Grove (Mr Wragg) on securing the debate.

I listened very carefully to the right hon. Member for Arundel and South Downs (Nick Herbert), but I am afraid that he seemed to be talking himself into a bank closure. Of course, this debate is about banking services, but I hope that we can also focus on the need to think creatively about the sort of sustainable bank—a community hub—that is necessary. This is perhaps not necessary in our cities, where we can walk down the street and pass six banks in half a kilometre, but it is necessary for our small towns and semi-rural communities around the United Kingdom. For them, it is the bank’s presence in a new sustainable form that we are fighting for and championing today.

In August 2017, Reuters reported that bank branches across Britain had closed at a rate of 300 per year since 1989. The Daily Mail reported in December 2017 that over 1,000 branches had closed in 2015 and 2016, and a record 802 branches closed in 2017. The accelerating pace of closures appears relentless. In my constituency, the town of Tickhill lost its last bank in 2015. In 2016, the town of Thorne lost its HSBC branch. Then, in November 2017, RBS served notice that the town of Thorne will also lose its NatWest branch, and the town of Bawtry is to lose its last bank branch, also a NatWest.

The previous Government’s response to this relentless wave of bank closures was to announce an access tobanking protocol in March 2015. It is now clear that the protocol was not what it seemed. It laid out a timetable for consultation about impact and the provision of alternative banking, but no—I repeat, no—mechanism to stop a branch closing. So the process for closure has been determined, but a mechanism to halt a closure is non-existent. Communities have no more chance of stopping the closure than they did in 2015. The Government have done, and are doing, nothing to change this. “It is a private matter; it is a commercial matter”, we have been told on several occasions during Prime Minister’s questions in recent times. The Government decline to collect statistics on closures or on how many communities are now without any banking service. It is as though closures were an inconvenient truth.

The banks would have us believe that this is a story of enlightened pensioners managing their ISAs and direct debits on their smartphones. The truth is somewhat harder to get to. This House, I believe, is not nostalgic, nor opposed to telephone or smartphone banking. We are not against people managing payment on their PCs. But the selective figures provided by RBS-NatWest to justify closure give a completely distorted impression of their NatWest branch to each of the towns in Don Valley. For example, RBS was keen to tell me that 88% of Bawtry customers and 86% of Thorne customers now bank in other ways, and that only 48 customers in Bawtry and 69 in Thorne attend the branch on a weekly basis—although the time period for this estimate was not provided to me. Yet when a member of my staff went to the Bawtry NatWest midweek in mid-January—a quiet post-Christmas week—they saw a queue outside the bank before it opened at 10 am, and at 10.45 am they found a queue more than 10 deep in the bank, with several counters in use. But when I asked RBS how many transactions took place at the Thorne and Bawtry branches in the first hour of each day since the new year, the bank refused to disclose this information. It was “commercially sensitive”, I was told. Nor would RBS furnish me with information on what proportion of the customers are pensioners, how many transactions took place at each branch in the past year, or why neither branch opened on a weekend. On a Saturday morning, footfall could be more frequent.

So much for dialogue and consultation. Well, I say this to Ross McEwan, RBS’s chief executive, and to Les Matheson, NatWest’s chief executive, personal and business lending: please do not patronise me with offers to meet a “senior representative” when you refuse to provide any information that may demonstrate that small businesses, pensioners or the community generally may need the services provided in the Thorne and Bawtry branches more than you care to admit. In response to a question about the possibility of branches sharing premises to make them more viable, I was told by Mr Matheson that NatWest’s arrangement with the post office means that the post office is now “the shared premises”. On that basis, why have any branches at all? The post office is the NatWest!

Where is the genuine attempt to find a model for sustainable banking? Instead of small counters in corner shops, why cannot post offices be located in secure bank premises, sharing them with more than one bank? Why cannot several banks have staff in Thorne or Bawtry on different days of the week, with banks sharing overheads in secure premises to create, as my hon. Friend the Member for Stoke-on-Trent North said, a community banking hub? That could be a win-win situation.

Where is the attempt to bring young people into branches—some real outreach to make them see the bank as more than an app on a smartphone? I do not know about colleagues around the House today, but I am always being lobbied by banks about their latest wheeze to provide for financial inclusion. They are always telling me about how they want to do more in our schools and communities to give people the skills not only to press a button on a computer or click on an app, but to understand what financial literacy really means. They are always lobbying us, but I do not see any effort to attract young people into branches to help them with financial decisions. Let us not stop at young people. Many of my constituents do not have a bank account at all and have never had one, and there are plenty of other people who still do not know quite how to go about getting a mortgage, how to run an ISA, how to save, or how to pay off debt.

