ATM Closures

John Glen Excerpts

Tuesday 4th December 2018 Westminster Hall

[The Economic Secretary to the Treasury (John Glen)]

It is a pleasure to serve under your chairmanship, Mr Hollobone. I thank the hon. Member for Rutherglen and Hamilton West (Ged Killen) for raising the matter and for the thoughtful way he set out several issues that I will respond to. I also thank the other five Back-Bench Members who made contributions.

First, I assure hon. Members present, and across the House, that the Government recognise that widespread free access to cash remains extremely important for the day-to-day lives of many consumers and businesses in the UK, particularly the most vulnerable members of our society. Ultimately, the Government’s approach to payments is one of facilitating maximum choice; consumers should be free to choose the method of payment that best suits them. I acknowledge that several scenarios have been set out, particularly for rural and less affluent areas, and I will come on to address some actions that can be taken at different levels to deal with those challenges.

The fundamental context for the problem is the rise of digital payments and the decline in cash use. The UK has one of the most extensive free ATM networks in the world; some 82% of the ATM network is free. I listened carefully to the remarks of my hon. Friend the Member for Moray (Douglas Ross), who resists the option to pay a fee. I share his antipathy to that situation, but 98% of all ATM transactions are conducted on free ATMs. Moreover, the free ATM network has increased by 40% in the past 10 years and the number of pay-to-use ATMs has fallen by a similar percentage.

However, we must all acknowledge that people are increasingly moving away from cash and towards digital payments. To be specific, in the UK, cash use has fallen from 61% of all payments in 2007 to a remarkable 34% last year. That fall is expected to continue at pace. Correspondingly, the declining number of withdrawals at ATMs is forecast to continue as cash usage by consumers for payments declines. We can all, therefore, recognise the challenge of maintaining efficient, free access to cash.

In response to that challenge, LINK—the UK’s ATM network—announced a series of reforms at the beginning of the year, which have provided the main focus of the debate. Its work to maintain widespread free access to cash involves acknowledging that 80% of free ATMs are within 300 metres of one another. There is evidence that too many ATMs are clustered in busy, urban areas, which unnecessarily duplicates the supply of that service. Therefore, LINK’s measures aim to reduce the amount of ATM duplication in urban areas and avoid unnecessary growth in ATM numbers, despite the observed decline in consumer demand for cash.

[Jim Shannon]

The Minister says that there has certainly been a downturn in the use of cash, but I remind him that we have to acknowledge that almost three quarters of people use cash two to three times per week. An interesting trend, which we cannot ignore, is that 60% of 18 to 24-year-olds also use cash at that level, so it is still vital.

[John Glen]

I acknowledge that we are not seeing the end of cash. The challenge is how we adapt to the different mode and frequency of its use. There is no simple single solution. Clearly, creating a complete network in sparsely populated areas will not always be the right answer.

Although the hon. Member for Makerfield (Yvonne Fovargue) is not in her place, for general edification I will respond to her point about the lack of notice when ATM operators move. They have a duty to inform LINK that a protected ATM will close. LINK can offer premiums to all its members to incentivise the replacement of the machine. It has set up a publicly available monitoring tool on its website that shows ATM availability. It has the power to mandate and directly commission an ATM deployer where one is necessary.

LINK’s measures aim to reduce the duplication that I mentioned earlier and to intervene where necessary. It aims to incentivise broad, national coverage of free ATMs and to protect every community across the UK from losing free ATM access. Specifically, LINK has ensured that free ATMs that are 1 km or more from the nearest free ATM are exempt from any reductions in the interchange fees that fund free ATMs. It has put in place specific arrangements to protect free ATMs more than 1 km away from the nearest free ATM, including boosting the interchange fee available in those areas. It has also enhanced its financial inclusion programme by tripling the interchange fee available to the lowest-income areas of the UK, to ensure that they all have at least one free ATM. Some 93%—an all-time high—of the most deprived areas in the UK have a free ATM.

That fact has to be seen in the context of the £2 billion of investment in the Post Office since 2010. The £370 million that is earmarked for 2018-21 is designed to maintain the last post office in the village and ensure that consumers can use the over-the-counter option to secure cash.

[Douglas Ross]

I am grateful to the Minister for his courtesy in giving way—a courtesy that was sadly lacking in the hon. Member for North Ayrshire and Arran (Patricia Gibson). As he is speaking about post offices, does he think that the hon. Lady did not take my intervention because she is fully aware that business rates are overseen by the SNP Scottish Government in Scotland? The problem for the Lossiemouth post office is that it is being punished by the SNP Scottish Government for having its ATM facing outwards and accessible 24/7 rather than inside the post office, which has therefore reduced the hours when the ATM is accessible.

