ATM Closures

Ged Killen Excerpts

Tuesday 4th December 2018 Westminster Hall

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

I beg to move,

That this House has considered the effect of ATM closures on towns, high streets and rural communities.

It is a pleasure to see you in the Chair, Mr Hollobone. I and other hon. Members on both sides of the House have been raising the closure of ATMs and its impact on our towns, high streets and rural communities for some time. The issue is more pressing than ever. In November 2017, LINK, the ATM membership body that sets the funding for free-to-use ATMs, began consulting on proposed cuts to the funding mechanism known as the interchange rate fee—a fee paid to the ATM operator, by the bank or company that issues a consumer’s bank card, when cash is withdrawn. Prior to LINK’s reductions, that fee was 25p. In its consultation, LINK proposed reducing the fee to 20p through four rounds of cuts beginning on 1 July this year and ending in January 2021, although the third cut was cancelled and the fourth has been put under review.

From the beginning, LINK accepted that those changes would lead to ATM closures. In its analysis and consultation documents, it stated that it expected a decline of between 1% and 11% in free-to-use ATMs, but that it was confident that there would be a reduction only in areas with a high concentration of free-to-use ATMs, such as cities. However, the number of closures has been far higher —approximately 250 per month—since LINK announced its consultation. Operators such as NoteMachine and Cardtronics say they expect to lose thousands of machines each, and new installations have been put on hold.

[Yvonne Fovargue (Makerfield) (Lab)]

Does my hon. Friend agree that one of the major problems is that the machine operators—Cardtronics and so on—do not have to inform the LINK network before closing a machine, and that the cost of replacing a machine is prohibitive?

[Ged Killen]

My hon. Friend anticipates my next point. If an ATM is removed, it costs between £7,000 and £10,000 to reinstall. That high capital investment means that, once closed, an ATM is difficult to replace, due to concerns that the investment may not pay off.

LINK sought to reassure the Payment Systems Regulator that the spread of free-to-use ATMs would not be damaged, because it would use its financial inclusion programme to protect ATMs in areas where there was not another free-to-use machine within 1 km. However, although it is well-intentioned and well funded, that programme relies on communities or operators reporting vulnerable ATMs to LINK and nominating them for extra funding, which, as my hon. Friend alluded to, they do not have to do.

The problem is that the existence of the financial inclusion programme is not well communicated, and there is concern that take-up has been poor. Anecdotal evidence suggests that the process for accessing the programme is not well known or straightforward, meaning that communities, operators and councils are often delayed in applying for funding.

I spoke recently to Tesco about its network of more than 4,000 ATMs. As I am sure Members know, many of those ATMs are in groups of two or three outside stores. Tesco told me that in some cases, those two ATMs are the last two in the town, but neither falls under LINK’s financial inclusion programme because both are right beside another free-to-use ATM.

As a consequence of the poor deployment of the financial inclusion programme, more than 100 ATMs with “protected” status have closed. We see examples of the programme failing in Scotland. Just outside Edinburgh, in the EH18 postcode, the nearest free-to-use machine is now 1.3 km away. In the PH24 postcode in the Cairngorms, the nearest machine is 6.6 km away. In TD10 in the Scottish Borders, some consumers must travel 10.9 km to withdraw their cash without charge.

[Jamie Stone (Caithness, Sutherland and Easter Ross) (LD)]

I am extremely glad that the hon. Gentleman is making an issue of the distance between ATMs. My constituency is vast and remote, and we have a thin scattering of ATMs. There is a threat of closure. I have a map here. I assure the hon. Gentleman that the distance between some of those ATMs is more than 10 km. If any one of them closed, that would be severely detrimental to my constituency.

[Ged Killen]

I thank the hon. Gentleman for making that point. He came along to an event I held in conjunction with Which? where that information was available to Members from across the House. Many Members were surprised to learn just how far apart ATMs are in their constituencies, and how vulnerable each of those areas would be if something happened to one of those machines.

The 1 km rule just is not working. Even if it were, things can go wrong quickly when one of the last remaining machines develops a fault or runs out of cash. I stopped off in Ballantrae in South Ayrshire over the summer recess, which seems a long time ago now. When I went to use the ATM, I discovered it was out of service. There is a post office counter in the local shop—we would need an entirely separate debate to talk about the pressure post offices are under to try to meet the gap in services created by the banks—but when I went into the shop to inquire, I discovered that the next-nearest ATM is more than 20 km away, or almost 13 miles in old money.

The other issue is that it is difficult to take account of local circumstances in applying the 1 km rule. In Cambuslang in my constituency, both free-to-use ATMs at either end of the main street are—excluding the other—within 1 km of another ATM, but those alternative ATMs would be not just inconvenient but very difficult to get to for anyone who experiences mobility issues. The closure of either ATM on the main street would have a massive impact on the small businesses in that area, which are already really feeling the pressure.