[Ged Killen]

My right hon. Friend is making an excellent point about the role of banks in attracting people into the branches. Does she agree that what many banks have been doing over a number of years is trying to drive people out of their branches by taking essential services away from those branches?

[Caroline Flint]

I absolutely agree with my hon. Friend. One would think that banks did not really want to foster demand for real branches, so the case for closure is made for them. They are creating a self-fulfilling prophecy.

Parliament needs to demand more from Government and more from the big five banks, beginning with support for local communities. While branches cluster in large cities in lavish offices, outlying towns and villages are being denuded of bank branches that are anchors for local businesses. We are told that the average customer travels just 2 to 2½ miles to their nearest bank branch. I worry about figures like that, because what they really mean is that the banks estimate all the access across the UK and then divide it, so of course the figures will be distorted by the density of branches in our cities.

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[Mr Paul Sweeney (Glasgow North East) (Lab/Co-op)]

Thank you, Madam Deputy Speaker, for the opportunity to contribute to this very interesting and vital debate on a massive issue that affects communities across our nation. It is always a pleasure to follow the hon. Member for Strangford (Jim Shannon), who made a particularly passionate and insightful speech about the impact the programme of closures will have on communities in his constituency.

I congratulate my hon. Friend the Member for Stoke-on-Trent North (Ruth Smeeth) on securing this debate, and on speaking so passionately and knowledgeably in introducing it this afternoon. I also thank the hon. Member for Hazel Grove (Mr Wragg) for his contribution, and for securing the debate through the Backbench Business Committee.

I speak with a degree of nostalgia and affection for community banking, given that I grew up around community banks. My mum has worked in retail banking for her whole career, and I remember vividly as a kid being taken down into the vaults of the Bank of Scotland in Charing Cross, where my mum worked. I also remember opening my Squirrel saver account at the Bank of Scotland, and my little plastic Bank of Scotland piggy bank, which was great.

I speak with great affection about community banks, but I also know how important they are, particularly for elderly customers and vulnerable people in the community. They develop a very close and affectionate relationship with the staff, who know them very well, understand their needs and are able to accommodate them. It is a form of personal interaction that builds affectionate relationships and a long-term engagement with banks, and those relationships are hugely valuable for the banks. I would have hoped that more banks recognised how important such personal interaction is for communities —it is vital—and how it contributes to them.

It is a shame to think that that bank in Charing Cross is now a Starbucks. That shows that this is a long-term process of withdrawal from communities, and we must challenge it because our communities are approaching a real cliff edge. My worry is that the programme of bank closures that we have observed, particularly in recent years, appears to target the poorest communities in our society disproportionately. Well over 1,000 branches have closed in the past two years alone.

In my constituency of Glasgow North East, where unemployment is twice the national average—I would add that it has had the lowest turnout in elections in any constituency, which perhaps shows the level of disengagement of many people—we have had the closure of the RBS branches in Possilpark, one of the poorest communities not only in Glasgow but in Scotland, and on Alexandra Parade in Dennistoun in recent months, followed by the closure of the Clydesdale bank in Springburn.

It was a cruel irony that, when I went down to look at the Clydesdale bank branch on Springburn Way, next to the shopping centre, I saw a branch of BrightHouse doing good business—it was doing a roaring trade. BrightHouse is a rapacious organisation that fleeces the poorest communities in our society by, I would argue, mis-selling consumer goods at outrageous rates of interest. That is also something we should challenge. As more people are forced out of normal commercial banking into the hands of these rapacious lenders, such lenders have to be challenged.

[Ged Killen]

My hon. Friend is talking about poorer communities being left behind by these banking changes, and he is absolutely right. Although the recent stay of execution for 10 branches in rural areas of Scotland is welcome, these are some of the wealthiest communities in Scotland, and three of the banks being saved are in the constituency of the Secretary of State for Scotland. The Government are the majority shareholder of RBS, so surely there is a role for RBS to step in and look after more such deprived communities?

[Mr Sweeney]

My hon. Friend is correct, and that is one thing we do not see—I have tried to piece together the evidence, but it is not nationally recorded. What is the density of banking operations in the poorest communities in our society? Data is not gathered on that issue. Possilpark and Springburn fall into the most deprived decile on the Scottish index of multiple deprivation, including for employment, health, education and housing. That seems to be the case for a lot of areas with branch closures, certainly in the Glasgow area, and it would be interesting if the Government could oblige banks to provide the data as a matter of national standards. By contrast, in the wealthiest parts of the city—I took the example of Byres Road, which is arguably the wealthiest postcode in Glasgow—every major bank is represented. Banks seem to be withdrawing from the poorest communities while maintaining their services in the richest parts of the city, and if that is extrapolated across the UK, it paints a dismal picture.