[John Glen]

In response to my hon. Friend’s earlier request, the Government are aware of the Valuation Office Agency’s ruling and are considering their response, which will come in due course. He points out that there is a clear distinction in that behaviour.

[Carol Monaghan (Glasgow North West) (SNP)]

The Minister talks about the importance of keeping an ATM in rural and deprived areas. The difficulty is that when there is only one ATM in such areas, it often experiences high levels of usage and regularly runs out of cash, which is worse than not having it at all in some ways. I encourage him to do what he can to ensure that we keep a network, even in such areas.

[John Glen]

It is obviously difficult for me to comment on each of our 64,400 ATMs, but the hon. Lady makes a reasonable point, which I will certainly take back to my next meeting with the Payment Systems Regulator.

[Patricia Gibson]

Will the Minister give way?

[John Glen]

Yes; I have a bit of extra time.

[Patricia Gibson]

The Minister mentioned the Payment Systems Regulator, so before he moves on I want to ask whether he is considering giving it greater powers to protect cash, and imposing a duty of care on it, to ensure that the UK’s cash infrastructure is sustainable. That would address a lot of the concerns that hon. Members have expressed.

[John Glen]

I will come on to talk about the powers of the Payment Systems Regulator, which I have met. My judgment is that it has considerable power over the LINK network. It can mandate LINK to do certain things and it can impose fines. I would need to look carefully at what that proposal would involve and where it would be different from the powers that LINK has at the moment.

I acknowledge LINK’s independent review, which is chaired by Natalie Ceeney. As was mentioned earlier, the report will be published in March. It is looking at long-term access to cash and exploring further the impact on consumers and small businesses of the shift from cash to digital payments. I have met Natalie Ceeney and encouraged her to look as broadly as possible at this issue. I imagine that the nature of her powers, as well as what she needs to do her job, will be part of her report.

This House should also note that the payment systems regulator, which the Government established in 2015 to ensure that payment systems work well for those who use them and which regulates LINK, has taken a lead in examining this issue. Following the first publication of LINK’s ATM footprint report, the regulator used its powers to place a specific direction on LINK. This is designed to make sure that LINK does all it can to fulfil its public commitment to preserve the broad geographic spread of free ATMs and to report to the regulator on a regular basis.

I think I have addressed a number of the concerns raised in the debate. The Government have invested heavily in maintaining a stable network of post office branches. Anyone can use their LINK-enabled bank card to take money out for free at the counter of every one of the 11,500 post offices in the UK. I acknowledge that a post office needs to be open for that to happen, so I am not presenting it as a perfect solution, but it is a significant alternative source of cash for many people.

Additionally, in the autumn Budget at the end of October the Chancellor announced the Government’s plan to help local high streets to evolve and adapt to changing consumer demands. It included £675 million for the future high streets fund to support local areas’ plans to make their high streets and town centres fit for the future.

The hon. Member for Rutherglen and Hamilton West raised a couple of specific points about digital payments failure. The Treasury and the UK financial authorities take this issue very seriously and are investing in improving the operational resilience of the system, including cyber, across the financial sector. Over the next five years, £1.9 billion will be spent on cyber-security initiatives.

The hon. Gentleman also asked about helping the vulnerable. The Department for Digital, Culture, Media and Sport has a digital skills partnership that is looking at partnerships across the private, public and charity sectors, which also involves training in digital skills for adults.

On the point about the powers of the PSR, it has the power to direct LINK and impose financial penalties; it is committed to using those powers. It also made a direct intervention on the interchange fees to LINK to deal with this issue.

To conclude, I thank the hon. Member for Rutherglen and Hamilton West for raising this issue. It is surely right that we consider the impact of an increasingly digital world and ensure that we protect those who need to be able to pay by cash. In the here and now, cash use remains important; it is still the second most frequently used payment method, just behind debit cards. We also know that around 2.2 million consumers predominantly use cash, many of whom are the more vulnerable members of our society.

I take this matter very seriously. I chair the Government’s financial inclusion forum, and for me there is a combination of interventions. There will be interventions from the regulator to deal with those who are making it very difficult for people to access affordable credit. However, this issue is also about increasing capacity.

I do not rule anything out in terms of efforts to improve the situation. With my officials, I have spoken to the PSR about this issue, and it has engaged with the regulator and LINK on this topic. I assure the Chamber this morning that I will continue to emphasise the importance that this Government place on widespread free access to cash.