Building Societies Act 1986 (Amendment) Bill

Debate between James Daly and George Freeman

2nd reading
Friday 19th January 2024 Commons Chamber

[George Freeman]

I completely agree—my right hon. Friend makes an excellent point, and we will come to that in due course. She is absolutely right.

I want to focus on building societies in rural areas. The flight of the banks, in particular from rural areas but also from a lot of high street banking and the role they have traditionally carried out—this is partly why the Bill is so important—highlights the importance of cash in the rural economy. Many of my local small businesses are really struggling with how to bank cash properly. We also have a problem in our part of the world with ATMs now being subject to JCB theft—ATMs being ripped out of the wall. So, there is a cash problem and building societies have a really important role.

As well as reflecting the very best of old Labour, this is also, if I may say so, the very best of civic conservatism. This is Edward Burke’s little platoons. This is the weft and the warp of local connected responsible civic community-based capitalism; the sort of capitalism that small platoon civic conservatism has long championed. I would argue that all parties in Government over the past 40 years have slightly forgotten that that needs to be championed. We have seen the rise and the domination of big capital, big banks and big disconnected capitalism. I am here today as a card-carrying supporter of the mutuality model and civic capitalism. I think both main parties have that in common in their different traditions and history.

On rural banking and finance, in Mid Norfolk we have five towns and 114 villages. We are not quite halfway between Cambridge and Norwich. Traditionally, it has been something of a rural backwater. It is an agricultural community, with many retirees and pensioners moving to quiet rural Norfolk. It is a real challenge to ensure that our villages remain vibrant and our towns remain thriving. The model of development over the past 40 years has been over-focused on commuter housing. People drive their cars to Norwich and Cambridge during the day, and that sucks the life out of many of our villages.

The rise of online commerce and digital retail has also taken quite a lot of the life out of many of our towns, and our high streets are struggling to remain vibrant. The Government’s moves to reduce business rates has helped, but the pandemic and the cost of energy crisis, coming off the back of the Ukraine war, has hit rural areas disproportionately hard. That is a theme I will be picking up in the coming months in this House in the run-up to the Budget. Everyone has been hit by the cost of energy increase of course, but in rural areas there is a double triple whammy. Every member of staff in a company has to drive. Most of my relatively low-paid working families have one, two or three cars. They are not a luxury; they need them to be able to get to work. All our public services are hit—our bus services and our county council services—all across rural areas. We are paying a double whammy because of an over-dependency on transport and heating. That huge rural impact is hitting remote backwater rural areas very hard, particularly in my part of Norfolk.

In that context, it is urgent that we encourage the revival of the rural economy. I have long believed and campaigned locally that, with a slightly different approach to planning and development in our area, we could trigger something of a rural renaissance, with many small businesses popping up off the back of the Cambridge phenomenon and the Norwich Research Park. Small businesses often start off by working from home or looking for converted farm units; they are not in the city centre, but distributed. If we can get more businesses back into villages and small towns, we will have more people of working age in communities during the day. That will reduce congestion and commuting.

The model of a vibrant rural economy is key to so many of the priorities of successive Governments. We will never get to net zero if we keep shovelling people into cars and making them commute long distances in congested traffic jams. The more we can get people to work from home or nearer to home, travelling when they need to during the day and not in peak hours, the better. That vision of rural renaissance is key, but it will never happen if young people cannot afford to buy a house near to where they work, if thriving businesses on the high street are unable to cash-up, save and deposit cash safely, and if pensioners are unable to save, take out their deposits and interact with banking in the way they have for the past 50 or 60 years. We need to ensure that we build an economy for the people who live there.

That is what my campaign, The Norfolk Way, is all about. It is a project to promote that vision of rural growth. The Bill touches on much of that. One has only to see the flight of the mainstream banks out of such areas—I know that colleagues in other constituencies see that—and the desperation that people feel, whether they are first-time buyers or pensioners.

[James Daly (Bury North) (Con)]

My hon. Friend is making an excellent speech, but we should not see building societies as a panacea; they are closing branches in my area as well. How do we encourage building societies to keep branches open when they are closing throughout the country?

[George Freeman]

My hon. Friend makes an excellent point. I do not want to suggest that they are a total panacea; I am lauding and applauding Nationwide in Dereham because it is doing great work, but we need to make sure that the Bill is part of a broader approach. I hope that Treasury Ministers, thinking about the run-up to the Budget and looking ahead, will think about how we can encourage more choice, more competition and more presence from both building societies and banks. We need choice and competition in rural areas and other areas that are not well served as well as in areas that are.

The opportunity for rural renaissance was hit hard by the pandemic, as well as by the Ukraine war, with its impact on energy prices, Putin turning off the gas taps and the cost of living crisis that we have all experienced. It is in that context that the Bill represents a chink of light and has been hugely supported locally. I am delighted to have helped the hon. Member for Sunderland Central bring it to the House.

I want to say something about the banks, because over the 13 years for which I have been privileged to be the Member of Parliament for Mid Norfolk the closure of banks—a cause on which I remember fondly working with the former Prime Minister, my right hon. Friend the Member for South West Norfolk (Elizabeth Truss), in 2009—has gradually hit much of rural Norfolk. Everyone understands that we cannot have a hugely staffed bank branch in every village, but there is a contract at the heart of the state between citizens, Governments and operations such as banks that work under regulations. Banks are there to provide a service, too, and if they are not going to provide that service we need to look at who will.