[Mr Gregory Campbell (East Londonderry) (DUP)]

I congratulate the hon. Gentleman on securing this timely debate. Does he agree that in coastal towns—particularly in my constituency but in others, too—we sometimes see the dilution of ATMs? A filling station might open with an accompanying shop and ATM, but the ATMs in the town centre might close, thereby exacerbating the problems we have with reinvigorating our town centres.

[Ged Killen]

The hon. Gentleman is absolutely right. He makes an excellent point about the existing pressure on our high streets. Removing ATMs and other services does not help that pressure one bit.

LINK has now been given a specific direction by the PSR to review its financial inclusion programme, due to its failure to protect the spread of free-to-use ATMs. However, I have little confidence in the regulation of the sector. LINK’s changes to ATM funding were the PSR’s first major regulatory hurdle. In my view and that of many stakeholders, it fell at that hurdle. Common themes related to the reporting of issues and access to the financial inclusion programme have been reported by those involved in the industry pretty much since day one. I sat across from the PSR and explained the concerns I had heard about the closure of free-to-use ATMs and about their operators, and from the many people who are against the cut to LINK’s interchange fee, and I was met with silence. On every occasion when concerns were raised, the PSR failed to act. Only latterly has it taken action.

[Ruth George (High Peak) (Lab)]

I thank my hon. Friend for bringing forward this important debate. My very rural constituency is similarly affected. When I met the PSR, I found its attitude was, “Wait and see whether there are any problems, and then we might think about acting.” Does he agree that that is not the correct attitude for a regulator to take when it has such a weight of evidence before it that there will be problems?

[Ged Killen]

My hon. Friend is absolutely right. When I met the PSR, it seemed wholly satisfied with listening to what LINK, rather than everyone else involved in the industry, had to say about the issue. That was surprising and disappointing.

The closure of free-to-use ATMs highlights the significant problem we have with the way access to cash is managed in the UK. There seems to be no effective oversight of the issue, and responsibility sits across numerous Departments, regulators and private companies. We need a regulator to have the powers to take a rounded view and implement effective measures that will ensure access to cash is protected. It seems likely that the PSR either does not have the power it needs or has not utilised fully and effectively the abilities it has. I should be grateful if the Minister would comment on that.

We are in a transition towards a cashless society, but we are not there yet. We need to be careful about how the transition is managed. Most importantly, we have to think about the impact on people who still rely on cash. Access to cash remains an important part of many of our constituents’ lives. Research from Which? has highlighted the fact that four in five people said that access to the free-to-use network was important in their daily lives and in paying for goods and services. Removing free access to cash would leave one in 10 people struggling to make payments, and would shut many consumers out of local shops and services.

We also need to think about what happens when the technology fails or in the case of hacking. This year the Visa payment system crashed and there were major online banking issues for TSB customers, many of whom of course did not have a local branch to visit as an alternative. The experience of other countries further along the journey towards a cash-free society, such as Sweden, where there has been a huge rise in the number of places that simply will not accept cash, is that there are now serious concerns about the lack of cash in the economy, so that the Government are looking at ways of addressing that retrospectively.

[Ruth Smeeth (Stoke-on-Trent North) (Lab)]

Does my hon. Friend agree that another challenge is the fact that in many communities there simply is not access to digital platforms—so that 25% of my constituents have not accessed the internet in the past six months? Moving to contactless payments or online banking is not an option available to them.

[Ged Killen]

My hon. Friend is right. My constituency is neither rural nor a city; there are new-build towns that are in between, with surprisingly poor access to broadband in some places. We are asking people to use those services instead of visiting a local branch. That is not always practical—not least for those who are perhaps not as tech-savvy as others.

It is not just a matter of ATMs. The whole infrastructure that supports access to cash will be at risk if we move towards a cashless society too quickly. Without intervention from the Government it will be the elderly, the least well-off, rural communities, struggling high streets and small businesses that will pay the price. We see that happening in other countries that have made the transition too quickly. That is the driving force behind my private Member’s Bill to ban ATM charges and protect access to cash, the Banking (Cash Machine Charges and Financial Inclusion) Bill. In principle I do not believe people should have to pay for access to their own money. Long gone are the days when people’s employers handed them a pay packet at the end of the week, and the banks would not much like it if we all decided to keep our cash under the mattress. We have little choice but to keep our money in banks, and that money generates profit for banks, so we should not be paying to get access to it.