It has been argued that bank closures are a reality of technological change because more people are using online banking services. In reality, however, 2 million Scots do not use online banking, and they are disproportionately older people who are not familiar with the change in technology. We must be realistic about the rate of change and how practical it is, so as to reduce the harm caused to society and prevent the generational dislocation that is evidently occurring. More than one third of people who use the services of Citizens Advice Scotland have no or limited internet access. How will they access finance and banking if the major commercial banks disinvest in their local communities? Such closures are not just driven by technological change.

It is a great privilege to be a council member of the Institution of Engineers and Shipbuilders in Scotland, and the banking sector is a huge driver of innovation in our society. As hon. Members have said, we have seen huge technological changes, and one great British innovation that sticks out for me is the ATM. In 2016, the Scot James Goodfellow was inducted into the Scottish Engineering Hall of Fame for his work in inventing and patenting the first ATM in 1966. He did that in response to the desire by the major commercial clearing banks to close on Saturday mornings. People were trying to find a technological way to accommodate that desire, and that is how the ATM came into being and why it is so ubiquitous on our high streets today. We must harness technological change for the public good, not simply use it as a cop-out or an excuse to ridiculously disinvest from our communities at an inappropriate rate. We in the House must challenge that and adapt technological change for the public good; we cannot leave the banks to be judge and jury about the way that such change should occur.

I mentioned that closures are not just driven by technological change, and we must consider the banking sector in the UK. Five of the major commercial banks hold 85% of all current accounts, and personal banking services are combined with riskier investment banking activities. That is symptomatic of a very difficult and high-risk sector that in the last decade alone threatened our national prosperity with the banking crash.

The banking system in this country is an oligopoly and one of the most centralised systems in the world. As Adam Smith recognised, profit-seeking behaviour runs contrary to the common good and the creation of national wealth—we should always remember that when considering this issue. Germany has more than 400 local savings banks, known as Sparkassen, 1,000 co-operative run banks, and 300 private commercial banks, and that contrasts with the five massive banks in this country. Those banks in Germany are characterised by providing “patient finance”, not just to households and consumers but also—critically—to industry.

When James Goodfellow made his speech while being inducted into the Engineering Hall of Fame, he said that the greatest regret of his career was that ATMs were patented and invented in this country, yet they are not built or manufactured here. We have not benefited from this country’s industrial innovation, and our industrial strategy is symptomatic of our banking sector. We do not finance industrial growth because we are seeking high-risk, high-return profit in the City; we are not investing in the real economy, and that contrasts with the German banking system.

Why does Germany have the largest manufacturing sector in Europe, and one of the largest in the world? Because its banking system is resilient enough to underpin patient finance and allow real industrial growth and long-term economic resilience. We see that with German investment in machinery and a productive economy, and with their productivity rate—German workers produce in four days what UK workers produce in five. If we look at that as a broader symptom of malaise in banking and industry, we have to grip it and address it at all levels.

That is why I am so proud to stand here as one of the 39 Co-operative party Members of Parliament: the largest ever group of Co-operative MPs in Parliament and the third-largest party group in this House. The Co-operative party has long recognised the structural problems in society, which is why it proposes turning RBS into a mutual owned by its members and run in a not-for-profit manner in the public interest. The case for that is clearly self-evident and vital: we need that disruptive intervention in the sector.

We want to create a legislative mechanism to support the development of credit unions in the United Kingdom, one perhaps based on the US Community Reinvestment Act 1977, which I think was mentioned previously. The key innovation of the Act, introduced under the Carter Administration, was to combat discrimination and provide access to credit for low and moderate-income communities. If we reflect on the nature of bank closures in the UK, it is highly likely that they disproportionately affect the poorest communities. In the United States, that was known as “redlining”: banks essentially blacklisted communities they thought not worthy of investment. We can make the accusation that that is happening today in this country, albeit on an informal and opaque basis. It is about time a light was shone on the reality of the economic dislocation happening in our poorest communities.

Legislation similar to the Community Reinvestment Act would combat that discrimination by providing access to credit for low and moderate-income communities. It would apply a rating to banks based on their density of operation in poorer areas. In the US, investment credit unions are included as a CRA activity, meaning that the credit union sector is worth billions of dollars and it competes on an equal footing with commercial banks. Santander’s operations in the United States contrast with its operations in the UK: an £11 billion five-year commitment to support community benefits. An increase of 50% was announced in the US. It does not extend its American community reinvestment activity to the UK, because there is no legislative or regulatory imperative to do so.

The picture in the UK today is one of perilous dislocation, with banks withdrawing from our most vulnerable communities. It is the duty of this House and this Government not simply to capitulate to free market dogma, but to temper and control that market in the public interest.