[George Freeman]

I do. My right hon. and learned Friend amplifies exactly the point I was making. He is right that sparsely populated or rural areas will often require different solutions, in the same way as small rural schools require us to network and support them through multi-academy trusts. Similarly, we need to be imaginative in how we support cash access and banking and saving in rural areas. That touches on a deep problem that I have witnessed over many years: Whitehall tends to see these problems through an urban lens, and we need to think a bit about how rural areas often need a slightly different approach. I hope that the Bill and the cross-party support for it will help to encourage the Treasury to think about how we can do more to make this a moment to encourage greater choice and competition out in the market.

It is particularly sad that the banks have stepped back from the service I described over the two or three decades in which many of them have focused rather more on big, international and complex financial trading—the derivatives that led to quite a lot of problems we had back in the great crash. It is particularly sad in Norfolk given that it is where one of our great banks, Barclays, actually started, with the Gurney and Barclay families. The first bank had its roots in King’s Lynn docks. As people were required to pay duties, they required credit finance. I encourage anyone who has not been to King’s Lynn to go there, as it has a beautifully regenerated and refurbished Georgian dockyard, where they can see the plaque commemorating the first credit facility that became the great Barclays bank. It is particularly sad to see a bank such as Barclays step back from the place in which it started. Everyone has history, roots and heritage, and I am not such a romantic that I expect Barclays to put a bank in every Norfolk village, but I do think there is a responsibility on all these companies to make sure that the people they are there to serve are getting the service they need.

I wish, in particular, to highlight the importance of access to cash on high streets for small businesses, as it is becoming a serious problem. I know that the Minister understands it, and I am grateful for his acknowledgement of it. Across East Anglia, and I am sure this is happening elsewhere, we are seeing an increasing frequency of ATM raids, where JCBs are driven into banks and ATMs are taken out. However, that is the thin end of a bigger wedge, and many businesses in Dereham, Attleborough, Wymondham, Watton and Hingham are beginning to struggle with what to do with cash on a Monday morning, and many local people are struggling to find a bank they can access.

I know that many people wish to speak this morning, so I will not detain you or the House for too long, Madam Deputy Speaker, but I want to touch on mutuality, which my right hon. and learned Friend the Member for North East Hertfordshire (Sir Oliver Heald) addressed earlier. We need to talk about, celebrate, champion and promote it more in this House. Some 300 years ago, we were writing the rule book for modern capitalism, defining the joint stock limited company and setting out the legal framework in English constitutional law, in common law, that drove the industrial revolution. We created limited liability companies, which allowed people to invest, raise money and back projects, and that was a key part of what this country did.

In an age of globalised capitalism and high technology, we have a challenge to make sure that capital does not become disconnected from the people who are providing the money, the savers, and the people who need the money to build businesses. For capitalism to work, we need a connection between money, the people who are saving it and the people who are borrowing it. The last crash in the City was a clear example of what happens when a disconnection is allowed to get to crisis proportions, whereby people do not know where the money that they have deposited is going and people who buy a complex derivative bond do not know what it is built on or what is underpinning it. We then have a serious problem. I am not suggesting that we go back to an agrarian revolution of trading wheat for a lift on a cart into Dereham, but I think there is a real issue in our economy in respect of connected capitalism.

Conservative Members in particular, as card-carrying advocates for the market, need to continue to champion and make clear the fact that markets work when they have values, connection and people at the heart of them. When markets are completely disconnected, they have no sense of the requirements of the people putting the capital in or taking it out, they do not value that connection and regulators do not understand the importance of the bond of responsibility between people who are trading with each other.

Mutuality is a proud tradition at the heart of the old labour movement, but it is also a proud tradition in civic conservativism—it is Burke’s little platoons. In a spirit of cross-party philosophising on this Friday morning, perhaps I can put some wind in the sails of the movement for mutuality. I would love to see more mutuality in different sectors, such as in finance, banking and housing, where, clearly, the building societies have been a great reform—I would argue that the housing associations have also been a great Conservative reform in housing.

There are many examples of where we could blow on to the embers of mutuality and encourage more of it in different areas, particularly in some of our social care sectors and health provision. It should not be a stark choice between private profit and public state. There is a whole third sector of mutuality— membership organisations that can deliver public goods, with cost reimbursement and important disciplines of financial control that are not necessarily either public sector, with all the efficiency challenges that go with it, or private sector, with all the incentives for high profit. There is a whole raft of organisations out there that we could be deploying better—in health and care, but also in criminal justice and a whole range of areas where the state has struggled in the past few decades to achieve its stated objectives.

[James Daly]

My hon. Friend is making an outstanding speech, and we could philosophise all day, which I am tempted to do very badly. Mutuality in the modern day requires a profit element. For all building society branches to remain open, the business has to produce a profit. Mutuality in the sense of Ketley’s Building Society in 1775 is a different concept completely. We therefore should always come back to the point he makes that, for mutuality to succeed, it must be based on a civic, conservative and capitalist model. It cannot work in any other way.

[George Freeman]

My hon. Friend makes an excellent point and encourages me to wrap up my philosophising. He is right—I am not at all anti-profit; it is about what is done with the profit. One of the geniuses of mutuality is that the profit is recycled back in to pursue the interests of those who put in the capital in the first place.