As LINK chips away at the funding formula for ATMs and more and more people use contactless and digital payment methods, there will be far fewer ATMs and more of the ones that are left will charge us for the privilege of withdrawing our cash. I do not want to stand in the way of progress towards a cash-free society, but I do want to shift the burden of that transition away from consumers and on to banks, who after all are the long-term beneficiaries of a cash-free society. We will never reap the rewards of those savings when they come, so let us have them now by requiring the banks to continue providing free access to cash where there is still a demand for it.

I was glad that the Labour party adopted the aims of my private Member’s Bill. For me, and for the Labour Front Bench, the rejuvenation of the high street is not just about helping small businesses; it is a social issue as well. I have noted that there is a growing cross-party consensus on the issue. The hon. Member for Bexhill and Battle (Huw Merriman)—he is not here for the debate, but I have notified him that I shall be mentioning him—has a private Member’s Bill on ATMs, the Minimum Service Obligation (High Street Cashpoints) Bill. I agree with the hon. Member for Ochil and South Perthshire (Luke Graham), who is here today and who, with his private Member’s Bill, the Banking and Post Office Services (Rural Areas and Small Communities) Bill, has highlighted the responsibilities that banks have to the consumers who bailed them out during the financial crisis. In addition to what is being done by Members of this House, a range of organisations have raised the same concerns. They include Which?, the Federation of Small Businesses and the Association of Convenience Stores.

I recently met the chair of the independent access to cash review, and I know that the review is considering in detail some of the issues I have touched on in the debate, so I look forward to seeing what comes out of that. However, in the context of bank branch closures up and down the country, and with high streets and rural communities facing ever greater challenges, the Government must take a serious look at the issue now. I hope that the Minister will reflect on what I have said.

[Mr Philip Hollobone (in the Chair)]

The debate can last until 11 o’clock, and five Members want to catch my eye. We have about 40 minutes of Back-Bench time, so if Members speak for more than eight minutes they will deprive someone else; please be courteous to each other.

--- Later in debate ---

[Ged Killen]

I thank hon. Members for taking part in this debate; I was encouraged to see so many people first thing on what promises to be a very long day indeed.

I also thank the Minister for his response. Unfortunately, for some of it I felt like I was hearing the LINK briefing that I have heard a thousand times being repeated back at me, but there were some interesting things in there that I agreed with. I was encouraged to hear him say that the authorities were investing in cyber security, but I suggest to him that the people who are seeking to undermine our security are also invested in that endeavour.

As we witness the rise of digital technology, which the Minister mentioned, we have to consider the experience of other countries, such as Sweden, that are now retrospectively looking at Government intervention. We have a chance in this country to get ahead of that by considering intervention now.

I agree with the Minister when he says that this issue is about consumer choice; he is right about that. However, having listened to the concerns of Members here today, he will understand that that choice is being taken away from some people, due to the lack of availability of free cash. He can quote some favourable statistics showing that the situation is better than we might have suggested, but on the ground the picture is very different for the communities that we represent.

We all recognised what the hon. Member for Moray (Douglas Ross) said about going to other ATM machines if he finds one that is charging a fee. I am exactly the same. Unfortunately, as he said, not everyone has the ability to go to another ATM.

The hon. Gentleman made an interesting point about business rates, which must be looked at. I have heard these concerns expressed many times by shop owners in particular. They are concerned not just because ATM machines attract business rates; as I understand it, an ATM machine in a store actually increases the rateable value of that store overall, which brings additional costs for that business. We need ATMs to be there if there are no bank branches offering ATM provision.

The hon. Member for Strangford (Jim Shannon) said that cash transactions were still in high use. From memory, when I spoke to Tesco it told me that over 60% of its transactions in store are still cash, and that there is a withdrawal from one of its ATM machines every 10 seconds. So, it is simply not right to say that cash is on the way out yet. As I have said, we are in a transition towards a cashless society, but we are not there yet and we have to get that transition right.

My hon. Friend the Member for Stoke-on-Trent North (Ruth Smeeth) said that services such as ATM provision were a lifeline for our communities, and spoke about the percentage of someone’s income that they could pay out in charges if they withdrew £10 from an ATM machine and were charged. Of course, if that person has only £10 in the bank, they will be unable to withdraw that from one of these ATM machines that charge.

I conclude by giving my private Member’s Bill one final plug. I am pleased to report that the inventor of the ATM machine and the PIN code, James Goodfellow, is alive and well in Scotland. Mr Goodfellow supports my private Member’s Bill. So, if the Minister is unwilling to take my word for how important this issue is, perhaps he will consider taking the word of the inventor of the ATM machine.

Question put and agreed to.

Resolved,

That this House has considered the effect of ATM closures on towns, high streets and rural communities.